technical #commentary

7/29/2019 Technical #Commentary

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The Chapman Report for February 4, 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)

- The S&P 500 continued its upward march thanks to a number of encouraging economic numbers thispast week. Even when the market received negative news such as the 0.1% GDP decline in Q4 themarket shrugged it off knowing that the Fed had reaffirmed its bond buying program known as QE.The program purchases $85 billion a month of mortgage backed securities and US Treasuries. As aresult of its QE programs the Feds balance sheet has ballooned to over $3 trillion. Of that almost $1trillion is in mortgage backed securities much of it considered to be of questionable quality. Much ofthe remainder is in US Treasury bonds and notes. The Fed has become the main buyer of US Treasurybond and notes at auctions.

- All of this is good for the stock market. Market participants call it a risk on trade. The S&P 500closed over 1,500 for the first time since 2007 with a gain of 0.7% this past week. The Dow JonesIndustrials (DJI) closed over 14,000 for the first time since 2007 with a gain of 0.8%. On the otherhand the Dow Jones Transportation (DJT) fell for the first time in several weeks losing a small 0.2%.Nonetheless, the DJT managed to make a new all-time high before closing lower.

- In closing at 1,513, the S&P 500 is now only 63 points from its all-time highs of 1,576 seen inOctober 2007. Similarly, the DJI is with 270 points of its all-time highs of 14,279 also seen inOctober 2007.

- In returning to the previous highs the S&P 500 is acting similar to the DJI in the 1970s. The DJI firsthit 1,000 in 1966 then revisited the zone 1968, 1973, 1976 and 1981 before it made its final low inAugust 1982. In 1983 the DJI broke free of the 1,000 zone for good. The S&P 500 first hit 1,500 in2000 then again in 2007. This is the third time at the 1,500 zone.

- TCs long held objectives for the S&P 500 were 1,525, 1,550 and even up to 1,600. The high this pastweek was 1,514.

- With a preponderance of tops and bottoms in the markets for years ending in 3 there is a chance thatthe top could be seen this month. The current rise is becoming overbought and there are a number ofindicators flashing warning signs. However, the market remains to the upside now as long as it holds

THE CHAPMAN REPORT

Charts and commentary by David Chapman

February 4, 2013


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above 1,480. Under 1,480, a decline to 1,445/1,450 is probable. A breakdown under 1,445 would bemore negative and set up a possible decline to 1,380.

- This market could also hang on until March. Recall that the top in 2000, 13 years ago, was seen onMarch 24. Nonetheless, TC has no particular objectives beyond 1,600 at this time.

- The S&P 500 is now up 5 weeks in a row and 9 of the last 11 weeks. There are negative divergencesin the indicators developing across all time-periods. This heightens the potential for a top.

- The risk on trade is driving the market higher. QE is the fuel. That is not a healthy reason for amarket rally.

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)


- The NASDAQ rose 0.9% this past week, as it got closer to the highs of September 2012. TheNASDAQ is the only major US index that has not yet taken out its most recent highs. On the otherhand the NASDAQ and the DJT are the only indices that have taken out their 2007 highs although theS&P 500 and the DJI are not far off those highs.

- The NASDAQ could take out the September 2012 highs at 3,197 this coming week. The NASDAQclosed at 3,179 on Friday after hitting a high of 3,183 following the release of the employment report.

- The NASDAQ appears to be climbing in a bull channel. The top of the bull channel is currently near3,230.

- Any thoughts that the NASDAQ might have been forming a large head and shoulders top patternended when the NASDAQ closed over 3,134. The NASDAQ could still make a double top with theSeptember 2012 highs if it were to fail that top. As well the NASDAQ would be diverging negativelywith the other US indices.

- A break under 3,130 would be negative and imply a potential decline to stronger support near 3,050.A break under 3,050 and especially under 3,000 could see the NASDAQ fall into a bear market.

