technical commentary - december 3, 2012

7/30/2019 Technical Commentary - December 3, 2012

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The Chapman Report for December 3, 2012 page 1 of 22

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INDICES

S&P 500Intermediate Trend: Up Short-term Trend: Neutral Week: Up

S&P 500 Strategy: Buy (cautiously)(for definitions of terms, see end of report)

- With talks between the White House and the Republican led Congress once again stalled over thefiscal cliff it was surprising that the stock markets managed to close higher this past week.

- The S&P 500 gained 0.5% this past week while the Dow Jones Industrials (DJI) was up a small 0.1%.The Dow Jones Transportation (DJT) was up 1.3% although remains well of its most recent highseven as the DJI is not that far from its most recent highs.

- Resolution to the so called fiscal cliff is in some respects moot as US Social Security and Medicarehave unfunded liabilities estimated at over $100 trillion.

- Some are worried that without a resolution soon on the fiscal cliff that December could see a sharpdown month in the stock market. There are apparently billions of dollars locked in hedge funds thatare currently taxed at 15% and could rise to 30 to 40% if the fiscal cliff issues are not resolved. Ifthe current impasse continues there could be sharp sell-off as the hedge funds unload to ensure theywill be taxed at 15% rather then a higher rate.

- On the other hand cycles continue to suggest that the market hit a low around the election and stillcould rally into December and even January 2013. Even the 2007 stock market which proved to betop had a rally into just before mid-December before a further drop got underway into late Decemberand January.

- Other cycles are the 40 year cycle of 1972 which saw the nifty fifty rally into January 1973 before atwo year bear market got underway.

- The 1976 election of Jimmy Carter saw a rally get underway that took the market to a January 1977top as well. What followed was 2-5 year down market that did not make its final bottom until August1982.

- Key stocks like Apple Computer (AAPL-NASDAQ) may have topped. The recent drop in AAPL wasquite sharp. The current rebound is anaemic, and it could see AAPL form a potential large head andshoulders top pattern.

THE CHAPMAN REPORT

Charts and commentary by David Chapman

December 3, 2012


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- 70 years ago was 1942 and the market made a significant bottom in April of that year as it started 4years up to 1946. That was encouraged by the surge in manufacturing because of WW2. No suchconditions exist today

- The master 60-year cycle was 1952 and that year saw the election of Eisenhower and the explosion ofthe H-bomb on November 1. The market had a low in September 1952 and rose to a peak in January1953. The market fell into late August 1953.

- 1992 was the election of Bill Clinton and the market rallied strongly until February 1994.- The 2002 market was the culmination of the 2000-2002 high tech/internet crash that bottomed in

October 2002. August 1982 was the end of the long bear market of 1966 to 1982. The GreatDepression low was in July 1932.

- So there are many cycles that suggest that 2012 could be a bottom. But given the market is now 3 plusyears up from the 2009 market lows odds favour a top and potential 2+ year decline.

- Ongoing threats of war, the fiscal cliff, the debt ceiling, Europe in a recession, Japan in a recessionand both laden with debt suggests that going forward could be difficult for markets. If there is hope itis all because of QE3 that should continue irrespective of whether the US solves the fiscal cliff anddebt ceiling or not.

- The S&P 500 is on a tight leash and a drop below 1,400 would be negative. Under 1,385 and themarket becomes increasingly dangerous. Major support is currently at 1,350 and under that level the

market could re-enter the long term bear.- Major resistance continues up to 1,430 but above that level the market could make an attempt at new

highs above 1,475. There remains objectives (and hope) that the market could still see 1,525, 1,550and even 1,600. But a move above 1430 only makes the market slightly bullish and does not suggest amajor move up even if it does see new highs.

Charts created using Omega TradeStation 2000i. Chart data supplied by Dial Data.


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NASDAQ Intermediate Trend: Neutral Short-term Trend: Neutral Week: Up

NASDAQ STRATEGY: Stand aside(for definitions of terms, see end of report)


- The NASDAQ had a decent up week with a 1.5% gain. As a result the NASDAQs intermediate andshort term trends moved to neutral from down. This was a positive development.

