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Lets zoom in on energy stocks.

Someone recently said Suncor is trading like oil is at $70. Well, for canadian heavy oil, the price differential to $WTIC is around $30 due to the pipeline issues.

So that helps explain why our Cdn oils have been more suppressed.

Here is a dashboard of Canadian Oil stocks.

Hey, the $TSX finally broke above its 200 DMA. Let's enjoy the rally!

What I like is that we finally broke above the 200 DMA with volume. As you can see this area has been resistance in a big way.

Let's list the resistance and check them off as we go past them.

1) 200 DMA - Black line...finally above it. 

2) This 50% fibonacci level at 12590 is very important as you can see by the red arrows.

3) There is more resistance around 12750 to 12800. You can see we got turned back there twice before. It was also a support level previously on the chart. 

4) The dotted blue lines mark out what is called a bearish wedge. Essentially, as the price moves higher and higher, the range gets narrower and narrower. Eventually it breaks down out of this pattern through the lower blue line and that would be a sell signal.

Should this breakout above the 200 DMA fail, we would use the rising dotted trendline as it gives us a tighter stop.

The rally was meaningful today. Some of the OIl service companies were great today. Obviously Gold caught a bid as well. So did $Copper!

No time to fall asleep here. I have 4 European summits marked on my charts in the last few months. It would appear the agreement isn't anything new today. So should the bond yields start to drop, the USD start to rise, or the Cdn $ start to fall, we would become increasingly worried about the sustainability. That fear exists on every breakout.

One note of caution, the transports had a bad day today. See last weeks article on Dow Theory. 

Good Trading,

Greg Schnell, CMT

Ask me what I am bullish about. The XEG.TO got a little life and moved back above the 40 week DMA. As a sign of encouragement, Crude oil broke out of it’s trading range. That is helpful as a major commodity. In the USA you can look at XLE for the ~equivalent~ of the XEG.TO. See John Murphy's article today on the energy sector.

 Stocks move in cycles. For a bull market, usually the bond market starts to soften, the equity market starts rolling, and then the commodities get going. That is typical. This inter-market relationship has been in place for many years. It must be viewed on the weekly charts.

Apparently the English language has more ways to say the same thing than any other language in the world. I guess we were blessed with Shakespeare or finance guys.

When things repeat, we have many different phrases for them. There is pattern recognition, repetition, cycles, behavioral finance, following the herd, overbought, oversold, breakout, failed breakout, etc. etc.

You can see most descriptions above, in this chart:

RN Elliott back in 1934 found an interesting pattern that repeated in multiple time frames. He would see this as 5 waves in the primary direction and 3 waves in the corrective direction. During some of the corrective phases, the market would make a sideways range bound pattern that he labeled x,y,z. He created exceptions and rules, and found a methodology that is practiced today by Elliott Wave practioners. But more importantly, he found these patterns in all time frames. From the subminuette right up to secular trend.

One chart for tonight.

THe $TSX is firmly against the resistance of the 200 DMA. A fail here would be significant. Caution is advised.

Remember, the Canadian Dollar, the $TSX, the $SPTEN are heavily influenced by $WTIC,$copper and $HSI.

The $CDW looks weak to me here, the $TSX looks weak here and the energy sector looks weak here.

I don't like copper being down 4 days in a row. $WTIC has some influence from the middle east and $BRENT. When the cold spell in Europe recedes, $BRENT may well recede too. Sometimes $GOLD behaves as a commodity. Especially with a rising $USD. IF that $USD chart is turning up, think about protection..

That red arrow on the right is painfully obvious for technicians.

Good Trading,

Greg Schnell, CMT

Living out in Alberta, I am in the home of ranch country which marks territory for the bulls. To the West is Banff National Park, Waterton National Park and Jasper National Park. All of these parks are home to grizzly bears and black bears.  Most days it feels just like the market. Bullish views in one direction and bearish views in another direction. Currently, everyone can find arguments to support their position.

Lets review the first work of intermarket analysis.

Lets talk about the DOW

The DOW doesn't have Apple in it.

The Railroads used to be the comparison. Now we use air, truck, rail, ship to move goods.

Let me cover these off.

One of the frustrations investors have is looking through the charts of common stocks and never seeing the great growth stocks that are accelerating.

How can we find these stocks?

Well the SCTR ranking system is extremely valuable. It will show you the powerful stocks and then you can choose those stocks to propel your portfolio. Why is this so important? Doesn't the market just move together?

Click on this button on the home page.                  ^^^

The market of 1994 was particularly difiicult.

It soared from the lows and created excellent rallies. Each rally was crushed and the 200 DMA flatlined.

More importantly,

What happened next?

That was a picture of the first 8 months of 1994. The peak on the right was Sept 1 1994.

Let's look at 1995.

OK. That's what I like...when do I get a rally into 1995??????????????

 Seems so awkward here but the January surge looks similar to the Jan 1995 or even the October 2011 had a roaring start.November and Dec  2011 did not make lower lows than October. (Hummm..) The move off the December 1994  lows looks higher on the right for 13 months! Bottom line, Compare the basing patterns of the two markets.

Can history repeat?

Well lets add another piece of data. Here is the VIX.

The $VIX absolutely collapsed and the Bull market was under way.

Here we go again.Great stuff here in the commodity space. I'm getting more bullish after looking at some long term data and comparing it to the current charts. I still think the market needs a rest. The $VIX has been on the low side of the 20 EMA for almost 10 weeks now. The SPX closed outside its Bollinger Bands Friday. Can it go on longer.... Absolutely. Can it stop here. Absolutely. But let's get ready for a bullish move higher by identifying some sectors that look poised to move and be ready. I would prefer to buy after the market pulls back.

One reason this blog today hones in on Commodities is that if the Euro zone and the US have to keep printing more money to create inflation, the commodities should get an awesome rally. Some would say the Eurozone isn't printing money, but they found $500B to liquify the banks should there be a sudden shock from Greece.

$SPTEN - Flirting with the 200 DMA

Just check out these charts:

Everything is screaming overbought. I think we are in a new uptrend and perhaps we will get a pullback on Greece news. Lumber, Copper, are in great shape. Here we sit. The COMPQ has blown through resistance. The SPX and Dow are testing the resistance areas this week. MSFT, WMT, INTC are moving into fresh air spaces on their charts.

$TSX - Flirting with the 200 DMA

$DJW - Flirting with the 200 DMA. This is a global stock index. So the trend is wider than the USA.

$AORD - Flirting with the 200 DMA

$CAC - Flirting with the 200 DMA

$NIKK - Approaching the 200 DMA

$KOSPI - Flirting with the 200 DMA

$CNXN - Flirting with the 200 DMA

That is a few indexes! OK. Lets see where this week takes us. I expect a pullback here, especially after Friday's rally.

It is the depth of the pullback that is unknown. Based on my chart work, we are now in a long term up rally. I think on the pullback, it looks like the commodities will join the party. That's a guess, but we'll have to wait and see.

Great meeting coming up on Tuesday  Feb 7 in Calgary. Myron Nowolselski is presenting some great work on bonds. It can be a very observant door into equities. If you can make it....book it at www.csta.org

As well two special events being held in Calgary. One with Tom McClellan on March 13,2012. The other with Ed Carlson on March 17th, 2012. Must be booked at www.csta.org

Can't line up talent like these 3 every month! Don't miss it if you can be in Calgary.

Good Trading,

Greg Schnell, CMT