The Canadian Technician

Woot Woot ! A Bi-Weekly Webinar Solely Focused On Canadian Stocks

Just a heads up that we are changing some of the information communication channels here at StockCharts. One of the things that is showing up in our work is the Canadian audience would like more Canadian specific information from the Canadian Technician.

To help focus our webinars on different types of markets and market analysis, I will be hosting a Canadian Technician webinar every second Tuesday starting at 5 PM EDT today. The opposite week will have Martin Pring doing his Market Roundup on Tuesdays at 5 PM. This will mean there is a new webinar series every Tuesday afternoon. 

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The Other Half Of The Full Monty On The Weeks Meltdown

For those who missed it, there is a part one to this article covered in the article linked here. The Full Monty On The Weeks Meltdown.

With the same chart style and the global review, I would like to continue to go around the globe and look at each chart on a monthly chart. Notice how important closes below the 20 month moving average (MMA) are, so I marked the low closes with arrows on the price chart. It is also very important when charts around the world break below this level as a group. RSI falling below 50 on monthly charts and staying below 60 is important as that typically marks a bear market. The monthly MACD with a negative slope is usually a big problem and a rising average true range is a big deal to me. Sometimes the narrowing of the Bollinger Bands can be a big clue. Arthur Hill and I have been writing about this and it is usually reflective of a change in trend but not always. The Bollinger Band pinch has been very notable on the weekly charts but I want to run with monthly here. Keep in mind that we still have a few trading days to rebound. These charts show the monthly close and the close below the 20 month MA (MMA) is what I want to focus on.

We can start in Russia ($RTSI). The data around 2000 is a little spotty (multiple months missing) so we'll leave that top out. The RSI, MACD and ATR all provided a nice long term signal that all was not well at the 2007 top and currently conveys the same message since 2011.

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The Full Monty On The Weeks Meltdown

Global stocks were dropping on the back of some weak Chinese news is the way the media portrayed the event. Is that what really happened? Definitely not. The market internals have been getting weaker for months as the RSI shows on the Dow. Commodity demand has been dropping if not plummeting globally which I believe illustrates the lack of global economic growth. The US Dollar ($USD) has gone sideways after last year's acceleration from July 2014 to January 2015. But commodities have continued to fall, even though the $USD is a lot weaker than January. The July earnings season was average to weak with everyone blaming the $USD. It takes a while for a strong dollar to show up in the financials. It also takes a while for the weakness in the energy sector to flow through and show up in other sectors. I think this energy sector weakness is one of the strongest global headwinds. 

Let's look at some of the charts and you can make your own opinion. I want to highlight some of the technical indicators that illustrates a slowing global scenario to me. Many of the world's largest companies are in the $SPX and it is usually the last to fail. Many of the blogs and webinars have been demonstrating the weakness underlying this market but the $SPX has been so resilient.

On these charts, we'll just go around the world and look at each chart on a monthly chart. Notice how important closes below the 20 month moving average (MMA) are, so I marked the low closes with arrows on the price chart. It is also very important when charts around the world break below this level as a group. RSI falling below 50 on monthly charts and staying below 60 is important as that typically marks a bear market. The monthly MACD with a negative slope is usually a big problem and a rising average true range is a big deal to me. Sometimes the narrowing of the Bollinger bands can be a big clue. Arthur Hill and I have been writing about this and it is usually reflective of a change in trend but not always. The Bollinger Band pinch has been very notable on the weekly charts but I want to run with monthly here. Let's start with USA and keep in mind that we still have a few trading days to rebound. These charts show the monthly close and the close below the 20 month MA (MMA) is what I want to focus on.

The rising ATR in 1996-1999 was not a reason to worry, but it was when it was part of the rest of the signals. Keep in mind what a behemoth the $SPX is and it is the last to fall usually.

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What Are Canada's Top 5 Micro Stocks Right Now?

I like to use the SCTR ranking to see our top performers, both big and small.  A quick view of the list makes for an interesting perspective. A lot of the top performing Canadian stocks are Micro Caps. While Micro Cap investing is risky and these are not being recommended here, the price action is compelling and the variety of stories interesting.

Our top ranked stock is Theratechnologies from the Healthcare sector. It has traced a sideways move for a month but it has been an outstanding stock since March 1st when it first made the 52-week high list.

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Are North American Markets Ready To Turn Higher?

Canadians have been looking in disarray at the comparison between the Canadian Stock Market and the US Stock Market. On the US side of the border, the market has been going continuously higher for a couple of years, but has now been consolidating. On the Canadian side, the market has wiped out bulls and bears. If a Canadian investor follows (rotates to) the strong areas of the market, the Canadian investor would be ok. However, many investors invest in what they know. Car Industry investors have invested in Magna, whereas Western Canadian investors have been trying to buy a bottom in Oil & Gas stocks for years. While the price of Crude Oil only recently collapsed, Natural Gas investors have continued to be tempted by sudden price rises, only to have the price roll back over and accumulate more losses in the related stocks. When the Natural Gas price finally does break out, no one will believe it. US investors have been able to see the big outperformance with Biotechs and are probably tuned in to it as the US investors have a lot of large companies with liquidity and can move around more.

Canada's stock market leadership has moved around the country with the poisonous rebound of Blackberry in Waterloo, the 80% plunges in oil patch companies in Calgary to the current groundswell towards Laval Quebec with Valeant Pharmaceuticals (VRX.TO). However, for investors in the $TSX index after a few roller coasters, the buyers of the XIU.TO would only be down 2.3 % YTD.

