The Canadian Technician

I'll Be On Trading Places With Tom Bowley Today at 12 Noon EST

Tom Bowley and I are teaming up to do the Trading Places Webinar at 12 Noon EST. Click here to register. Trading Places 20160205. There are some trend changes to talk about with some new industry rotation showing up on the charts. As an example, how about a break above a trend line going back to 2012?

See you there!

Good trading,
Greg Schnell, CMT

 

Are The Banks WorldWide Suffering Another Meltdown?

  • Globally, Bank charts are messed up
  • US Banks
  • Canadian Banks
  • Japanese Banks
  • Chinese Banks
  • European Banks

Lately, some of the banks have been behaving very poorly. This can actually be widened out to include some of the insurers as well. In a webinar on Tuesday, Martin Pring on Tuesday, February 2, 2016 (Market RoundUp Live With Martin Pring and Greg Schnell), Martin and I presented two different views from the financial sphere that indicated stress within the financial sector. I wanted to take the time and add some of these charts to the blog article commentary as I feel they are pretty important.

One of my fellow technicians in New York told me a simple rule. When the banks break down, something is going on, they can see trouble sooner than anyone else because they can analyze their customers financials at any time. First let's look at the US banks because they are some of the biggest in the world.

Here is a histogram of how they have performed over the past 200 Days. Two of five have dramatically underperformed the $SPX over the same period. This is a big problem. Wells Fargo has also underperformed over the same period. 

Continue reading "Are The Banks WorldWide Suffering Another Meltdown?" »

Hunting For Winners In The Canadian Utility Sector

Last week the Utilities Sector in Canada stormed to new 9-month highs. Today I went through to find some of the top performing Utility plays in Canada.

Here is an ETF for the sector. XUT.TO soared last week on good volume and pushed the SCTR above 90 on Friday.

In no particular order, I'll list a few of the Utilities here.

Algonquin Power (AQN.TO) has been hitting new highs for a while now. But last week registered the second largest volume candle in 4 years.

Northland Power (NPI.TO) has been hitting new highs since October.

Here is Fortis (FTS.TO). It is trying to break to new highs this week.

Here is Innergex Renewable Energy. It broke to new highs last week.

Canadian Utilities (CU.TO) has soared with the largest 2-week move in 4 years. The SCTR is at the highest level in 4 years on January's close. Price broke a 1-year downtrend and the volume surged to create a top 10 volume bar. With an SCTR at 89.2, this is nice and strong.

Lastly, Emera (EMA.TO) has a beautiful chart.

Lots of good charts here. If the interest rates from the Fed are not pushing higher, this could be a nice place to enter the Utilities. The big trend is down for the indexes and 2/3 of the stocks move with the indexes. However, the Utilities Sector is associated with being defensive, so it should hold up better than most. That means a trading plan is necessary. But then again, having a trading plan is a good idea in any market.

Good trading,
Greg Schnell, CMT.

Note: At the time of writing, the author holds a position in one or more of these stocks and may exit the position at any time.

 

Is The $USD Stalling?

  • The Barrier at 100 for the $USD index
  • Gold Rallies on the Stalling Dollar
  • The oil low last week has held for one full week!
  • Defensive posture is entrenched
  • Bank weakness wakes up Wall Street

The Canadian Technician Webinar on Tuesday focused on Gold stocks and Oil stocks. This particular week has a very informative piece on how the SCTR can help find strong stocks within a strong industry group. We were able to compare the gold stocks and oil stocks to each other and demonstrate the differences in market bottom behaviour.

Continue reading "Is The $USD Stalling?" »

When The Price Of Oil Controls The Stock Market

If you were wondering: When will it end?  Here is a chart of the USO oil tracking ETF and the $SPX with 30-minute bars for the last 4 weeks. Oil in red high-low-close bars and the $SPX in green.

Until this resolves itself, it could continue this vicious move.

Good trading,
Greg Schnell, CMT

 

Finding Rising Stocks In Canada's Bear Trend

Here are the charts I think are the most important from the Canadian Technician Webinar! Well, wouldn't it be very Canadian to start the first webinar with a chart of Crude. Let's do that.

The Toronto Stock Exchange has clearly broken the support on the monthly charts. The RSI is reaching 30 on a monthly chart! That's a crazy level of oversold. I do expect some bounce through earnings.

The Canadian dollar dipped into the 69 level for the first time since 2003. The blue vertical lines show major directional changes on the Canadian Dollar and the corresponding effect on the $TSX. A directional change in the dollar would probably change the direction of the $TSX.

