Wednesday, August 29, 2007

TSX Going Below 12500...Aug 29th Observations

I don't use an alarm clock anymore since retirement unless we have something special going on. The sounds of the west coast were the first things I heard this morning. The first was the sound of the nearby fog horn at the light house. There must have been fog out on the Straight of Georgia this morning. The second sound I heard was the squawking of a Raven flying over the house.

I checked the stock price charts for RY (Royal Bank) , K (Kinross Gold) and PCA (Petro Canada) just now... well known examples of the Canadian in the banking and resource sectors. All three appear consistent with my impression of the TSX Comp index going lower. These three stocks all look like they will go below their lows of mid August 2007. All three have made recent rallies, since mid August lows, on decreasing volume.

BMO (Bank of Montreal) may have started its drop. Now at $65, I expect BMO to go below the mid-Aug low of $59 (-10% from today's price). BMO news out about large trading losses. The company fundamentals seem to agree with the chart. Another red flag.

If I was a gutsy gambler I would short BMO stock at this time. Selling short is an interesting experience. You sell the stock first, then buy it back later at a lower price (if your successful). It is still buy low and sell high. Unlike buying Put options there is no time limit to run out on your trade. If I owned a lot of BMO shares I could sell covered Put Options at this time. But I digress.

These individual stock charts are suggesting the same thing I see in the chart for the S&P TSX Comp Index. If my prediction is correct, this is the way it should be. When possible, it is always wise to look at something from at least two different viewpoints. If it walks like a duck, looks like a duck and sounds like a probably is a duck.

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