- Weekly indicators are trying to turn up while daily indicators have turned up from oversold levels.- The NASDAQ has run into weekly resistance at the 13 and 40 week MA respectively. These MAs

are at currently at 3,039 and 2,989. In closing at 3,010 the NASDAQ is between the two key weeklyMAs. The key daily MAs are also bunched close together with the 200 day MA at 2,987, the 100day MA at 3,019 and the 50 day MA at 3,023.

- The NASDAQ needs to break out over 3,050 to confirm a breakout and suggest that a further run totest the September 2012 highs at 3,196 is possible. Over 3,100, the odds increase that new highs are

possible.- Under 2,970 suggests weakness and under 2,940 the NASDAQ could break down to test the recentlows at 2,810. A breakdown under 2,810 would probably see the NASDAQ break the 2011 lows at2,726.

- Volume on this up move has been light suggesting that the rally is corrective at best.- There is some potential that the NASDAQ could be tracing out a large head and shoulders top pattern.

The left shoulder high was formed in March 2012 with a high of 3,134. As long as this current rallyremains under that level it is possible that a right shoulder is forming. The neckline would be at 2,820.


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- If a large head and shoulders pattern is forming than a breakdown under 2,820 could have objectivesdown to 2,350.

- However, it could take some time to form the right shoulder. The left shoulder took roughly threemonths to form. The current rebound has only been in place since mid-November.

BONDS

US TREASURY BONDS Intermediate Trend: Up Short-term Trend: Up Week: Up

US BOND STRATEGY: Trend System Long, Bond Model Long(for definitions of terms, see end of report)


- US Treasury bonds as represented by the 30-year bond futures rose 0.9% as Europe continued to try andsort its debt problems and the White House and Congress continued their dance over the fiscal cliff.

- The White House has proposed $1.6 trillion in tax hikes along with $400 billion in cuts and a $50 billionstimulus package. The Republican led Congress dont want to hear anything about tax hikes onlyspending cuts. This led Republican House Leader John Boehner to declare that there had been nosubstantive progress on negotiations. Hopes for an early resolution of the fiscal cliff standoff continues.Who will blink first?

- Fast approaching as well is the debt limit. The current limit of $16,394 trillion is expected to be hit byMarch 2013. Expect more fireworks and drama concerning the debt limit.


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CANADIAN BONDSIntermediate Trend: Up Short-term Trend: Up Week: Up

CANADIAN BONDS STRATEGY: Trend System Long, Bond Model Long


- Canadian bonds as represented by the Government of Canada ten year bond futures (CGBs) gained 0.7%this past week.

- The big news of the week was the announcement that BofC governor Mark Carney was leaving hisposition to assume a similar role with the BofE. Never has a Canadian been the head of the BofE.

- With Carney leaving it is not expected, however, that monetary policy will change to any degree nomatter who is the next governor.

- Canada is tied to the international community and while the Cdn economy has not been a ball of fire it hasthus far avoided the chaos seen in the Euro zone and the problems of the debt laden US economy.

- Canadas growth slowed as 3rd quarter GDP came in at an anaemic 0.6% (annualized). It was noted thatweak exports were a prime reason for the low growth. It marks a big deterioration from 2nd quarter growthand it is the third consecutive quarter of sub 2% growth.

- Given the weak economy plus the ongoing difficulties in Europe and the US with the approaching fiscalcliff the odds of any new governor raising interest rates is very low to nil. Cries continue for the BofC tolower interest rates further.

- Besides the 3rd quarter GDP the Sep GDP was flat vs. a 0.1% gain in Aug; the Oct raw materials indexwas also flat vs. a gain of 1.3% in Sep; and, the industrial product index for Oct fell 0.1% vs. a 0.5%decline in Sep.


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- This week is the employment numbers out on Friday. The consensus is for a small gain of 4.5 thousandjobs in Nov. The unemployment rate is expected to remain unchanged at 7.4%. Some forecasters arelooking for a decline in jobs in Nov.

- The post Carney BofC meets this week as well for its interest rate decision. No change is expected fromthe current 1%. The market may learn who is replacing Carney this week.