- Weekly indicators are currently diverging negatively. Some daily indicators are rolling over even asprices move higher. These are warning signs that this bull run has the potential to end suddenly. Asnoted a break under 3,130 would signal that the rally is over and a corrective mode could occur.


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BONDS

US TREASURY BONDS Intermediate Trend:Down

Short-term Trend:Down

Week: Down

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 fell 0.9% this past week. The decline wasattributed to the jobs numbers released on Friday.

- Ten-year US Treasury notes rose to 2.04% from 1.98% the previous week. Two year Treasury notes were0.27% down slightly from the previous weeks 0.28%.

- It was another mixed week for economic numbers in the US.- On the negative side the consumer confidence index for Jan slipped to 58.6 vs. 66.7 in Dec. But this

seemingly negative development was offset later in the week by the release of the Jan Michigan sentimentnumber that came in at 73.8 vs. 71.3 in Dec. The market had expected a slight decline to 70.5.

- The Q4 GDP fell 0.1%. But domestic demand appeared strong as inventories fell sharply and that helpedpush the GDP number into negative territory.

- The jobs numbers were out on Friday and again it was another mixed picture. The nonfarm payrollsshowed that 157 thousand jobs were created in Jan below the expected 195 thousand. However, offsettingthis number was an upward revision in the Dec number to 202 thousand jobs from the originally reported168 thousand jobs. The unemployment rate, however, rose to 7.9% from 7.8%. Not the direction the Fedwas hoping for. Earlier in the week the ADP employment numbers reported a gain of 192 jobs in Jan vs.185 thousand in Dec.


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- The FOMC re-affirmed its QE program this past week. The Fed is to purchase $85 billion a month ofmortgage backed securities and US Treasuries. The Fed continues to see downside risk to the economy.

- Manufacturing numbers continued to positive. The Jan Chicago PMI came in at 55.6 well above theexpected 50 and above Decs 50. The Jan ISM Index was 53.1 vs. 50.2 in Dec. The market expected 49.5.

- The Case-Shiller 20 city price index for homes rose 5.5% in Nov. This follows the 4.2% gain in Oct.However, the Dec pending home sales fell 4.3% after Nov reported a 1.6% gain.

- Durable goods orders for Dec rose 4.6% vs. a gain of 0.7% in Nov.- The headline U3 unemployment rate rose to 7.9% this past month from 7.8%. But the U6 unemployment

rate remained unchanged at 14.4%. Shadow Government Stats www.shadowstats.com reported that theirunemployment number also remained unchanged at 23%. The SGS number reports the U6 unemploymentplus discouraged workers defined away back in changes made in 1994. The U6 unemployment number isU3 plus discouraged workers under one year and marginally employed workers seeking full timeunemployment.

- The only economic number of significance out this week is the Dec trade numbers expecting a deficit of$46 billion vs. $48.7 billion in Nov.

- This was the 2nd week in a row that US Treasury prices fell. The long treasuries appear to have majorsupport near 139^10. At 142^27 the bonds still have about $3.50 to fall in price. The US Treasury bondsappear to be making a huge topping pattern; however, this is an incomplete pattern. If the pattern plays

out it could be a huge head and shoulders top. The right shoulder would still need to be formed. So it isimportant that the 139^10 major support zone hold.

- Both the bond trend system and the bond model system remain on the sidelines.


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CANADIAN BONDSIntermediate Trend: Down Short-term Trend:

DownWeek: 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) continuedtheir recent weakness by falling 0.9% this past week.

- The drop broke three weeks of effectively sideways trading and appeared to suggest that bond pricescould fall further.

- Significant support for the Cdn CGBs, however, is just below at 132. That is just over $1 away fromFridays close.

- The bonds continue to trace out what could be a huge topping pattern. However, it is not expected at thistime that a major drop should occur. Nonetheless, the 132 zone should be watched.

