So far (at least) today we have bounce day for equities and some commodities. While metals and the Canadian dollar are down hard again as I write.
Bounce days are a natural recurring phenomenon in on-going bear markets. But it will take more than a few bounce days to reverse recent trends.
Dropping through the key level of 12,750, the TSX is now hovering around its last bull cycle peak reached in September 2000:
If the TSX cannot hold at the 11,300 to 12,000 range, the next leg down would look to the psychological 10,000 for potential support. For the past couple of years, my technician partner has told me that 10,000 was the potential downside target for the TSX and the Dow this contraction. Hopefully the broad markets will hold there.
If I had to hazard my guess, I would guess that broad indices may not hold at these levels in the weeks ahead. But that is just my guess. If equities do bounce off support in a meaningful way we will get some buys and that will be fine. Having not lost any capital in this downturn with lots of cash at the ready, we are happy to look for re-entry points in the weeks or months ahead.
Meanwhile with all the fear and talk of government bail outs in the world, one may have guessed that gold would have performed better over the past few months. But after our sell in May, gold has so far failed to break out again in a meaningful way:
At this point, gold would have to close through $940 in a meaningful way in order for us to wager on a further leg up.
At the same time the US dollar has continued its bullish reversal over the past 12 months. It is enough for us to acknowledge and manage our capital to benefit from this trend. But if I am asked to guess why the U$ has broken out through all of this, I would guess it is because the world is now finally realizing that the economic contraction ongoing is global not American. America started into the downturn first. They have more GDP and relative wealth in their population. They may well weather the present storm better than many other nations now finding themselves in the eye of this storm.
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