The Bottom Line

Technical, fundamental and seasonal influences point to another volatile period for equity markets around the world this week, but with less intensity than recorded last week. Support was established by major equity indices on August 8th including 1,105.54 for the S&P 500 Index, 10.604.07 by the Dow Jones Industrial Average and 11,617.81 by the TSX Composite Index. Preferred strategy is to hold/add to sectors that benefit from favourable seasonal influences at this time of year (e.g. gold equities on weakness, agriculture, “gassy” equities, biotech) and to watch for entry points on weakness in other economically sensitive sector in October.

The Dow Jones Industrial Average gained 466.89 points (4.32%) last week. Intermediate trend is down. The Average trades below its 50 and 200 day moving averages and completed a “Death Cross” last week. Support has formed at 10,604.07. Short term momentum indicators are recovering from a deeply oversold level. A MACD buy signal was recorded on Friday. Strength relative to the S&P 500 Index remains positive.

The TSX Composite Index gained 320.04 points (2.67%) last week. Intermediate trend is down. The Index trades well below its 50 and 200 day moving averages. Support has formed at 11,617.81. Short term momentum indicators are recovering from deep oversold levels. Strength relative to the S&P 500 Index remains positive.

The U.S. Dollar slipped 0.20 last week. It remains in a six month trading range between 72.70 and 76.72. Intermediate trend is down. Short term momentum indicators are neutral.

Crude Oil added $2.66 per barrel (3.21%) last week. Gain since its new support on August 8th at $75.71 is 13.0%. Short term momentum indicators continue to recover from deeply oversold levels.

Gold fell $25.50 per ounce (1.32%) during a week that gold prices swung wildly up and down. Volume shows a typical “blow off”. Short term momentum indicators have rolled over from an extreme overbought level.

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