Whats next for the TSX?

 

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.

TSX LONG

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

tsx sectors

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:

http://www.bnn.ca/Video/player.aspx?vid=383870

 

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.

2 Comments

  • Keith:
    Excellent blog as usual. I agree with your assertion that volume does start to decline during June for the slower summer period. Statistics are clear. I would like you comment though on the longer term decline in volume evident at least where I watch most closely that being the US market. I record the daily NYSE volume and the 25 day MA of it. Compare the past five years 25 DMA for June 19: 2010- 1.51 B shares 2011- .910 B 2012- .856 B 2013- .741 B 2014- .626 B
    Thanks.

    Reply
    • Good observation Terry. You will note that the volume has declined (per your data) each year – but that can be a bit misleading. That’s why I tend to refer to moneyflow as a more accurate way of measuring volume. Moneyflow is essentially volume multiplied by price change, adjusted up for positive price change, and down for negative price change. Moneyflow is available in different forms, but you will see on my blogs that my favorites are Accumulation/Distribution–which is a cumulative measurement–its ideal for trend analysis of total money going into the market–it cumulatively tracks volume x change in price (+ or -, added or subtracted to the line). The other one I like for shorter termed analysis is an oscillator by Marc Chalkin, the CMF (Chalkin Moneyflow) oscillator. It shows moneyflow momentum, sort of like RSI does for price. Go to stockcharts.com and look at their “school of technical analysis” section to learn more about these indicators.
      Pull up a chart of the S&P 500, as you mentioned, and put those two moneyflow indicators on it. You will see both are still bullish and rising, despite the actual volume data. Particularly the Accum/dist. line – which shows the trend remains up for money going into the market.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

12 + 2 =

Topics

Topics

Recent Posts

SPX PE

This market might be in a bubble, so profit by it!

S&P sector weighting

TSX looks bullish in spite of itself

gold

Gold oversold: Time to be bold, or should it be sold?

TAN

Green energy stocks extremely overbought

dow theory

Bear-o-meter neutral, with some caveats

gsci

What does a commodity bull market look like?

cta-bg

Never Miss an Opportunity

Sign up for our newsletter to receive valuable insights that are available only to subscribers.   Beyond the blog – beyond the videos – get the inside scoop.

Scroll to Top