- The Cdn ten year bond reached 2% this past week, the highest level in 8 months.- The Cdn economy surprised this past week when it was announced that Nov GDP grew by 0.3%. This

helped support the Cdn$. The Oct rise was a small 0.1%.- There were few other numbers this past week. The industrial product index for Dec was flat vs. a decline

of 0.3% in Nov; and, the raw materials index for Dec fell 2% which was just a bit more than Novs 1.9%decline.

- Canada has a busy week for economic numbers. Jan housing starts are out and the market is expecting195 thousand vs. 198 thousand in Dec; the Jan employment numbers are expected to show a gain of 5thousand jobs well below the 39.8 thousand jobs in Nov; the Jan unemployment rate is expected to rise


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slightly to 7.2% up from Decs 7.1%; and, the Dec international trade deficit is expected to be $1.5 billionvs. $1.96 billion in Nov.

- Cdn bonds appear to be following their US counterpart to lower prices (higher yields). Major support isjust below. The trend following system and bond model system are both on the sidelines.


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PRECIOUS METALS AND CURRENCIES

Intermediateterm trend

Short-termtrend

week trend intermediate strategy

Gold neutral neutral up Long hold (caution)Gold Bugs Index (HUI) down down up (small) Stand aside

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

TSX Gold Index down down down (small) Stand aside

US$ Index down down down Stand aside

CDN$ neutral down up Long hold (caution)

(for definitions of terms, see end of report)

Gold & Silver


- Both gold and silver put in a dramatic up/down week but by the end of the week both managed to closehigher. Gold was up 0.8% while silver gained 2.4%.

- Platinum fell 0.5% but palladium jumped 2.1%. Copper continues to move upward this time 1% on theweek.

- Gold rose as the US$ fell this past week. The FOMC re-affirmed their stimulus program of purchasing$85 billion of mortgage backed securities (MBS) and US Treasuries. The jobs number was encouraging,


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however, the unemployment rate rose to 7.9% from 7.8%. This also helped re-affirm the Feds stimulusprogram, as it is their desire to continue with the program until the unemployment rate is down to 6.5%.

- Many consider the improving jobs picture combined with the Feds stimulus program inflationary. Thishelped support gold and silver prices this past week.

- The improving jobs picture also helped support commodity prices this past week.- Physical demand for gold and silver continues to be strong. Apparently Americans bought a $0.5 billion

of gold and silver in January. Pushing the demand is the fact that the FDIC guarantee of $250 thousand atbanks expired at the end of the 2012. Many it seems are concerned about the safety of the banksespecially the ones that were bailed out by the Federal Reserve during the 2008 financial crisis. Reportsindicated that Americans withdrew some $114 billion of cash in January from the banking system.

- China continues to build its gold reserves. China now holds the worlds second largest reserves behind theUS. They have now surpassed Germanys reserves of 3,395 metric tonnes.

- The purpose of China building its gold reserves is to ensure national economic and financial safety andpromote Yuan globalization. Holding more gold also hedges against foreign exchange risks. China hasclaimed for years that its gold reserves were too small. They believe that their gold reserves should be inthe same proportion to its population as the US gold reserves are to the US population. Given China has 4times the population of the US this would appear to imply that China needs to build reserves of about33,000 metric tonnes. Reserves of that size are larger than all the current reserves held by the worlds

central banks.- Gold continues to find support around the 200 day MA (currently at $1,662). Major resistance is at $1,695.

A break above that level would help confirm that a low is probably in. There is further resistance up to$1,720.

- Support is at $1,650 then again at $1,640. A break under $1,640 would be somewhat negative and suggestthat gold could fall to $1,600. Given the positive pattern traced out this past week a decline is notexpected.

- The major breakout zone for gold is currently near $1,760. A solid break above that level and especiallyabove $1,800 would have potential objectives up to $2,150.

- Silver also put in a few sharp up and down days this past week but as with gold silver closed higher onFriday. The pattern of a sharp up day followed by a sharp down day then another up day is actually quitebullish. The expectation would be higher prices this coming week.

