Charts to watch

Here are some charts I am following for various reasons. I’ll look at the loonie, WTI oil, Canadian oil, the SPX, the TSX and Europe. If you have any broad market or sector charts you’d like me to address, please put them in the comments at the bottom. Here goes:

 

Canadian dollar

The loonie’s fate is now largely driven by oil, and by debt. I’ll cover oil in the next chart.

We have too much debt, thanks to a government that was spending in a pre-recession manner (and I might add, largely on things that do NOT aid our economy) BEFORE the current crises hit – see this Financial Post story. We also have the most over leveraged consumer in the world, as explained in this blog .They are now facing the prospect that this situation extends beyond temporary layoffs. A quote from David Chapman, of Enriched Investing:

Small business typically makes up upwards of 70% of the (US) economy by employment and represents over 40% of GDP. As businesses are just forced to close their doors (estimated to be upwards of 50% within a month of two of this if aid does not reach them) as this drags on, millions of workers will effectively have nothing to go back to. Ergo, the rush to get assistance to them. University and high school students looking for summer jobs are now behind a mass of unemployed waiters/waitresses, bartenders, and countless others. Careers will be dashed. Hope for the future stymied.
The Canadian unemployment situation is potentially just as dire. Canada’s official numbers do not come out until next Friday. Canada has seen a stunning 2.13 million unemployment claims since March 16. That amounts to around 11% of the total labour force. As in the U.S., many of the businesses that let employees go may not come back the longer the lockdowns last. We are witnessing a potential labour disaster of unknown proportions…..Upwards of 80% of the working population lives paycheck to paycheck and the rent came due April 1. Thousands were unable to meet April rent and we have already heard of eviction notices.
A steep recession? Absolutely. An economic depression? Highly probable and we are not prepared for it.

Here’s a chart that I keep in my chartlist, and support points that I had plotted many years ago. Interestingly, my noted 0.70 support point was roughly met and held recently (we saw about 0.69 a week ago). One can hope that 0.70 continues to hold. If it doesn’t, it can easily go as low as the 2002 lows.

 

 

Oil

WTI oil is the benchmark. Below is a chart with support lines. I had noted support levels and kept them on my chart list from years ago. They  held, until they didn’t.

WTI had major support at around $42. Then $50. That’s where we picked some up for our VT strategy, with an eye on selling around $60 resistance. You can see that after it broke $50, it found support back at $42. Under normal conditions, that level should have held. But it didn’t. Times are not normal. We sold a bit of our oil on Friday, but still have about 5% exposure through some producers.

WTI’s current challenge is the old lows of 2016. Last week’s price pop on the potential for Saudi-Russian talks (which are now delayed until later this week) pushed prices to that high-$20’s  point. That’s a level of resistance, albeit not as significant (due to the one-and-done nature of that spike) as $42. Momentum is oversold enough to allow a bit of positive news from this week’s meeting to influence it positively.

 

Here’s the Canadian oil index chart. It’s just below the lows of 2018, and above those of 2016. Canadian oil trades differently than WTI to some extent. The good news (if any) is that it hasn’t broken its old lows by much at all, suggesting support resides at current levels.

So again, good news this week will help oil which in turn helps the loonie, possibly moving it (the loonie) back to the low-mid 0.70’s. Bad news will solidify the break below 2018’s lows, and (aided by falling oil prices) will present a reason for the loonie (top chart) to move into the low 0.60’s.

S&P 500

The SPX is just now touching its last rebound high at 2650. That’s first resistance. Then comes 2750, and 2850. Stochastics is getting up there, but still has room to go. RSI has plenty of upside before it gets overbought. Positive news this week on earnings will drive the SPX through 2650. Keep an eye on earnings and virus news. That, along with these resistance points. Watch for momentum becoming overbought. Stochastics is close….

 

TSX

The TSX300 is about 30% energy names, and almost as much in financials – who (banks) rely on energy for a chunk of their business. No surprise to see this chart is not a heck of a lot different than that of WTI lately. Hardly worth posting, but what the heck. Follow oil and know how our index, or banks, and our loonie will do. Canada relies on energy for its economy. Good thing that sector got so much support from our government in the past few years ….just ask Alberta!

