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In a chart review this weekend the TSX jumped out. The TSX closed near the top of a two year range on Friday and looks like it is setting up for an upside breakout. The TSX has a ~50% weighting in energy and basic industry.
The 12,800 region has six times been resistance now and is currently testing resistance again. Note the large ascending triangle in the TSX chart below; this could be a long term basing pattern about to be completed. While there is still heavy resistance in the 12,800 region, a break through and a close above 12,900 would be very bullish.
You could argue that on a shorter term a break has already begun as illustrated in the chart below. You could further argue there’s an inverse head and shoulders (albeit the shoulders are far from symmetric).
Gold and gold mining stocks have recently turned more bullish. At this point I think this may be just the beginning of a bigger move. The potential bottom that’s being formed is quite evident on a 1%x1 P&F close only chart. The downtrend that begun in 2012 is on the cusp of breaking in conjunction with a fulcrum bottom reversal. A break of the downtrend and completion of the fulcrum would suggest that the recent strength in gold and miners is just the beginning of a much bigger move.
Peter Brandt covered the potential move in oil and energy futures, and I agree that a significant move in either direction can be expected. I am also watching for a break of the three year down trend in relative strength of XLE:SPY.
Given the strength of gold miners and basic industry stocks recently, I suspect energy, basic industry, and the TSX are all on the verge of bigger upwards moves. I will be looking for confirmation in the TSX above 12,900, a break of the downtrend in XLE:SPY, and a completion of the fulcrum bottom on gold miners to position.
Disclosure: No positions at this time.