Resource based economies breaking out

Oil put in a possible technical bottom earlier this year. So too did most of the materials, including copper (below) and gold (not shown).

copper

The upward move in commodities has driven commodity sensitive economies such as Canada and Australia off of multi-year lows. Unlike Canada, however, Australia has seen economic growth at the fastest pace in four years. How long before Canada sees such growth is to be determined. The most recent economic report shows Canada’s economic numbers as a bit more uncertain.

Below, the base breakout on the EWA chart for Australia suggests that there is a case for Australia’s turnaround. To be more confident of investing in this index, the downtrend, as illustrated by the declining trendline from 2014, needs to be broken.

EWA

The TSX chart illustrates a likely base breakout and break of an intermediate termed downtrend. Both indices are a long way off of their old highs.

tsx

Energy, as well as some of the other commodity plays can back off a bit over the early to mid-summer. Energy in particular can come back into strength after from August into October. Given the overbought conditions of the energy markets and the TSX, and the challenge of the trendline for Australia, I wouldn’t be surprised to see a slowdown in the near term for these markets. However, the technical setup is encouraging for the late summer and onwards if current chart patterns do not reverse. See my BNN video below for more on those charts.

oil

Keith’s MarketCall

bnn

Click here to view my opening market comments from BNN’s MarketCall from Tuesday.

 

 

About the economy…

howard marks

Howard Marks of Oaktree Capital is probably one of the most respected money managers and pragmatic economic thinkers in the industry. I try to read his memos and books as often as possible. His remarks are usually balanced, well thought out and come from a background of real experience, not just theory.

This recent memo is one of his longer ones, but it covers quite a bit — and offers his usual humor mixed into the wisdom. Click here to read his thoughts on the current economy. Enjoy!

 

 

7 Comments

  • I bought some SINA stock today breaking out of the nice base with a decent upside target. I know you don’t discuss individual stocks but thought I would share that one.

    Reply
  • Keith: I’d like you to revisit a post topic from April 1, 2015 on the subject of preferred ETF’s and give your current perspective going forward.
    I am retired and have too much presently allocated to Growth and cash and not enough “income/fixed” assets. So I am looking for options to move cash into income generating assets.
    – I understand pref’s may have been beaten down and some think they may now be undervalued. Do you concur?
    – if BoC raise rates what would be the impact to pref’s? I suspect negative but seeking confirmation. If negative and if I believe rates will eventually rise, then will the capital depreciation be offset by yield?
    – if one believed that NA is due for a recession inside of 24 months, how hard would pref’s be impacted relative to index ETF’s?
    – Would you be a buyer now of pref’s if you needed income in your portfolio? If not pref’s then what?
    – if you were a buyer of pref’s, which companies ETF’s might I investigate?

    Thanks as always for your insight.

    Reply
    • Thats quite a multi part question!
      I think you have inspired my Monday’s blog topic Daddyo–i will review preferred share trends –thanks for the idea.

      Reply
    • Earnings don’t support it.
      Employment doesn’t.
      Caution – “Melt-up” market in progress.

      Reply
  • Hi Keith,
    We moved out of oil recently after taking in profits and now my investment partner is wondering what to do with the profits. So I came to read your blog for advice and I would agree with your “melt-up” market. Maybe Canadian bonds will go up after the market reaches its peak? Thanks for your helpful input as always!

    Reply
    • Seasonality can be strong for bonds in the summer. They are the “flight to safety” choice by many investors, as you suggest- often coinciding with a decline in stocks.

      Reply

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