The $TSX was breaking out to new highs this morning on the back of the marijuana legislation passing both the house and the senate.
While that looks pretty good, it is an important time to watch the market for other clues. I presented a global chart review at the CSTA Annual General Meeting last week that showed a number of weak charts. Since then they have all broken meaningfully. Shanghai to new two year lows is an example.
As China is one of the biggest producers of steel and cement, as well as one of the biggest buyers of commodities, this chart induces a little caution for me into the Canadian investment landscape. The list is a little longer than one country though. The $KOSPI in South Korea broke a major trend line after the Singapore Summit last week.
Most of the Asian and European stock market indices have setups that I am not that bullish on. One other place to look for clues is the other commodity countries. The Australia stock chart looks similar to Canada's by testing new highs. That sounds better.
One reason to add caution is the currency charts of Canada and Australia are both weakening. They both track the shape of the $CRB so that is a little disconcerting when the Canadian chart broke 77 and the Aussie Dollar broke to new 52 week lows.
Here is the Canadian Dollar. Not as high on the marijuana theme as the $TSX.
The $USD is preparing for some big tests currently. It is trying to break through the 95 level on a weekly close. I like the PPO as a clue to what is going on. The PPO line is being tested and has broken slightly. If the $USD is going to start another bull leg higher, this is the inflection point for me. So the attention over the next 3-4 weeks is on the $USD.
In my title I mentioned that Utilities were starting to interest me. A good example of a beaten down sector that might be reversing is Utilities. Here is the chart of Atco.
So there are a lot of reasons to be cautious here, but a smart observer of the market would say a bear market does not hit new all time highs. That happened today, so we must maintain a bullish bias. Here is a link to the video.
Here is this weeks Commodity Countdown Video. Some of the conversation is on the indexes and a large portion stares down the calamity in Commodities. I did share some important calendar dates for the US Dollar. I comment on Gold and Silver in the video.
I host a new TV show on StockCharts.com called The Final Bar. It airs Thursdays at 5 PM ET and is repeated throughout the week on StockCharts TV. You can also catch it on my Vimeo channel or on the StockCharts.com YouTube Channel.
This week the Final Bar covered the deterioration in some of the foreign markets. I never expect the US to be the first market to fail. When the rest of the world starts showing some weakness, it can be important to use this advance notice. I think its a pretty important video.
Good trading,
Greg Schnell, CMT, MFTA
Senior Technical Analyst, StockCharts.com
Book: Stock Charts for Dummies
Twitter: Follow @Schnellinvestor
