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Toronto Stock Broker David Chapman
February 28, 2011

THE CHAPMAN REPORT – Technical Commentary Feb. 28th

This week…

  • A week of turmoil in the Mid-East/North Africa. The western economies have shown little support for their former autocratic and even despotic allies quickly throwing them overboard for whatever may come. This is a sharp change from 1979 when the overthrow of the Shah in Iran brought forward years of attacking the new regime in Iran that has lasted until today. The turmoil in the Mid-East/North Africa leaves March uncertain. Although March has a history of some volatility but has generally been positive for the market. First key level is 1280 for the S&P 500.
  • Bonds rose in price this past week as there was a flight to safety against the back drop of the unrest. A buy signal was seen in the bond model for Canadian bonds and the short term trend for bonds turned up.
  • Gold rose and silver soared to new highs this past week against the backdrop of the unrest. The HUI rose but the TSX Gold Index was mixed to down following a sharp decline on Thursday when it appeared that Saudi Arabia would make up some of the lost Libyan oil production. There are rumours of a pending shortage of silver which could spur prices even higher. The precious metals stocks and gold still need to make new highs in order to end the divergence with silver.
  • It was no surprise to see energy prices soar this past week. Oil prices hit a high of $103 achieving in one fell swoop long held targets of $100/$101. The world can manage prices around these levels but any further sustained rise in oil prices to $150 or higher would be destabilizing to the western economies where the recovery has remained feeble. While all eyes are on Libya there is another country that may be more important to watch. Details in the commentary.
  • The S&P TSX Composite fell this week as well as 13 of 14 sub indices declined. Only Energy bucked the trend. The TSX Transportation to no one’s surprise fell.


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