technical commentary for week of february 11, 2013

7/29/2019 Technical Commentary for Week of February 11, 2013

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The Chapman Report for February 11, 2013 page 1 of 21

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INDICES

S&P 500Intermediate Trend: Up Short-term Trend: Up Week: Up (new highs)

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

- Stronger than expected earnings helped propel the S&P 500 to another high close this past week. TheS&P 500 gained 0.3% this past week. However, the Dow Jones Industrials Index (DJI) fell 0.5% evenas the Dow Jones Transportation Index (DJT) gained 0.5%. All three indices made new highs for theirmove to the upside.

- The S&P 500 closed at 1,517.95 after hitting a high of 1,518.30. The October 2007 high was at1,576.10.

- TC has long held objectives for the S&P 500 of 1,525, 1,550 and even up to 1,600. With the close thispast week the S&P 500 is closer to those objectives.

- The S&P 500 may be forming an ascending wedge triangle. This pattern is bearish. A breakdownunder 1,500 would bust the potential triangle. Potential objectives would be down to 1,400. Interimsupport would be seen in the 1,450 area.

- The current top of the wedge triangle this coming week appears to be up at 1,527.- As TC has noted in the past cycles show that for years ending in 3 the majority of tops or bottoms

occur in January or February. Until the market breaks to the downside the market does have a low inJanuary. The other cycle that may be in play here is the one from 2000 when the market topped out inMarch at 1,553.

- This is the third time since 2000 that the S&P 500 is over 1,500. As has been noted before from 1966to 1982 the DJI touched at, near, or above 1,000 in 1966, 1968, 1972, 1976 and 1981.

- The first year of the Presidential tends to be the most bearish.- As noted the S&P 500 has resistance at 1,525 to 1,530. Support is at 1,500. Under 1,500 the next

good support is at 1,470. Below 1,470 the S&P 500 would fall to 1,450. Major long term support is at1,380. Under that level the S&P 500 would enter a major bear market.

- Helping the markets rebound this past week was a 4.7% gain by Apple (AAPL-NASDAQ). Applegained 4.7% this past week. However, Apple has fallen almost 33% from its highs of September 2012.

THE CHAPMAN REPORT

Charts and commentary by David Chapman

February 11, 2013


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It is possible that a corrective up move gets underway. If that were correct that would help themarkets and also help keep this market up into March.

- Over 1,530 the S&P 500 should rise to 1,550. Over 1,550, the S&P 500 could then make a movetowards 1,600. The highest objective that TC currently has is 1,605.

- The current wave to the upside appears to a 5th wave from the lows of October 2011. It is possible thatthe low of 2011 was the 4-year cycle. If that is correct then the cycle came in early almost too early to

be the low of the 4 year cycle. The previous cycle bottomed in March 2009.- If the market were to top in February or March 2013 then it could be final top for the current 4-year

cycle. The market could then see a sharp drop into the latter part of 2013. This would fit with anormal 4-year cycle dating from the March 2009 low.

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


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

NASDAQ STRATEGY: Long hold(for definitions of terms, see end of report)

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

- For the sixth consecutive week the NASDAQ was up this time gaining 0.5%. The high of 3,196.89was just shy of the September 2012 high of 3,196.93.

- At these levels, odds favour new highs.- The NASDAQ appears to be forming an ascending wedge triangle. This has been building since the

NASDAQ gapped higher on January 2, 2013.

- The current top of the wedge triangle is at 3,250 so it is possible that the NASDAQ could continue itscurrent hot run once it is above the September 2012 highs.

- Support should be seen at 3,160. A breakdown under that level would be negative and suggest furtherdeclines 3,090 to 3,100.

- Weekly indicators are beginning to make some negative divergences. Momentum indicators arelagging previous move higher made in March 2012 and September 2012. Odds are that the NASDAQis undergoing a terminating phase.


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BONDS

US TREASURY BONDS Intermediate Trend:Down

Short-term Trend:Down

Week: Up

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


- US Treasury bonds as represented by the 30-year bond futures bounced up this past week following twoconsecutive down weeks. The 30-year Treasuries gained 0.6% this past week.

- Ten-year US Treasury notes slipped to 1.99% from 2.04% the previous week. Two-year Treasury noteswere 0.25% down from 0.27% the previous week.

