Near termed outlook
The TSX remains in a bear market with no signs of consolidation in its downward trend. Meanwhile, the S&P 500 has been very busy consolidating with (thus far) no breach of the August 8th lows. A cardinal rule within technical analysis says that the more tests of a level of support, the greater likelihood of that support holding. There have been three tests of the August lows so far (at or near the lows), which gives some evidence of these levels holding. Greece is in the news again today—and that’s the wild card. But if the upcoming earnings season and near-termed economic signals come through in the next few weeks, we could be setting up for that bounce I’ve mentioned in the past couple of blog commentaries. Fundamentally, there are a few factors that could support a bounce in early winter, including a fairly low trailing PE on the S&P (around 13 X), and the S&P yield which is actually marginally over the US 10-year treasury note. I continue to look for a rally into the 1250- 1300 area for the S&P 500 over the first months of the winter – and thereafter a resumption of a bear market.
Gold has been supported by its 200 day moving average since early 2009. Since its parabolic rise over the summer, it has retreated some $200 and is looking to find support at that MA – which currently lies around 1530. Gold remains in an uptrend, but it may not yet be oversold enough to justify buying at this point.