- Silver has resistance up to $32.50 but above that level a run to $34 is probable.- A break above $34 could have potential objectives up to $45 and up to $56.- Support for silver is at $30.70 but under that level, a drop to $30 may occur.- The commercial COT for gold turned higher this past week improving to 33% from 31%. There was a

22,000 fall in short open interest and a 6,000-contract rise in long open interest. This is a positivedevelopment.

- On the other hand the large speculator COT fell sharply this past week to 77% from 82%. Largespeculators are led by the hedge funds. Their long open interest fell 14,000 contracts while short openinterest rose 9,000 contracts. This suggests that it is possible that the selling seen recently in the futuresmarket especially at the open came from hedge funds.

- The silver commercial COT clouded the issue by slipping to 32% from 33%. There was a 1,000-contractrise in long open interest but also a 3,000-contract rise in short open interest.

- The action in gold and silver this past week was positive. With the monetary base breaking out from an18-month sideways pattern, the Fed re-affirming its QE program and physical demand remaining strongespecially for investment purposes it all appears to support higher gold and silver prices. The onlynegative has been apparent selling in the futures markets by the large speculators (hedge funds).


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Gold Bugs Index (HUI) and TSX Gold Index


- The gold stocks continue to frustrate and underperform. This past week the Gold Bugs Index (HUI)gained a small 0.2% while the TSX Gold Index (TGD) lost a small 0.3%. The weak performance camedespite an up week for both gold and silver.

- This past week was interesting given the gold stocks ability to rebound despite the sharp down day seenon Wednesday.- This does leave a chance that they may be making a bottom even as they have not achieved potential

objectives.- The HUI broke down from what appeared as a descending triangle. The objective for the HUI is down to

375. This objective is just above the 373 seen in May 2012 but below the 385 seen in July 2012. The lowthus far has been 393.

- If the HUI can regain 410 or higher this coming week there is a good possibility the low is in.Confirmation, however, would not come until the HUI broke out over 430.

- The HUI also left a possible morning star on the weekly charts. The morning star is a bottom reversalpattern. This Japanese candlestick pattern is actually a 3 day or in this case a 3 week reversal pattern. Thefirst week or day is a sharp down. That was seen the previous week. This past week the candle left on the

chart was a small body candle that saw the HUI trade in a tight range and close on the week or day iseither slightly above or slightly below the open. To confirm the pattern the HUI should have a sharp risethis coming week. This is a potential pattern only at this point.

- A similar pattern formed on the weekly chart of the TGD. The TGD also broke down from a possibledescending triangle. The objective is 255. The low thus far was 275.

- The TGD must regain above 300 to suggest that a low is in. Confirmation that a low is in would come ona breakout and close above 310.


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- The gold stocks have been dogs of the stock market for the past year. They have been dogs despiteboth gold and silver closing higher in 2012. The contrarian sees the dogs as a possible winner in thecoming year.

- An up week this coming week would be a good sign that the gold stocks may have bottomed.Canadian Dollar


- Higher oil prices and commodity prices helped to push the Cdn$ higher this past week by 1.1%.- The Cdn$ was also buoyed by the November GDP report that showed the Cdn economy grew by 0.3%.- The jump this past week for the Cdn$ pushed it back over 100 after it fell to a low of 99.11 the previous

week.- There is, however, considerable resistance at 100 and up to 101.25. Over 101.25 the Cdn$ could rise to

102 where it would meet a downtrend line from the July 2011 at 105.90.- Support is at 99 but under that level a decline to stronger support at 98 is probable. A breakdown under 98

while not expected could see the Cdn$ fall to major long term support near 95.- The Cdn$ commercial COT jumped sharply this past week to 37% from 20% the previous week. There

was a 28,000-contract jump in long open interest and an 18,000 contract decline in short open interest.

- On the other hand, the large commercials (hedge funds) saw their COT fall to 74% from 89%.- Despite the rise in oil prices this past week there is concern that the price that Cdn producers are receivingfor their oil will widen with WTI.

