The past 5 days have been pretty rough on stock markets. Fundamentally, the chaos in Libya is causing a lot of uncertainty in the investing community so money is getting taking off the table. At the same time the Toronto Stock Exchange was reaching a resistance level as you’ll see in the chart below. For the most part, resistance and support levels are held, so from a technical perspective we were due for a correction. When the technical analysis pointing downward matched up with the fundamental bad news, the correction happened in a big way.

I’ve highlighted the channel so you can see how the resistance level was being tested and failing all along the way, but the support level wasn’t getting the tests as often which would be considered an overall bullish trend.
So what happened to the bullish trend?
Right around the same time the technical traders were expecting a correction, the fundamental traders received news of chaos and instability in the world and wanted out. So it was a double dose of bearish sentiment happening to drive the stock market down 600 points this past week.

The bad news beyond the fact that we’re down 600 points is that the chart has fallen through the support of the up channel trend. It looks like there’s a little support at the 13,400 level and then more support at 13,200, but either way you slice it, there appears to be more room for declines in the TSX in the short term.

The fundamentals seem to be supporting more downward movement as well, considering the devastating effects of the earthquake and tsunami. Our thoughts are prayers go out to those people affected by those events.

Technorati Tags: stock market, Technical Analysis, tsx