The Canadian Technician

The Canadian Banks

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The Canadian Financial sector has been in the news lately and there have been some big gainers. Seasonally, they get a bid going into Canadia RRSP season.

$SPTFS 120111


Interestingly, the BNS ticker was the strongest a few months back. Now the Royal Bank has literally launched higher..

There is a phrase that goes something like ' when even the dogs start barking, you know the rally is over.'

I am not sure I agree, but it does make you pause.  The muted news out of Europe can only help.  Funny how European news goes to backburner as the earnings come in. Then, when we can't focus on earnings data, we go back to debt and politics it seems.  I mentioned to a friend the other day, why do Merkel and Sarkozy always seem to meet on a full moon? It just seems to work out that way lately.

I have a couple of cautionary notes here.

1) The german 2 year note had a negative yield this week. What that means is if you invest $100,000 they will give you less than $100,000 back and you knew that when you bought it.

2) The US Treasury 10 year priced with a yield of 1.9% . That is not a sign of money moving out of bonds to enjoy this great rally. TYX = 30 year, TNX= 10, FVX = 5, 2 year, IRX = 3 month. Notice how the bonds haven't lifted at all throughout the entire rally of last fall. That is hard to believe.

Dashboard Bonds 121211

So as stong as this rally has been, there does not seem to be a move out of bonds into equities. If we get a great rally that should happen in earnest. Bonds are a safe haven for investors. But less than 2% on a 10 year bond is less than inflation normally. If large institutional investors are still willing to pour money into the safety of bonds with a low yield, we should probably be cautious in the equity markets. 1 Small toothpick can pop a very large rising balloon. Perhaps that is the current Equity market.

 

Good Trading,

 

 

Greg Schnell, CMT

 

Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More
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