Monday, July 2, 2007

TSX Correction Down to ~12,500?

In light of almost every 'professional' analyst saying that a correction on the TSX Index is overdue, I thought I'd take a look at its two-year chart and see what all the fuss was about.

It appears as though a short-term top has been made as a break up above its recent highs would be necessary for the uptrend to stay intact. The question now is will the index go sideways over the summer months or break down and test support levels. Without looking into it in greater detail, there appears to be some support around the 13,400 mark; if that fails the 12,000 to 12,500 might be tested. I suspect the test of the lower level would not occur until September or October since most major corrections that I recall occur during those months (I could be wrong about this as I'm just going from memory). Hopefully, it happens sooner than later so we can get it out of the way and continue going upwards from there.

I currently have about 70% of my holdings in cash. I doubt my cash component will stay that high over the summer months but I'd like to have at least fifty percent available for the potential big dip.

The TSX Index closed on Friday at 13,906.


FourPillars said...

I hate to be Mr. Negative but given then 4.5 year bull market in the TSX you can probably go back at least 2 years and find lots of predictions of "coming corrections". Of course there will also be lots of other predictions as well.


White Eagle said...

You're absolutely right FourPillars... there are always predictions for both sides of the story. Since I am currently heavily weighted in cash and we're in the summer duldrums, I'm going to be patient and try not to 'force' myself into investing in any new holdings unless there are compelling reasons to do so.