The job numbers were dismal

BOTTOMING PROCESS CONTINUES

The first few days of a month tend to be greeted by a somewhat positive market. The record since 1953 is that the first day of the month is an up day roughly 56 per cent of the time, though Mondays tend to be mixed, with gains only about 47 per cent of the time. And in bear markets Mondays are up only about 40 per cent of the time. The first day of December also tends to bring us an up day in the market.

Well this past week we had the first day of the month of December, in a bear market, and it was also a Monday. The markets were pummelled. The Dow Jones Industrials dropped 680 points or 7.7 per cent, the S&P 500 fell 80 points or 8.9 per cent and the TSX fell an astounding 864 points or 9.3 per cent. So much for history.

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

• The previous week had seen a huge engulfing bull candle. This past week saw a pullback
  but no real technical damage was done. Friday’s up close against back drop of relentlessly negative news was positive.
• Some fast moving weekly indicators are turning up and continued to point upward this
  past week despite the down week.
• Some shorter term indicators are giving some early buy signals. Daily MACD has turned
  up and stayed up this past week.
• We appear to be on the cusp of breaking one of the down trend lines. A move above 900
  would confirm the break out.
• Early December lows are not unusual in the market.
• We may have completed a five wave down pattern from the May 2008 highs.
• Potential target zones remain anywhere from 1000 to 1100.
• Only a firm break under 800 would signal a more serious test of the lows or even new
  lows. We doubt that at this time.
• The VXN Indicator remains above its 1997, 1998, 2001 and 2002 highs but is down off
  of a potential double top high. A breakdown under 50 could target down to 20.

TSX INDICES

After getting some relief the previous week the markets took it on the chin again as the TSX composite fell 12.4 per cent. Very few were spared although we can note the following:

• Consumer Staples and Information Technology were the only sectors to close up on the week. Interesting that Info Tech bucked the trend. Info Tech can sometimes be the early birds out of a big hole.
• New lows were seen for Telecommunications, Metals & Mining and Income Trusts. Telecommunications were a bit of a surprise given that we now have three of them in our portfolio below and all hung in nicely. We think they are buys still. Metals & Mining are struggling hugely because of the meltdown in commodity prices. But many positive divergences are emerging. Income trusts suffered but yields are now high. Expectations seem to be that many will suffer dividend cuts.
• The CDNX Venture Exchange hit new lows again. Numerous positive divergences are showing up in the charts though and we are seeing clear signs of accumulation and insider buying in a number of juniors we follow.
• Despite a down week the Gold sector remains a short term buy.

A lot of bad news was absorbed this week and we could not make new lows. A possible bullish sign? [read more...]

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• The first day of the month is usually positive. Not this month.
• The job numbers were dismal.
• Other economic numbers are telling us that we have been in a recession now for a year
• Collapse in commodity prices was astounding from a top in July. It was a crash and is actually separate from the financial panic collapse.
• All financial panics are about debt collapse. For years the warnings were there but most ignored them and the messengers were shot.
• The similarities between this bear and the Great Depression continue to astound us in terms of the ups and downs in the market.
• There are even similarities with the financial panic collapse of 1973-1974.
• The money just keeps pouring in and there is more to come.
• Some differences between Japan of the 1990’s and today. They had deflation. We have default.
• Some of the credit spreads are coming down – but only a little.
• Will Santa Claus come this year?

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