The jump in the Technology Group

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

The S&P 500 has turned firmly downwards. Once again though we found support in the broad 1,320 to 1,350 zone (the low was 1,331) and rebounded. Technically it is possible that we have made an important low but we would not be able to confirm that until we broke out above 1,375/1,385. That zone should now repel any rally to the upside. In the short term we are at resistance/support near 1,360 but above that level we certainly could return to 1,375. Only above 1,400 would we be in a position to challenge the highs at 1,440 and focus on targets up to 1,500.

To the downside, a firm break under 1,320/1,330 would target the low closes near 1,270. Below that the lows at 1,257 would be in the line of fire. With all indicators both for the intermediate and short term having turned down, the up day on Friday does not change the near-term picture, which has turned decidedly bearish. As we are in a zone of a potential bottom it is possible that we could turn back up.[read more…]

TSX INDICES

The TSX Composite fell 1.3 per cent on the week led by energy and financials to the downside. 12 of 14 sectors were down on the week with only information technology (Nortel had a big up week) and the income trusts enjoying an up week.

Key going forward of course is the TSX Energy group as they represent some 30 per cent of the TSX Composite. They could help drag things down going forward if they were to go into a corrective mode. After a 39 per cent up move from the lows seen in March a corrective period would not be surprising nor would it be unwelcome. Golds have been whipsawing us the past few weeks and the Metals group appears to be topping. However, the Materials Group with both golds and metals is still in a good uptrend even if it is slowing down here.

The jump in the Technology Group caught us by surprise. However, we admit a reader did suggest we buy Nortel. We were not enthusiastic about it but good call on him. The stock is still overvalued at these levels so we had little interest in pursuing something that might be short lived. If we are going to buy stocks like that we would rather find undervalued ones not overvalued ones. .[read more…]