- Cdn bonds continue to trade in a narrow range. The market is below the July highs of 140.44. But they areholding important long term support down to the 136/136.50 zone. A breakdown under 136 would be ofconcern and could trigger a decline to major long support at 132.

- Resistance is at 138 and up to 140.- The trends remain up for both the bond model and the intermediate trend.


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PRECIOUS METALS AND CURRENCIES

Intermediateterm trend

Short-termtrend

week trend intermediate strategy

Gold up down down Long holdGold Bugs Index (HUI) neutral down down Stand aside

Silver up up down Long hold

TSX Gold Index neutral down down Stand aside

US$ Index down (weak) neutral down (small) Stand aside

CDN$ up (weak) neutral down (small) Long hold (caution)

(for definitions of terms, see end of report)

Gold & Silver


- Gold slipped 2.3% this past week while silver was off 2.7% on fears that the US fiscal cliff talks wouldfail.

- Wednesday morning on the open saw a flash crash of almost $30 in gold as some 7,000 metric tonnes ofpaper gold hit the market.

- The cynical observation was that this was an attempt to manipulate gold prices lower. A hedge fund wassuspected as the seller.


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- Ironically it is the thought of failure on the fiscal cliff that could send gold prices higher. The fiscalcliff would probably be cushioned by more QE even QE4 as some have speculated.

- TC is not sure about QE4 as QE3 is open ended with no real end date. TC believes that this is QE toinfinity as there is no end in sight.

- As well, it has become well known that the Federal Reserve has been purchasing roughly 80% of USTreasury issues.

- Between QE3 and the Fed buying the US Treasury bond issues the Feds balance sheet continues to growquickly.

- The commercial COT for gold did slip this past week to 26% from 28%. There was an 11,000 contractjump in short open interest and a 5,000 contract decline in long open interest. Given the flash crash thispast week next weeks commercial COT should be interesting to see if any of that was covered.

- Silvers commercial COT slipped slightly to 30% from 31% as there was a 1,000 contract rise in shortopen interest and a 1,000 contract fall in long open interest.

- As to the other precious metals platinum only slipped 0.7% while palladium was up 2.9%. Copper, often aleading indicator for gold was up 3.2%. It is extremely rare to see a rise in copper and not one in gold. Onaverage base metals were up this past week even as precious metals were down. The metals stocks werealso up on the week even as the gold stocks were down.

- This is an unusual occurrence as normally they two are generally in sync. As noted, gold and copper oftengo hand in hand together.

- Gold has support at $1,700 and down to $1,695 but under that level a decline to stronger support at$1,650 to $1,670 is possible.

- Silver has support at $33 and then down to $32. Below $32 a decline to $29 is possible although there isgood support is seen at $30 as well.

- Resistance has developed at $1,760 for gold. Above $1,760 there is further resistance up to $1,800.Some have said that there has been manipulation to keep gold under $1,800. Irrespective of whether thathas any truth or not a breakout over $1,800 would raise the odds considerably that gold would run to$1,900 and see new highs.

- The double bottom pattern that formed with the low in December 2011 and again in May 2012 haspotential objectives up to $2,100 and even $2,500 once the market firmly breaks through $1,800.

- Weekly indicators for gold remain in an uptrend. The fast moving MACD is touching its slow movingMACD but has not yet turned down. If the market turns up it could generate a strong up move.

- Silver has resistance up to $35. Silver has a possible triple bottom (rare). A firm breakout over $35 couldsee silver reach objectives of at least $46. Further objectives can be seen up to $52 and even as high as$80.

- Gold and silver have been superior performers since the 2008 financial crisis outperforming the marketsby a considerable margin (see discussion under gold indices below).

- Central banks continue to be net buyers of gold and both gold and silver physical demand has remainedfirm.

- TC believes the low of December 2011 was the 34-month cycle low and the May/July 2012 lows was the4.25-year cycle low. It is extremely rare to see occurrences of both the 34-month cycle low and the 4.25-year cycle low. An examination of gold since gold became free trading back in 1971 there is no record ofboth a 34 month and 4.25 year cycle low occurring together. Golds long-term cycle is one of roughly 25

years broken by 3 cycles of 8.5 years. The 8.5-year cycle breaks down into either 3 cycles of 34-monthlows or two cycles of 4.25 years.

