Stock Comment Merrill Lynch ($80.09 U.S.)

Merrill Lynch is one of several high flying senior U.S. brokerage firms. I think it's worth noting that over the past ten days or so, the MER share price has made two attempts to poke up through a previous $80 all time high set in early 2001. When price resistance and "round numbered" resistance coincide, the combination should present a difficult obstacle to overcome.

This saga is worth watching in my view. Easy penetration could be taken as positive for markets in general - and failure at $80 might suggest the opposite.

TSX Index (12,302)

You would never know it by today's strong TSX trading, but in price momentum terms, there are good reasons why we should soon see a modest correction from here. Before we move further ahead in a powerful intermediate/long term uptrend, a pullback to retest the 12,000 area or below would fill the bill nicely.

With soaring gold, silver and copper prices, it's hard to hold this index in check. It regularly exceeds my optimistic expectations.

S & P 500 Index (1289)

I've said nothing about the S & P 500 Index since early March because there has been nothing to add to my comments at that time. It's as if we're stuck on one side of 1300 or the other, in a gently rising trading range that now extends from approximately 1280 to 1320. When we finally break loose, I'm looking for a quick correction, with a revised target of 1225 to 1240.

With or without this short term correction, I consider the outlook beyond the near term to be positive.

Gold Futures (U.S. $588.40)

Gold appears to be building an important intermediate term top in a powerful long term uptrend. It has regularly exceeded my short term expectations, having done so again last week when quotes briefly touched important "round number" resistance at $600 per ounce, before falling back. If and when we do see a correction, my intermediate term downside target is now in the $540 - 550 area, revised upward from $500.

Can you explain why the price of gold has exploded while inflation is almost non-existent? The escalating tsunami/hurricane/tornado issue may be at the core of the explanation for the flight into gold.

CNN tells us that in the U.S. there have been 400 tornadoes so far this year, compared to 92 by this date in 2005. Four hundred tornadoes, and we're only a week into the U.S. tornado season? Given a 26 week season, if nothing changed, that would mean 10,000 twisters across the U.S. north east before the season was over. That's before we consider the prospect of another devastating U.S. hurricane season, or the reality that nature is busy running amok in many other places on our small planet.

Natural disasters? A pandemic? Terrorism? Oil/gas supply problems? A nuclear event? Somewhere, somehow there is a rational explanation for the current aggressive activity in the price of gold.

Gold producers are reaping a huge bonanza at current prices, and should continue to do so through intermediate term corrections, so long as the long term uptrend is undisturbed and inflation remains in check.

Interest Rates U.S.

I had assumed that an inversion was in the cards as the short rate soared toward the level of the long rate. Instead, the long rate may now be taking off on the upside to stay ahead of the soaring short rate. No inversion - but rapid long rate acceleration instead . If long rates skyrocket, perhaps it will be a housing market collapse that brings on the recession.

Dow Jones Industrial Index (11,109)

For now we're drifting along above 11,000, but beyond the near term it would be healthy to see a correction to the 10,500 area in my opinion.