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15 Charts For All Investors Creating Serious Tension For August

Today I want to zoom into the currency wars. The equities seem to be the foot soldiers for currency wars. If central bank action/ fiscal policy can get the currency low enough, you can stimulate economic activity. I'll start the explanation between Canada and the US to make the concept clear and then broaden it out globally. Last week we hit 11 year lows on the Canadian currency. Yes, lows from long before the financial crisis. Think about the seriousness of the Financial crisis and now currencies are taking out the 2009 lows. Something big is going on. The Canadian Loonie has plummeted 29 cents in three years and we just had back to back negative GDP quarters. How can the USA be doing so well without us participating? So much for stimulating the economy with a low dollar. What is up with that? Since the end of 2014, the Canadian buck is down close to $0.10 which is remarkable as one of America's major suppliers. While I agree the US Dollar can be strong, Canada's manufacturers should have been finding huge opportunity with the big swing. 

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Today's Webinar Has A Big Message - Don't Miss It

In my review of the charts today, there are some critical messages showing up. I plan to review these on today's webinar and post the charts on the Market Roundup Blog. 

This chart is a start of the message. 

You can register by following this link. Market Roundup Live.

We kick off the action at 4:30 EDT. If you don't get the chance to watch it live, the link for the recording will be on the StockCharts.com home page under the What's New Section.

Good trading,
Greg Schnell, CMT

The $TSX Tries To Find Support

The Toronto Stock Exchange ($TSX) is struggling to hold above the long term trend lines. The chart below shows the last 19 years on the $TSX. After major uptrends, the market broke through the 3 blue lines and rolled over. In 2008 it went on an energy resurgence and popped to new highs before making a final turn down. In the current market, we can see that the blue trend line is well represented with lots of touches over the past 4 years. There is also a red trend line that shows the extreme market lows and investors may wish to wait for the breakdown on this line. That line is under pressure this week and it seems to be breaking down with the renewed selling in commodities. We can see the purple SPURS are breaking down and the $TSX continues to underperform the US market.

The one indicator shown in the bottom panel is one that I have been associating with a market top. What it shows is the increase in the weekly volatility. We can see the elevated levels on the Average True Range (ATR) are usually bearish. The recent spike up (OCT 2014) and pull back mean the weekly swings are above normal. Should this continue, I would be very cautious and I would suggest that the $TSX could accelerate to the downside if this trend line does not hold. 

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If Gamblers Stop Playing The Shanghai Market, Are They Headed Back To Macau?

One of the reasons that the gambling in Macau slowed down was the entire gambling crowd had become traders and they were participating in the euphoria of the stock market. Retail accounts for trading were opening at an astronomical rate like a million/ week or something in that stratosphere. Macau was also going quiet as the Chinese government frowned on the gambling industry. 

So the question is whether or not the gamblers return to Macau. I have a few charts related to the gambling industry and I have assembled them in a chartlist called Gambling. These industry specific lists can be helpful when you are looking for trend. You can also work through the Sector Summary tool on the home page.

Lets start with the most vocal stock in the group, Wynn Resorts. Wynn has no new breakouts here in price, but the SPURS shown in purple recently broke an 8 month downtrend. The $110-$120 are will be important with the gap at $120. But the soaring volume recently suggests some buyers are showing up for work. The MACD looks ready to run. The thick blue line represents previous resistance in momentum. Watch closely. The SCTR is very very weak.


Chart 1

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5 Charts To Chill The Heat

The markets are at or near all time highs. The optimism is overwhelming. Consumer confidence just roared in with a triple digit positive reading of 104 and this is only the third time in history the confidence has been so high. What's not to like? Breadth is an important feature of technical analysis as it ranks how many stocks are participating. Greg Morris has written entire books on breadth, so I won't attempt to cover it all off in one blog. So what is breadth? Breadth measurements help us understand how many participants out of a group of stocks are involved. The old joke about 6 workers leaning on a shovel and watching while one worker digs a trench is a good analogy. The lack of participation means it will be a long time before the trench is finished because not a lot of people are helping.

In the equity markets, we can use groups like the S&P 500 to measure the big caps or groups like the NYSE Composite which includes all the listings on the New York Stock Exchange. To keep it simple, I will use two examples of breadth. One is the percentage of stocks on a buy signal on a PnF chart which are called Bullish Percents. More information on Bullish Percents can be found on this link to the Chartschool article. Bullish Percent Indexes. The other is the number of stocks above or below a moving average. In this case we'll use the long term average of 200 days. The indicator is specific to each group and the $SPX indicator is $SPXA200R. (The percent of stocks above the 200 DMA).

In the top panel, there are two things going on. One is the value (price) of the $SPX shaded in grey. The other is the Bullish Percent Index. When the market is above 65 it has lots of breadth and moves higher. Markets above 75 have lots of breadth with more than 75% of the stocks pushing higher. One of the issues on the chart below is the downward dotted line where every rally has less and less stocks returning to buying signals after pulling back. The current reading is marked by the lime green line. If we look left on the chart, the major declines occur when the market cannot rally back above 65. Those are the areas to worry about. Recently our rallies back up to 75 were ok, but the $SPX has waddled sideways since the beginning of the year. Not enough participation to make meaningful new highs.


Chart 1

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