Canadian Stocks Extremely Oversold

Published July 30th, 2007 in Canadian Markets, Technical Analysis Tags: energy sectors, global financial market, inflection point, Lowrys, Lowrys Reports, moving average, natural resource sector, stephen whiteside, uptrend.

The US market isn’t the only one getting whacked. Almost all the international markets have swooned in unison, thanks to an ever intertwining global financial market.

The Canadian market has been most recently driven by the natural resource sector: the mining (gold, uranium, etc) and energy sectors (oil and natural gas) especially.

According to Lowry’s research, when the percentage of stocks trading above their 10 day moving average is below 10%, the market reaches not only a short term bounce but also a lasting intermediate to long term bottom. It has only failed once! To see a graph of this indicator from 1990 onwards, click the above link.

On March 5th 2007, the US market had less than 4% of stocks trading above their 10 day moving average. You all know how that turned out. Last week, in the Canadian market, we saw less than 9% of stocks trading above their 10 day moving average.

While there is no law that says that this indicator can’t go lower (even to zero), past behaviour would argue that we are seeing an opportunity here for an inflection point.

Click to Enlarge Graph

Graph from Stephen Whiteside’s uptrend.com