Reflex rally now playing

As markets swooned the past couple of weeks, central bankers began to panic and take to the policy propaganda media channels talking about other stimulative tricks they could try. Of course with their policy rates already at nil and balance sheets already full of debt, talking and buying up more financial assets are the only tools they have left, and both are at best, temporary in effect.

Nevertheless, the past three days have seen a reflex rally in risk assets and we could easily see a 2/3rds style recovery of the prior decline before the next overhead resistance level is tested.

The following chart of the Canadian TSX offers a big picture view on the decline since September, the present rally and where we could see the next overhead test in the 14700 to 15100 area marked in the orange band below.  Big interim rallies are par for the course in corrective cycles.  But unless they break above prior resistance peaks the downward trend remains in place.  Stay tuned.
TSX Oct 20 2014

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