Gold Breaks a Multi-Year Trendline

Author Larry Berman

Posted: 10 May 2012 re-posted from etfcm

The TSX showed its first evidence of a higher volume (27.5% above the 3 month average) capitulation yesterday from an oversold level (RSI <30 at day’s low). But the grey clouds over Europe, the euro and by extension commodity prices linked to the dollar are an ongoing issue. Specifically, gold broke a multi-year trendline and is now in a recognition trade when trend followers are selling. The gold sector is looking to shake out the resolve of the bulls and this could keep pressure on the TSX despite the oversold condition.

WTI is finding some support below $96 for now, but probably has a date with $85 or so closer to the summer low period. Bounces should be limited in the coming months to the declining trendline off the 2012 highs and range trade is the best bet at this point. If the S&P 500 breaks 1340 support, then the Canadian financials should have their bottoms slapped a bit more too. For now, expect the TSX to hold around Nov-Dec lows 11,421-11,469.



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