While Canadian stocks have been setting new highs, it appears some headwinds may be approaching for our northern neighbor. If we were to look at just the pure price action then things would look pretty good for the iShares Canada ETF($EWC). Price has broken above the previous high set in 2011. However, it’s when we look under the surface that we can see some problems.
The chart below shows EWC on a weekly basis going back to late 2010. On the top panel I’ve included the Relative Strength Index (RSI) which is a momentum indicator. Two weeks ago Canadian stocks made an attempt to break its July high but ended up producing a false break as price was unable to hold above $32.90. We also saw the RSI indicator make a lower high, creating a divergence with price.
Read the rest and see the chart at See It Market.
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