Bullion – still in an up-trend:

On a past post on Monday, November 25, 2013, “Gold and the A-B-C Correction” I displayed a 15-year gold chart and wrote, “Bullion – The long term trend in bullion is still up as displayed in the 15 + year plot to the left (insert). Currently the 12-year primary trend line is at the $1200 dollar level. This important level was tested during the (C) corrective wave low of June 2013 when bullion bottomed at $1183. The current wave of selling should not violate the June 2013 lows – see support from the major producers (above).”

Ok - so now let us revisit the same chart - now updated to January 29, 2014. I am using the same trend lines with a semi-log scale. Don’t forget – you can’t place trend lines on a linear scale if the price doubles. Observation; bullion seems to have completed the long bear phase as displayed in the A-B-C corrective period. All we need now is for the gold complex is to confirm the new bull and begin to operate inversely to falling stock markets. 

A Positive TSX January Effect:

The January Effect is the bullish tendency of the smaller companies (the Russell 2000) to out perform the large companies (the Dow or the S&P500) during the month of January. This important signal – thanks to the Stock Trader’s Almanac – is somewhat based on bullish investors biding up the economy sensitive smaller companies as we begin the New Year.

When the study is applied to our own TSX our chart displays a bullish January Effect in Canada (so far) – which means the S&P/TSX Small Cap is out performing the large cap S&P/TSX60 index through January 24 as measured by a simple spread. The TSX Small Cap index is typically reflects the performance of the smaller and risky energy, materials and industrials – such as biotech, technology, mining and oil & gas producers.

A Positive January Effect:

A few posts ago I expressed annoyance with “experts” who explained the January Effect to be one of those, “as January goes – so goes the year” rules – which is incorrect. The January Effect is in reality the bullish tendency of the smaller companies (the Russell 2000) to out perform the large companies (the Dow or the S&P500) during the month of January. This important signal – thanks to the Stock Trader’s Almanac – is somewhat based on bullish investors biding up the economy sensitive smaller companies as we begin the New Year. The “as January goes – so goes the year” thing is actually the January Barometer which relies mostly on the market direction during the first trading week of the New Year.

Our chart displays a bullish January Effect in the US (so far) – which means the Russell 2000 is out performing the S&P500 through January 21 as measured by a simple spread. In our local TSX we also have the S&P/TSX Small Cap index out performing the large cap S&P/TSX60 index.