- That in turn could put downward pressure on the Cdn$.- Despite the good performance of the Cdn economy in November, the Cdn economy is vulnerable to the

global economy and demand for commodities. Canada is quite dependent on the performance of theglobal economy and demand for its commodities. As well the weakening Cdn housing market couldweaken the outlook for the Cdn economy.


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US Dollar Index


- With the Federal Reserve effectively committing itself to a continuance of QE, the US$ Index fell 0.9%this past week.

- While the January nonfarm payrolls came in somewhat below expectations the market was buoyed by theupward revisions in December and November. What disappointed the US$ was the rise in unemploymentfrom 7.8% to 7.9%. Earlier in the week the US reported that Q4 GDP disappointed falling 0.1%.

- The US$ Index now sits just above 79 and the possible neckline of a large head and shoulders top pattern.A break of 79 and especially under 78.35 could see the US$ Index fall to potential objectives at 73.

- Stronger manufacturing numbers in Europe helped boost the Euro this past week. Europeanmanufacturing is at its highest level in a year. The Euro rose 1.5% this past week. The Swiss Franc wasalso strong gaining 2.1%. However, the British Pound was only up 0.6%.

- The weak currency continues to be the Japanese Yen as it fell 1.9%. The Yen has fallen to its lowest levelin 2 years. Japan is in the process of picking a new BoJ governor. The Japanese PM Shinzo Abe islooking for a governor to boost stimulus. Many are accusing Japan of deliberately devaluing theircurrency in order to boost their exports. This could set off a round of competitive devaluations by the

major western currencies. The current decline for the Japanese Yen is now in its 12 week and is thelongest losing streak since 1971.

- As well, China continues to boost their currency with the purchase of gold and the creation of a Yuantrading zone in Asia. This appears to be the whale in the kitchen that no one wants to talk about. It is adirect threat to the supremacy of the US$ as the worlds reserve currency.

- The commercial COT for the Euro fell to 41% this past week from 42%. While there was a 7,000-contractjump in long open interest it was more than offset by a 14,000 contract jump in short open interest.


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- The Swiss Franc commercial COT meanwhile improved to 38% from 28% while the British Poundcommercial COT also improved to 50% from 43%. Surprisingly the commercial COT for the JapaneseYen actually improved to 83% from 81% despite the falling Yen.

- Weekly indicators for the US$ Index are deteriorating. This supports the bearish outlook for theUS$ Index.

- The coming week could prove to be pivotal for the US$ especially if it does break 79.


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ENERGY

Intermediateterm trend

Short-termtrend

week trend intermediate strategy

Oil up up up 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


- Oil prices continued their best winning streak since 2004 gaining another 2% this past week. Natural gas(NG) continued to struggle losing 4.2%. Oil prices have now been up 8 weeks in a row matching a similarstreak in 2004.

- With the attack on the Algerian gas plant a distant memory oil prices are now focusing on the perceptionthat the US economy is improving. Stronger than expected manufacturing numbers along with risingemployment helped push oil prices higher this past week. A weaker US$ also contributed to the rise.

- The spread between West Texas Intermediate (WTI) and Brent crude continued to rise as well. This pastweek Brent crude rose to $116.76 vs. $97.77 for WTI. The spread is now at $18.99 vs. $19.60 theprevious week.


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- The WTI/Brent spread narrowed on a reversal of flow from Cushing, Oklahoma to Houston area mighthelp relieve the glut in the central US.

- A glut of oil has gathered at Cushing because of the lack of outlets for oil coming in particularly oil fromthe Cdn oil sands. Supplies at Cushing did fall by 0.2 million barrels this past week.

- The EIA reported that crude supplies overall rose 5.9 million barrels this past week leaving them 30.1million barrels above last year levels; gasoline supplies, however, fell 1 million barrels but are still 2

million barrels above last year; and, distillates fell 2.3 million barrels leaving them 14.8 million barrelsbelow last year.

