The Canadian Technician

Why Canadian Investors Have To Be Way More Cautious Here $TSX

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We have seen roughly one day a week of slight downward pressure in the US markets during this huge rally. So the little bit of selling this morning is hardly cause for alarm. The Dow was up 1897 points this month when it closed on Friday. Can it do 2000 points before Wednesday? That's a nice month!!!!!

But this blog is mostly about the Canadian market and how it fits with the other global markets. The local news is not so pretty.

Let me start by showing a chart of the $TSX and the $SPX off the 2009 lows.


The Canadian market has dramatically underperformed the US market for the past 9 years. Even coming off the lows, we couldn't keep up. If you need to mail a chart to any of the leaders in Canada, you have my permission to share this one!

It's old news but it might not have been presented so succinctly before. So why do I bring this up today? Canada ($TSX) has now lost all the Year to Date gains and is negative on the year. The USA market ($SPX) is up 6.94%. Both the NASDAQ 100 and the Dow Industrial Average are even moving faster!

If that is not bad enough, Canada has three major sectors that make up 2/3rds of the exchange. Financials, Energy, Materials. They are all failing to perform in any way like the USA euphoria.

Looking at just a PerfChart for Canadian sectors, even the Healthcare sector with medical marijuana stocks has been declining for the last three weeks. It is now making lower highs and lower lows (purple on the chart). Some of the tech names like Shopify (SHOP.TO) have been performing well, so there is one bright spot in a sea of underperformance.

With a backdrop like that for the Canadian market, make sure you are trading the market you are investing in. Our Canadian market is not rising, so trim your portfolio accordingly. When the parabolic surge in the US slows, we will probably sell off with them. The fact remains that even within a global surge, Canada can not follow along and that makes this a very serious situation for Canadians and Canadian investors.

If you did not get a chance to see the Commodities Countdown for January 25th, 2018, I have included it here. There are some solid technical reasons to be cautious on energy and materials here.

The Dollar Gets Bucked Off 2018-01-25 from StockCharts.com on Vimeo.

I will be producing a Canadian Technician Recording on Tuesday January 30th. There will be a link here and on my Vimeo channel. Check back for a lot more coverage of the situation.

Good trading,
Greg Schnell, CMT, MFTA

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Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com specializing in intermarket and commodities analysis. Based in Calgary, he is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is also the author of Stock Charts for Dummies (Wiley, 2018). Learn More
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