Technical Take: TSX Holding Above 13,450 Range Would be Very Bullish

February 6, 2014

2 minute read

by Ryan Lewenza, North American Equity Strategist, TD Wealth

Highlights

Despite the recent weakness in the Canadian equity market, the technical profile of the S&P/TSX Composite Index (S&P/TSX) remains constructive with the index trading above its key 50-day moving average (MA) and in an upward channel. We view the 13,450-13,500 range as an important technical support level, that should it hold, would be very bullish for the S&P/TSX. That said, we have been calling for a pullback in the North American equity markets, and see the recent weakness as the beginning of that pullback, with the odds for another leg lower, before the equity markets begin to stabilize.

• With the roughly 4% pullback since its highs of 1,850 in early January, the S&P 500 Index (S&P 500) has declined through its important 50-day MA. We are now focusing on the 100-day MA, which has also proved to be an important support level in recent months. Similar to our short-term call for the S&P/TSX, we believe the S&P 500 could ultimately break below its 100-day MA, as a Wave C decline unfolds.

• The upside of the market weakness is that investor sentiment has begun to normalize, following elevated levels in Q4/13.

• The technical profile for spot gold has improved, but we believe it is still too early to rush back into the precious metal. Spot gold remains in a confirmed intermediate downtrend, which must be broken to the upside before getting more constructive on the metal.

• In this week’s report, we highlight Amgen Inc. (AMGN-Q), and General Electric Co. (GE-N) as attractive buy candidates and recommend investors trim/sell Cineplex Inc. (CGX-T) and Time Warner Inc. (TWX-N).

The Technical Take - February 3, 2014