- The decline in the 10-year Treasury notes this past week was the largest since November.- US Treasuries declined this past week due to weaker than expected growth in the Euro zone. German

exports grew less than expected in Dec and that helped spur some flight out of the Euro into the US$ andUS bonds.

- Also helping the US Treasuries was a narrowing of the trade deficit. The trade deficit for Dec narrowed to$38.5 billion from $48.7 billion in Nov. The market had expected a deficit of $42.5 billion. The USdeficit narrowed as the US imported less oil. With shale oil and gas extraction growing it is beginning tolessen US dependence on imported foreign oil. The reported trade deficit was the smallest in 3 years.

- Other numbers released this past included Dec factory orders that rose 1.8% following a 0.3% decline inNov; the ISM services number for Jan was 55.2 vs. 55.7 for Dec; while Dec wholesale inventories fell0.1% vs. a gain of 0.4% in Nov. Consumer credit for Dec jumped a sharp $14.6 billion when the market


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was only expecting a gain of $10 billion. The Nov jump in consumer credit was $15.9 billion. The risingconsumer credit bodes well for retail sales but it is a concern that consumer debt is rising once again.

- This coming week retail sales for Jan will be released. The market is expecting a tiny gain of 0.1%following a 0.5% gain in Dec. A gain of that magnitude is largely inconsequential.

- US industrial production for Jan is also out looking for a gain of 0.2% vs. Decs gain of 0.3%. Capacityutilization for Jan is expected to be 78.9% up slightly from Decs 78.8%.

- Some of the recent improvement in economic numbers has some suggesting that the Q4 GDP might be revisedupward. The Q4 GDP was reported at a negative 0.1%. Some expect the improved trade numbers amongst othersmight see the Q4 GDP revised upwards to a gain of 0.5%.

- The Fed continues to buy US debt. The Fed balance sheet is now over $3 trillion. It was noted that US debt hasincreased $47.2 billion thus far in 2013 but the Feds US Treasury holdings have jumped $51.1 billion. Thatsuggests that the Fed has purchased $3.9 billion more in US debt than what was issued since the beginning of theyear.

- The US monetary base grew by $32.6 billion from January 23, 2013 an increase of almost 1.2%.- The US issues $72 billion of 3, 10 and 30 notes and bonds this coming week.- The 30 year US Treasuries have support down to around 140. Considerable resistance is above at 147, 150 and 152.

Only above 152 could the US Treasuries see new highs (close this week at 143^22).- Despite the recent negativity for US bonds odds of a major collapse in the bond market appears to be low. The

reality is that the US with $16.4 trillion of debt simply cannot afford higher interest rates. They will do what they

need to do to keep interest rates low. If there is one thing that could impact US bonds negatively that is a majorcollapse of the US$ and the China dumping their US Treasury bond holdings. The US and China may be in acurrency battle but the odds of China taking that drastic step appear to be low. However, China is not adding to theirholdings. The result is that the Fed continues to be the major buyer of US bonds of late.

- The intermediate trend system remains down and the bond model system is on the sidelines.


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-CANADIAN BONDS

Intermediate Trend: Down Short-term Trend:Down

Week: Down

CANADIAN BONDS STRATEGY: Trend System Stand aside; Bond Model Stand aside


- Canadian bonds as represented by the Government of Canada ten-year bond futures (CGBs) broke theirrecent downtrend by gaining 0.6% this past week. Despite the gain the downtrend remains intact.

- Cdn bonds appear to have improved this past week as Canada reported a disappointing Jan jobs number.- Jobs in Jan were reported to have fallen by 21,900. This followed a gain of 39,800 the previous month.

Both full-time and part-time employment fell. The participation rate fell to 66.6% from 66.8%. The dropin the participation rate helped push the headline unemployment rate down to 7% from 7.1%.

- The international trade deficit narrowed for Dec to $0.9 billion from $1.67 billion in Nov. This was seenas positive. However, housing starts for Jan plunged to 160.6 thousand from 197.1 thousand. Buildingpermits for Dec plunged 11.2% following a plunge of 14.5% in Nov. On the other hand the IveyPurchasing Managers Index for Jan jumped to 58.9 vs. 52.8 in Dec.