- Given that both may have occurred, it should normally set up a potential strong rally. That strong rally atthis time remains to be seen.


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Gold Bugs Index (HUI) and TSX Gold Index


- Gold stocks continue to struggle. With both gold and silver up 9.3% and 19.1%, respectively thus far in2012 one would expect the gold stock indices to be up at least an equal amount. And of course, you wouldbe quite wrong. Instead, the Gold Bugs Index (HUI) and the TSX Gold Index (TGD) are instead down

9.8% and 13.9% respectively.- With both gold and silver down this past week, the gold stock indices didnt really stand a chance. The

HUI fell 2.7% and the TGD was off 2.8%.- Both the HUI and the TGD did make it past the 200-day MA recently. It was first time over that key MA

since November of 2011. The all-time highs for both indices were made in September 2011. The HUI isdown almost 38% from its September 2011 highs and the TGD is off even more by 31%. Gold is down9.5% while silver is down 31.7% from its all-time high close seen in April 2011.

- For further perspective, the S&P 500 is down almost 10% from its all-time high seen back in October2007 while the S&P TSX Composite is down over 18% from its all-time high made in May 2008.

- It has been a struggle for the broader market over the past few years not just the gold stocks. In somerespects the gold stock indices have not fared so badly since 2008. The HUI is off 12.6% since its March2008 peak and the TGD is down just over 19% from its March 2008 high. When looking at it from that

perspective the gold stocks have been roughly equal with the broader market. Gold, however is up 71%from its March 2008 peak and silver is up 61% in the same time. Bullion has been the strong performersince the peak of the 2008 financial crisis. Being in stocks (paper) has not been the place to be.

- The HUI has resistance at 460 and the TGD has resistance at 320. Major resistance for the HUI is seen at480 to 520. If the HUI can break through that zone then odds improve considerably for new highs aboveSeptember 2011.

- Similarly, the TGD has major resistance at 360 and up to 390. This is a zone of major congestion thatformed during the 2010/2011 topping pattern.


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- The HUI has support just under 440 but if it breaks through there then there is stronger support down to410. Under 410 new lows are possible. For the TGD support is close by at 305 but under that strongersupport is seen down to 295. Under 295 new lows are possible.

- The intermediate trend for both the HUI and the TGD is currently neutral. This puts the gold stock indicesin a position to either turn down or turn up. Weekly indicators have turned down but there weresignificant positive divergences seen at the July 2012 lows.

- These positive weekly divergences are the best hope that the instead of turning down further that theuptrend that started out of the July lows could soon return.

Canadian Dollar


- The Cdn$ fell a small 0.1% this past week. It seems lethargic trading is not just a feature of the stockmarkets.

- The weak 3rd quarter GDP numbers seemed to have little impact on the Cdn$. Many have complained thatthe high value of the Cdn$ has been hurting exports (except it seems for oil and gas). Weak exports werecited as a reason as to why the 3rd quarter growth was so anaemic.

- As well the announced departure of BofC Governor Mark Carney to take over as head of the BofE alsoappeared to little impact on the Cdn$.

- The Cdn$ found support at the 40 week MA (100) but remains below resistance at the 13 week MA(101.13).

- Weekly indicators are weak although some fast moving ones are attempting to turn higher. Theintermediate trend is in a weak uptrend. Daily indicators are pointed up but the short term trend is neutral.

- If the Cdn$ can break out over 101 then there is further resistance up to 102.60. Only over 102.60 couldthe market turn more firmly higher and potentially challenge the April and July 2011 highs near 106. Atthis time the odds of that happening appear low.


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- Downside support is at 100 and then down to just above 99. A break under 99 could lead to furtherdeclines down to 98.

- The Cdn$ could be tracing out a large topping formation. Major long term support is near 95. The onlyway this pattern could be broken is for the Cdn$ to break out above 103 and then see new highs above106. Right now the odds of that happening appear low as does the odds of a major breakdown.

