The TSX is in the process of testing its October lows. Yesterdays positive move (and, so far, today’s) caused a ripple of movement on the near termed momentum indicators to the upside. Its far too early to be excited about the prospects of our home and native land’s index yet, but the TSX may, should Mondays low hold, attempt to form a double bottom shortly. Here’s the nitty gritty on the short termed indicators that I watch:
- The money flow oscillator on the top pane (which is an RSI of money flow) is bearish- more importantly, the longer termed cumulative money flow line has also deteriorated (bottom pane)
- Stochastics is oversold but NOT hooking up
- RSI is oversold and is showing early signs of hooking up.
- MACD histogram is moving up, but its MA’s are not
- Comparative strength vs. the S&P500 is declining (no kidding!) and remains below its 20 day MA. However, it is on the verge of breaking that line – that may be a bullish omen.
The seasonal factors are typically positive from around mid December and into January. The above signals are rather mixed, so it would appear that the TSX is at a “make it or break it” moment. Much depends on the energy sector of course, as well as our banks. Crude shows no sign of bottoming (nat gas is somewhat more positive, as seen by support at $3.60 on the chart below). The banks, which are another key TSX index component, showed a similar test of their October lows yesterday. Lets see what the next few days deliver for the TSX. Confirmation of support at the October lows over a few days will be a potential buy signal.
Keith on BNN
I’m on MarketCall this Friday December 19th at 6:00PM. 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]
IS PMO (PRICE MOVING OSCILLATOR) OF ANY BENEFIT IN ASSESSING A STOCK OR AN INDICE. IS IT ONLY BEING USED TO READ AN OVERSOLD OR OVERBOUGHT SITUATION (PLUS OR MINUS 0 READING). DO YOU TAKE IT INTO ACCOUNT AS A PRIMARY TOOL IN T.A. LIKE STOCKCHARTS SEEMS TO DO?
Sorry–cant help here–I have never used the indicator, and it would be of little benefit to explain the little I know about the indicator–beyond what you could read in stockcharts.com “chart school” pages.
BTW–one thing I can say is that I am a big believer that all indicators – oscillators, volume, moneyflow, moving averages, etc–are all just icing on the cake. All that really matters are the “4 Phases”, as I explain in my book Sideways. If you can identify the phase – the other stuff just refines your timing around that identification.
with financials holding up 36% of TSX, and the resource sectors making up the remaining 40%, I would think the XIU would have limited upside going forward.
with 30% M&A activities in the energy sectors for the big banks and earning would be quite subdue going into 2015, I would tend to reduce my exposure to ZEB, and perhaps park some serious $$$ into ZUB, the equal weight US bank ETF.
The US seems to be the growth engine of the world in the next two years.
The financial sectors in the US have a long way to go , back to its glorious dates in 2006/2007. The Canadian financials are quite stretched, without too much growth.
The financials tend to be in a bear market about 1 year, before the recession kicks in , I cannot see it happen in the US , since we are in the last two years of US election, Obama would do his best to stimulate the economy , perhaps even a tax relief for all the US multinationals to bring all the over-sea cash back home to create more jobs, to further stimulate this stagnant economy.
much appreciate your comments on this topics ??
Funny you would mention that–below is a clip from my top picks on BNN last Friday (ZUB was one of them!)
I think there is a little upside left for the CDN banks as PM’s are forced to buy something other than oil in the CDN market. Banks will benefit from this–but agree that the strength will be minimal compared to the US banks.
Have you done any work on margin debt on foreign stock exchanges? On one blog I read margin debt in China is 18%. That is huge. I am aware that in the last couple of days the Chinese bond market looks a little weak. If that blows up it could take every body down.
I am not sure what the China % margin debt comment means–18% of what? Is that 18% of total Shanghai market cap? Let me know.
Whatever the case–margin debt in the USA peaked this past February at around $450 BB. Latest stats showed that it is off of those highs by several % in October. That makes sense given the “risk off” trades over the fall and this month.
I haven’t done any studies of how significant margin debt is to market performance. Intuitively, it seems bullish in the near termed to see margin debt growing, and bearish when it unwinds–but I have no statistics to back that up.
%of market cap. In the blog the comparison to the U.S. was 2.8%
Thanks–wow, that’s huge!
What is the update on this make it or brake it comment on the TSX?
It has obviously gone up and I thought that the 14600 range would be a resistance point as it was back in October but last Friday the TSX reached 14700. Does it have potential to go higher? What is the next range of resistance?
Luc–the TSX looks to be breaking down. However, if it can get through 15,200 that might suggest a neckline of a double-bottom–hard to see that happening with oil still heading down.
OMG, I wrote this comment last night and I just looked at the TSX and it is definately breaking down now (-400pts). Thanks for your fast reply to your blog.! Are you more confident now about gold going up? 😉
14,600 support next stop!
I have no faith in gold beyond a potential 1-3 month oversold move – but even then, I’m iffy. The big trend is down.