- Oil prices have moved through their resistance level of $95 and appear to be headed for the nextresistance level at $99/$100. The September 2012 highs topped out at $99.52.

- Support is at $95 but a breakdown under that level could send oil prices back to $90 and the 40-weekMA. The 13-week MA is on the verge of crossing the 40 week MA. On Friday both the 13 and 40 weekMAs were at $90.60.

- Weekly indicators are rising with considerable room to rise further. There has been some deterioration inthe daily indicators but there are no negative divergences visible.

- Oil prices may have made a double bottom with the lows of October 2011 and June 2012. As well oilprices may have formed a huge symmetrical triangle off the top of April 2011 at $114. The breakout pointis currently at $106 and has potential objectives up to about $145.

- Strife in the Middle East is probably the only catalyst that could propel oil prices that high.- That cannot be ruled out. The Sahel in North Africa is a hotbed of rebels, insurgents and jihadists. The

Sahel stretches from Senegal in the west to Eritrea in the east. From the Atlantic Ocean to the Red Sea. Itpasses through current insurgent areas of Mali as well as Chad and the Sudan including Darfur. The areais thought to be rich in minerals and oil. Just to the north of the region lies Libya and Algeria.

- Egypt contains the important Suez Canal a major transportation route for oil tankers. Over the past fewweeks, Egypt has been gripped with protests and riots between supporters of the regime and theopposition.

- Possibly the most dangerous event occurred this past week when Israel bombed a convoy of trucks inSyria that may have been on their way to Lebanon to provide armaments to Hezbollah. The attack tookplace on Syrian soil. Israel has been silent on the matter. The attack could be deemed an act of war andSyria and Iran have threatened retaliation. Russia has supported the Syrian position. This has the potential

to be a destabilizing event if Syria does retaliate. Syria is locked in a vicious civil war.- NG prices continued to weaken. NG prices are currently caught between the 13 and 40 week MAs at

$3.50 and $3.10 respectively. A break either way should determine the direction of the next move. Above$3.50 NG could go back towards $4. A break under $3.10 on the other hand could send NG prices downto $2.50 support.

- NG prices rose in the early part of the week on colder weather but as temperatures rose NG prices faded.- Working gas in storage fell to 2,802 Bcf this past week with a withdrawal of 194 Bcf. This was above

both the 5-year average and last years withdrawal. Inventories are 202 Bcf lower than last year but 304Bcf above the 5-year average.

- Oil prices are, however, the key going forward. Improved economic numbers and a weaker US$ aredriving prices higher for the moment. But lurking in the background is the potential for the Mid-East toblow up and that would send oil prices sharply higher.


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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

- The AMEX Oil & Gas Index (XOI) continued to forge ahead this past week even as once again the TSXEnergy Index (TEN) lagged.

- The XOI gained 2.9% this past week while the TEN lost 0.6%.-

The XOI continues to benefit from higher oil prices while the TEN continues to lag because of the belowWTI prices that Cdn producers continue to receive for their oil.- The XOI continues to move higher in a narrow bull channel. The rally petered out a bit this week despite

the strong gain. The big up day was on Tuesday then for the rest of the week the XOI traded sideways.- Some resistance appears at 1,375 but above that level a run to 1,400 is probable. Even new highs are

possible. The most recent highs were made in May 2012 at 1,412. The XOI remains well off its April2008 highs of 1,638.

- The XOI has support down to 1,340 but a break under that level would suggest further losses. Bettersupport can be seen down to 1,300 to 1,310.

- Despite the recent run-up in the XOI the 50 day MA is now just crossing the 100 day MA. Those MAscurrently at 1,262 and 1,252 respectively could prove to be magnets for a correction.

- The XOI appears to have broken out of a huge symmetrical triangle that formed off the top of May 2011.The triangle broke to the upside at 1,290 and has potential objectives up to 1,740.- The TEN continues to trade below resistance near 260. A breakout over that level would be positive withpossible objective up to 290.

