What the charts are telling us about the Canadian markets

August 2, 20122 Comments

My original teacher in Technical Analysis in the mid 1990’s was Ralph Acampora, a legend in this field. It was during his training course in Toronto way back then that he convinced me (and others in the class, I am sure) to pursue the CMT designation—a designation that he, in fact, helped create. Despite all of the books, lectures, and experts I have known, read, and learned from, Ralph’s words ring in my head every time I look at a chart. Ralph told our group of then-budding technicians to ask ourselves “what is it doing?” when viewing a chart. Not what it may do. Not what the media says the security will do. Put simply—Ralph taught me to view a stock or commodity and determine if, right now, the stock is going up, down, or sideways. All else is peripheral.

Ralph also went on to suggest that this pattern or trend must be considered in place until it breaks the significant support or resistance levels that signify its formation. If the market is making higher highs and higher lows, for example, we must consider the trend to be up and stay long the security until that pattern is interrupted. In an uptrend, an interruption of the pattern would be a lower low or break of the trendline.

I’ve mentioned in recent blogs that the trend for the S&P 500 has been, and should continue to be considered in an uptrend until proven otherwise. As such, the S&P has been making higher highs and lows since March 2009 on the weekly chart, and has been making higher highs and lows since June of this year on the daily chart. All else is peripheral.

The TSX, on the other hand, has been in a bear market since February 2011. Lower highs and lower lows tell the story. Some view the TSX’s short termed trend as bullish, citing higher levels since its June 4th low of 11,200. I disagree. On July 19th, the TSX failed to take out its July 5th highs of just over 11,900. A higher high was not reached—although the troughs have been (barely) making new highs since June. Thus, the TSX can’t be considered to be participating in the recent uptrend(s) that the U.S. market are enjoying. At best, the TSX is consolidating.

There will be no blog next week, but will be back to writing on August 13th.

You can view my most recent Investors Digest and Moneyletter columns free & without a subscription by visiting: here.

 

2 Comments

  • I sense the market (S&P) wants to breakout for this summer rally you have mentioned. MSM has been overly bearish. We shall see this coming week that 1400 level is key to overcome.

    Reply

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