Resource Stock Update - V14 #4.5  Markets   - May, 20, 2008

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Potash stocks and food/agriculture is one of the hottest sectors. I am just finishing my report on
Potash and a new Potash stock and it was getting to long to add in this market update. So I thought
I would send this out separate and send out my new potash pick later today or tomorrow morning.

I think we are at crucial and/or critical points in the markets.

S&P 500 chart

As you can see we are getting close - or at the point were I suspected that this bear market rally
may end. We are close to the 1450 area which I said was a major resistant level. The market actually hit 1440 yesterday and retreated. This 1430 to 1440 level has also become the 200 day moving
average, more resistance. This rally has taken sometime and we may see a topping pattern here that
may last several weeks. A break below 1380 would be a signal we are going lower.

There is a lot of resistance between here and 1500 and I just can't see the market going much higher
without at least a good period of consolidation, and/or a correction and another run at this
resistance level. For now, the odds point to a weaker market, not a stronger one.

Gold stocks as measured by the Gold Bugs index are also at an important juncture.

Gold Bugs Index   HUI Chart

You can see that with gold stocks, the 200 day moving average is acting as support. The index is now
at it's 100 day moving average and resistance in the 450 area. The down trend line is barely broken
and I would like to see the index go over 460 in the short term, then ultimately over 480 to take
out the April high. A period of consolidation or small correction from this level would not be a
surprise.

And better news, the TSX Venture Index is up through it's down trend line. I talked about this index
on May 1st, suggesting a bottom was in and it was the time to buy.

http://www.playstocks.net/RSUV1441May12008mkt.asp

                                                  TSX Venture Index

Today the index is up another 40 points as of this writing to about 2650. Clearly we have poked
above the down trend line, but we are still close to the 100 day  moving average which has turned
back the last three rallies. I believe this time we are going higher and look to the 2700 area which
is the 200 day moving average as the next resistance area. We would next want to see the market
break above 2820, the previous high as a clear sign we are in a longer term up trend.

I know one hears a lot these days about 'sell in May and go away'. Last year I said it could be
different and it turned out that we rallied into July and then the sub prime mess hit. This year I
expect the major market indexes could have trouble in the summer, but the mining and resource stocks
will likely see a continuation of this rally. They are not very far off their recent bottoms so have
lots of legs left to the upside.

(c) Copyright 2008, Struther's Resource Stock Report

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