Europe

The broad European chart (IEV-US) shows support at current levels. Disclosure–we own this ETF in our models. We bought on the H&S neckline breakout, circled. As with absolutely everything, it moved before our 3-bar sell rule applied. So we still own it. Recently, it broke current support at $33 momentarily.  But now its holding. It looks like $38 is possible. We shall see. News will drive this chart more than technicals.

 

Post your comments

Let me know what you want me to cover. Make it something broad (an index, a commodity, a currency, asset class or sector) or a well followed and influential large capped stock. Something that is of interest to all readers, not just to yourself. Thanks!

16 Comments

  • Hi I would like to do trend following. Any suggestions off books? Would like to buy hmy or asr or kl

    Reply
    • You can always read my book Sideways. Or Murphy’s books. Martin Pring has great books on the subject, along with Weinstein.

      Reply
  • Hi keith:
    Just wondering that everyone talks about how to vix is so eratic but I use Stockwatch for my charts and I cannot find what vix I should be watching.
    I think someone said it should ususally be a high of 20 and now is 45 or so so you get a lot of volatility. Is this the index you watch and if yes which one in Canada.
    Perhaps you think there is a better one to watch /keep an eye on . can you give me some hints.
    Thanks and keep up great work.

    Reply
    • Hans–the best way that I know of to watch the VIX is on Stockcharts.com. They have long and short views and they also have the mid-termed AMEX version of the VIX. The most popular volatility index is the broad based $VIX – the AMEX one is VXZ

      Reply
  • Hi Keith, what’s your opinion on the REIT sector? It got hammered after a steady multi-year run. Do you see this sector rebounding in the near-term or more pain ahead if tenants can’t pay their rent? Buying opportunity or buyer beware?

    Reply
    • I was listening to an interview with a US REIT analyst this morning. His bottom line: the best case scenario is business gets back to normal 6 months from now (September)–worst case is 1 year. Thus, the individual companies that a commercial REIT holds is more important than making a sector call. If a company has enough cash flow to live through those potentials, should be good. If not…..

      Reply
  • I’ve taken note of the nuclear stocks Cameco CCO.TO and Uranium Participation U.TO, the uranium basket of energy sector. Both of these seem to have bucked much of the negative moves of the overall market.

    Reply
    • Yes, power is more important than a new TV, so they are holding out well. We have CCO in our Aggressive Strategy

      Reply
  • Hi Keith,

    Would you consider doing a post on the technical implications of gaps in a chart. Particularly why sone analysts say they must be filled at some time in the future.

    Reply
  • I’m wondering about Emerging Markets. I currently hold VEE and am looking to add to it. On the weekly charts, VEE bounced up from it’s support at $26.50and through lesser support of $28 but have not yet crossed above the 10 week SMA. The daily chart is encouraging. Price is now above the 20 day SMA, price action has been up now for two days, MACD is seriously positive, RSI is looking to break the 50 mark and Full Stockastics has already done so and is ticking up.

    If it’s up again tomorrow, is VEE a buy?

    Reply
    • We hold a similar emerging markets ETF. True, they are at some resistance. But they have been somewhat outperformers of late. Im inclined to hold ours.

      Reply
  • Hi Keith,
    Thanks for your blog and updates, especially in these times.
    What are your thoughts on gold/silver? Seems like they can’t keep up with physical demand as well as all this free money printing and increased debt.
    Thanks for your thoughts.
    Chris in Jordan Station.

    Reply
    • Pretty hard to ignore gold lately Chris. I think gold has a good shot at hitting its old high of $1780-ish. From there, we shall see. If you hold, keep holding and reassess if it hits that target or begins to fail.

      Reply
  • Hi Keith

    Could you take a look at BRICs using ETF or Indices and comment on USD strength (impact on these economies)?

    Also- Corporate fraud from Chinese stocks listed on NASDAQ seems to be piling up. it was LK , then IQ and now TAL. How do you view these group of stocks ?

    Reply
    • As a technical guy not sure how I can comment on corporate fraud–but I will cover the emerging markets in a blog–thanks for the idea

      Reply

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