Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Friday, October 19, 2007

Market Update

Natural Resource stocks are taking their lumps today as investors A) grab gains and B) take defensive positions with the Dow down over 200 points as I write this. Also, the rise of the Canadian Dollar against the US dollar must be worrying Canadian investors -- Canada sells 70% of its exports to the US, though I think that will change in a big way over the next few years (hello, China!).

Natural resources have had a great run lately, so it's not surprising there is profit-grabbing, as Red-Hot Canadian Small-Caps subs did a couple days ago. It's all part of the ebb and flow of the market.

Let's look at a daily chart of the S&P/TSX Composite ...You can see that the S&P/TSX Composite is dropping below its 20-day moving average (the red line) today. Many "black box" technical trading systems take that as a sell signal. The TSX has enjoyed a great run since its low in August, so it is due for some consolidation before the next leg up.

My target for a pullback would be the Bollinger Band -- right around 13922. It's not written in stone -- there is other support at 13663. And, of course, the TSX could rally this afternoon to close back above the 20-day moving average.

The Green line on the bottom is the longer-term uptrend. Will the TSX pull back that far? It's scary to think about, but just think of the opportunities.

I'm glad we took some gains. One of those didn't work out as planned, because the stock pulled back too quickly for you to get filled on the order. Hold it -- a pullback should lead to another rally.


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