TSX spikes out of downtrend. Is this a trend change?

September 20, 20179 Comments

Below is the chart of the TSX with its recent move through the downtrend. Technically, I like a minimum of 3 days—and even better, 3 weeks for a breakout from a consolidation (bottoming pattern) or a downtrend. Further, I like to see the last high AND the last low taken out to prove that breakout to be the “real deal”.  Thus, at this point I’m not a “believer” in the TSX….yet. Readers of this blog know that I’ve been negative on the TSX for some time, and in 2015 forecasted that it would top and drop at its old highs. I was close—the TSX topped in February at a level just a bit over its 2014 high level. From there it’s been in a downtrend, as predicted.

Adding to my skepticism of this breakout being valid are the seasonals. All of the seasonal experts (DV Techtalk, Equity clock, Thackray) point out that the seasonal tendencies for the TSX weaken somewhat from now to late October. Brook Thackray had a good YouTube video on rotating back and forth between TSX 300 and S&P 500. Click here to see it.

 

I’ve previously mentioned the Canadian debt and the  longer termed consequences on economic growth of an irresponsible government’s policies. Click on this link to read the details of what the most respected global macro analysts are saying about Canada’s future. The analysts on that blog commented before the new small business tax changes.  The new message from Ottawa is this:  Big unionized  business (BBD, GM and F) get handouts and breaks, while small business, farmers, doctors etc. get no handouts and get their tax breaks removed. Not to mention the potential consequences of minimum wage increases on employment and small business investment in Ontario and other provinces.

Certainly the growth picture has only gotten worse for Canada since that blog was written. Or, perhaps we don’t need those darned doctors, farmers and businesses. We can all work for Bombardier or the government!

Suffice to say that longer termed government policies continue to suggest, despite any neartermed rally,  that we aren’t likely looking at future growth potential to drive through the TSX’s old highs.

 

Another easy prediction

I’ll say it again – as I said in 2015:

Near termed rally for the TSX? Sure, anything can happen. A test of old highs again? Sure, its possible.

A new high on the TSX over the next 12 months? I think not.  Feel free to bet against me on this. I am putting my money where my mouth is on that prediction. We remain underweight the TSX. It’s been a good move so far, and I’d suggest that trend continues for a while to come.

 

 

9 Comments

  • I am no fan of government debt. The problem is that money is created based on debt. If you start paying off the debt you take money out of the economy. The real solution would be to kill the fractional reserve banking system and replace it with sound money.

    Reply
    • Bert: it’s not just the debt, its the culmination of MORE debt (deficit)!!!!!
      https://www.valuetrend.ca/armchair-economics-101/

      Hey–I have a great idea—lets stop overspending to begin with!!!Here’s how:
      -lets stop handing out money to Big business, convicted terrorists, foreign countries, and illegal immigrants–then let’s ask our PM to keep his twice yearly vacations in line with what other PM’s have spent (typically half of Trudeau’s) rather than $200k-$250k per pop — and he might stop getting other taxpayer paid perks like 2 nannies that other PM’s who had kids didn’t need. Then lets ask him to go visit our own countrymen who are losing their homes in BC while he’s more concerned about handouts to everyone else BUT our own people.
      Just a thought.

      Reply
      • I agree with what you write. I don’t think you understand how central banks work. Money is created by leveraging treasury notes into money. If you pay off the debt you will create a recession because you will be taking money out of the economy. I do believe the constitution requires the Bank of Canada to loan the government money interest free. It was the other Trudeau that ignored the law and linked us up with international banks. I support conservative fiscal policy. But it is the international bankers that control the supply of money in the economy. If you do what they want any policy will succeed. The Harper government had big deficits but it did not mean big tax increases. The GST was a big tax grab but it did not sink us. The bankers supported these governments with and adequate supply of money. Harper was ultimately controlled they the globalist bankers.

        Reply
  • Hi Keith – I’ve heard people say that the TSX often moves with oil because oil is such a big component and lately oil has turned around. Since June, it seems to be trending higher. How long do you think this trend will last and do you have any predictions as to how high you think it’ll go? I’ve heard $55-60. Perhaps this will give us clues on the TSX. Thanks so much for sharing your knowledge as always.

    Reply
    • Jim–there is very significant technical resistance at $55 for WTI–much beyond that would take a significant event or significant reduction in stockpiles.

      Reply
  • Hi Keith: Always read your comments and what you say about small/big business is accurate. I am one of the small businesses that will get hit if changes are enacted to tax law. Moving to more international exposure and away from the encroaching socialism in Canada.

    Reply
  • Hi Keith,

    Always enjoy your blog posts and how freely you share info.

    I know at one time you were working on a retail product. Is that still in the cards? Something that those with lower wealth could invest in…to grow their wealth 🙂

    Thanks,
    Cameron

    Reply
    • working on it…it keeps getting delayed – my own decsion–but we need ot do it right, or not at all
      ETA likely next spring…

      Reply

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