The $TSX put in another lower low and a lower high this week and closed down relative to last week. The sideways trading range we see in the Canadian market is reminiscent of the period from July to October where the market traded around a level. The level currently shown as a red line is about 15500. On the price panel, this was the first week on the one year chart below that the $TSX never touched or got above the 10 Week MA (blue line). The RSI and MACD are still in a bullish posture on this shorter term chart although the MACD has crossed below its signal line.
Here is the link to this week's recording.
Greg Schnell, CMT, MFTA.
The $TSX has not made a new high for three weeks and it looks suspiciously like this week is creating an important support level that needs to hold.
Below is a one hour chart, which I don't look at often. The RSI is stuck below 60 and the Relative Strength chart shown in purple illustrates the $TSX continuing to underperform the $SPX. The price rolled down significantly and has failed to get any higher than 15645. Monday March 1 was a big rally day in the USA with the Dow up over 300 on a push to new highs. The Canadian market has rallied back up to test the March 1 high, but continually rolls over. So far, the highs of March 10th and Monday, March 13 have stalled at lower levels. This chart looks weak. I have drawn a horizontal support line around 15425. The more this level gets tested, the more likely it is to fail.
While the market awaits the Federal Reserves decision to raise interest rates next week, lots of things are happening under the surface. The bullish moves in the marketplace are now happening in the defensive sectors and we are seeing more and more information creating a warning for the market cycle.
Here is a picture of the Bullish Percent Index (BPI) for the $TSX ($BPTSE). The point I would like to make on this chart is where the BPI crosses the 40 WMA at a very high level, the 4 previous corrections have been at least 5%. In a roaring bull market, that is not so bad but it is nice to be aware of the potential setup. I have drawn the red horizontal line at the current BPI level and the blue lines show the timing on the $TSX when the market crossed down below the 40 WMA from these lofty levels. The other thing to notice is the market does not hold this level of Bullish consensus. You can see the $BPTSE has not spent a whole year above the 68 level since we started recording the data. The 2013-2014 period was close but that had QE Infinity in play at the time.
I have posted my Canadian Technician Market Review for the Canadian market. You can click the play button to start the video or use the link below this to open a new browser window.
Here is a look at how the Canadian market performed on a relative basis from the February lows of 2016. So one year later, the market has been in a trend almost straight up with very little corrective activity.
I spent a significant portion of time at the start of the webinar to display how the Trump Jump rally ignited the financial stocks and left the others well behind.
The $TSX is weighted 1/3 Financials, 1/3 Materials and Energy, and 1/3 the other 6 sectors combined.
As we got to the November 2, 2016 low off the back of the October Fed Meeting, the market had been declining. The Fed meeting started the rally and the Trump Jump accelerated the rally. Canadian stocks followed. For the entire $TSX, it wasn't a very mixed bag. Using the $TSX average as a benchmark, Financials were clearly the outperformers and nothing else came close. This is using the $TSX as a benchmark.
By unclicking the highlighted $TSX in the top left, you can get an absolute percentage change from November 2. You can see all the growth sectors were positive, and the defensive sectors dramatically underperformed.
This changes the look considerably and I should have pointed this out on the recording. However, the main point is still the same. Financials had the vast majority of the gains and the 'Energy and Materials 1/3' had very little. The final third was actually better with the Industrial and Consumer Discretionary doing ok. That becomes misleading because of what is happening in the past month rather than the past 3.5 months. The majority of the gains in Consumer Discretionary have been in the last month while the Financials are just in line with a lot of the other sectors. We are seeing big improvements in the Healthcare space as the Biotechs surge and some bouncing in the Concordia Health and Valeant charts. Materials got a lift for a few weeks in Gold and then it has gone sideways for the most part. The improvement in the defensive sectors is important.
Zooming in one more time, we see the action over the last week. Materials are getting beaten down, Energy has rallied slightly, but Healthcare and Consumer Discretionary have been surging. A big part of the Energy surge would be the 7% pop in the group from Crescent Point Energy. Canadian Tire has really surged and so has Shopify.
But the Industry group that is moving very well now is Forestry and I talked a lot about looking at the markets more recent history to spot the change in Industry rotation. This is over the last week.
Here the same list sorted by SCTR and we can see that a large portion of the group is above 50 and a lot are above the 75 level.
So this is definitely an emerging area.
There is a lot more information on the recording so I would encourage you to watch it. Arthur Hill also produced a recording over the weekend for members. Martin Pring published a members article on the $USD. If you are finding value is some market commentary as a visitor to the site, there is a significantly larger value found in becoming a member. Click here to access a one-month free trial offer.
Greg Schnell, CMT, MFTA.
The energy sector has had a rough ride since December 8th. The decline in the energy stocks has been going on for two months. Even some of the best performers last year are down around 20-25%. On the Commodities Countdown webinar 2017-02-09, I discussed how to monitor stocks in the energy group for improvements. This is starting to show up.
I like to go back and review old chart annotations and last night I came across an interesting chart on $WTIC. The date on this chart was 2014-06-03. Funny enough, it was within days of the final high before oil collapsed. Look how closely it picked some of the major lows/highs in the market. We have another week before it hits another cycle point. The cycle is close enough to be aware of potential moves. I am not a cycles expert, but this is setting up for a breakout move.