The market bounced back

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

Following the huge outside week reversal the previous week, the market bounced back this past week. It is strange sometimes watching the reaction of markets to events. The bond market is now clearly showing signs of concern over rising inflationary pressures, and the US dollar appears to be hailing the rising inflation by rising because it believes the Fed will be forced to stop lowering interest rates and even hike them to stem the inflationary pressures.

The gold sector has naturally reacted negatively to the rising US dollar, as has oil. Both fell on the week. But the stock market seems unperturbed by rising inflation and clearly they don’t believe that the Fed will hike rates and may lower them further.

The S&P 500 was also helped by the report that first quarter growth was 0.9 per cent, revised
upward from the previously reported 0.6 per cent gain. As we have mentioned elsewhere, given
the fall in the first quarter for Canada, a rise in the US seems almost unreal. Further, some good results were reported on the week by stalwarts such as Dell. The drop in oil prices this past week also emboldened the S&P 500. [read more…]

TSX INDICES

Boy what a mixed week. The TSX Composite closed down very slightly on the week. The down week was led by Energy, Gold, Metals and Materials. Overall out of our 14 sub indices six were down and eight were up. But overall it was the four major downs that took the TSX down on the week. Others down were Health Care and Consumer Discretionary. The latter has performed very poorly and no reason to own the group at all.

The up groups are no big star performers at all. Utilities look good and so does the industrials group but most of the others are weak and are still to be avoided. They are trading for the most part under their 40 week MA and as long as we are under that level we will continue to stand aside. We do have up markets on the dailies and as long as that is in play we are probably in a bear market rally and one might selectively trade the group but no reason to hold on for longer unless we regain above the 40 week MA and the weeklies turn up as well. Given we are at or near resistance zones profit taking at these levels is suggested.[read more…]