S&P500 Index
Russel Small Cap
Dow Jones Large Cap
It is clear to me that the US markets appear "ahead" of the Canadian market in their evolution if only because commodity based securities have been under pressure because of the perceived slowdown in the demand for these cyclical resources. A look at the bullish % charts and/or the # of stocks above the 50 and 200 days moving averages does confirm the same observation. Therefore, in my mind, the Canadian market WILL catch up and one should allocate a greater proportion of one's assets in Canadian in the next few months for that reason alone...!
This week's strategy
We present below my typical TSX Point and Figure chart:
Please click on the chart for a larger image
There is no doubt in my mind that stocks are currently overbought. The oscillator that I use , the RSI(9) is flashing that stocks will have lower prices in the next few days. As always, the question will be whether this is a pullback in an ongoing uptrend or something much more significant. With new support from the bullish support line, the odds favour a shallow down swing with the most probable support at the previous quadruple top in the 12,000-12050 zone. But given that there is no certainty in this world, the tactic should be to expect the market to respect channel support marked as a white "O" in a blue background at 12,200. Should we have a breakdown to 12,150, one should protect our long positions with the appropriate hedges (short ETF positions). Of course, the standard P&F double bottom (11,700) breakdown (11,650) would suggest moving from a 1 to 1 hedge to a short net position given that a test of the bullish support line at 11,200 would now enjoy a higher than 50% probability.
Pierre Brodeur
Pierre,
ReplyDeleteThanks for early indication of Bulls back. About you channels, what I understood is, say, 'x' breaks out (double-top or tripple top) in one direction by 6 boxes then the channel bottom for this up movement will be 6 boxes from the last low i.e. 'o' column. Is my understanding correct? Or is there anything more?
Regards,
Rajib
Yes Rajib, it is as simple as what you describe. We are assuming symetry of up and down swings when markets are in equilibrium. When that symetry is broken, supply or demand is taking over and thus a trading opportunity arises. This was inspired by my reading of Cycle analysis by J.M.Hurst and especially J.R. Stevenson of which my firm was a client many many many years ago.
ReplyDeleteI have written on this in a previous post with an example I believe.