Canadian Stock Market Trends 20190717

Well, good morning everyone and welcome to Wednesday morning. It's Stephen Whiteside here from with today's look at Canadian Stock Market Trends. In the pre-market this morning, stock index future are flat. So far it looks like we're going to have a very quiet open on Wednesday morning.

Let us start off as we always do with a quick update on the US market. The CBOE Volatility Index (^VIX) is still on a sell signal trading below the lower channel line. That, of course, is supportive for higher stock prices. That doesn't guarantee higher stock prices, but at least we know the options traders in Chicago are not overly concerned about the direction of the market. On Wednesday we're looking for a close above $14.05 to change that view. Now, we saw a small pullback in the Dow Jones Industrial Average (^DJI) yesterday, a bigger pullback in the S&P 500 (^GSPC) and an even bigger pullback in the NASDAQ-100 (^NDX). Of course, all of those are still on buy signals. No change there.

Now, the rest of the market is in the channel, so that's neutral. We've got the Russell 2000 (^RUT) and the Zacks Micro Cap Index (^ZAX) both trading in the channel at the moment. Now, one thing to note is that the KBW Nasdaq Bank Index (^BKX) rolled over yesterday, generated a new daily sell signal. We certainly made a lower high there and then started to roll over, and we've seen that weakness in the Canadian banking sector already.

Let's move on now and take a look at the Canadian market. Starting with the S&P/TSX Composite index (^GSPTSE), the TSX is stalled up here. Why are we stalled up here? Well, we've been here before. We peaked out in April and started to roll over. Now we've come back up two lines, and once again we're stalled out up here. Would love to take out those April highs and head up to 16,875, but that is not what the market is doing right now. Looking at our Panic Zone chart, we've had a recent early warning sell signal but no major downward pressure. You can see from the panic zone chart we're not really projecting any change here. We're going to be playing within the same playing field as we have been for the past four months. We've traded back into the channel for the past couple of days but still no daily sell signal.

That is also true for the S&P/TSX 60 Index (TX60.TS). The S&P/TSX Canadian MidCap (SPTSEM) and the S&P/TSX SmallCap Index (^SPTSES) stocks are still holding up fairly well, while the S&P/TSX Venture Composite Index (^SPCDNX) is still on a daily sell signal after making a new low on Monday. Now, of course, I've always said that the Canadian market is a lot more fun when the Venture Exchange is on a daily buy signal. That is certainly not the case right now.

Our next mission this morning, of course, is to walk through the major Canadian sectors and see what is working and what is not working. Starting off with banking stocks S&P/TSX Equal Weight Diversified Banks Index (^SPTSXEWDB) and financial services S&P/TSX Capped Financial Index (^SPTTFS), both charts have an open gap which we're finding support in right now. Of course, if that open gap does not hold, then we've got a low from late June that could potentially act as support. We are certainly not seeing a lot of downward momentum in this sector, but we're seeing a new sell signal in the US, so that could put pressure on the financial services and banking stocks.

Looking at health care stocks S&P/TSX Capped Health Care Index (^GSPTTHC) , we made a new low on Monday, and the marijuana stocks Horizons Marijuana Life Sciences Index ETF (HMMJ.TO) also made a new low on Monday. Certainly, no change in trend expected on Wednesday. Now, real estate S&P/TSX Capped Real Estate Index (^GSPTTRE) and telecom stocks S&P/TSX Capped Telecommunications Index (^GSPTTTS) both rolled over yesterday generating new daily sell signals. Then we've got the energy sector S&P/TSX Capped Energy Index (^SPTTEN). We took a run at the energy sector once again. Once again, we did not get anywhere, which is unfortunate. These, of course, are low-risk buying opportunities. They certainly are not guaranteed to work out. We had a nice pop. That gave us a buy signal. No follow through to the upside unfortunately, and of course, we are trying to break out above the June high. That did not work. We don't have a sell signal here yet. Some stocks do have sell signals, and you have to take them. Of course, I will be certainly willing to try this once again if a new low-risk buying opportunity is set up. Again, the index is not on a sell signal this morning, but some stocks are already on sell signals.

Now the materials S&P/TSX Capped Materials Index (^GSPTTMT) are back on a buy signal as of Tuesday's close. Then we've got consumer discretionary S&P/TSX Capped Consumer Discretionary Index (^GSPTTCD) still on a buy signal and they have been for the last three weeks. Then we saw a nice big pop in industrials S&P/TSX Capped Industrials Index (^GSPTTIN), and that had a lot to do with a couple of railroad stocks. Then we've got the gold sector still on a buy signal. No change there.

Last two sections of this morning's presentation. First, we'll start off with TSX most actives, and not at the top of the active list is Canadian National Railway Company (CNR.TO), which was up over 2%, and Canadian Pacific Railway Limited (CP.TO), which was up over 4%. Those are certainly the big contributors to the gains in industrials on Tuesday. Then the most actively traded stock was Encana Corporation (ECA.TO). Still on a sell signal here so no joy second day of a sell signal and making a new low for Encana for this move. Next up we're looking at Bombardier (BBDB.TO). Bombardier still on a buy signal. No momentum to the upside whatsoever. Then CannTrust Holdings Inc. (TRST.TO) made a new low on Monday. Still on a sell signal, of course. No interest there. Next up we're looking at Barrick Gold Corporation (ABX.TO), and we traded back into the channel yesterday. We're looking for a close below $20.74 on Wednesday to give us a sell signal.

Looking at First Quantum Minerals Ltd. (FM.TO), we generated a buy signal on Monday. On Tuesday, we were up over 6%. Our next stock is Crescent Point Energy Corp. (CPG.TO). Another one of those energy stocks that couldn't take out the previous high, and we're now back on a sell signal. No joy for Aurora Cannabis Inc. (ACB.TO). Still on a sell signal up nicely yesterday. We're looking for a close above $9.72 on Wednesday to give us a buy signal. Then looking at IAMGOLD Corporation (IMG.TO), we closed higher yesterday. Not expecting a sell signal on Wednesday. That would happen, of course, with a close below $4.39. The first financial stock to show up in the most active list is The Toronto-Dominion Bank (TD.TO). We're treading water up here. We're still on a sell signal. That would change on Wednesday with a close above $77.15.

Now our last section this morning is commodity prices. We saw a pullback in crude oil, a pullback in natural gas, and a pullback in gasoline on Tuesday, all back on daily sell signals. We saw a pullback in copper yesterday, but we're still on a buy signal. Gold is treading water up here at the 14.06 level and still looking for a breakout above 1,437.50. Now, a little data point that could help us do that is the price of silver which was up over 2% yesterday. Nice big up day for silver, and that could certainly be a catalyst for gold breaking out above the recent highs.


Okay, folks, that is all for this morning's presentation. Have a great day. If you've got free time on your hands on Wednesday, why not donate some blood. Next time you hear my voice is this Sunday. At that time we'll take a look at protecting your portfolio.

Stephen Whiteside

Market Timing Service