-

Overall the economic numbers released this past week showed a slowing Cdn economy. This helped pushbond prices higher and the Cdn$ lower.- There is only one important economic number out this coming week. Cdn manufacturing shipments for

Dec are expected to be down 0.5% following a 1.7% gain in Nov.- The gain for Cdn bonds this past week offset some of the sharp drop seen the previous week. Major

support for the bonds is seen at 132 (close this past week at 133.96).- A break above 135 would be positive, however, the CGBs need to break out over 137 to suggest that

they might attempt to challenge the highs of July 2012.


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- In the interim, the CGBs remain on the sidelines for both the intermediate trend and the bond modelsystem.

PRECIOUS METALS AND CURRENCIES

Intermediateterm trend

Short-termtrend week trend intermediate strategy

Gold neutral neutral down (small) Long hold (caution)

Gold Bugs Index (HUI) down down up (small) Stand aside

Silver up (weak) up (weak) down Long hold (caution)

TSX Gold Index down down down (small) Stand aside

US$ Index down up down Stand aside

CDN$ neutral down up Long hold (caution)

(for definitions of terms, see end of report)

Gold & Silver


- A stronger US$ helped push gold and silver slightly lower this past week. Gold slipped a small 0.2%while silver was off 1.6%.

- Gold continues to trade around the 200 day MA while silver is holding above that key support zone.


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- Short term both gold and silver made lower highs over the past week or two and that suggests that theymay have another downside drop even as the fundamentals continue to improve.

- Gold has support at $1,640 but a break under that level could suggest a drop to $1,600 to $1,610.- Silver has support at $30.70 but a drop under that level could see silver prices fall towards $29.- Given numerous positive indicators on the weekly charts any further drop for both gold and silver at this

time should be short-lived.

- The gold commercial COT slipped slightly this past week to 31% from 33%. However, the fall wasmostly caused by a drop in long open interest by 14,000 contracts even as short open interest dropped by7,000 contracts. Overall open interest dropped by 7,000 contracts. Falling open interest is usuallyassociated with corrective action whereas rising open interest is normally associated with the trendwhether rising or falling.

- The silver commercial COT was steady at 32%. Both long and short open interest rose roughly 1,000contracts.

- Gold has resistance at $1,680 and up to $1,695. A breakout over $1,695 would be positive and suggest amove up to $1,720. Above $1,720, the next major resistance is at $1,760 and up to $1,800. A breakoutover $1,800 could suggest objectives for gold up to $2,140.

- Silver has resistance at $32 and $32.50. Above $32.50, silver could rise to $34 resistance. Over $34,silver breaks out and has potential objectives up to $45 and up to $56.

- Both gold and silver continue to trace out what appears as very large triangular patterns from theSeptember 2011 high for gold at $1912 and the May 2011 high for silver at $49.50. The pattern appearsas a potential ABCDE triangle. If that is correct then this is the E wave.

- The triangle for gold breaks out above $1,750 and projects up to $2,140. Silver breaks out above $32.65and has potential objectives up to $56.

- The major support zone that should hold is gold holding above $1,610 and silver holding above $29.50 ona weekly closing basis.

- Other precious metals continue to act bullish. Platinum was up 1.6% this past week as problems continuedin South Africa. Because of mine closures, platinum supply has fallen to a 13 year low. Palladium,however, fell 0.7%. Copper was off a small 0.4%.

- Gold in Japanese Yen terms made new highs this past week.- Chines imports of gold from Hong Kong doubled in 2012.- Gold sentiment is about as low as TC has seen it in recent months. There have been numerous bearishpredictions.- Central banks around the world continue with loose monetary policy. QE is prevalent in Japan, the Euro

zone, Britain and the US.- All of these countries are concerned about attempts by the other countries to devalue their currencies. Of

late Japan has been the worst offender. Statements from the other countries hint at that being a problemand all want to prevent their own currency from rising. This past week it was the Euros turn to fallsharply.

- China continues to build its gold reserves. Despite Chinas recent build-up of gold reserves, it still onlyrepresents some 2% of their total reserves. This compares to the 70% of reserves for the US, Germany,France and even Italy. Russia has also been increasing its gold reserves and they are now up to just over10%.

- Germany has recently asked to repatriate some 300 tonnes of gold currently being held at the NY FederalReserve. That it would take seven years to repatriate the gold has raised more questions than answers.- China by building its gold reserves is trying to promote acceptance of the Yuan as a global currency.

China also wants to get rid of the US$ peg and is trying to create a Yuan currency zone in Asia. In orderfor China to have global acceptance of the Yuan they need to build their gold reserves.

