A reader asked me to post my thoughts on the TSX recently. You’ll notice that I typically spend more time on the US markets for analysis. Thats because the US market is much broader and has a much more significant influence on world markets than our TSX. Nonetheless, we Canucks often have a good chunk of our wealth in TSX listed stocks, so its worth a look at our index periodically for that reason.
Todays blog will re-visit two charts that I’ve shown on this blog and/or my speaking engagements over the past year. First, lets look at my “revised seasonality” chart for the TSX. I show this to illustrate that the TSX has been entering its traditionally weaker period earlier than the US markets. While the S&P 500 continues to be a better bet to “Sell in May and go away”, the TSX, as illustrated by the red boxes on the chart, has been peaking much earlier than that. In fact, in 2011, 2012 and 2013 the TSX sell point arrived in late March.
The next thing I’ll take a look at is a 4-year chart on the TSX. This is the chart I posted a few months ago with my original target price for the TSX marked on it. You’ll see that the TSX is currently approaching its 2011 highs of around 14,300 – which was my target for the index. The TSX will face a certain level of resistance at this point very soon. Perhaps the market will find both seasonal influences and technical resistance at that 14,300-ish level too hard to overcome after March. Conversely, a solid breakout through 14,300 (one that can last more than a few days, and more than just a few points) would be technically bullish.
We’re inclined to stay with our high quality Canadian stocks at this time. We expect to begin taking a bit of profit on some of our higher beta names by the end of the month, given the potential for another TSX seasonal peak later this month. For example, we may look at reducing some of our smaller capped positions. However, we expect to maintain a high exposure to favourable sectors on both sides of the border until late April.
Keith on BNN
I will be on BNN television’s “MarketCall Tonight” show on Tuesday March 11th at 6:00pm EST. Phone in with your questions on technical analysis during the show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for me) to [email protected]
Another great chart. In your previous comments, you mentioned banks may have topped, utilities and Reits don’t look appealing but commodities are starting to look attractive. What are your top sectors right now? I look forward to your appearance on BNN next tuesday.
We’re heavily weighted in technology, pipelines, infrastructure, fuel delivery (pipelines and other delivery companies) and some direct energy exposure. We also have some unique situations and small caps that we’ve been making money on for the past few months. One such play is one of my last BNN shows top picks, and I’ll be speaking about it on the show next week.
In preparation for “sell in May” (or March for the TSX), I know that you mention in your book “Smartbounce”, that switching to XBB in the summer is an option. Do you think that XBB is a safe investment this summer given the interest rate environment? Thanks
Good question Eric
In short- the answer is no. I’m more inclined to stick with short maturities and cash this summer. Seasonal tendencies for bonds are usually pretty good over the summer, and they still may be ok this year, but there is the lurking danger of a market reaction to Fed Tapering. I don’t like saying “this time is different” very often–but this time may be different. I’d probably avoid that trade this year, just to be safe.
Pipeline IPL seems to tag the 50 day each summer then blast off- I am waiting for that buy point so you can be sure it won t happen this year 😉