TSX - Jan 18 - 2009

charts courtesy of stockcharts.com

TSX is, once again, in a tight spot.

Last time, it was relatively easy to lean on the long side of the trade side as the weight of technical evidence from breadth and oversold levels from some key sectors (Materials and Energy) could give a bull something to work with.

Now, we have somewhat different picture. People’s pre-2009 enthusiasm for a new year of hope and prosperity has been tempered a little, and talk of deflation has become a bit louder.

Technically, TSX is in a fine state of balance, and the action of the coming week can either topple it over or send it higher.

It has been outperforming the S&P

Breadth has been OK on the advance. Volume came in much less than Thursday. I strongly suspect a beautifully executed short squeeze on Thursday, and some option-related settlements on Friday. I suspect the same thing for S&P, by the way.

As we can see from this 60-miunte chart, index is an area of converging short term moving averages and support resistance points.

Te decline from Jan 7 counts 5 clean waves down.

The advance, however looks corrective. The rise from mid-day point of Friday looks a bit weak

and cagey .

Either way, TSX may offer a good quick trade to a nimble trader. Things cannot stay in balance for a long time.

In closing, let us keep things in perspective by looking at the beautiful rise of the index from the 80s, and the spectacular bust that started in 2007