Technical Take: "We anticipate that the S&P/TSX Composite will peak soon"

prepared by Ryan Lewenza, U.S. Equity Strategist, TD Wealth

Attached is TD Waterhouse'sĀ Technical Take, prepared by U.S. Equity Strategist and VP, Ryan Lewenza, and team, and their report highlights below, for volume 2 of "our new technical analysis report called The Technical Take."

Highlights of todayā€™s report include:

Ā·Ā Given our expectations for a continued range-bound trading environment for the S&P/TSX Composite Index (S&P/TSX), we anticipate that the S&P/TSX will peak soon, and head lower in the following weeks.

Ā· From a seasonal perspective, we note that August is the third-worst performing month for the S&P/TSX, with an average monthly loss of 0.36% since 1990. Additionally, there is a below-average probability (52%) of a positive monthly return in August.

Ā· The S&P/TSX Capped Financials Index is overbought with an RSI reading above 70. We therefore expect some near-term profit taking within the sector, possibly seeing the S&P/TSX Capped Financials Index declining into the 200 to 202 range, which represents the intersection of the uptrend line and previous resistance. While we expect some short-term weakness in the sector, we remain long-term bullish on Canadian financials, given its continued strong relative strength.

Ā· The intermediate and long-term technical trends for the S&P 500 Index (S&P 500) remain positive, especially in light of the new all-time highs, and as such, we remain long-term bullish. In the short term, we believe that the S&P 500 could experience some backing and filling as the S&P 500 registered an overbought condition with an RSI reading near 70. We are looking for the S&P 500 to pull back to its rising 50-day MA, which currently intersects at 1,643.

Ā· Gold has bounced back sharply, rising nearly 12% since the July lows. The rally in gold can be attributed to more dovish comments by the Fed over its asset purchases, which has led to weakness in the U.S. dollar, and in turn provided a boost to the price of gold. Sticking with our technical discipline, we see the recent bounce in the gold price as short term, with the technicals remaining bearish in our view. We see US$1,336/oz. as a key technical level, and only a break and two day hold above this level would alter our current negative view.

Ā· In this weekā€™s report we highlight Canadian Western Bank (CWB-T) as a trim/sell, and PNC Financial Services (PNC-N) as an attractive buy idea.

TD Portfolio Advice & Investment Research

You can read or download the complete report below in the slidedeck:

 

The Technical Take - July 29, 2013

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