US Dollar Index


- After falling sharply the previous week the US$ Index appeared to be consolidating the loss with narrowloss this past week. The US$ Index fell a small 0.1%.

- The Euro touched a one-month high this past week but the gain on the week was a very small 0.1%. TheBritish Pound fell 0.1%. As to the Japanese Yen and the Swiss Franc well they were essentiallyunchanged on the week as the Yen lost 0.02% and the Swiss Franc gained 0.01%. Traders might havedied of boredom given those kinds of moves.

- The commercial COT of the Euro slipped a bit this past week down to 72% from 77% the previous week.- Long open interest dropped 15,000 contracts and short open interest jumped 5,000 contracts. The suggest

that the US$ decline may be stalled for the time being.- The Swiss Franc commercial COT fell sharply to 49% from 71%. This might be an even stronger

indication that the US$ ability to fall further at this time might be limited.- For the record the British Pound commercial COT also fell down to 42% from 47% however, the

Japanese Yen commercial COT strengthened to 80% from 77%.- The US$ Index has support at 80 but resistance at 81 and up to 81.50. Above 81.50 there is further

resistance at 82.- Above 82 the US$ Index could exhibit further strength and test the highs the highs of July 2012 at 84.25.


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ENERGY

Intermediateterm trend

Short-termtrend

week trend intermediate strategy

Oil down neutral up Stand asideNatural Gas up down (weak) down Long

XOI Index neutral down down Stand aside

TSX Energy Index down (weak) down down Stand aside

(For definitions of terms, see end of report)

Oil & Gas


- Oil prices continue to find support down to $85, however, firm resistance appears to be forming justbelow $90. Oil prices eked out a 0.7% gain this past week as trading could only be best described aslethargic.

- The bloom appears to have come off natural gas (NG) as prices fell a sharp 11.7%.- Oil prices were encouraged by some positive economic numbers in the US this past week. However, like

everything else the Damocles sword of the so called fiscal cliff hangs over the market. The mostencouraging economic number according to pundits was the Chicago PMI that moved back over 50 with areading of 50.4. This was an improvement over the previous months reading of 49.9. From my


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standpoint this number was hardly earth shattering and showed at best a muddle along economy with thereal risks to the downside.

- While oil prices do respond to economic conditions oil prices are the most sensitive to politicalmaneuverings particularly in the Mid-East. Here the dangers remain even if the they are relatively in thebackground at present. In a word, Syria, Iran and Israel/Palestine are the conflicts in the Mid-East thatcould oil prices higher. Syria is the least of the areas.

- Oil prices have resistance at $90 and then up to $95. Only above $95 does oil prices have a good chancethen of moving to $100 and higher. Major resistance remains up to $107.

- Oil prices still appear to be forming a potential large bottom pattern. Support is at $85 but below $85 oilprices would likely test down to $80 and even the June 2012 lows near $78. The October 2011 lowsremain the benchmark over the past few years. This support is down to just under $76. The odds offollowing that low appear to be low given the ongoing conflicts in the Mid-East.

- The EIA reported this past week that oil supplies fell a small 0.3 million barrels, however, they remain39.4 million barrels above last years levels; gasoline supplies rose 3.9 million barrels but are 5.6 millionbarrels below last year; while, distillates fell 0.8 million barrels and are 26.4 million barrels below lastyear.

- Are NGs sharp run-up over? Part of the reason for the fall a jump in storage in the US. While theinjection was only a small 4 Bcf it was 22 Bcf above the 5 year average. Normally it is a withdrawal

during this period. The injection was also 2 Bcf above last years levels. NG continues to be plagued byoversupply.

- NG may have made a small double top on the charts. The breakdown under $3.60 suggests a potentialdecline to $3.15. A break of $3.40 would suggest that a fall to that level was possible. Major trendlinesupport appears to be down to $2.85.

- Oil prices remain in a weak short term uptrend while the uptrend in NG was shaken this past week.Overall the intermediate trend for oil remains down while for NG it is up but as noted the fall this pastweek has damaged the uptrend.

