Chappy’s StockPicks, Chappy’s Technical Commentary

S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)

The S&P 500 has now run right up into our ideal topping zone of 1,425-1,435. The high this past week was at 1,422. There is an outside chance that we will still make it to the 200-day MA near 1,433 but the reality is that this bear market rally is getting long in the tooth. Many stocks are approaching major resistance zones and former breakdown zones that are often tested in bear markets.

Of course the bulls will get excited at breaking the down trend from the October highs, but last week we pointed out that that was possible. We are now at “sell in May and go away” time, and typically if we are to see a top it comes in the first week of May. We have also cited the 1938 and 1946 cycles that saw similar double-bottoming patterns in the first quarter, then after a strong rally collapsed right back to the lows and even lower. As well, if we are to continue this rally then we must go right through 1,430 and except for small pauses keep rising to 1,500 and higher. [read more…]

TSX INDICES

The TSX Composite gained 1.25% in the past week with 10 of 14 sub indices up on the week. The losers were all the cyclicals gold, energy, materials and metals and mining. Indeed the gold sub index gave us a sell signal closing under the 40 week MA for the second consecutive week. Neither of Materials or the Metals did the same.

At the other end the Information Technology sub index closed over the 40 week MA giving us a buy signal. The reality is elsewhere though all we have done is crawl back to classic resistance zones where in bear market moves we typically fail. The same could occur with the golds as well who have fallen to a huge support zone and if the bull market is still valid that could quickly reverse as well.

The TSX did not make new highs this week despite closing higher. Indeed we remain below the July and early November highs. Unless those highs are taken out the next drop could be quite problematic. We would be continuing a pattern of lower highs which is the definition of a downtrend. This occurs even as we make these highs very close to the two previous highs. The 13 week MA has still not crossed over the 40 week MA. [read more…]