Technical Commentary: Fear Causes Markets To Fall

This week…

• The stock markets fell for the 2nd week in a row on fears of sovereign debt contagion in Europe, a slowing Chinese economy and follow through from the weak job numbers seen on Good Friday. But the last weekly low at 1,340 is still intact and objectives on what appears as a small double top on the charts was met this past week. Regaining 1,400 would be positive.

• Bonds rose for the same reasons the stock market fell. New highs are possible.

• Gold rose but was weak on Friday following weakness for Spanish bonds that sparked a rush into US bonds and the US Dollar. The US$ still appears to be forming a top and gold a bottom but the reality is until gold breaks above $1,700 at minimum and especially above $1,800 and the US$ falls below 78 and not take out 81/82 then risks for gold remains to the downside. The gold stocks recovered from the decline to new lows seen the previous week. The gold stocks are woefully weak and are at extreme lows when compared to the price of gold itself.

• Oil prices fell on global economic weakness (China, European concern over bond contagion and the weak US job numbers) but also because Iran and the US are talking and who knows they might even reacha deal. Sanctions are biting and that has brought the Iranians back to the table. But the real hurdle is the Republican held congress who even if Obama does get a deal the Republicans may jettison it because it is an election year and any success for the President must instead be seen as failure. Natural gas prices fell under $2 and new lows. It is the first time under $2 since 2002.

• The TSX Composite fell on the week but it was not because of golds and metals. Their rise prevented a potentially steeper drop in the composite.

D.C.