Reversal Time?

I have been speaking to a lot of people lately about specific TSX stocks, as everyone is asking the same question: Why is the stock down? What don't we know? Thus far my answer has been mostly "profit taking" or "end of year jitters", and I will keep with this explanation until I have reason to change it. No sooner did I make my bold proclamation on this blog for the TSX to hit 12,000 then the momentum abruptly died with no staying power to follow through. While I have mixed views on technical indicators, sometimes they can adequately capture the prevailing sentiment and as a result serve as a good guide to what is happening in the market. Pictured below is the TSX daily chart with the momentum reversal.

Whether the TSX can hold support at the 50d average will be a key test for the market, and so far today is not looking so good. Another troubling indicator is the rising wedge formation on the TSX, typically a bearish indicator. This same pattern presented itself on the Dow Jones average in the late spring this year just prior to a 9% reversal.

One doesn't have to look very far to find negative sentiment indicators out there, and whether the markets keep trending up or not it probably makes sense to take some profits.

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