THE CHAPMAN REPORT – Technical Commentary 9/7

This week

• The stock market gains on the back of better than expected economic numbers especially the non-farm payrolls. That these numbers can in no way make up for the huge job losses over the past few years does not seem to be a concern for the market. As well quantitative easing (QE) is sparking a shift to risk assets (stocks) at the expense of safe assets (bonds). Speculation is being chosen over good sense. A rising stock market is not a panacea for a sound economy.

• If stocks rose bonds fell for the same reasons. Canadian bonds made a possible key reversal (new highs for the move followed by a reversal and close below the lows of the previous week). Bonds are giving sell signals although officially the bond trends remain long.

• Gold rose and silver broke out. Silver is now potentially targeting up to $27 with the breakout. Gold is still struggling at these levels as the previous highs remain elusive. However with the US$ weakening it is probably a matter of when not if that gold too will see new highs targeting next $1300 to $1350. The US$ Index is vulnerable to a fall to 80. Below 80 the US$ Index breaks down.

• Oil prices were decidedly mixed and remain below its key pivot at $76/$77 but above the breakdown level at $70. Stocks are struggling to rebound once again rebounding at key support levels.

• The TSX had a strong up week and a number of sub indices saw new highs. But two key sub indices financials and energy remain weak even as both rebounded this past week. The TSX Venture Exchange enjoyed a strong up week as junior mining exploration stocks are showing signs of life.

D.C.