Saturday, June 9, 2012

The TSX Relative Weakness

Our chart on the last post was the daily NYSE A/D Line clearly displaying the recent breakdown of the S&P500 and the NYSE A / D Line which is a significant negative technical event. However equally significant is the major support levels which are just below the current prices at Friday May 19, 2012. I concluded was too late to sell so let us change the mantra from sell-in-May to stay-in-May

Over the past year the strongest global markets on a relative basis were in the U.S. large and small cap space. The bad news for Canadian investors is that along with the mature European bourses, Canada was among the weakest markets on a relative basis. The good news is when performance deviation between the various global markets is operating there is also opportunity for investors. For example if we know that U.S. equities have out performed Canadian equities over the past 12 + months then we simply wail for the relationship to change and then react by increasing our Canadian equity exposure.

Our chart this week is that of the weekly closes of the TSX Composite Index plotted above the two squiggly lines representing the TSX performance vs. the S&P500 index.The TSX Composite will generate an out performance signal when the faster black line crosses above the slower blue line, AND when the blue line turns upward.

So far there is no pending improvement in the TSX vs. the S&P500 and so in the interim be patient and enjoy the relative strength of the U.S. markets

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