- Despite sound fundamentals for gold, gold could still have one more plunge to the downside. If that iscorrect it could complete a five-wave decline from the highs of September 2012 and also complete apossible E wave. Silver has traced out a similar pattern.


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Gold Bugs Index (HUI) and TSX Gold Index


- Last week TC mused that the gold stocks must have an up week this past week in order to suggest that thegold stocks may have bottomed.

- The gold stocks did have an up week even if it wasnt a strong one. The Gold Bugs Index (HUI) gained0.8% while the TSX Gold Index (TGD) was up 0.4%. The up week occurred even as gold and silver wereoff slightly this past week.

- It is possible that both the HUI and the TGD are attempting to form a descending wedge triangle.- The HUI needs to stay above 385 and the TGD above 270 in order to suggest that this is possible.- A breakout above 425 for the HUI and above 292 for the TGD this coming week would suggest that low

might be in.- Patterns left on the charts over the past couple of weeks are suggestive of a possible low.- Momentum to the downside has slowed considerably over the past several weeks. There are numerous

positive divergences visible on the weekly charts.- Even if the HUI and the TGD break out above the levels noted above there is considerable resistance

above that needs to be overhauled before a confirmation of low could be seen.- The HUI has resistance at 440 and 460 once past 425. The TGD has resistance at 310 and 325 once over

292.- Neither the HUI nor the TGD have dropped to potential objectives from the descending triangles that

formed from mid-November 2012 to mid-January 2013. The HUI has (had?) objectives down to 383 (lowthus far 393) and the TGD down to 255 (low thus far 275). Failing to achieve these objectives is bullish.

- On the other hand both the HUI and the TGD may be just forming a pennant formation over the pastcouple of weeks. This is the more bearish case.


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- A break under 400 for the HUI and under 278 for the TGD would be somewhat bearish. The HUI triangleprojects down to 383 (the descending triangle objective) and the TGD triangle projects down to 266 (stillabove the possible descending triangle objective).

- If that scenario proves correct it could be a short-lived drop and would for both the HUI and the TGDcomplete a possible 5-wave drop from highs seen on January 2, 2013.

- Either way there are numerous signs that suggest that the recent weakness in the gold stocks could besoon coming to an end.

Canadian Dollar


- Weaker commodity prices, particularly for oil and weak economic numbers helped push the Cdn$ lowerthis past week.

- The Cdn$ fell 0.6% this past week after gaining the previous week. It was the third weekly decline for theCdn$ in the last 4 weeks.

- The Cdn$ failed at 100 resistance. Helping to push the Cdn$ down was the job numbers that showed aloss of 22,000 jobs in Jan. The market had expected a gain. As well, housing starts for Jan were sharplybelow the Dec number.

- The Cdn$ has support at 99 but below that level a decline to 98 is probable. Below 98 there is support at97 but major support is not seen until down to 95.- Resistance is at 100 and at 101. Major resistance is at 102.- The Cdn$ commercial COT rose to 40% this past week from 37% the previous week. Four weeks ago the

commercial COT was at 17%. A rising commercial COT is potentially positive for the Cdn$ goingforward. The rise this past week was because of an 8,000-contract rise in long open interest. Short openinterest was flat.


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- The Cdn$ appears to be forming a large symmetrical triangle. This decline might be the C wave of apossible ABCDE type pattern. The A wave bottomed in October 2011 while the B wave topped inSeptember 2012. Following completion of a possible C wave there would be a D wave up and an E wavedown.

- Symmetrical triangles can either be consolidation patterns or they can be tops. If this is a consolidationpattern then a breakout to the upside could see a 12-point move from the breakout point. Conversely, if

this is a top the breakdown could have objectives 12 points below the breakdown point. The breakout orbreakdown points have yet to be determined and would not become clear until the D and E wave arecomplete.

US Dollar Index


- The see-saw battle of the currencies continued this past week this time with the US$ benefitting.- The US$ Index rose 1.5% as the Euro currency sunk 2.2% after ECB President Mario Draghi commented

that a rising Euro could hurt the Euro zones economic recovery. This suggested that the ECB mightlower interest rates further.

- The Japanese Yen fell 0.1% as the BoJ governor said he would step down early. This suggested that PMShinzo Abe might push for further easing. Japan is already carrying out its own form of QE.

- The pullback in the Euro was probably overdue. The Euro has been steadily rising since lows were seenback in July 2012.

