Recap: Week Ending June 28, 2013

July 2, 2013

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This past week marks one of the first in many where almost all major global indexes moved higher. The move higher comes after violent horizontal trade over the past few weeks with strong aggressive moves to the downside. Recent high and lows on both the SP 500 and Dow Jones have been much defined. All three major US indexes, SP 500, Dow Jones, as well as the NASDAQ 100 are all flirting with their 50 day simple moving average. The 50 MA or moving average is an industry wide standard which is watched by most as possible support or resistance zones. Meanwhile, the TSX bottomed early in the week. This bottom appears to be very weak with just one touch of the lower level. Further weakness in the index is not out of the question with expectations to once again test this lower level for sellers. The lower gold price is not helping the TSX which it being made up of many gold producers and refiners. The price of the precious metal is expected to fall further as the US Federal Reserve continues to warn about the ongoing threat of deflation. With such news in the market investors are positioning themselves, many existing winning gold positions, which they have held for years, and are reassessing the situation. Interestingly, as gold continues to fall Apple Computers moves with it. This positive correlation indicates that possibly both assets are held by long term investors who are slowly liquidating their positions. As with gold, bonds continue to sell off. The price of the 30 year US treasury has fallen over 9% since its May highs. The sudden drop in prices has shot up yields to levels since October 2011. Many believe that bonds need to pause and readjust to what has happened economically with this move being a simple overreaction. Unlike the directional moves we have seen both in gold and bonds, oil or WTIC has traded horizontally between $93 and $99 within the past week and even month. Part of the reason for this is the lack of geopolitical news out of oil producing nations. The lack of conviction in either direction comes as protests and violence are starting up in Egypt, the world’s 28th leading oil producer. Even though Egypt might not be a large producer their influence on the oil trade in large with their centralized location. It will be important to watch the news out of Egypt in the coming days to see if protests continue.

This past week was very quiet with economic news out of Canada. The upcoming week is no different as it will be shortened due to the holiday Monday. With this being said, the week will end off with powerful economic data when both Canada and the United States will release their unemployment figures for the month of June. In Canada, no change is expected from the previous reading of 7.1%. South of the border economists are predicting a tick down from the prior reading of 7.6% to 7.5%.

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