Momentum indicators surge as INK Canadian Insider Index rallies 1.5%

Thank you for joining us in a weekly technical look at the mid-cap oriented INK Canadian Insider (CIN) Index. Last week, the INK CIN Index made a final plunge as low as 1108.56 before it embarked on a powerful turnaround. The Index ended the week at 1151.95 with a 1.5% or 17.5-point gain, as world markets rebounded with gusto.

For the last couple of weeks, including in last week's blog post "Dives and divergences" we've suggested that divergences on our momentum indicators were hinting at a big bounce and/or potential trend change, and bulls were relieved to see this play out. Our long-term momentum indicator MACD has now risen for three straight weeks and moved into the black, surging from -3.76 to 3.65. The MACD histogram continues its upward trend. As a result of this major swing in momentum, the blue 'fast line' crossed up and over the red 'slow line', generating a buy signal (though, we know these can whipsaw). In addition, our short-term momentum indicator, RSI shot up strongly from 28.1 to 42.3 for a 14-point gain, generating a substantial 50% increase.

Support is at 1125 and 1140. Resistance moves up to 1160 and 1180.

Along with the Index's rebound, we saw a powerful reversal in the price of copper which enjoyed an impressive 3% gain on the week. This helps support my forecast that we are in the very early stages of a melt-up for the markets and that we will soon see a rotation into commodities and risk-on sectors into the New Year. What's next? I think we could see an initial market pullback or retest over the next week or so, and then a really powerful rally once this market bottom is confirmed.