Gold & equities outlook

October 3, 20112 Comments

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

 

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.

quote-teal

2 Comments

  • I recently purchased your book ‘Smart Bounce’ and thought it was a great source of information especially for a DIY like myself.

    I would appreciate your recommendation for gold seeing how this might be a good entry point.

    What do you advise your clients to purchase?

    Regards,
    Steve.

    Reply
    • I can’t really give you specific advice due to licencing requirements and lack of knowledge of your specific situation–but I can say that I like the equities a bit more than bullion at this time–although both look ok for a move. Explore the ETF’s out there –there are both equity and bullion ETF’s for gold listed on both CDN and US exchanges
      Thanks for the complements on the book–be sure to check out my new book “Sideways”–it takes a more detailed look at technical analysis techniques.

      Reply

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