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This is good in terms of trading because our immediate level of support (risk) is now higher than what it was this week-end. Recall that the double bottom was at 11,700 whereas now double bottom is now at 11,950. Indeed let us assume today's high of 12,300 is the high of this column. We would then have a lower high and the new lower low would be at the double bottom (11,950) breakdown (11,900). That's the traditional way of looking at this uptrend. For trading purposes, I submit that any reversal into a column of "O" is actually my signal that the bears have taken control, at least for awhile and profit taking would be my immediate move. That's because the upswing would not respect its very short term target potential of 12,750, the channel resistance marked as a white "X" in a blue background. Whatever happens, I believe that 12,700-12,850 is a zone of significant resistance which is also acting at the neckline of a significant accumulation formation which is currently tracing the head of a H&S. One should expect another "correction back to the 11,650-11,700 area with a few new columns of "X"s and "O"s before we get a major H&S breakout. Another scenario is that we continue the "W" reversal and as a confirmation I would use the Ichimoku cloud below:
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The recent market peak was reversed at the top of the Ichimoku cloud which is acting as resistance in this longer term traditional downtrend. It is the third time that the TSX is unable to move into a bull market defined in terms of this Japanese approach. A breakout will confirm the reversal pattern which has already been identified by the Point and Figure approach.
Pierre Brodeur
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