The TSX 60 recaptures the 20 moving average--just barely...

Today the TSX 60 index recaptured the daily 20 moving average. You'll recall from my analysis earlier this week that I was calling for a float up into the 780 gap fill area. Since then we've seen exactly that and closed today significantly higher at 783.11--just .60 points above the 20 moving average. Because the recapture is so slight, it's difficult to tell if it represents a true breakout or a minor pierce signalling a move lower.

Despite this recapture, there is still a lot of resistance at these levels. Going forward into Friday and early next week I will be looking for a followthrough move to the upside or downside, thereby confirming the levels as cleared or continued resistance. In the meantime, my outlook on the TSX 60 will remain neutral.

Key medium term breakout area for TSX 60

The TSX 60 index may have some upside in its future if it can make it above a key trend line. This trend line connects the highs from July 25 to the pivot high from August 17, as outlined in the chart below.

A break of this trend line could lead to medium term upside

Since Wednesday of last week, the TSX 60 index has been consolidating sideways underneath this trend line. This resulting bullish flag pattern means that the trend line should provide only minimum resistance.

A breakout above this trend line would be significant as this is a medium term 60 minute chart. I'll be looking to go long here for 1-3 days depending on how fast the price moves up. First resistance on any such breakout will be at the 200 moving average and the gap fill at 795. Secondary resistance will be at the pivot top at 804. A close back below the blue trend line triggers a stop out.

The XIU.to ETF is a good way to play this breakout, as well as individual stocks. If I find any stocks with supporting bullish patterns I'll post them here.

TSX levels to watch

As the markets normalize, and with US debt issues put to bed for the time being, we can again focus on secondary markets like the TSX 60.

The TSX 60 has bounced considerably from the lows made on August 8. If it continues to move up, there will be several resistance levels to look for. The first is a narrow range between the 61.7% fib retrace, the 20 moving average and the pivot low at 811. This should be very good resistance provided we don't consolidate below it for several days. If this zone is broken to the upside, look for resistance at the 50 moving average. The dominant pattern is a bearish wedge--This means I will maintain a bearish bias and look for pullbacks at these resistant levels.

On the upside, the key levels to watch are the 200 moving average and the down-sloping blue trend line. A confirmed break above these levels will signal a possible breakout and can be bought long.

Oil and other commodities will play a key role in determining the direction of the TSX. If they remain strong, favour upper levels of resistance as the TSX should remain strong in sympathy.

Major Down Move for the TSX 60

Last week I wondered if the TSX 60 had put in a pivot top or if it was merely consolidating sideways. Today the answer to that question is clear as the index traded sharply lower down 1.33%. This is a major reversal to the downside and indicates that for the time being we are in a weak, down-trending Canadian market.

Seeing this down-move is good in terms of gauging the direction of the market, but it's unclear if we'll see further selling or if this dip will be bought.

The TSX 60 will have some support at it's current levels around the 20MA, the 50% and the 61.8% fib retracements. Until we break these levels, it's possible that we at least see a small bounce before going lower. However, today's move down was a very big one and should limit any upside we may see.

A pivot appears to be in on the TSX 60

As with the S&P 500, I'll be watching the TSX 60 very closely over the next few trading days. I hope to have actionable levels to swing trade very shortly, but until then follow the chart above as a guide to the nearest support and resistance levels.

Are Ag Stocks Ready to Pop?

After a good move on Friday, the market seems prepped for a possible further push up on agriculture stocks like POT.to. The bullish case being made is that people need to eat under any economic circumstances and therefore stocks like this are safe bets.

As a technical trader, I'm not concerned with bullish fundamentals unless there are technical factors suggesting the same.  Fortunately, I see several on POT.to, Saskatchewan’s giant potash company, that suggest possible upside in the near future.

First, Friday's breakout up-move easily pushed through two pivot resistance levels--55.97 and 56.58. This alone is a bullish sign to be sure, but please note that the push up also brought the price above a crucial inverse head and shoulders neckline. What this tells me is that any retrace back down to the neckline (currently just below 55.50) is a good buy. However, a close back below the neckline negates the trade.

If POT.to keeps going up, there is no major resistance until 59.67 and 60.50.  And if it is able to show this much strength, re-testing February’s highs might not be an unrealistic expectation.  But, like always in tech analysis, this pattern has its caveats.

For starters, the left shoulder is not ideal as it is considerably smaller than the right shoulder. I like this pattern best when each shoulder is roughly the same size. This coupled with an overall market that is very extended makes me cautious about jumping on board just yet.

