Daily chart of the Canadian TSX-V index
TSX-V is an index pertinent to the global inflation trades * (e.g. commodity exploration/production, EM) and also smaller precious metals stocks, especially junior/exploration stocks. Representing the more speculative end of inflation trades, if its rally stays intact, a tailwind is implied for a much bigger slice of the markets as it rotates to include cyclical, inflation sensitive and ‘anti-USD’ stuff.
Da ‘V’ hit our target zone, which ranged from the downtrending SMA 200 (orange) to visual resistance at around 580. So far this week it has pulled back hard (filling a gap in the process), but the rally is not implied to be over. Not yet. As you can see, the index is testing its rising SMA 50, is at a higher low to the previous lows (544.91 on Feb. 23 and 536.31 on Feb. 13) and has dropped into a thick lateral support zone. Moderately overbought RSI is reset.
So far, it’s all normal to an ongoing rally. Taking out 544.91 would increase the caution and taking out 536.31 would break the play. Otherwise, this looks like a buying opportunity. **
* “Inflation trades” is not a literal term the way I use it. There are too many internal dynamics sometimes at odds to make blanket statements like that (for example, as supposed currency devaluing inflation raged in the US the US dollar rammed upward due to implications of hawkish Fed policy). In my use of the term, it just means markets traditionally correlated with inflation.
** As a side note, I sold a member of the index yesterday without even looking at the chart. I had painters all through the house, was quite unsettled, and was on an iPad (nice little gadget but I am much more comfortable on my Mac) and just reacted to the urge to take some profits. When the dust settled I remembered why I bought RIOFF (RIO.V) and its chart is still trying to break from the bull flag I bought it for. So don’t be surprised if it shows back up again. <insert here disclaimer about the trade log being written by a trader as faulty (or fickle) as the next casino patron>
