It appears that as quickly as the headwinds of selling blew into U.S. equity markets yesterday, they seem to be dissipating today. Although it had appeared that sentiment had turned negative once again yesterday and fear of a long recession seemed to have increased, equity markets held near their mid-November lows and well above their late-November lows. This suggests that a bottoming process for equity markets seems to still be quietly underway. Most significantly, it appears that U.S. markets may be in the processing of completing the right shoulder of a reverse head and shoulders bottom. This appears significant as a similar pattern appeared during the 2002-2003 market low and the opposite pattern appeared during the 2007-2008 market peak.

With right shoulders apparently forming, equities may rebound in coming sessions toward tests of the patterns’ neckline resistance near 8,900 for the Dow Industrials (US30 CFD), 900 for the S&P 500 (SPX500 CFD) and 1,200 for the NASDAQ 100 (NDAQ100 FD). Shoulder support now potentially appears near 8,000-8,100, 800 and 1,090, respectively. Should those levels fail at some point, the patterns would be called off and retests of the late November lows near 7,500, 750 and 1.025, respectively, may be possible.

Canadian equity markets have been backing off today, possibly due to a combination of mixed commodity price action and political uncertainty. The S&P/TSX 60 (Toronto60 CFD) has been holding above the 500 level and if this continues, it may complete a right shoulder as well, with neckline resistance near 560. Should 500 fail, however, next support appears closer to 450.

Commodities have been mixed today with copper and crude oil trading just below key support/resistance levels of $1.60/lb and $50.00/bbl, respectively. Meanwhile, wheat has been testing support at the $5/bushel level. This trading suggests that investors still appear to be uncertain as to whether commodities have fully priced in the ramifications of the current global economic slowdown or not. Precious metals, meanwhile, appear to be having trouble building upward momentum and have been trading well short of their key $800/oz and $10/oz respective resistance levels. This suggests that while the long-term trends for precious metals may remain positive, for the moment, the group may have trouble gaining ground as soft prices in other commodity areas may ease near-term inflation pressures or expectations. Note that $700/oz represents a key long-term support level for gold.   

Upcoming Free Seminars:

In the coming weeks, Colin Cieszynski will be making a number of free presentations for accredited investors across Canada.

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For more information on these and additional CMC Markets seminars, please go to CMC Markets Seminar Registration Page at:

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Upcoming Trading Webinars:

In the coming months, Colin Cieszynski will be presenting a series of free webinars on trading for accredited investors from coast to coast. 

Date                Time                Topic                                      

For more information on these and additional CMC Markets seminars, please go to CMC Markets Seminar Registration Page at:

http://www.cmcmarkets.ca/en/content/education/free_seminars.do

This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision. 

This commentary is provided for informational and educational purposes only. Nothing contained in this commentary is intended as investment advice or a recommendation or solicitation to buy or sell. All opinions expressed are current as of the date of publication and subject to change without notice.

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