- Support formed at the 100 day MA currently at 255. There is further good support down to 250. Below250 and especially under 240/245 the market could break down.

- The TEN may have a double bottom that formed with lows in October 2011 at 217 and another low inJune 2012 at 219. If this pattern is correct a breakout over 260 could have objectives up to 340. Abreakdown under 240 could nullify the pattern.


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- The energy stocks especially the XOI have had a good run recently and may be due for a pause. The TENcontinues to underperform because of the below WTI prices received by Cdn producers. There is no signthat is ending so it could continue to be a drag on the Cdn energy stocks.

TSX Indices

- Despite a decent up day on Friday and new 52-week highs the S&P TSX Composite closed lower thispast week. The S&P TSX Composite lost 0.4%. The TSX 60 was also down losing 0.7%.

- The TSX Venture Exchange (CDNX) managed to eke out a small 0.1% gain. This index continues totrace out what appears to be a significant bottom.

- Only three of the 14 sub-indices recorded gains on the week. Leading the way to the upside wasTelecommunications up 1.2%. Health Care gained 1% and Industrials were up 0.9%.

- Leading the way to the downside was Information Technology that lost a sharp 6.8% thanks to the verysharp reversal of Research in Motion (RIM-TSX) soon to become Blackberry (BB-TSX). Blackberrycollapsed 27% in 4 days following the introduction of its new Z10. Other losers were Metals & Miningdown 1% and Materials off 0.8%.

- There were few changes on the week. There were no intermediate trend changes.- Short-term trend changes were as follows: Metals & Mining up to neutral; Materials up to down; and,

Telecommunications down to up.- Several new highs were seen as follows: S&P TSX Composite, TSX 60, Consumer Discretionary,

Financials, Industrials, Real Estate, Information Technology and Utilities.- However, could the market be seeing a top? Why? While the indices and some sub-indices saw new highs

a number of them also saw weekly reversals meaning new highs were made but the market closed lower.- Making new highs and closing lower were the S&P TSX Composite, TSX 60, Financials, Real Estate,

Information Technology and Utilities. The S&P TSX Composite, the TSX 60 and InformationTechnology all had outside reversal weeks. This means they made higher highs and lower lows then theprevious week then closed lower on the week. This raises the possibility that it was an outside keyreversal week.

- However, the key US indices did not have similar patterns. So the reversals may not mean much.- The TSX Composite has taken out the highs of February/March 2012, however, the failure to close higher

leaves the breakout in doubt.- Support is at 12, 550 and a break under that level would be slightly negative. A break under 12,500 would

be more negative and suggest a possible move down to 12,000. Under 12,000 the market could enter abear market.

- Resistance is at 13,000. Above 13,000 the market does have potential to rise to 13,500 and even challengethe highs of March/April 2011 near 14,300.

- There are potential objectives up to 13,300. The market could still see that level unless it breaks under12,500 then a rise to that level becomes less certain.

- Weekly indicators are rising and have considerable room to rise further. There are some negativedivergences in the weekly charts but they are not particularly strong at this time.

- Some daily indicators have begun to turn down.- This coming week could be pivotal. The reversals seen this past week are of concern. Given the reversal

this past week it would not be surprising if the market fell further this coming week. New highs, however,would end any thoughts of the reversal and the potential objective up to 13,300 would come more intofocus. Holding above 12,500 would also be positive and suggest that further new highs were possible.


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Note: Changes date from Jan 18, 2013

TSX INDICES

trend

close on

Feb 152-week

high

52-week

low

interm-

ediate

trend

short-

term

trend

Week

trend

strategy

TSX Composite 12,768.83 12,895.28 11,209.55 up up down Long hold (new highs)

TSX 60 732.52 742.39 637.70 up up down Long hold (new highs)

TSX Venture 1,228.66 1,696.14 1,153.90down

(weak)up

(weak)up

(small)Stand aside

Energy 256.70 295.40 218.70 up up down Long hold

Financials 197.70 199.62 164.65 up updown

(small)Long hold (new highs)

