Most lows for the year are made by early December at the latest.

THINGS LOOKING UP – A LITTLE

We are only a week or so from the lows of November 20 but seven weeks from the momentum
low made on October 10. And we couldn’t help but notice that fewer stocks made new lows on
November 21 than were made on October 10. This tells us that we are still trying to form a low of some importance. This does not rule out new lows or a test of the November 21 lows, quite
possibly even in December, but we are seeing signs that things are looking up – at least a little.

The seasonals have shifted in favour of the bulls. If the old adage of “sell in May and go away”
was particularly vicious this year, then quite possibly “buy when it snows” will counter some of
that gloom. Okay, we have seen at least one decent snowfall. So we guess that counts. But the
reality is that most bear markets end in November or early December. Tellingly, the famous 1974 bear market low was made on December 6. The momentum low was made two months earlier, on October 4.

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

• A big 12 per cent up week leaving a huge engulfing bull candle on the charts.
• Some fast moving weekly indicators are turning up.
• Some shorter term indicators are giving some early buy signals. Daily MACD has turned up.
• The previous week we did bounce off a long term trend line from the lows of 1932. It obviously proved to be prescient.
• The gloom of the previous week has not gone away. Expect a rally to eventually be met with selling especially for yearend tax selling.
• We may have completed a five wave down pattern from the May 2008 highs.
• We broke a steep down channel although more gentle down trend lines remain firmly
  above at 1100.
• The 1100 area we believe is target zone for any coming rally.
• While we would be pleased to see some follow through this week first initial resistance is seen at 970. Expect that zone to act as a first good resistance and then a retest of the breakout line at 890/900.

TSX INDICES

At last some relief. The markets closed up on the week with the TSX Composite making a 7.3 per cent gain with no new lows. A solid performance. Leading the way was two old favourites – Gold and Energy up 8.6 per cent and 20.6 per cent respectively. The big gains in the energy sector were a relief after weeks of falling and becoming grossly undervalued in relation to the price of oil and gas.

The CDNX Venture exchange also saw an 8.8 per cent gain on the week. So are commodities back? Well naturally we are not out of the woods yet but the gains coming with huge positive divergences at the lows are a relief at minimum and heartening at best.

Not everyone participated in the rebound as healthcare, information technology and telecommunications bucked the overall positive week closing lower although none of them saw new lows for their move. [read more...]

Subscribe to David’s reports and read more about:

• Lows may have been made on November 20.
• Most lows for the year are made by early December at the latest.
• Could Santa Claus bring some relief?
• Last year Santa Claus stayed away and the January effect was a bear.
• Documenting the nasty bears of the past century and the rallies that followed.
• Most ended anywhere from October to December with November being the favourite month for the final low.
• The rebound rallies can be impressive averaging gains of 77%.
• The commitments from the US Government keep getting bigger and bigger. Now $7.8 trillion.
• The fear is deflation but the real bug-a-boo will be inflation as they monetize the debt.
• Bonds have had a record rally to new highs. But it won’t last.
• Bond cycles.
• Safe havens. Gold and Bonds.

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