Equity markets across North America have been breaking down this morning, apparently in reaction to a number of economic data releases. In the U.S., major indices broke down through a number of significant support levels and previous lows including 12,000 for the Dow Industrials (US30 CFD), 1,335 for the S&P 500 (SPX500 CFD), and 1,940 for the NASDAQ 100 (NDAQ100 CFD). The next support levels for these indices appear near 11,700, 1,300, and 1,880-1,900, respectively.

Sentiment appears to have turned against equities in the wake of a number of U.S. economic releases. For example, the Philadelphia Fed index for May came in at (17.1) well below the (10) reading expected. Meanwhile U.S. jobless claims were 381,000, above the 375,000 investors had been expecting.

In Canada, meanwhile, markets appear to be reacting negatively to today’s inflation report, which rose by 0.6% in May to a 2.2% annualized rate, which suggests that the Bank of Canada may need to continue to hold the line on interest rates. The S&P/TSX 60 (Toronto60 CFD) has declined below 900 and the S&P/TSX Composite has fallen back under 15,000 this morning. This leaves a mixed technical picture as it appears uncertain whether Canadian indices have completed a bearish triple top or are still forming ascending triangles. Breaks from the current trading channels of 14,650-15,125 for the Composite or 860-905 could send a signal of Canadian market direction for the next several months.

Commodity price action has been mixed this morning. Crude oil has dropped 2.5% and fallen back through the $135/bbl level again, setting up a possible test of $131.50/bbl in coming sessions. Gold, on the other hand, has moved back above $900/oz and appears to be testing resistance near $915/oz, with additional resistance possible in the $935/oz-$950/oz area.    

Canadian share update: golds glitter, crosswinds in airlines

With the price of gold rallying back through the $900/oz level this morning, capital appears to be rotating back into the gold group. A number of gold producers have been among the market leaders in Canada this morning including High River (TSX: T.HRG, Stock Forum), up 2.4%, Golden Star (TSX: T.GSC, Stock Forum), up 2.2%, Agnico-Eagle (TSX: T.AEM, Stock Forum), up 1.8%, Kinross (TSX: T.K, Stock Forum), up 1.8%, and Goldcorp (TSX: T.G, Stock Forum), up 1.5%.

Yamana Gold (TSX: T.YRI, Stock Forum) has gained 1.8% this morning after releasing new exploration results from a number of its properties. Highlights included increased tonnage and grades at its Gualcamayo project, an extension of the Bonanza North zone at El Penon, and updates on progress at its Pikar do Gioas and Mercedes projects. Later this year, Yamana expects Gualcamayo to commence commercial production, the Phase Two expansion at Jacobina to be completed, and a feasibility study for Mercedes to wrap up among other initiatives. Yamana recently completed a successful retest of support and having broken through $15 this morning, could advance to test resistance near the $16 level. A breakthrough there could signal that an advance toward $18 (measured objective) to $19 (previous resistance) may be possible on trend.    

Canada’s major airlines and travel companies appear to be flying in different directions this morning. Earlier this week, Air Canada (TSX: T.AC.b, Stock Forum) announced plans to cut capacity and positions later this year, while WestJet (TSX: T.WJA, Stock Forum) indicated that it intends to keep expanding its services and hopes to grow market share. As investors continue to react to these developments, AC.B has declined 5.4% today while Jazz Air (TSX: T.JAZ.UN, Stock Forum) has dipped 0.7%. On the other hand, WestJet has been trading nearly flat and Transat (TSX: T.TRZ.A, Stock Forum/TSX: T.TRZ.B, Stock Forum) has gained 0.4%. Note that AC.B broke down through a short-term trend support line and could decline to test a gap near $20 or previous support near $18 over time.   

Upcoming educational 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                                      

July 22             7:30 pm ET      Developing a Trading Strategy 1: What Kind
                                              of Trader Are You?

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. 

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