Trying to get a handle on the size of the bailouts everywhere

IT’S A BAILOUT WORLD!

If anyone had any doubt about the enormity of the financial crisis gripping the world, look no further than at the amazing conversion of Canadian Prime Minister Stephan Harper and his Finance Minister Jim Flaherty from small c, small government, fiscal conservatives to big spending, big government, deficit hawks. This is not a comment on the actual merits of the budget; merely a note that Harper and Flaherty have joined the bailout world, even if it seems to be with some reluctance.

Trying to get a handle on the size of the bailouts everywhere The Toronto Star printed a “bailout primer” the day after the budget. While it covers only five nations it is illustrative. We summarize much of it below. All figures are US$ billions.

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

• For the fourth week in a row the S&P 500 closed lower.
• The S&P closed down on the month 8.6%. The DJI lost 8.8%.
• According to the January effect barometer the direction of January determines the
  direction for the year.
• Since 1950 the record is 91.4% accurate.
• Down Januarys indicates a down year.
• Up Januarys indicates an up year.
• In 2008 January was down. 2008 was down.
• In 2007 January was up. 2007 was up (very slightly).
• They also say the top 10 performing sectors in the S&P 500 in January outperform over
  the next 11 months.
• So you might want to own – materials, industrials, consumer staples, utilities, healthcare,
  technology, and telecommunications but definitely avoid financials and insurance.
• February is not known to be a good month for markets often the weakest in the
  November to May period.
• S&P continues to make might what be a head and shoulders bottom.
• But we caution the downward sloping neckline could also be a descending triangle.
• We got over some resistance at 840 and even 860 but failed to hold it.
• Support lies at 800. A break under 800 would seriously have us looking at the November
  lows again and possible new lows.

TSX INDICES

The TSX Composite put in a meager .8% up week with 7 of 14 sub indices closing up on the week. The gain on the week was not thanks to the Gold sector which after making new highs closed lower on the week. While this constitutes a reversal week it doesn’t necessarily mean the run in the Golds is over. Key will be the next few weeks. They just finally gave their buy signal only a week ago and reversals just after getting the buy signal is not unusual. It has been quite a run from the lows. We will watch closely.

The small up week saw ups this week from Consumer Staples, Financials, Healthcare, Information Technology, Real Estate, Telecommunications and Utilities. If the advance is to continue we need some leadership there. In particular we need the financials moving higher. Healthcare and Info Tech may be an indication that the rally will broaden further.

The TSX Venture Exchange enjoyed another up week gaining 2.7%. The venture exchange is showing some outperformance signs of late .Certainly the beat up junior mining sector which never gave up its solid fundamentals needs a reprieve here. Might need some more work on forming what may be a bottoming head and shoulders pattern.

We continue to remain optimistic on the market going forward despite the steady stream of negative news in the background. Possibly with the market trying to eke out gains in the face of the relentless negative news is a sign of this growing positiveness.[read more...]