Citigroup wishes to divest themselves of some $400 billion of loans

S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)

The S&P 500 fell this past week, thanks particularly the reporting of record first-quarter losses at AIG and the announcement by Citigroup that they wish to divest themselves of some $400 billion of loans – an incredible amount. We have more to say about that in our bond commentary.

The S&P 500 hit our ideal topping zone near 1,400/1,425 (the high was 1,422) and the 40-week MA. This drop took us near our first major area of support near 1,375/1,380 (low was 1,384) and the 13-week MA. It is possible that we will just trade around these two points for at least the next week before deciding which way to break.

The lows came right down to our trendline up from the March lows, so it is possible to go right back up. At the other end there is considerable resistance in that 1,420/1,430 zone. If we were to break through it we would then go straight up to 1,500 and possibly the October 2007 highs near 1,575. A clean breakdown through 1,375/1,380 would next target us to 1,350. Below 1,350, and especially under 1,320, we would target the March lows and our possible outstanding target of 1,185/1,200.[read more…]

TSX INDICES

Propelled by Energy, Gold, Metals and Materials the TSX Composite gained 1.7 per cent on the week and is within hailing distance of new highs. Energy gained over 7 per cent and the Golds were up over 5 per cent constituting a big part of this gain. The TSX Composite we believe now should put in new highs. Triple tops are very rare so we would be surprised that the index failed here even as some sectors may fail. Indeed we have a two tiered market where the places to be are the aforementioned Energy, Gold, Metals and Materials and the places to avoid are Financials, Real Estate and the consumer stocks even as there may be individual ones worth looking at.

Targets on the TSX Composite could be as high as 17,300 but we emphasize just as we saw with our double top scenario that failed we could fail this one as well. We need to have our key sectors keep propelling this one higher but have at least some ongoing participation from the other groups. It is then very possible to see those levels this summer if our rally into the summer months develops as we continue to suspect.. [read more…]