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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Bid Buster who wrote (46062)	2/8/2006 2:21:25 AM
From: maceng2	Respond to of 116555

The band seem to be playing the normal tune now, and marching in step. -g- "U.S. fund managers are used to dealing in millions of shares, so they hit our market and, bang, it's on its back pretty quickly" theglobeandmail.com Market tumbles 2.2% as gold and oil suffer slumps JOHN HEINZL From Wednesday's Globe and Mail Canadian stocks suffered their biggest rout since the dark days of October Tuesday, signalling to some that the great Canadian resource rally has run its course even as others insisted the market is merely catching its breath. Even for the bulls, it was hard to deny the depth and breadth of the damage. The commodity-heavy S&P/TSX composite index sank 263.23 points or 2.2 per cent to 11,817.3, pressured by hefty declines in the price of oil and gold — the two commodities that did most of the heavy lifting as the benchmark streaked to record highs. "It's the problem of having a resource-driven market these are the kind of fluctuations you can expect," said David Cockfield, who helps manage the equivalent of about $1.2-billion at Leon Frazer & Associates Inc. in Toronto. In New York, the price of gold for April delivery fell $19.50 (U.S.) or 3.4 per cent to $554.80 an ounce — its biggest drop in two years. Bullion's slide was greased by oil's drop of $2.02 or 3.1 per cent to $63.09 a barrel, as traders turned their attentions away from the nuclear standoff with Iran and toward today's U.S. oil inventory numbers, which are expected to show healthy supplies of crude. On the Toronto Stock Exchange, the S&P/TSX's capped gold index skidded 6 per cent for the sharpest slide of any group. Both the energy group and metals and mining fell 4.7 per cent, while materials shed 4 per cent. Declines of such magnitude are rare, and the fact that they cut across so many sectors at once suggests that large U.S. institutional investors were heading for the exits, removing a key source of demand for Canadian stocks. "U.S. fund managers are used to dealing in millions of shares, so they hit our market and, bang, it's on its back pretty quickly," Mr. Cockfield said. Given the severity of the selloff, some analysts said the S&P/TSX rally may have run out of gas. The index soared nearly 22 per cent last year and more than 7 per cent in 2006, before yesterday's slide. "We've had the Canadian market, in particular, in a parabolic upward move, so we were due for a correction," said Don Vialoux, an independent technical analyst based in Oakville. "Clearly today was a shot across the bow." One worrisome trend is that stocks are rising in advance of earnings reports, then selling off sharply after the numbers are released, he said. Such was the case with Alcan, which rose and then "virtually collapsed" after reporting a wider fourth-quarter loss, finishing down 2.7 per cent. Some analysts said a correction is exactly what the market needed. "This is just a normal, healthy bout of profit-taking," said Elvis Picardo, research analyst and chief market strategist at Global Securities in Vancouver. "It's been a one-way street since the October lows and the index was up close to 20 per cent in that time." Nonetheless, he also advises caution. In a bulletin to clients yesterday, Global Securities noted that "gains of this magnitude are unsustainable in the short term, and we therefore advocate taking substantial trading profits as and when they arise." Yesterday marked the steepest slide since the S&P/TSX dropped 235.05 points on Oct. 20, a day when oil prices tumbled more than 2 per cent and the Bank of Canada cut its economic growth forecast. The gloom was not confined to Canada. U.S. markets finished broadly lower as more evidence rolled in that the housing market's best days are behind it. Luxury home builder Toll Brothers cut its outlook for home deliveries in 2006, knocking 5.5 per cent off its stock and dragging other builders down with it.