Where do we stand now?

I have been unable to write an update this past week-end. There were just too many "signal" on the securities of my database and my priority is of course my portfolio trading. However, if by now you know my trading philosophy, you can guess that I had protection in this last downswing.

Because of time constraints (again), I am presenting a chart from stockcharts.com on the TSX index:

Please click on the picture for a larger chart

I am neither a bull or a bear. I watch prices and try to develop scenarios given what I see.

Today, as expected and hoped the market reversed into a column of "X" which might be the beginning of a low volume Santa Claus rally. You can see the left shoulder, the head, the neckline and perhaps the right shoulder of a bullish reversal head and shoulder accumulation formation.

It could fail, of course, especially if the market reverses and we get a double bottom (11,650) breakdown (11,600). That would be our second order of risk which is why I am still hedged at this stage.

The greater risk is a breakdown of the longer term (intermediary trend) support line which currently resides at 11,450 (purple arrow). If this breaks, it would confirm that we are continuing a longer term secular bear market.

However, there is a good chance that a right shoulder has just begun. It won't happen in one single column of "X". However, we now must see an equal or higher low to 11,650 to be convinced of this scenario. An uptrend from here is necessary in my mind (Higher Highs and Lows). Given that time will contribute to this scenario, I have identified a resistance zone (yellow) where a breakout of the neckline might occur.

This is the strategy I am currently basing my tactics on.

Pierre Brodeur