By now, everyone is aware of the new high that the TSX 300 composite put in yesterday. Amazingly, the last high on the TSX 300 was exactly six years ago (June 18, 2008)! If it were not for dividends, our buy-and-hold friends would just now be breaking even, plus a penny or two. Also amazingly, the index is up almost 100% from its low of March 2009.
Much of the upside has occurred recently. The S&P/TSX composite has risen 13 out of the past 14 sessions. It is up 10.8% year to date and 22.1% over the past 52 weeks. If there was ever a bull market climbing a wall of worry, this is it:
- Record low interest rates generating a lack of viable alternatives to equities,
- High oil prices driven by geopolitical disasters and war—i.e. the Middle East and Russia.
- Low volume of late. I discount that fact a bit, given that volume is almost assured to be low at this time of the year.
- Lack of breadth. The TSX would not be where it is now if it were not for the energy sector (up about 20% YTD) and the interest sensitive’s (TSX dividend stock index, pipelines, utilities, telecoms, REIT’s, financials etc.). For example, materials, info-tech, metals, gold, and other components have NOT been moving in tandem with those sectors. The energy and financial sectors represent about 55% of that index!
Here is a comparative performance chart of the TSX sectors for the past 100 days. You can see that it has been energy (black) that has done most of the work for the TSX’s recent rally—by a wide, wide margin. Given the above factors , particularly the lack of breadth, and the ever-possible potential for resolution of the above noted geopolitical situations, I continue to hold a fair allocation to cash
I was on BNN yesterday covering the close, as the TSX hit its record high. Here’s the clip, where I discussed some of the factors that might affect our markets going forward:
BTW—on the US side it’s notable that there were only 38 put options traded yesterday for every 100 call options. Sentimentrader.com notes that only six other days in the past decade have seen trading this skewed toward call options. The tendency was to see short-term (less than 5 days) and intermediate-term (2-3 month) weakness. The dates were 11/15/04, 12/10/04, 1/24/06, 4/14/10, 4/15/10 and 1/14/11.