- The British Pound rose 0.5% this past week as there appeared to be good acceptance for the new BofEhead former BofC governor Mark Carney. The Swiss Franc fell 1.1% along with the weakening Euro.

- The Euro, however, does remain in an uptrend and the US$ Indexs intermediate trend is still down.- However, the US$ Index has once again found support at 79.


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- The US$ Index has resistance at 80 but stronger resistance is seen at 81. The US$ Index closed the weekat 80.32.

- The 79 support level continues to hold. However, the US$ Index still has what appears to be a large headand shoulder top pattern that breaks down under 79 and has potential objectives down to 73.

- The head and shoulder top pattern becomes questionable above 81.50 and invalidated above 82.- The Euro commercial COT was at 40% this week down from 41% the previous week. Long open interest

rose 8,000 contracts but short open interest jumped 15,000 contracts. The commercial COT is somewhatnegative for the Euro.

- The Japanese Yen commercial COT slipped to 81% from 83%. The commercial COT for the Yen,however, remains positive despite the recent sharp decline for the currency. The British Poundcommercial COT was at 55% vs. 50% the previous week and the Swiss Franc commercial COT fellsharply to 20% from 38%.

- The currencies are in a see-saw battle. The Japanese have been actively pursuing a lower Yen and that inturn could generate a negative response from the other G-4 members. The Europeans are concerned abouttheir rising currency and would like to stem that rise. Between Draghis comments, some weakereconomic numbers particularly out of Germany and continued weakness in Spain and Italy it helped pushthe Euro back this past week. The US talks a strong dollar but their actions continue to suggest a desirefor a weaker US Dollar. The Chinese dont want their currency to rise as it would be negative for their

export dependent economy. However, the Chinese want it both ways by working to create a Yuancurrency zone in Asia that would no longer use the US$ for trade.

- Some call what is going currency wars although officially all would deny any knowledge of currencywars.

- The key for the US$ Index remains at 79. The topping pattern appears good, however, if the market wereto break out above 82 any thought of a US$ breakdown would be over.


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ENERGY

Intermediateterm trend

Short-termtrend

week trend intermediate strategy

Oil up up down LongNatural Gas up (weak) down down Long (caution)

XOI Index up up up Long hold (new highs)

TSX Energy Index up up down Long hold

(For definitions of terms, see end of report)

Oil & Gas


- Brent crude surged to a 9 month high because of strong exports by China. But West Texas Intermediate(WTI) prices slipped as the US recorded a narrower trade deficit thanks to lower oil imports. The US hasstarted riding a boom in shale oil and gas and that is lowering the USs dependence on imported oil.

- Brent crude prices rose 1.4% to $118.90 but WTI slipped 2.1% this past week to $95.72. A stronger US$didnt help WTI prices.

- Natural gas (NG) prices continue to be weak as they fell another 0.9%.- The drop this past week for WTI ended a string of eight consecutive up weeks. A pause was probably

overdue.


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- WTI has support at $95 but under that level a decline to $90 is possible. Some interim support at $93could be seen.

- WTI has resistance up to $98 but above that level a run to $105 is possible. There would be interimresistance at $100.

- The Brent WTI spread is widening because of increased demand in Asia along with a tight market. WTIis also being hurt with the glut gathering at the Cushing, Oklahoma delivery point. There had been some

expectation that Cushing would open up and that helped narrow the WTI/Brent spread but since January31 it has been widening after an announcement came out that capacity would be limited at Cushing.

- Brent is widening with WTI because of strong fundamentals and not because of risk that the Mid-Eastwill blow up any time soon.

- The Mid-East remains a potential hot spot. If the Mid-East were to blow up then WTI could break outover $105 and there would be potential objectives up to $145.

- The EIA reported that crude supplies rose 2.6 million barrels this past week leaving them 32.4 millionbarrels above last years levels; gasoline supplies rose 1.7 million barrels and are 2.3 million barrelsabove last year; and, distillates fell 1 million barrels and are 17 million barrels below last year. The crudeglut is helping to keep a lid on WTI prices.

- If gluts are impacting WTI prices gluts are also keeping a lid on NG prices. While overall it has been awarm winter this week storms blew in on the East Coast and much colder weather was predicted. This

could keep NG prices firm at least temporarily.- The winter season withdrawal continues with working gas in storage falling to 2,864 Bcf this past week a

decline of 118 Bcf from the previous week. This was 47 Bcf below the 5-year average but 24 Bcf abovelast years level.

