Neartermed trends may be changing

The TSX300 hit and slightly over-reached my target (set back in 2015) of 15,600. Please see the chart below. It actually got pretty close to 16,000 before reversing into what I must say was a fairly predictable decline from those levels.

The TSX remains in a neartermed downtrend and sits near 15,100 as I write this blog. How low could it go? Well, it’s a fairly concentrated index so you do need to pay attention to its three main sectors (financials, energy, materials) to determine where it’s going next. But I’d give it a good shot of hitting the dashed green line of support on the chart below – which lies somewhere around 14,500 or thereabouts.

Technical Trend Analysis of TSX shows near-termed downtrend with 14500 target

 

The big picture for the S&P 500 looks to be maintaining its uptrend (rising black trendline, and above the 200 day MA) on the chart below. Moneyflow (bottom pane) is bullish–despite slowing neartermed moneyflow momentum (top pane).

However, a minor trendline break (green line) is appearing on the daily chart. That’s an early signal, and it may prove invalid. However, some of the factors I mentioned in this blog suggest that the US market is ripe for a correction – if you haven’t already, you might want to read it. MACD has been diverging for a while, and other momentum studies have too. I also note that many of the market leaders in the FANG (FB, AMZN, NFLX, GOOGL) are faltering. So keep your eyes open—there are many other factors such as breadth and seasonality that are weighing against continued upside for this index.

S&P 500 Trend Analysis shows break of minor trendline - major trendline remains intact

We’re 40% cash with a 5% USD treasury bond position in the ValueTrend Managed Equity Platform. We have a huge list of stocks that I like technically, and Craig likes fundamentally. We’re looking for an opportunity to buy any of them on weakness. Perhaps nothing will come of the signals I note above. But if something does happen – we are prepared. Perhaps you should be too.

 

5 Comments

  • Good afternoon Keith,

    The Shiller PE ratio is at the same level as the Black Tuesday of the late 20’s. So something will be happening. How much importance we put on this?

    Thanks,

    Paul

    Reply
    • Paul–I created an indicator called the “Bear-o-meter” (look it up on this blog on the search spot). It incorporates the trailing PE–not the Shiller one, but I do respect Shiller’s ratio. Problem is that any factor such as PE ratio (trailing, forward, or inflation-adjusted like Shiller’s’) is just one factor. That’s why I use multiple factors in my risk-reading Bear-o-meter. Note that the Shiller ratio has been in a high level for quite some time. So it can be too far-forward looking as a leading indicator if you use it in isolation.
      The Bear-o-meter compliation was last read in June (https://www.valuetrend.ca/bear-o-meter-signals-market-risk-improving-still-danger-zone/). It hasn’t changed since then, as it still sits at “3”- this is basically on the edge of a “too risky” and “neutral” reading-basically I show a higher than normal risk, but not in the complete panic zone.
      Bottom line: one factor is not enough to draw a conclusion from. But I d agree, based on my compilation, that markets are risky right now. That’s why I am 40% cash right now.

      Reply
  • BAD OMEN?

    “BANKS BEAT ESTIMATES BUT LOWER LOAN LOSS BIGGEST DRIVER OF GAINS. THAT WILL END AS SLOWER ECONOMIC GROWTH,HOUSING RISK AND TRADE ALL HIT PROVISION LATER.”

    (JOHN ZECHNER, AUGUST 2017)

    Reply
  • Hi Keith,
    Do you believe that with the breakout of gold at $1,300 that it is a worthy trade? If this breakout is valid, what price do you think gold will get to? Thanks.

    Reply
    • To me, gold looks good. Its broken out of the triangle at the level you note (per a prior blog I mentioned that level as an important breakout point).
      $1360 is major resistance now and initial target, and if that breaks it could be a big move–much higher– $1400+

      Reply

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