An extremely ugly week as the TSX Composite fell 11 per cent. We are now down 27 per cent from the May top and 22 per cent in the past month. There is no where to hide. Every sector except Financials, Gold and Consumer Staples made new lows. On the positive side is that many of them are flashing extremes normally seen at bottoms. The fact that Financials, Golds and Consumer Staples are not making new lows we view as a divergence and a potential positive in this debacle.
While we are at extremes here we could see a rebound rally develop at any time. The sectors not making new lows are the ones to look at for possible buys. The TSX could rebound back to the major breakdown level near 12,000 and in a best case scenario get back to 13,000. But that is about as good as it gets. Fact is we have now broken down under the 4 year MA and once we do that we are entering a more serious bear market. We expect the TSX Composite to correct at least 50 per cent over time which targets down to between 7,000 to 8,000.
The sector that has the best indication of a possible bottom in the making is the Gold sector. In some of the faster indicators (stochastics) we are getting positive divergences. This is of course not a guarantee that we
are making a bottom but it is at least a reasonable indication that we could be in the process of bottoming.
Financials are also showing positive divergences. So amongst the carnage there is some hope here.
While the CDNX Venture Exchange continues to make new lows overall we are seeing a number of stocks that definitely now appear to be in the accumulation stage. There have been a number of them have very high volume days with no significant price movement a clear sign of some accumulation occurring through placement usually at the expense of very distressed sellers. Nonetheless it is a positive indication there. The
CDNX Venture Exchange is also in the zone of old basing indicating there is very little if any downside from here.
Subscribe to David’s reports and read more about:
- The financial panic of 2008 is on
- We may be in the vicinity of temporary low
- The bear market may still have many years to run
- The financial system is stressed out
- The authorities appear to be at a loss as to what to do
- Calls are coming for a new Bretton Woods
- Gold remains the one true currency
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These are 3 separate reports (more details here) (at least 44-46 per year): a fundamental and technical perspective on what’s happened during the week and what’s shaping up for the coming one. The Technical Commentary, Technical Scoop & Chappy's Stock Picks.
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