Recap: Week Ending May 15, 2015

May 17, 2015

American equities climbed last week as weakness was seen in Canadian markets. The NASDAQ 100 performed well, closing up 0.80% on the week. The S&P 500 was the laggard on the week only closing up 0.31%. With that being said, the real loser last week was the Toronto Stock Exchange Composite Index or TSX. Last week the TSX fell        -0.41%. The move lower in Canadian equities occurred despite a strong rally in gold. Last week gold pushed 3.02% higher or $35.80. The move higher in gold was one of the largest the metal has seen since January of this year. The push higher puts gold just above its 200-day simple moving average, an area highly recognized in the industry as resistance on the upside and support on the downside. Often a positive correlation between Canadian stocks and gold occurs as many Canadian companies sell gold and benefit from higher prices. A similar line can be said about crude oil which also closed last week higher. Crude settled Friday at $59.96, closing the week up $0.49 or 0.82%. It appears that crude has found a strong level of acceptance at and around the $60 mark where it has traded for the past few weeks. With this in mind, the trading ranges of oil have become narrower and narrower. Despite narrowing ranges, trading volumes remains at higher levels. The move lower in gold and oil was assisted by a weak USD Index, indicating inflation or a step towards it. Last week the USD Index, which is comprised of a basket of currencies traded against the USD fell 1.72 points or 1.82% to close Friday at 93.18.

From a technical standpoint, the TSX continues to fall from its yearly highs that it established in April. The index was unable to attract new buyers, causing it to fall to levels which had a historic presence of buyers. Currently, the TSX is sitting between its 50 day and 200-day simple moving averages. The index was able to find support on the 200 day, however, is experiencing resistance at its 50-day average, this is common and occurs very often. The MACD, or moving average convergence/divergence indicator, is currently bearish showing a sell off is occurring. Looking at the indicator it appears that the bottom for the TSX’s move lower is not in yet. Another technical indicator RSI, or relative strength index, is currently sitting at 46 meaning the index is neither overbought or oversold. A 70 reading is considered overbought where a reading at 30 or below is considered oversold. With the RSI sitting around 50, the index could move in either direction. The somewhat conflict between the MACD and RSI indicates that the TSX may undergo a period of sideways or chop type trade.

For the most part, the economic calendar in both Canada and the United States was relatively light. One of the major releases was US retail sales which were released Wednesday. On a month to month for the month of April basis the figure disappointed coming in at -0.3% vs. a previous reading -0.2%. The reading was even worse when one considers economists consensus expectations of 0.3%. Market reaction to the reading was surprisingly muted with the Dow trading in its narrowest range finishing the day slightly negative.

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