After relentless selling, the oil market finally bounced. There was a little support on Monday with Repsol's acquisition of the plummeting Talisman (TLM). With crude up $1 at the close, and the bouyancy provided by the Fed meeting, anyone short the market today stared at a tough reversal on their position. Here is the Toronto Composite ( $TSX). While the $TSX has under performed the $S&P 500 ($SPX) since August, this downtrend was significant in magnitude. We can see the $TSX made a nice double bottom at 13635 so it was a good place to look for a bounce. The real question will be whether the Canadian market will have enough energy left to break through the 200 DMA and challenge the most recent high of 15184.
The 15154 level marked the 2008 top. So to see the market roll over so close to that level now marks an area that traders should monitor closely. Here is the longer term chart.
I have shown the MACD with a crossing signal, but this is not month end yet, so I left it in orange for caution rather than red. If the bounce we had today continues, this would probably lift the MACD high enough to be above the signal line at month end. Technically, the Canadian market is in a dangerous place trend wise. By failing to hold the breakout above the 2008 highs, the market looks weak. The support level of 13640 was also a rough support level in both 2008 and 2011. We could also draw one down at 13000. The fact the $TSX had trouble staying above the 10 month MA in green and is now below is very bearish. How it behaves over the next few weeks will be very important. Getting above the 10 MMA and the previous resistance at 15154/15184 will be critical to erasing the topping conditions currently setting up.
If you believe the global markets are going to get weaker here, watching for a place above here to add protection to your portfolio will be valuable.
Martin Pring will be joining me for a year end review on our final 2014 webinar on Thursday December 18th at 4:30 EST. It couldn't be more timely to set the stage for 2015.
Good trading,
Greg Schnell, CMT