- Winter usually brings higher prices for both oil and gas and the threat of war in the Mid-East pulls oilprices higher.

- These positive seasonals for both oil and gas may be the best scenario for oil and gas going forward.


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Amex Oil & Gas Index (XOI) and TSX Energy Index (TEN)

Charts created using Omega TradeStation 2000i. Chart data supplied by Dial Data

- Despite a rise in oil prices this past week the energy lost ground. The AMEX Oil & Gas Index (XOI) lost0.5% while the TSX Energy Index (TEN) fell 0.7%. It probably didnt help that natural gas prices fellsharply.

- The energy indices continue to trace out what appears to be a bottoming pattern. The XOI has resistanceat 1,220 but above 1,230 the XOI could be breaking out. Support is seen down to 1,160 and if the XOIwere to fall further below 1,120 it would suggest that new lows were possible.

- The TEN has considerably less latitude. Moving average resistance is seen at 255 and there is furtherresistance up to 260. Support is close by at 240. A breakdown under that level could suggest that the TENcould fall further to test the June lows near 220.

- Daily indicators are in an uptrend; however, weekly indicators are neutral here. While daily indicators arein an uptrend it has not as yet turned the short term trend up. The neutral weekly indicators are confirmedwith the intermediate trend neutral as well (the TEN is in a weak downtrend, which is means it is close toneutral readings).

- The energy indices continue to trace out what appears to be a bottoming pattern. However, the currentpattern is such that it needs to be realized with a breakout to the upside to confirm. Otherwise the pattern

could well just be a long consolidation following lows that were seen in October 2011. The TEN has whatappears to be a double bottom in October 2011 and June 2012 (both in the 215 to 220 range) while theXOI has been making higher lows. However, the highs of September 2012 were below the highs ofFebruary 2012 (the TENs highs were also lower) so that suggests that a triangular pattern is nowforming.

- This heightens the importance of an upside breakout if this rally is to continue.


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- TSX Indices- It was very lethargic week in the markets. The S&P TSX Composite barely moved positing a small gain

of 0.2%. The TSX 60 fared only slightly better with a gain of 0.4%.- The same could not be said for the TSX Venture Exchange (CDNX) that suffered a 3% decline. The

CDNX remains buried barely above the lows seen in June at 1,154 (current close at 1,221). The most

recent highs were last seen in February 2011 at 2,465 leaving the current market down 50% from thatwatermark. The CDNX peaked in April 2007 at 3,372. The market is down almost 64% from those highs.The CDNX is currently trading at levels seen in 2002 and the early part of 2003. The current decline thathas now lasted almost 2 years is almost unprecedented for the junior exchange.

- The S&P TSX Composite, however, cannot really brag. The TSX is down 14% from its April 2011 highsand down 19% from its all-time highs seen in June 2008. Very few sub-indices are above their 2008highs. The exceptions are Income Trusts, Consumer Staples, Health Care, and Metals & Mining. Gold isslightly below its 2008 highs and well off its 2011 highs. On the other hand, gold and silver are wellabove their 2008 highs one of the few strong performers in the past four years.

- The lethargic week generally played itself out amongst the sub-indices as well. Eight of fourteen sub-indices were up on the week led by Industrials that had a 1.6% gain. Financials were up 1.5% and Metals& Mining gained 1.4%. Golds were the leader to the downside losing 2.8%. Materials lost 1.7% and

Energy fell 0.7%.- There were a couple of intermediate trend changes this past week: S&P TSX Composite neutral to up;

and, Energy neutral to down. The S&P TSX Composite as a result gave a buy signal. However, theuptrend is very weak and the index only barely changed from its neutral reading to one of up.

- There were very few short term trend changes as follows: S&P TSX Composite down to neutral;Industrials neutral to up; and, Metals & Mining neutral to up.

- That Metals & Mining bucked the weakness seen in Golds, Energy and Materials is an interestingdivergence. Normally all four move in the same direction.

- The S&P TSX Composite is holding above the 40 week MA support at 12,020 but below 13 week MAresistance at 12,285. The support 12,000 resistance 13,000 has narrowed considerably over the past fewweeks.

