I wonder why the Canadian market is behaving as it should given the bear market in commodities while the American market is clearly in a bull market reaching new highs from week to week. The partial answer must be that the Bank of Canada doesn’t have a “Plunge Protection Team” like the Fed, Japan and China have! The other reason, of course is “expected earnings growth” of Canadian companies and given the attitude of the leadership of our southern neighbor, it seems to me that penetrating this market and increasing our business opportunities there are neutral at best.
The only persons who can make some money in the current market environment are day traders like Bill Cara did a few weeks ago purchasing and then selling at the right time several gold stocks. The chart above shows a market that fluctuates but that is also going nowhere with multiple bull and bear trap signals. You have to be very smart, experimented and talented to navigate these waters.
The next chart shows a traditional view of the market most familiar to readers. Technical 101 will describe the pattern as a Descending Triangle which is considered a bearish formation. You can learn more about this pattern at:
A break below the support of this pattern will confirm the bearish implications with a preliminary target price of between 14,550 and 14,500 for the TSX. We are getting a break today
One “problem” with Point and Figure charts is that it does not care about Volume. I do care about volume as in many cases it does precedes Price. My comments are on the chart. Finally, the RSI indicator at the top of the chart is confirming the down trend of this market. I will wait for a breakout above the level 60 resistance before I will consider a reversal of trend.
I am neither bullish or bearish, just conscious of the risks that the market is suggesting to me. I prefer to be safe than sorry when I see such pictures on my screen. After 30 plus years in this business as a pro, I know myself quite well: I don’t have the talent to predict the future but I do listen to the message of the market and have learned to execute intermediary trades in environment where Expected Return is greater than Expected Risk. The market is telling me that were are not in such an environment.
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