Week of May 13 Market Summary

May 20, 2013

This past week has yet been another historic one for the global markets, two of the largest stock indexes in the US, the Dow Jones and S&P 500 both jumped higher into record levels. The move higher comes as global markets have been on one of the largest rips to the upside that has been seen in decades. Higher levels are continued to be supported by Federal Reverse quantitative easing, as well as the onslaught of positive economic figures. In the currency markets the Yen continues to break down, pushing the USD higher, this has caused the USD to enter bid sessions across all major currency crosses. As the Yen weakens US treasuries have seen a rise as Japanese investors, who are the one of the largest holders of US debt, purchase bonds as a store of their money, hiding from the weakness of their home countries currency. Despite the classic inverse correlation with the USD and markets priced in it, both continue to push higher. In Canada, the hotly awaited consumer price figure showing a small decrease in the prices over the past month. This most recent release is not the best news for the Canadian economy. In recent months, large international funds have said their portfolios are aggressively positioned for a strong downturn in the Canadian economy. The news of this is supported by the recent down turn in gold which has since sold off after the small retracement off its disastrous week in mid April. As gold has taken a hit so has some of its largest refiners and producers, Barrick (ABX) as well Goldcorp (G) have fallen down alongside it. These companies account for a large percent of the TSX index. As these major components show extreme weakness the TSX has fallen from its yearly high. Since the collapse of gold, the TSX has since recovered; however, as the offer in gold continues to increase the likelihood of another push lower in the TSX is gaining steam.


The week ahead will provide more insight into the tax scandal at the Internal Revenue Services, IRS, where it was recently exposed the certain groups were targeted for specific tax returns. The most predominate group being members of the Tea Party, who are commonly high income earners and contribute greatly to the tax bank. Many say this could be the last blow to the Obama administration for any hopes of a 2014 democratic senate.  In the week ahead, we will also hear from the Federal Open Market Committee, FOMC, where investors are awaiting the news on the possibility of the continuation of the open markets operations, quantitative easing. The classic “sell in May and play” saying has not preformed well for investors as it has in previous years with the market closing negative only three down days since the start of May. This is compared to last May when the trend high was seen on the first day of the month. As the market continues to go higher and short buy back stop losses continue to be hit, the market is only expected to go higher. Many experts expect to see a top after a long period of consolidation in major indexes; however, following the 100 plus point gain for the Dow on Friday, the likelihood of this occurring at this time is not likely.

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