This is the New Highs - New Lows. We can see the chart is showing a severe level so some bounce should show up soon. I have shaded the blue area. You can see that when we can't get this ratio to hold more than 50 new highs compared to new lows, the $TSX is falling or sideways at best.

Here is the Bullish Percent index for Canada. At 30%, it is about as low as it gets without a Lehman Brothers moment. It doesn't have to bounce, it can stay here. However, the 30% of the stocks that are on a buy signal, are mostly in Utilities and Consumer Staples.

In the bottom portion of the chart above, you can see that the Canadian market has only had this low percentage of stocks (18%) above the 200 DMA at the end of the week once before. That was after the Lehman moment. Last Friday's close in the zoom box was slightly more than 20%. It's time to look for things to buy, but I would suggest staying in the Consumer Staples and Utilities for now.

Lastly, we ran some scans. One of the things that showed up was about 15 gold stocks with SCTR's above 75. The Gold stocks are currently pulling back. However, investors should watch closely for a change to the upside. There is more information on my Commodities Countdown article. Here is the link to that article.

If you would like to listen to the webinar, here is the link. The Canadian Technician 20160112. I will be hosting the Commodities Countdown 20160114 Thursday. Click here to register. 

Other Trivia: You can follow me on Twitter @schnellinvestor. You can also feel free to click the yes button at the bottom of these blogs to get an email when they are updated. You can do that for all the blogs on StockCharts.com

Good trading,
Greg Schnell, CMT

Canada's Stock Market Officially Entered Bear Market Territory

If you've owned Canadian stocks and have been invested in the $TSX 60, you probably have already noticed the change in portfolio value. I think the real problem in waiting this long to tell long-term investors that we are in a bear market, is the amount of portfolio damage that has been done. Hopefully, some of the information on my blogs and webinars helped you to be aware of the major trend changes and allowed you to get out early.

So while it may be a mute point, The $TSX last touch of the 200 DMA was back in June. Let's look at the signs on the chart.

  • The SPURS ( SP Rel Strength) has been declining since the market top.
  • After falling below the 200 DMA, the market rallied and made a series of higher lows but could not make new highs.
  • In February 2015, investors spent almost five weeks trying to push to higher levels but were unable to. Exhaustion.
  • While both the oil and materials sectors were waning, the transportation industry groups were starting to weaken significantly. 
  • Once the 200 DMA rolled over, the market continued to make a series of lower lows and lower highs.
  • February March April all showed volume declining while the market was rising. I find that clue hard to trade.
  • The MACD stayed below zero on a daily chart. Daily charts can easily surge to positive territory.
  • The ATR was clearly becoming elevated as shown on the bottom panel.

So when will it be over is the real question. The right answer to that will probably be viewed in different ways. 

I would suggest other coincident factors will start to turn higher in sympathy with the $TSX. When the broad macro trend changes, the opportunity to make real gains comes to the forefront.

As an example of things that might help guide us:

  • The $TSX SPURS will start to make three-month highs.
  • The Australian market SPURS will do the same.
  • Commodity markets will improve. Almost all of them are below their 200 DMA right now. When they start rising above as a group, this will be helpful.
  • The $CRB with start making 3-month SPURS highs.
  • Consumer Staples will no longer be the top performing group.
  • Big name large-cap growth stocks will start to emerge in Canada on top of the SCTR list.
  • Emerging markets will start to improve.
  • Our Bullish Percent Indexes will start to make higher highs.

If the vast majority of this list starts to show strength, investment strategies will be changing. I plan to stay focused on the Canadian and USA sector rotation models while continuing to look for basing patterns on the commodities and emerging markets. Rather than try to anticipate the bottom, as bear markets can be fickle, we can wait for a growing trend change. Trading the market we are given, rather than the market we want is important. Right now a defensive portfolio alignment is working way better than trading the growth names. Short-term trades can also work but they have to be trades placed with a short-term target. For investors following the JCB and ECB as their investment philosophy, it has been a very painful route. The charts continue to tell us to stay away from those areas.

For more ideas on what Canadian stocks are currently shining and improving, I will be doing a Canadian Technician Webinar on Tuesday, January 12th.  The Canadian Technician Webinar Registration Link. I plan on demonstrating how to find the stocks (how to fish for the stocks) that are working in Canada and discussing other ideas to help make money in this otherwise difficult market. The main names are going to have trouble. We'll have to think outside the box (TV) to find success. I put a lot of effort into the webinars as I can cover so much more information in an hour than in a blog format. If you get a chance to watch the recordings, they also show strategies and areas to look for tradeable ideas. The Commodities Countdown Webinar 20160107 had a lot of ideas regarding Japan, the $USD, Metals and miners, bonds, and overall trends.