- This suggests that market is possibly coiling for a break out move.- If the breakout is over 13,000 then confirmation would only come with a move and close above 12,500.

On the other hand if the break out is down then confirmation would come with a breakdown under11,800.

- Indicators are quite neutral here, however, the key MACD indicator has not as yet crossed over to thedownside. This leaves the market with the potential to breakout to the upside with a downside breakdownless likely.

- There is an old adage dont sell a quiet market. The market has been very quiet almost to the point ofboredom.

- The pattern forming over the past few weeks may be a flag or pennant formation. One could also make anargument that the S&P TSX Composite is forming a large triangular bottom. A breakout over 12,500would be a confirmation that an upward move is under way. Potential objectives could be as high as14,000.

- The lines appear to be forming. Above 12,500 and the market goes up and below 11,800 the market falls.Anything in between would appear to be just more lethargic trading.


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TSX INDICES

trend

close on

Nov 3052-week

high

52-week

low

interm-

ediate

trend

short-

term

trend

Week

trend

strategy

TSX Composite 12,239.36 12,788.63 11,209.55 up (weak) neutralup

(small)Buy?

TSX 60 702.59 728.03 637.70 up (weak) neutral up Long hold (caution)

TSX Venture 1,220.90 1,696.14 1,153.90 down down down Stand aside

Energy 249.26 295.40 218.70down

(weak)

down down Stand aside

Financials 187.65 190.51 156.34 up up up Long hold

InformationTechnology

25.96 27.25 21.37 up updown

(small)Long hold

ConsumerDiscretionary

93.44 94.55 79.80 up up up Long hold

Consumer Staples 234.56 234.98 196.48 up up up Long hold

Healthcare 61.85 71.50 55.65 down down down Stand aside

Industrials 117.24 118.98 99.66 up up up Long hold

Materials 325.68 396.99 277.78 neutral down down Long hold (caution)

Telecommunications 111.10 112.32 97.80 up upup

(small)Long hold

Utilities 217.13 232.96 209.77 down down up Stand aside

Gold 309.93 424.51 265.99down

(weak)down down Stand aside

Metals & Mining 944.82 1,258.22 781.13 neutral up upStand aside

(bottoming?)

Real Estate 227.26 238.92 196.01 neutral neutral up(small) Long hold (caution)

Income Trusts 181.80 193.00 161.51 neutral down down Long hold (caution)

(for definitions of terms, see end of report)


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EXCHANGE TRADED FUNDS

- Lethargic markets continue everywhere.- So many of the ETFs below are in either neutral or weak up or down trends. Even ones that did not

attract weak in parenthesis are no balls of fire.- Intermediate term trend changes were as follows: XGD neutral to down; XEG neutral to down; QQQ

down to neutral; SPY neutral to up; EEM neutral to up; JJC down to neutral; and, IFN neutral to up. Sellsignals were generated for XGD and XEG while SPY generated a buy signal. It should be noted,however, that one cannot describe these up or down trends as strong. They are barely above the readingsthat would have the trend in neutral. The market is very lethargic.

- Short term trend changes were as follows: XBB down to up; XSB down to neutral; XRB down to up;XIC down to neutral; QQQ down to neutral; SPY down to neutral; GLD neutral to down; JJC down toneutral; and , IFN down to neutral.

ETF intermediatetrend

short-termtrend

intermediate strategy

XGD/T Gold down (weak) down Sell (reluctantly)

XMA/T Materials neutral down Long hold

XIT/T Technology up up Long holdXFN/T Financials up up Long hold

XEG/T Energy down (weak) down Sell (reluctantly)

XRE/T REIT down (weak) down Stand aside

XIU/T TSX 60 up (weak) neutral Long hold

XSP/T S&P 500 up up (weak) Long holdXBB/T Bonds up (weak) up Long hold

XSB/T Short Bonds down neutral Stand aside

XRB/T Real ReturnBonds

up up Stand aside

XIC/T Composite up (weak) neutral Long hold

XMD/T Mid-Cap neutral down Long hold (caution)QQQ NASDAQ neutral neutral Stand aside

SPY/NY S&P 500 up neutral Buy?

