Toronto Stock Exchange Displaying Strength

by: Jeff Pierce November 06, 2008 | about stocks: DIA / EWC    

Jeff Pierce

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Something I noticed last night when looking over the charts of the TSX and the Dow (click to enlarge, below) is how they have similar looking charts, but different volume action going on beneath the surface. The glaring flaw in the US market's recent move up is how low the volume has been relative to the selling climax that took place in October.

You really would have liked to see some overwhelming buying pressure like the Stock Chartists talk about in this article about 90% upside days. To date we have not seen that type of buying interest that so often propels the markets higher, and yesterday’s weakness could be a tell as to the direction we’re going to move in.

matket

The Toronto Stock Exchange has some interesting action going on and I’m not saying that this index is going to take off, but the volume on the up days is certainly the type of action that indicates accumulation. Even the volume on the October slide was relatively contained when you compare it with the massive selling in the Dow.

If it’s true that you want to put your money in the stocks or indexes that are displaying the most strength, then it might be prudent to keep an eye on the $TSX. One last point, if inflation does rear it’s ugly head, this index will do quite well as it’s heavily leveraged with commodity type companies that tend to do well with rising inflation.

matket

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This article has 3 comments:

  •  
    Nov 06 03:36 AM
    Way too early for the inflation cycle to hit. As such, good theory but for the time being the TSX will move in tandem with the rest of the world markets.

    As for the volume paradox; congrats on noticing this, however, conclusion is a bit off. Sometime 2009, oil will retest the $100 mark or thereabouts. Recession or no recession, it's going to happen for a number of reasons. How and when is dependent on so many variables that stating a possible scenario now is equivalent to buying a lottery ticket. The TSX is reflecting this and basically has turned into a giant option put/call machine with an emphasis on oil and gas with other commodities playing second fiddle.

    When it finally happens, then and only then will the TSX part from following the rest. (Australia is similar yet very different components, also less dependent on U.S. economy.)

    Be careful how you place your bets as options have a tendency to expire worthless!

    CrossProfit
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  •  
    Nov 06 12:37 PM
    Not sure where you learned your technical analysis but the TSX is not displaying any kind of strength from the charts you exhibit above. And I agree with the comment above, it is WAY too early to expect inflation to begin to play a part in propelling the TSX higher.

    But one other key point you miss altogether. My research indicates that the TSX performs even worse than the SPX or DJIA in the two US post election years. Since 1950 97% of TSX gains came in the 26 months leading up to US elections versus just 3% in the 22 months afterward. Not very good odds from an historic perspective and as a trader, probability is one of the best tools available.
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  •  
    Nov 06 07:19 PM
    In the two days that the Dow lost 10%, the TSX lost about 5.5%. I would say relative speaking the TSX is holding it's own against the US markets. Know I'm not about to investing on anything in the long side at the moment, but during the past 2 days I would have rather had my money in the Canadian markets.
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