A Comment -- General Comments From an Expert (A Commentary)

Commodities. They’ve gone too far ahead and are now pausing. They’ll be starting up again soon.

Dow Industrial - Weekly chart shows a head and shoulder pattern, which was a major bottom that occurred in 2009. Dow has marched steadily upward from there. Primary trend line has not been violated, not even close.

TSX Metals – Both gold and metal stocks have gone through ABC corrections. Metal stocks chart shows higher lows, so they look pretty good. Gold stocks have pretty well equal lows even though the bullion took off giving a big divergence between bullion and stocks. If you are looking for a terrific rebound opportunity, go for gold stocks.

Market - Thinks the market hit its bottom about a week or so ago and expects we will work our way up. Considers 14,000 a bit of a resistance level, we’ll get through that and then run into even more resistance. Probably caught in a range of 13,200 to 14,400. We have to get rid of the debt ceiling problem in the US along with some calmer news from Europe.

Natural Gas. He has gone from negative to more neutral. Gas storage conditions are much more normal now. We haven’t had that much warm weather which is what it takes to get this going. However last storage entry was above what was anticipated. If you have a longer term basis of say 5 years, you can be investing in gas now.

(A Top Pick Dec 21/10. Down 42.98%.) Pairs trade and was Long Sea Dragon (SDX-X) and Short Bankers Petroleum (BNK-T). Sea Dragon was hit with the uprising in Egypt. Sold some of his Sea Dragon but still has his short on Bankers.

Constructive on the market. Believes the TSX is in a trading range of between 12,500 and 14,500 and doesn’t see it breaking below based on what the economy is doing. Expecting high single dividend returns, including dividends, over the next year or so.

Utilities. Should these start to be sold off in expectations of higher interest rates? If you are rotating into the market, it makes sense, but not sure what you will rotate into. Materials have done substantially better but don’t pay dividends.

A classic traders market right now, more so in the US than in Canada. We are currently 3 years into the bull market. Years 1 and 2 was just getting all the boats top rise and now it’s about earnings and momentum. Excellent earnings momentum right now, particularly in the US. Thinks US housing will be dead for a long time, unemployment will be high for a long time and the US debt will be a mess. However, companies that are exhibiting great earnings are not in those sectors.

Market: Triple whammy facing investors. Euro Debt. Economic data shows we are slowing and not in recovery, although in expansion mode. Inflation in commodities, wage inflation off shore, effecting import prices. All this leads to risks in the market. All the oil stocks are still making a ton of profit at $99 oil. Lots of good value in he US. Market doesn’t want to give them a good multiple.

Economy. There is going to have to be a restructuring of the European peripheral economies. This shouldn’t be a surprise to anyone. Most European banks are stuffed full of European debt which they still have at its book value. Can’t get out of these as it would blow a big hole in their balance sheets. No matter what they do there are going to be major losses, which is not good news for the market. Inflation is starting to creep back in which will eventually lead to higher interest rates.

Oil. Feels the $100 a barrel is here for the foreseeable future because of demand from the emerging markets. This means the Cdn$ will remain high and above parity for the foreseeable future.

Bank preferred shares. When Bank of Canada increases interest rates, what happens to them? Effectively preferreds are “bonds in drag”, i.e. dressed up as equities. If interest rates go up there is a capital loss. There are alternative preferreds that help mitigate the problem.