The TSX-V index is making a new high for the recovery cycle. This is important to many of the more speculative resources/commodities trades.
The ratio of the V to the senior TSX is an indicator we used for a bullish signal in May when it impulsively took out the 200 day moving average and again in June when it formed a Diamond consolidation pattern that went on to resolve in an upside break.
With the ratio not having made new highs we could call this a minor negative divergence but the status above the SMA 50 paints it as constructive as long as it holds.
Bottom Line
The inflation/reflation trades have been on full display lately with notable late stage laggard Uranium finally blasting off. The herds are jumping on the bandwagon and I am personally preparing for an interruption to the inflation trades, however brief it may be.
But the bullish status of TSX-V and the intact TSX-V/TSX ratio argues differently at this time.
Also, keep in mind that the US Fed and political fiscal policy makers are aligned to support continued inflation. So if there is an interruption I am certainly not making a big bearish deflationary call. Not at this time and possibly through much of 2021.