EWJ/NY Japan neutral up Stand aside (bottoming?)

FXI/NY China 25 up up Long hold

EEM/NY EmergingMarkets

up (weak) up Long hold

GLD/NY Gold up down Long hold

SLV/NY Silver up up Long holdJJC/NY Copper neutral neutral Stand aside (bottoming?)

IEV/NY Europe up up Long hold

IFN/NY India up (weak) neutral Long hold (caution)TLT/NY 20-year bond up up Long hold

for definitions of terms, see end of report


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Horizon Beta Pro Single ETFs

- The HBP Comex Gold, Comex Silver and Winter NYMEX Oil and Winter NYMEX Natural Gas arecurrency hedged.

- The HBP Inverse ETFs can be used as portfolio hedges or as positional trades.- There wasnt a lot of changes this past week.- There were no intermediate trend changes.- Short term trend changes were as follows: HUC neutral to up (weak); HUN up to down; HIX neutral

to down (weak); and, HIG neutral to up.

ETF Intermediatetrend

short-termtrend

intermediate strategy

HBP Comex GoldHUG/T

up neutral Long

HBP Comex SilverHUZ/T

up up Long

HBP Winter NYMEXCrude Oil HUC/T

down up (weak) Stand aside (bottoming?)

HBP Winter NYMEXNatural Gas HUN/T

up down Long

HBP S&P TSX 60Inverse HIX/T

down down (weak) Stand aside

HBP S&P FinancialsInverse HIF/T

down down Stand aside

HBP S&P EnergyInverse HIE/T

neutral up Stand aside

HBP S&P Gold InverseHIG/T

down up Stand aside

for definitions of terms, see end of report


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DEFINITIONS OF TERMS

Intermediate-term trend (weekly trend): Of interest to conservative long term investors. As long as the intermediate trend is up,conservative long term investors can continue to hold. But watch the short-term trend for possible trend changes coming.

Short-term trend (daily trend): Of interest to more aggressive investors and traders. When the short term trend turns up moreaggressive investors and traders may wish to go long. Note though that all strategy signals are based on the intermediate trend only.

Strategy:

Buy: All buy signals relate solely to the intermediate trend. A buy signal is issued when the intermediate trend turns up.

Sell: All sell signals relate solely to the intermediate trend. A sell signal is issued when the intermediate trend turns down.

Stand aside: intermediate strategy is in stand aside mode following a sell signal.

Long or long hold: intermediate trend is up following a buy signal and investors can continue to remain long.

Long or long hold topping or caution: short term indicators are diverging negatively and there are other indicators indicating to usthat the market may be topping out. Confirmation will only come when the intermediate trend turns down and issues a sell signal.

Stand aside - bottoming: short term indicators are diverging positively and there are other indicators indicating to us that the market

may be about to change from stand aside to buy. Confirmation will only come when the intermediate trend turns up and issues a buysignal.

Stand aside accumulate: similar to stand aside bottoming above except investors may wish to consider accumulating.Confirmation will only come when the intermediate trend turns up and issues a buy.

(New highs, new lows): market or index is making new highs or new lows.

Trend Signals:

Up Trend is up.

Down Trend is down.

Neutral Trend has entered a transition phase before either resuming the current trend or changing trend. This is a caution zone andsignals that a trend change may be in the offing.


Copyright 2 01 2 All Rights Reserved David Chapman


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General DisclosuresThe information and opinions contained in this report were prepared by MGI Securities. MGI Securities is owned by Jovian CapitalCorporation (Jovian) and its employees. Jovian is a TSX Exchange listed company and as such, MGI Securities is an affiliate ofJovian. The opinions, estimates and projections contained in this report are those of MGI Securities as of the date of this report and aresubject to change without notice. MGI Securities endeavours to ensure that the contents have been compiled or derived from sourcesthat we believe to be reliable and contain information and opinions that are accurate and complete. However, MGI Securities makesno representations or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained

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technical commentary - december 3, 2012

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