Well, if it wasn't a Black Friday, it was sure a grey Friday. Canada's Exchange ($TSX) was the least damaged on a global selloff. Friday's carnage amounted to 1.7% for the $TSX, but the US Markets sold off by 3-4% and some global markets were down by more than 10%. Italy ($MIB) was clocked falling 12.48%. The centre of the storm, England was down 3.15% but the daily candle was down 8% at one point. I find it interesting that the British market fared better than the American indexes.
Canada's $TSX has a large contingent of Gold mining stocks and they gapped up on the open and sold off a little over the course of the day. But this was a marginal ballast to an otherwise messy day globally.
A quick view of Canada's financial sector stocks is in order today. One of the things I don't like is the way Manulife, Sunlife and Great West sold off. They sold off between 4-7% while most of the Canadian banks sold off 2%. The important thing to notice is that the breakouts in Canadian Banks and insurers have all come back, failing their breakout levels.
Manulife (MFC.TO) had broken out but now it is going the other way. That brief push up in late May was encouraging, but a failed breakout can be an even bigger message of something more sinister when trapped under the 200 DMA. At this point, this chart looks like lower prices are in order.
Sunlife (SLF.TO) is one of Canada's largest insurers and it recently broke out to new all-time highs. The SCTR was trying to get above 75 but was not able to. It is hard to know that it will not become a strong SCTR as it is climbing, but the fail is very important. Now the SCTR is the weakest level on the 18-month chart. SCTR's entering into the bottom quartile should be respected for what they are. Very weak stock price action which will probably lead to more selling.
Great West Life (GWO.TO) failed to hold its April breakout and now it is making new SCTR lows. The red arrow points to new lows around 30, and it has been unable to rally. My red price trendline is a little aggressive as it misses 2 or 3 days, but the general uptrend looks threatened with Friday's price action. Friday rolled the MACD over at zero. Bearish.
Power Financial (POW.TO) is one of Canada's powerhouse companies. However, this chart is showing the same trend as the insurance companies above. The SCTR has become the weakest on the chart. A failed breakout in April (this is a common story so far), and a MACD rolling over at zero.
Industrial Alliance (IAG.TO) is stuck below resistance as well. The SCTR is approaching the 18-month low levels. A ranking of 20 with all of the industry group breaking down, as shown above, suggests more pressure for shareholders. The MACD is rolling over, the Relative Strength in purple is breaking down and Friday starts another test of 200 DMA support.
What I learned the most from Friday's price action is that a serious market correction is starting for Financial stocks. I will write another article going across the banking sector as I think the European banks are akin to a waking Grizzly.
Caution for me as I think the Financial District looks lower.
Good trading,
Greg Schnell, CMT, MFTA.