- NG prices are trading in a narrower range. Resistance is at $3.50 and support is at $3.10 to $3.15. Above$3.50 further resistance would be seen at $3.60 and $3.75. Below $3.10 a decline to $2.60 is probable.

- Asian demand is keeping Brent prices high but the growing oil and gas shale gas boom combined with theglut gathering at Cushing, Oklahoma is keeping a lid on WTI prices. The growing shale oil and gas boomis also hurting Cdn oil exporters as noted in the discussion on the TSX Energy Index below. Cdn oilproducers are receiving prices $25 to $42 below WTI. For many Cdn producers that means that their oilfields are no longer profitable.


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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

- With both oil and gas off this past week, the energy stocks succumbed to some profit taking. The AMEXOil & Gas Index (XOI) fell 1% while the TSX Energy Index (TEN) was down 0.7%. The XOI ended astring of 5 consecutive up weeks.

-

The XOI has thus far topped out around 1,375. A small platform has formed. This suggests that thecoming week could be down. The XOI is trying to find some support around 1,350 but below that level adecline to 1,325 and even 1,300 is possible. Below 1,300 the XOI could fall back to 1,250.

- A breakout above 1,375 would be positive and suggest further moves to 1,400 to 1,410. That was the highof May 2011. However, the XOI would have to break over that level to sooth any thoughts of a multi-month double top.

- The XOI did breakout of a possible huge symmetrical triangle pattern. The pattern suggests potentialobjectives up to 1,750. The symmetrical triangle appeared to complete a 5 point ABCDE type correctivepattern. Failure, however, to make new highs above 1,410 would be negative.

- The XOI indicators have turned up and appear to have considerable latitude to move higher. There are nonegative divergences on either the daily or the weekly charts. The daily indicators have, however,softened.

-

The TEN continues to struggle and underperform its US cousin. The struggles of the Alberta oilproducers are now becoming known. If WTI oil prices are below Brent oil then the price the Albertaproducers are receiving is even lower. This is due to the glut of oil collecting in the US and to the ramp upin production in the US of shale oil and gas. There are, however, considerable issues with the methodsused to extract the shale oil and gas (fracking) and that could yet be its undoing in the US.

- Nonetheless it is hitting the Cdn energy patch and it has happened fast. There was an excellent story in theSaturday Report on Business in the Globe and Mail entitled Twilight of a Boom.


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http://www.theglobeandmail.com/report-on-business/economy/twilight-of-an-energy-boom-albertas-new-

fiscal-challenge/article8415713/- The TEN is in an intermediate uptrend but it is weak. The TEN has resistance at 260. It is having

difficulty breaking over that level.- Support is at 255 and then down to 250. Below 250 could fall to 230. Under 230 there is the potential to

test the lows of June 2012 just below 220.

- A breakout over 260 would be positive and could suggest a move up to 270 and 275. Over 275 a run to300 is possible. The highs of March 2011 near 370 seem a long way off.

- Weekly indicators for the TEN have are only mildly to the upside. Momentum is weak. With thesoftening of the market over the past week, the daily indicators have weakened but have not as yet turnednegative.

- The XOI may well be hitting the pause button after a strong run-up. If oil prices in particular remainstrong and break over $100 odds favour the XOI to return to the upside and head for higher objectives. Arising XOI would help take the TEN higher as well.

- A failure on the other hand could prove to be quite negative. The breakdown points are seen at under1,300 for the XOI and under 240 for the TEN.


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- TSX Indices- Despite the market making new highs the previous week then closing lower the market did not follow

through to the downside this past week.- It was, however, a feeble rebound. The S&P TSX Composite was up a small 0.3% this past week. The

TSX 60 was also up 0.3%.

- The TSX Venture Exchange (CDNX) did not fare as well falling 1.9%. Despite the fall the CDNXcontinues to show at least some positive signs in the indicators. The weekly MACD has crossed to theupside even though the intermediate trend has not yet turned up.

- Seven sub-indices were up on the week and seven were down. Blackberry (BB-TSX) led the way forInformation Technology as the sub index jumped 7.8%. Real Estate was up 1.1% and Industrials jumped0.8%.