Also of relevance, check out AGU.to, another agriculture stock with a similar inverse head and shoulders pattern. The same rules apply to this trade--a re-test of the neckline is a buy and a close below it is a stop out. AGU.to will have resistance at the 88 and 93 pivot highs.

On either of these trades, please mind your stops. Both stocks will not have significant support until their moving averages several dollars below the necklines.

I may take either POT.to or AGU.to for a long swing on a re-test of the necklines, as outlined in the charts above. If you're already in these trades for any reason, just be sure to use a stop to protect your profits. Also, just to reiterate, please be aware that the market is incredibly extended. Any and all stocks are due for a pullback at any time, including these. This doesn't mean that a bullish pattern can't play out, it just means be careful.

American readers should note that POT.to and AGU.to trade interchangeably with their NYSE counterparts POT and AGU.

Weak showing for TSX60

The TSX60 Capped Index ended up 0.62% Monday while US markets were closed for the July 4th long weekend. On Friday US markets rallied sharply while Canadian markets remained closed.

As you you'll recall from last night's article, I expected the markets to gap up by approximately the same percentage basis as the US markets rallied Friday. This was not the case as the TSX closed up only by about 1/3 the latest SPY close. In fact, earlier in the morning the TSX was actually trading negative.

Float up, fade down.

This kind of showing is interesting. The fact that the TSX under performed the S&P 500 by a good margin shows that perhaps some of the exuberance of Friday's rally has faded. It also confirms my suspicion that the TSX might lag as it had not yet hit major resistance just above Thursday's close.

If the TSX does continue to push higher it will hit strong resistance at the 860 pivot low and ascending trend-line. If Tuesday's market pulls back, the 50MA at 850.95 will remain a barrier.

With Canada's exchanges re-opened, what remains to be seen is how the US market trades post holiday weekend. The SPY is arguably in a more precarious position as there is no real support until all the way back at 132, the breakout level from Friday afternoon's initial spike. On the other hand if US markets continue up, there's no real resistance until just above 134 and then all the way back to the double top at around 137.

The futures will be re-opening for the week shortly and I'm eager to see how they perform. I'm still short the market and will be looking to get more short in the event of further upside. Personally, I think it's likely that Tuesday is an uneventful day with little price movement either up or down.

If any news is released overnight, I'll re-evaluate my position. Follow me on Twitter to stay up to date with my latest thoughts.

The Week Ahead for the TSX

The week going forward will be an interesting one. I'm eager to see how the Canadian markets react to the sharp rally seen in the US on Friday after being closed for Canada Day.

Most likely, the TSX will gap up to match Friday's gains in the US. The question is where will it hit resistance.

You may recall that the SPX closed Thursday slightly above several resistance levels. The TSX60, as of Thursday, has not yet hit it's upper band of resistance on the daily chart. This includes the 200MA at 845.89, the 50MA at 851.53, the 61.8% fib at 854.26 and the blue trend-line at ~860.

Getting to these levels will take a good push up to be sure, but the fact that there is clear resistance ahead possibly shows a more definitive top than on the US S&P. And while it's possible we eventually break above these levels, it 's very unlikely that it happens before trading resumes in the US on Tuesday.

In any case, Monday's trading should be relatively uneventful. Once the initial gap up has occurred, I expect that the market will trade sideways or slightly up for the rest of the day. I'll be sure to post my initial reactions to the open on Twitter and post a summary here at the end of the day.

Thursday Market Summary

Thursday was another sharp up day in the markets. This should not be a surprise to anyone who reads this blog or follows me on twitter. The S&P 500 index broke through the 61.8% fib level, the 50 moving average, a pivot low and a down sloping trend-line. I think it's possible we go higher to the 1330 or 1345 levels, but we are currently into strong resistance that should bring some sort of pullback.

I took a short position on the SPY at 131.70 and 132.05 via the HSD.to 2x ETF, as per my post yesterday. I also shorted the NASDAQ at around 2773. Both of these positions ended flat on the day.

The timing of these shorts could be better as we're entering into a holiday period. Those who've been following me know that I generally assume an up market in light volume holiday trading. In fact unless we get some kind of horrible news out of Europe, I wouldn't be surprised to see a flat or slightly up day tomorrow. The shorting levels should still work once the holidays are over.

Canadian markets are closed tomorrow for Canada Day. The TSX60 is into strong resistance as well, but I'd like to see it higher before shorting, preferably into the daily 200MA or even the 50MA. I'm less confident that a top is in on the TSX so I left it to short on Monday or Tuesday in case the markets float up again.

I'll be watching the markets on Friday but I expect trading to be extremely light in volume and therefore fairly boring. If I see anything interesting I'll be sure to post it here or on twitter.