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

Markets. Some optimism has been built in that we are going to sell some more bonds. This is probably more important than the US side in the very short term. Feels there is money waiting on the sidelines so you could get a little bit of up fall run after September. The Canadian market has lagged the US. Energy has been very poor. Stocks are still dragging even though we have a $95 oil price. There are bank dividend increases coming next week.

Markets. Feels this is a stealth rally. There are a lot of non-believers in it. Sentiment has shifted too far negatively. People were legitimately worried that we were repeating 2008 again. We are on much better footing and the market is slowly starting to recognize that. Housing market in the US has clearly bottomed and has moved from a half 1 million annual starts to 700,000-800,000. Thinks it can move back over 1 million. Once you get the housing market going, you are creating jobs and more wealth. Auto sector is doing very well. US is sort of back in its role as the dominant player in the global scene, which makes a clear difference. There are shifts going on right now from areas like consumer stocks, which have been safe and sort of defensive. He feels more money will be shifting from defensive to cyclical economically sensitive stocks. Canada’s resource sector has been completely undervalued.

Economy. Thinks Europe is in the process of bottoming, but will take a while. China is really the wildcard but thinks it is still 7.5%-8% growth this year, and that is the low point.

Natural gas. Thinks this has bottomed but he has a hard time getting bullish that it is going to get a lot higher. Shale gas is bringing an endless supply which he thinks will dampen prices for a long period of time. Thinks we saw the worse when it dipped to about $2 MCF but he doesn’t think we are racing back to any of the old highs.

Financials. Feels the big upside is in the US banks especially in the ones that have really been pummelled such as Bank of America (BAC-N), CitiGroup (C-N) or J.P. Morgan (JPM-N) and feels there is a better recovery here. They are cheaper and trading at 50%-60% of BV, while Canadians are trading at 1.5%-2% times BV.

Markets: Sees a cyclical trend from 65-82. People compare this decade to then. Kept hitting peaks and troughs during that time in a 4-year cycle. In modern times, it toughed last in ’09. We are at the high point of this cycle, whether it is now or two months from now and a trough expected in 2014. Expects a sell off in September for seasonal reasons but there may be a rally over the winter but it will be the last kick at the can.

Oil broke out. It hit his first target of $92 and eventually broke through and next level is $102-$105. After that you have to see where the breakout occurs. Seasonal increases will occur at the end of October.

Penny Stocks: The problem is they are often illiquid and not well followed so there is less of a crowd following it and tech analysis is studying what the crowd does so you have to be careful with these.

Election Year: Believes in this pattern. That is why he was bullish for the pattern. Step until Nov the markets are not all that bullish in an election year. We had our run.

Markets: Not a surprise that China is sniffing around the ABX African asset. Thinks ABX would like to re-focus themselves. Wouldn’t be surprised if they consummate something. He prefers to sit on the sidelines until something is communicated more clearly and he has a sense of their direction. Thinks you will start to see more M&A activity in copper next year.

Short selling. He has tried to short on paper but found he wasn’t very successful. It is much more stressful than he would like. If revenues are going down, that makes it more difficult for company. If that is going up, that makes it more difficult for a company. If you think a company will not be able to cover their dividends and will have to cut or eliminate them, that is a good-looking short.

Markets. Historically, in the last 80 years during US presidential election years, markets have tended to peak right around the beginning of September and go in a corrective mode right through until usually around the end of October, prior to the actual election itself. Then you get a very strong upward move. In the last 50 years, rather than 80 years, market peaks in the middle of August and then moves lower until the end of October. When you have very close elections, like the current one, there tends to be a more prominent direction.

Seasonal Trends. Energy and precious metals do very well during the summertime. A sector that tends to be very weak at this time of the year is the transportation area. Higher energy prices in the summer put pressure on airline stocks.

Gold. How do you incorporate “policy action” into your technical analysis when it could clearly break down the charts before we even see it technically? He looks at technicals and seasonality but also he looks at fundamentals. Some of these that have impacted the sector would include earnings reports. 2^nd quarter earnings reports for a lot of gold companies have been a disaster. However, once the earnings reports were finished at around the end of July, gold and gold stocks started to show some nice recovery. Also, more and more central banks have started to move into the gold area. China and India are obvious choices and Russia is another one. Technically, chart shows a flag formation. Gold bottomed mid-May and slowly but surely we are getting higher highs. Magic number is $1,642, which would be very bullish and if it breaks above this, he could see a technical target of over $1725 level.

Dow and S&P 500 index funds. Should the caller sell these and put more money into the TSX index fund? The S&P 500 has gone up 11% since January 4, which is a huge move in a very short period of time. We are now at a period of resistance. One of the ways of measuring over bought and oversold is the percentage of stocks above their 50 day moving average. Every time the S&P 500 gets up to around the 80% level, that is a warning sign that the market is about to roll over. The S&P has its weakest month in September, plus the presidential material; it looks like it would be an opportunity to take some profits and the possibility of re-entering at around the support level.