Near-term uptrend for the TSX index and will test 12,500

The above weekly chart at the close of trading for the week January 16, 2012 shows the near-term uptrend for the TSX Index with resistance at 12,500. The weekly volume is increasing which bodes well for a continuation of the trend and a break at 12,500. But the intermediate trend is sideways and below the 200 day moving average.  Caution is advised before making any major commitments to this short-term rally. The performance of the TSX pales in comparison to the DJIA which is trading above the 200 day simple moving average and ready to test major resistance.

On Monday, January 23, 2012; the TSX Index made a tentative close above resistance of 12,500.  But you should apply both a price and time filter to confirm the break.  A reasonable price filter for the index would be a 1% to 2% break with a time filter of two days. Then 12,500 would be the new support level.  The reversal of roles from resistance to support or support to resistance is an important concept in technical analysis.

On Tuesday, January 24, 2012; the TSX Index closed below the resistance level of 12,500.  Needless to say, this is not a positive development.  At this time, there is no need to chase the near-term rally as the so called “fast money” made an exit at the 12,500 level.

On Wednesday, January 25, 2012; the TSX Index closed at 12,539 with a bullish engulfing pattern on the daily chart.  The volume was above average and OBV and RSI are both trending up. The fundamental news driving the market is the Fed statement confirming low interest rates and the renewed hope of a deal in Greece with the private lenders.  Now there has to be follow-through on Thursday.  I am looking for a confirmed break above resistance of 12,500 as per the price and time filters.

On Thursday, January 26, 2012; the TSX Index closed at 12,462 after reaching an intra-day high of 12,615.  Where is the follow-through?  The failure to hold above the resistance level of 12,500, for the second time this week, after an encouraging start to the session does not bode well for the continuation of the near-term uptrend.  The selling pressure in the financials, both banks and lifecos, was a standout among the decliners. There was some negative economic data out of the US and this was the cue for the traders to take some profit.  Always look at the market reaction to any news event.  It does not matter what I think or you think about the news event: the only thing that matters is the market reaction.  And traders are selling into the short-term rally which was dominated in Canada by the financials and energy.  The TSX is still in an intermediate lateral trading band: it has gone nowhere in comparison to the DJIA.  Take your cue from the charts.

On Friday, January 27, 2012; the TSX Index closed at 12,466.  It  was unable to break resistance at 12,500 this week.

Now, you need to complete your own daily analysis of the  TSX Index using the advanced settings for BigCharts which are detailed on this site.

Please review last weeks chart analysis for the TSX Index.

Relevant articles picked from the Web:

• Energy, financials drive gains on TSX — Financial Post — Jan 24, 2012
• Canada’s banks may still be best TSX bet for 2012 — Financial Post — Jan 24, 2012
• Where CIBC sees commodities in 2012 and beyond — Financial Post — Jan 26, 2012
• Manulife and Sun Life shares downgraded — Financial Post — Jan 26, 2012
• Gold seen rising yet again in 2012 — Financial Post — Jan 26, 2012
• Canadian dollar proving less sensitive to risk  — Financial Post — Jan 26, 2012

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Note: This technical analysis is for educational purposes so you can learn to trade online using candlestick charts. Please conduct your own chart analysis or consult your financial advisor before making investment decisions. The chart snippets are from BigCharts.com which I recommend and have used for fifteen years. The author of this article may hold long or short positions in the featured stock or index.

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