As the new year begins, click on the yes box below the Canadian Technician and The Commodities Countdown blogs to subscribe. Because of Canada's posture in commodities, this can be very beneficial to follow both blogs. You can also follow me on Twitter @Schnellinvestor. New Year, new start. Let's make some money in the market we are given.

Good trading,
Greg Schnell, CMT

Reviewing The Year 2015 On The Canadian Stock Market

  • $TSX closes down 11% on the year
  • The Loonie plunges under water
  • The Canadian Banks hold near the highs
  • The Canadian economy continues to slow according to the transports
  • Consumer discretionary left Santa at the North Pole
  • Energy Exploration Companies  are try to survive with everything they do losing more money than what they invested
  • $NATGAS may have put in a tradable low
  • Mines and Minerals fail to rally

The Toronto Stock Exchange continued to get beaten up and closed down 11% on the year, near the weakest level of down 13%. 

The 13000 level is an important support level for the Canadian market and investors struggled to hold there. It did manage to close the year above 13000 but the chart shows how close it was. 

Here is a weekly chart showing why 13000 is important. In 2007-2008, the market briefly dipped below but quickly rallied above. The big candle shooting down in 2008 was almost like falling off a cliff below 13000. It took investors two years to get back to 13000 and that was the support level for the final highs into the commodity top of 2011. 13000 was resistance all through 2012 and most of 2013 with the Canadian market rallying in Q4 2013 to break above the range. In 2014, 13600 was the spike low. In 2015, the first plunge below 13000 was a spike below, but this level would be tested many times in the 2nd half of the year. Closing out a tumultuous year for Canadian investors at the 13000 level probably says it all. 

If the Canadian market can not hold this level, investors should be very cautious. A look at how the Canadian dollar behaved after it lost the 2008 level was very telling of the move down. The actual area on the $TSX above should be thought of as a range between 12500 and 13000. If the Canadian market struggles to stay above that level, this would become meaningful resistance in the future.

The Canadian Banks outperformed the $TSX, but 4 of the big 5 gained between 10-20% including dividends over a two-year period. Scotiabank (Bank of Nova Scotia) has Latin American exposure as well and Brazil's stock market closed at 6-year lows. The BNS.TO chart is actually breaking down quite hard shown in Aqua Blue. If the $TSX gives way, you could probably expect the banks to make a move lower.

Canadian Transportation stocks showed a slowing economy as all of them were down on the year.

Consumer Discretionary ($SPTCD) has been falling since July 2015. Santa Claus failed to start a rally as the discretionary group had one of the lowest weekly closes of the year. I don't think this is just Alberta weakness.

The energy sector got taken out to the woodshed, punched, kicked, quartered, crushed, and shredded, but other than that, all was well. I am not optimistic that the lows are in as the oil and gas bankruptcies start to be reported weekly. 

If there is a bright spot in the energy sector, it might be that Natural Gas ($NATGAS) might have put in a tradeable low.

Canada's pride, our diverse supply of industrial metals to precious minerals, failed to rally. The current low was put in 2 weeks ago. Unless the $USD stops soaring higher, this low is going to be violated or at least tested. Just because companies are going bankrupt with low prices, politics and a lack of demand, does not mean it can't go lower. 

Lastly, the Canadian Industrial complex ($SPTIN). Everyone keeps suggesting the low Canadian dollar is a boon for manufacturing. The problem is you still need demand and that hasn't shown up in Canada or the USA.

To wrap up, I don't see signs of a turn yet for the Canadian economy. The Australia market has rallied slightly, and I emphasize slightly, so that could end up being a signal that Asia is getting better. Should that be the case, the charts in Canada may start to revert and a bullish swing could help rejuvenate into a positive trend. Until then, the bear market in Canada is firmly frozen on the charts. At this point, a defensive strategy looks like the best medicine in a weak market sitting on a precipice of support.

Good trading,
Greg Schnell, CMT

 

Canada Breaks Below The Long Term Trend Line ($TSX)

Canada broke to two-year lows this week and now the long term trend line has been broken. From a technical perspective, this is a very important signal. Previous weekly pushes down did not close the week below the trend line. This week this is in jeopardy at the time of writing.

Canadian investors should also note that this will be the lowest close in two years. The chart in the bottom shows the Canadian market underperforming the US market as well.

Good trading,
Greg Schnell, CMT