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Glenn Atkinson Rank: 54 Followers: 13 Votes: 2 Years Member: 10 Last Update: 22 April 2017, 8:11 Categories: General Market Commentary
Sector / Industry Analysis
Ratio Analysis

March 24 -2017 - update
Fundamental Observation 1) China asking Canada to reverse Harper decision to restrict Chinese investment in oil sands; 2) China & India & Canada proceeding with climate change - leading to more EEM energy purchases from Canada (nat gas(exported to EEM via USA LNG), uranium (CCO), oil....with pipeline approvals becoming more palatable , OECD CLI upswing below and global protein consumption up (inferring EEM on upswing economically), back to 2003?....but with much larger EEM economies. See BDI chart.

(OECD CLI, take a look, very rare for such coordinated fundamental improvement in global growth outlook,( http://www.oecd.org/std/leading-indicators/OECD-CLI-02-17.pdf)

Past month Global bond:TSX , flat (1011a), whereas emerging markets (1013) equity higher 3+%, Sig EEM out-performance on what should be more correlated assets.(+1081) NYSE slightly weaker to bonds (1014) prob explains TSX weakness since much CAD exports to USA
Cu:bonds, and Cu:Gold, both indicating global growth - reinforcing OECD CLI noted above.
Financials very extended to energy (3 years now), could be forming 'island' high. (1023)
TED (1030) trust among bankers returning....still at v'high levels of distrust.
Bonds indicating positive equity sentiment, but strength of trend weakening (1031), but 2yr bond well in positive trend channel
Inflation/Deflation - neutral at low inflation level....but off 2016 bottom. (1031b)
USD short term, rolling over, med term, at overhead resistance. (1033)
CRB long term downtrend (1034b), commodity equity near top of range (1034c)
Gold, steady in neutral range (1035), Energy weak (1040)
CAD bonds not broken long term rising trend (1065)......Baltic Dry Ships.....v. close to beginning first rising trend in many years. (1070)

Summary:
SPX closer to expensive (relative bonds) than TSX. Energy is not responding in this economic/business cycle, charts indicate CAD oil sands may become horse buggy....too early to tell. Equities, particular EEM, and Europe look

Less

100 TSX

Jan 26, 2017 - interesting long term ascending triangle; decade of quant easing, break of RS downtrend to SP500, fundamental OECD CLI globally moving higher, oil outlook improving, seems appropriate set-up for late cycle rally. More on this with Bond:equity ratio charts.
April 8, 2017 - basing of TSX:XSP....EEM strength could/should indicate TSX begin to outperform XSP.

1011 a Global Bond to TSX (cur adj)

Jan 26, 2017, 3 prior cases in 20 yrs with declining ratio from current level. (Sept 1999, 8 mo, +35%, June 2005 - 30 mo, +38%, May 2009, 20 mo, +33%).....volatility will increase, and set traps where the last one doesn't come back....sometime in next 6 mo to few years TSX should be about 30% higher and that is a sell! Anything can happen, consider reducing equity on sig appreciation, use equity trend lines and breaks mean start selling....not all on first break, remember, there will likely be increasing volatility.

1011 Global bond to TSX300 - Monthly)

1012 Canadian bond to TSX 300 - Monthly

Canadian bond to TSX 300 equity ratio, Monthly - a long term reversion to mean indicator that cycles between extremes of Fear and Greed.

Feb. 3, 2014, With the TSX beginning to turn lower, it is unsure whether there was a false breakout of the triangle pattern above, and the TSX will turn lower to join the emerging markets, or if the EEM will bounce off the lower trend line and begin to rise. Time will tell. In April 2011, TSX equity to Canadian bonds were very close to a sell....not so much now, so it looks like better long term odds to hold TSX equity for now.

Jan. 30, 2014 - TSX has broken out of a consolidation wedge, seemingly to the upside. However only a close above 14136 will note a higher low (HL) and then higher high. (HH) It is worth noting that the normally well correlated BRIC and TSX has strongly diverged in their current consolidation triangles.....TSX up and BRIC bounced back down from the upper trend Chanel and remains in the consolidation triangle. See chart below # 1013

Dec.12, 2013- TSX 300 turning lower, however from upper panel TSX300 is not expensive relative to bonds.


XBB.TO:$TSX

1013 Global bond to MSCI emerging matkets- monthly

1014 Global bond to NYSE-Monthly

Jan 1, 2017 - US mkts closer to expensive than cheap, added 'stop loss' trend lines. Violation of these, strong indicator to reduce equity position given relative high price placed on equity.

1020 Euro Index/Japanese Yen - Indicator of global liquidity

Euro:Yen ratio is considered an indicator of global liquidity.

Liquidity (as measured here) continues to come out of the system. Peaks are places to exit equities, troughs are places to buy, we are neither, and trending lower, caution advised.


$XEU:$XJY

1021 opper versus Global bond ratio - growth versus fear

1022 Copper versus gold - growth versus inflation expectation

Copper versus Gold, an indicator of growth versus inflation outlook

1023 CAD financials versus energy - Monthly - Disinflation versus inflation expectations

Canadian Financials versus Canadian energy, an indicator of disinflation versus inflation.
May 8, 2016, If one remains invested in TSX equities, energy should be strongly favored over banks from a reversion to mean persepctive over the next few years. Somewhere ahead, when inflation regains its footing, energy should double relative to banks from here.

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