After being down 433 points on Wednesday, the TSE Composite fell another 240 points in the first of our trading today before closing 96 points higher.

Eighty points was tacked on in the last 20 minutes of trading, and 30 points in the last three minutes, suggesting that much of the rally was short-covering.  With decliners outnumbering advancers 2:1, the rally was narrow, and probably driven by a program. 

On the graph, it looks like an intra-day pivot reversal, similar to lows on August 16, January 22 and March 30.  For those of us short Canada, we must be cognizant that the next move may be higher.  If the next move is higher, the question is whether or not it is sustainable. 

I do not know the answer to that question.  I had been preparing to start covering my shorts on a 10% correction from the high on June 6.  At the low today, the decline was 9%, so I did not.  The market also bounced at resistance around 13,825.  That may be all the market is going to give us bears. 

On the other hand, the market internals have been terrible, with the market becoming narrower the past six weeks.  Thus, any bounce may be short-lived.  When looking at a broader index, the MSCI Canada ETF, ticker EWC, the chart looks more ominous. 

Including the 1% follow-on after today's 1pm close, a further 2% would put us right back into the top of a steeply declining downtrend.

I have been lightening up my broad short positions over the past few days.  I expect a tradable bounce either next week or the week following.  However, there could be significant downside of 10%-15% before the bounce occurs.