IMajor resistance is clear at 870 and then again at 900

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

• The S&P 500 fell 4.8% this past week. This was a disappointment following the strong
  up week the previous week.
• The major catalyst was Treasury Secretary Geithner’s bailout plan suggesting the cleanup plan for the US financial sector could easily be $2 trillion. There was also the talk of the release of the remaining TARP money of $350 billion. The plan would allow for stress testing of institutions, selective capital injections, the ability for FDIC to dismantle some badly troubled institutions (meaning forced bankruptcy), guaranteeing bank debt, trying to lure in private capital (with juicy dividends on preferred shares). Shareholders would be largely wiped out.
• The market gulped.
• Friday the 13th was largely a non-event as the stimulus package was the only major news and the market drifted lower. This weekend is the G20 meetings. Don’t expect anything exciting.
• There is thoughts (again) that General Motors will go into bankruptcy.
• The market is just drifting in here.
• The key support remains at 800 for the S&P 500.
• IMajor resistance is clear at 870 and then again at 900.
• IOnly above 900 do we have a real chance of turning this market bullish and achieving our
  targets up near 1050/1100.

TSX INDICES

The TSX fell 3.7% this past week continuing a pattern of up and down weeks that we have witnessed over the past several weeks. Seemingly we are just spinning wheels sitting just 6.9% off of the November low weekly close. The high was made into the first week of January and we are now down 4.5% from that high weekly close. Still what this could be is a B wave after the first wave up out of the November lows. So it may not be as bad as everyone thinks.

Only 4 sub-indices had up weeks and it was the usual suspects. Gold, Materials, Telecommunications and Consumer Staples. The worst performer on the week was the very weak Financial Index down over 8%. Another group up on the week was the TSX Venture Exchange. Indeed that exchange is making a lovely rising pattern and that is very bullish. So for the brave, the speculators and those that love to roll the dice it may mean some good news coming for your favourite penny stock. We are encouraged.

A note on our strategy since some have been asking. This response covers the strategy column for both the TSX Composite below and the ETF’s. Our strategy and market timing is based off of the intermediate signals only. So until the intermediate signals turn positive and give us a buy signal our strategy will remain in stand aside mode.[read more...]