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TSX 'directionless'

TORONTO (Reuters) — Investors are advised to stock up on stomach elixirs if they plan to ride what is likely to be the Toronto Stock Exchange roller-coaster over the next few months.There will be 200-point gains for the key S&P/TSX composite index over the the first half of the year, but they are likely to followed by drops of similar magnitude.

Just look at this past week. After climbing about 240 points in the middle of the week and coming within inches of its record high of 13,053 on Wednesday, the index took a turn for the worse a day later, giving back 83 points.

On Friday, the TSX was up again, rising 52 points.

“The market is racked by indecision right now in what it wants to do,” said Rick Hutcheon, president of RKH Investments. “There is very little compelling evidence to suggest that the market should continue to march higher. Conversely there is very little compelling evidence that would suggest the market is due for a correction.” Hutcheon said part of the blame lies in the fact that the market is stuck in a “directionless” phase as investors question their positions in natural resource issues.

Being overweight in these commodities seemed like a good idea at a time when gold was flirting with a 26-year high of $730 an ounce last May and oil was king when it was tapped at $78.40 a barrel in July.

Since then, both have slipped from those highs and investors have started to look for better spaces to park their money.

“Directionless markets, are markets that are backed by the ‘story du jour’,” he said. “They shoot up 200 points on some thing and then you correct and find another reason to go one way or another.”

Worries over the strength of the US economy, which in turn affects world-wide demand for resources, as well as concerns over geopolitical tensions, will continue to weigh on the minds of investors.