Technical Commentary – S&P Falls Sharply On Friday. Bond Go To New Highs

This week…

• The S&P 500 failed the recent highs and fell sharply on Friday pushed down by the ongoing turmoil in Europe and the threat of a Greek debt default. The sudden resignation of a key ECB official also negatively impacted the market.

• Bonds once again went to a new highs as US government bonds continued to act as a safe haven amongst the debt turmoil. However, given the overbought nature of the market and a market possibly seeking the 6 year cycle high it is potentially dangerous to step into the market now. Long US bonds made new all-time highs above the one seen in December 2008 at the height of the Lehman Brothers panic.

• Gold failed to rise this past week, however, the gold stocks were one of the few bright spots during the week. Gold stocks often lead gold to the upside. This has not been the case for sometime so this is a possible positive sign for gold going forward. Until new highs are seen above $1910 there remains some risk that gold could probe lower first.

• Oil prices tried to rise earlier in the week, however, with continued signs of a weakening global economy oil prices once again failed near $90 and pulled back on the week even though they eked out some gains. The energy stocks, however, did not gain and fell along with the broader market. The energy stocks look particularly weak and are close to new 52 week lows.

• The TSX Composite fell on the week as well with only the Gold sub index managing any substantive gains. Telecommunications and Income Trusts eked out small gains.

D.C.