BullMarketRun - The Incredible CDNX Comparison With 2004


August 18, 2010
The Incredible CDNX Comparison With 2004

On July 16, BMR posted an important and very popular article (“Hopeful Sign: 2010 CDNX Chart Looks Like Repeat of 2004“) that compared the 2010 CDNX with the 2004 CDNX. This research was significant additional evidence that the CDNXmay have hit bottom in early July and helped us immensely in issuing avery bullish forecast at that time (helping our readers make money) forboth the CDNX and Gold.

Today, a month later, BMR’stechnical analyst is going to revisit this striking comparison (we havere-posted the July 16 article for reference purposes – we suggest youread it or read it again - in order to fully understand and appreciatethis morning’s update).

At BMR we have used the CDNX as an extremely effective leading indicator, which it is – for the broader markets, for Gold and commodities in general, and even for the overall economy. This is one of the world’s great speculative markets and the CDNX is also very resource-based. That’s why the technical health of the CDNX is so important to monitor. As a classic example, when Gold and oil were both strong and moving higher in the first half of July, 2008, the CDNXwas going in the opposite direction and broke down severely by the endof the month – moving much quicker to the downside than the Dow or theTSX. This signaled that major trouble was ahead (speculative money is always the first to flee danger)and sure enough markets across the board soon crashed. That’s why wedon’t believe in the theory being advanced by some analysts right nowthat another major crash is on the way – the CDNX is not confirming this. To the contrary, the CDNX has been leading the overall markets (and Gold)to the upside over the past 6 weeks. Far from an imminent crash, wecould very easily be on the verge of a major upside breakout. That’swhat the CDNX is telling us.

Below, on the right, is the CDNX 2010 chart while the 2004 CDNX chart is beside it on the left. See the link below.


John: With this update let us cover the period from July 1 to Aug 13. Thisis a very important period because it includes the lows of each year andthe expectation of a reversal to the upside. We see on the 2004 chartthe CDNX was in a horizontal trend channel and did notbreak to the downside into a lower horizontal channel until the thirdweek in July. On the 2010 chart we see that the CDNXmoved into the lower channel around July 1, so the base consolidationstarted about 3 weeks earlier. The eagerly awaited breakout to theupside on the 2004 chart occurred around the 3rd week of Septemberwhereas this year it occurred during the 3rd week of July – 2 months earlier.

After the breakouts, the CDNX, on both charts, hasmoved in exactly the same pattern and in an upsloping channel. Theoutlook for the remainder of this year is very bullish. I expect we willsee the Index continue to move up in an orderly manner within theupsloping channel until at least the end of the year.


Source: http://www.bullmarketrun.com/?p=2858