Here is a not so well kept secret. I am far from a genius. Here is another secret, I benefit from serving one of the most astute subscriber bases imaginable. I benefit because I am always accessible to subscribers as I ask each week for any feedback, questions or critiques they may have. I get all of those things and the interactions are one of the best features of this job.
Which brings me to this post, inspired because subscriber MC, a learned and experienced man in the Canadian resources markets and hence, the CDNX, made a point to me this morning that the recent low may be more than just a bounce and that my dismissive tone in yesterday’s post may be too conservative with respect to this index and its potential.
First the context. I am a Man Who Stares at Charts and you know how we are; we stare at charts and tell what we see. This man who stares at charts also tries to give parameters and caveats (e.g. my assertion that targets do not need to be stop signs). I think it is important that if you are going to do TA you tell what you see and do not try to baffle ’em with bullshit (“complex H&S” or “Golden/Death Cross” anyone?).
So what I saw in the CDNX daily chart is exactly what I wrote, first in NFTRH and later here at the public site. I saw the RSI divergence at the November low, a pattern develop (on volume), a measured target of 565 and finally, an ‘eye test’ target of around 580 and the SMA 200. So the targets are in the books.
Although I prefer to clear the Santa seasonal and get into January before giving a lot of weight to much of anything we’ve seen over the last couple of weeks, these targets do not need to be stop signs. Hence, we take a look at the weekly chart at MC’s prompting for a 3-5 year view.
CDNX weekly shows a double bottom that was actually two higher lows to the important 2016 low. Back then gold and then the gold miners and silver led commodities and stock markets up into a reflationary period. An extension of that could well be in play now. But again, the seasonal begs some patience and short-term forward evaluation.
The price has taken out the weekly EMA 25, which has acted as a bear ball and chain for 2 years. That’s notable. What would be even more notable would be a cross upward by the EMA 10 above the EMA 25 as happened in short order after the bottom in 2016 but failed to happen on the 2019 bounce. Again, patience.
The even longer-term monthly chart tells us little other than the price is about a million miles lower than at the bubble top in 2007 as well as the echo bubble top in 2011. Both of those years saw the blow outs of inflationary phases and associated inflation trades/bubbles.
If the would-be double bottom on the weekly chart is real and it gets through current resistance at 575 da VEE could target all the way up to 675 or 725, which are the only two notable resistance areas. All the way up??? That’s barely a blip on the monthly chart. So why not? Why not higher, for that matter?
Just a man staring at a chart and riffing about it with the aid of an experienced subscriber to start 2020. I am personally starting the year with all of my assumptions and biases in check and subordinated to what we will see, gauge and react off of moving forward. I had a very good year in 2019 but believe me, if da VEE sets its sights materially higher in 2020 this will be an even better year.
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