Technical Commentary: Gold & Bonds Soar As Market Crashes. US Credit Rating Gets Downgraded

This week…

• The news of the week was the Friday after hours announcement by S&P downgrading US debt from AAA to AA+. This overtook the earlier agreement between the White House, Congress and the Senate to raise the US debt ceiling to avoid a potential US debt default. There is a short special section outlining TC’s take on the news.

• Despite the agreement to increase the debt ceiling the market seemed to prove the axiom “buy the rumour” – in this case that an agreement will come to raise the US debt ceiling and “sell the news” – they did raise the US debt ceiling. The market crashed through 1290 S&P 500 and swiftly achieved most objectives. A small bounce back occurred on Friday following new lows and possibly aided by the better than expected US job numbers.

• Bonds soared as the market crashed, the turmoil continued in Europe and signs continued that the US economy is faltering.

• Gold soared to record highs but silver and other metals faltered as signs that the global economy is slowing. Gold stood out as the only asset class that was going up. In financial and economic turmoil gold is money.

• Oil prices collapsed (and so did the energy stocks) because of signs that the US and global economy are slowing.

• The TSX Composite had a mini crash and every sub index was down on the week. The Gold sub index was the best performer along with Telecommunications.

NOTE: Next weekend we have to go to Montreal to bring our daughter back to Toronto. Following 4 years of schooling in Montreal she has secured an entry level job here in Toronto and is moving home – well at least temporarily. A short report or email report will be prepared.

D.C.