InformationTechnology

28.35 30.73 21.37 up up down Long hold (new highs)

ConsumerDiscretionary

101.72 102.79 81.74 up up down Long hold (new highs)

Consumer Staples 246.38 249.67 197.94 up updown

(small)Long hold

Healthcare 69.02 71.50 56.86 up up up Long hold

Industrials 132.71 133.39 105.17 up up up Long hold (new highs)

Materials 316.63 392.23 277.78 neutral down down Long hold (caution)

Telecommunications 114.64 115.00 99.88 up up up Long hold (new highs)

Utilities 231.58 235.24 209.77 up up down Long hold (new highs)

Gold 279.86 395.64 265.99 down downdown

(small)Stand aside

Metals & Mining 1,035.21 1,258.22 781.13 up neutral down Long hold

Real Estate 238.52 240.67 204.79 up up down Long hold (new highs)

Income Trusts 189.02 193.00 169.17 up updown

(small)Long hold

(for definitions of terms, see end of report)


19/21


Note: Changes date from Jan 18.

EXCHANGE TRADED FUNDS

- Once again there was little in the way of changes for the ETFs although a few made new highs.- Intermediate trend changes were as follows: XEG neutral to up; and, HUN up to neutral. XEG is

officially a buy.- Short term trend changes were as follows: XMA up to down; and, GLD neutral to down.- New highs were made by XFN, XIU, XSP, SPY and IEV.

ETF intermediatetrend

short-termtrend

intermediate strategy

XGD/T Gold down down Stand asideXMA/T Materials neutral down Stand aside

XIT/T Technology up up (weak) Long holdXFN/T Financials up up Long hold (new highs)

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

XIU/T TSX 60 up up Long hold (new highs)XSP/T S&P 500 up up Long hold (new highs)XBB/T Bonds down down Stand aside

XSB/T Short Bonds down down Stand asideXRB/T Real Return Bonds down down Stand aside

XIC/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 (new highs)

EWJ/NY Japan up up Long hold

FXI/NY China 25 up up Long hold

EEM/NY EmergingMarkets

up up (weak) Long hold

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

JJC/NY Copper up up Long holdIEV/NY Europe up up Long hold (new highs)

IFN/NY India up (weak) neutral Long hold (caution)

TLT/NY 20-year bond down down Stand asideHBP Winter NYMEXCrude Oil HUC/T

up up Long hold

HBP Winter NYMEXNatural Gas HUN/T

neutral down Long (caution)

HBP S&P TSX 60 Inverse

HIX/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

herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Informationmay be available to MGI Securities that is not reflected in this report. This report is not to be construed as an offer or solicitation tobuy or sell any security. The reader should not rely solely on this report in evaluating whether or not to buy or sell securities of thesubject company.

DefinitionsTechnical Strategist means any partner, director, officer, employee or agent of MGI Securities who is held out to the public as astrategist or whose responsibilities to MGI Securities include the preparation of any written technical market report for distribution toclients or prospective clients of MGI Securities which does not include a recommendation with respect to a security.

Technical Market Report means any written or electronic communication that MGI Securities has distributed or will distribute to itsclients or the general public, which contains an strategists comments concerning current market technical indicators.

Conflicts of InterestThe technical strategist and or associates who prepared this report are compensated based upon (among other factors) the overall

profitability of MGI Securities, which may include the profitability of investment banking and related services. In the normal course ofits business, MGI Securities may provide financial advisory services for issuers. MGI Securities will include any further issuer relateddisclosures as needed.

Technical Strategists CertificationEach MGI Securities technical strategist whose name appears on the front page of this technical market report hereby certifies that (i)the opinions expressed in the technical market report accurately reflect the technical strategists personal views about the marketplaceand are the subject of this report and all strategies mentioned in this report that are covered by such technical strategist and (ii) no partof the technical strategists compensation was, is, or will be directly or indirectly, related to the specific views expressed by suchtechnical strategies in this report.

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