- Metals & Mining lost 3.8% followed by Utilities losing 0.9% and Energy off 0.7%.- There was little in the way of changes this past week.- There were no intermediate trend changes.- Short-term trend changes were as follows: CDNX up to down; and, Metals & Mining neutral to down.- Consumer Staples, Health Care, Industrials and Real Estate (by 0.01) made new highs.- Despite the small gain this past week, the pattern of the past three weeks appears to suggest that the

coming week should be down.- Key support is at 12,500 and as long as the market holds at or above that level it could regain and even

move to new highs.- Below 12,500, there is support at 12,300 and 12,000. The market breaks down under 11,760 which was

the November 2012 lows.- New highs above 12,900 would suggest that the market should reach 13,000 and even up to 13,500.- Weekly indicators are pointed up and there are not a lot of negative divergences. That suggests there is

potential for higher prices.- Daily indicators on the other hand have turned down but no sell signals have been seen.- The pattern over the past three weeks suggests this week could be down. New highs above 12,900 would

negate that.- Key is that on any pullback 12,500 holds.


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- TSX INDICEStrend

close on

Feb 8

52-week

high

52-week

low

interm-

ediatetrend

short-

termtrend

Week

trend

strategy

TSX Composite 12,801.23 12,895.28 11,209.55 up up up Long hold

TSX 60 734.50 742.39 637.70 up up up Long hold

TSX Venture 1,205.81 1,696.14 1,153.90 downdown

(weak)down Stand aside

Energy 254.93 295.40 218.70 up up down Long hold

Financials 198.26 199.62 164.65 up up up Long hold

InformationTechnology

30.57 30.77 21.37 up up down Long hold

ConsumerDiscretionary

101.43 102.79 81.74 up up down Long hold

Consumer Staples 253.84 254.78 197.94 up up up Long hold (new highs)

Healthcare 69.30 71.50 56.86 up up up Long hold (new highs)

Industrials 133.84 133.84 105.17 up up up Long hold (new highs)

Materials 316.41 392.23 277.78 neutral down down Long hold (caution)

Telecommunications 114.04 115.00 99.88 up up down Long hold

Utilities 229.46 235.24 209.77 upup

(weak)down Long hold

Gold 281.04 395.64 265.99 down down up Stand aside

Metals & Mining 977.66 1,258.22 781.13 up down down Long hold

Real Estate 241.07 241.16 204.79 up up up Long hold (new highs)

Income Trusts 188.39 193.00 169.17 upup

(weak) down Long hold(for definitions of terms, see end of report)


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EXCHANGE TRADED FUNDS

- Once again not much in the way of changes for the ETFs.- Intermediate term trend changes were as follows: XMA neutral to down; and IFN up to neutral.- Short-term trend changes were as follows: FXI up to down; EEM up to down; GLD down to neutral; SLV

neutral to up.

- New highs were seen for XSP (very slight new high).ETF intermediate

trendshort-term

trendintermediate strategy

XGD/T Gold down down Stand aside

XMA/T Materials down (weak) down Stand asideXIT/T Technology up up Long holdXFN/T Financials up up Long hold

XEG/T Energy up up Long holdXRE/T REIT up up Long hold

XIU/T TSX 60 up up Long holdXSP/T S&P 500 up up Long hold (new highs)

XBB/T Bonds down down Stand asideXSB/T Short Bonds down down Stand aside

XRB/T Real Return Bonds down down Stand asideXIC/T Composite up up Long hold

XMD/T Mid-Cap up up Long hold

QQQ NASDAQ up up Long hold

SPY/NY S&P 500 up up Long hold

EWJ/NY Japan up up Long hold

FXI/NY China 25 up down Long hold

EEM/NY EmergingMarkets

up down Long hold

GLD/NY Gold neutral neutral Long hold (caution)SLV/NY Silver up (weak) up (weak) Long hold (caution)JJC/NY Copper up up Long hold

IEV/NY Europe up up (weak) Long hold

IFN/NY India neutral neutral Long hold (caution)

TLT/NY 20-year bond down down Stand aside

HBP Winter NYMEXCrude Oil HUC/T

up up Long hold

HBP Winter NYMEXNatural Gas HUN/T

neutral down Long (caution)

HBP S&P TSX 60 InverseHIX/T

down down Stand aside

for definitions of terms, see end of report

Copyright 2 01 3 All Rights Reserved David Chapman


20/21


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.



21/21


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 for week of february 11, 2013

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