CDNX and Gold
The CDNX plunged to a yearly low of 1343 early this past week but appears to have stabilized and could be ready for a rally after reaching deeply oversold technical conditions. The Index jumped 17 points Friday, albeit on light volume, to finish the week at 1370, a 15-point decline from the previous Friday. Only time will tell if we’ve seen the bottom of this market yet (the CDNX is off 19% over the last 48 trading sessions since this slump began), but a rally (likely to as high as 1440, an area of previous support) seems to be underway. Selling dried up on the CDNX this past week as soon as the Index fell slightly below its rising 300-day moving average. Based on historical patterns, it’s reasonable to assume the CDNX will find a bottom not too far below its 300-day M.A., similar to what occurred each year from 2003 through 2007. Since the 200 and 300-day SMA’s continue to advance with no significant threat of going into decline anytime soon, we must continue to take the view that what we’ve witnessed over the past 2+ months is merely a sharp correction within an ongoing bull market that could very well hit new highs later in the year. Gold showed some resilience this past week, briefly dipping below $1,190 before recovering to close Friday at $1,211. Over the past 10 years, the months of June and August have been the worst for Gold. Based on seasonal patterns, therefore, we should be prepared for some further weakness or consolidation in Gold before new highs in the fall.
