Canadian Stock Market Trends 20190814

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 futures are down sharply. Dow futures currently down 335 points, so we are going to see some aggressive selling at the open on Wednesday morning.


Now, yesterday we had quite a wild day. If you were watching us yesterday morning, we were looking for the VIX to close below $16.59 to give us a new sell signal which would turn us bullish on the stock market. That did not happen, and that lower channel line, of course, has continued to move higher, so on Wednesday we're looking for a close below $16.82. Not expecting that to happen. In fact, we're expecting us to go back and retest the previous week's high.


Looking at the major indices and looking at the ETFs for those indices, there's the Dow Diamonds; there's the SPY, SPDR S&P 500 ETF. The QQQ, Nasdaq 100 ETF recovered quite a bit, almost a new daily buy signal there. That had a lot to do with strength in the XSD, SPDR Semiconductor ETF. No joy for the Financial Select Sector SPDR Fund (XLF). Of course, they're still in the doghouse closing at the lower channel line. Then we've got the IWM, iShares Russell 2000 ETF and the IWC, iShares Russell Microcap ETF, no joy there.


Looking north of the border, the S&P/TSX Composite index (^GSPTSE), still on a sell signal. The S&P/TSX 60 Index (TX60.TS)still on a sell signal. Traded up to the upper channel line yesterday. Looking at the midcaps, smallcaps, and the microcaps, which rolled over yesterday, we're all on a sell signal now. Looking at commodity prices, crude oil was up nicely yesterday. It's up in the pre-market this morning. Natural gas traded up to the upper channel line yesterday looking for a close above $2.17 on Wednesday to give us a buy signal. Copper is now back on a buy signal joining gold. Gold had a pullback yesterday. Some selling in the gold sector yesterday, but for the most part not a lot of sell signals.


Taking a look at some of the major Canadian sectors starting with the financials. The financials is not a place I spend much time in. There's not a lot of opportunity for capital gains, and I'm not that interested in dividend income. That's me personally. Obviously, a lot of investors are interested in dividend income and are interested in the financial sector. But from a capital gains point of view, if you look here at $37, we've recently been up to $39, that is a very small move. Compare that to the energy sector, and if you look here, we're down at $8.20 up to $10.60. That is certainly a much bigger range. Then, of course, if you look at the gold sector, we started off down at $11, and now we're up at $16 level.


You're talking about 50% moves there that you're not going to see that in the financial sector. So it's very important that you know the volatility, you know the risk/reward of what you're looking at. A buy signal is not a buy signal if it's something that you're not interested in or if it's too risky for your personal portfolio. You shouldn't be involved in things that are too risky, and you can weigh that out by looking at the volatility of the particular symbol. There's the material trading through the lower channel line yesterday. So no trend changes in any of these major sectors on Tuesday.


Let's finish off this morning's presentation looking at the TSX most actives starting with Encana. Encana traded right up to the upper channel line so any higher close on Wednesday would give a buy signal for Encana. Of course, that buy signal should only be taken by people who have been sitting on their hands waiting to buy Encana and particularly anybody who's been short this stock.


Then we've got Barrick Gold Corporation (ABX.TO). Barrick traded into the channel, came back up and actually closed higher on the day. There's Yamana Gold Inc. (YRI.TO). Yamana traded through the lower channel line yesterday before coming back closing in the channel. That's one of the reasons we don't use stops. We wait for the closing price to close below the lower channel line. Not a stop below the lower channel line. So we're looking for a close on Wednesday below $4.20.


Then we had B2Gold Corp. (BTO.TO) traded in the channel yesterday. We need to close below $4.57. Then we're looking at Kinross Gold Corporation (K.TO). Kinross traded down to the upper channel line, closed above it. Looking for a close below $6.10 to kick us out of that stock. Then Enbridge Inc. (ENB.TO). Enbridge generated a buy signal on Tuesday. Of course, that buy signal is only of interest to people who've been waiting to buy this stock. Then we're looking at Suncor Energy Inc. (SU.TO). We need to close above $38.38 to give us a buy signal on Wednesday. Then looking at Cenovus Energy Inc. (CVE.TO). Cenovus traded up to the upper channel line. Looking for a close above $11.73.


Then the most actively traded financial on the most active list yesterday was Manulife Financial Corporation (MFC.TO). Looking for a close above $23.01 on Wednesday to give us a buy signal. Not expecting that to happen. The most actively traded bank was The Toronto-Dominion Bank (TD.TO) on Tuesday, and that's looking for a close above $75.69. Not expecting that to happen. The most actively traded marijuana stock on Tuesday was Aurora Cannabis Inc. (ACB.TO). Currently on a buy signal. That would change on Wednesday with a close below $8.41.


Let's finish off with a quick look at the Horizon BetaPro VIX product BetaPro S&P 500 VIX Short-Term Futures ETF (HUV.TO). If you're along the VIX right now, congratulations. We've had the opportunity to take money off the table at $5.08 several times. Next target to the upside is $5.47 and then $5.86. You want to take money off the table at those points without totally liquidating your position just in case we get a sharp move to the downside.


Okay, folks. That is all for this morning's presentation. Not expecting any major trend changes on Wednesday. Looking for a retest of last week's lows in the market. Have a great day. The next time you'll hear my voice is on Sunday.


Stephen Whiteside


Canadian Stock Market Trends