Time to watch the Russell 2000:

Just the repeat once again on market breadth “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

They say a picture is worth a thousand words.  

Our latest NYSE advance / decline line displays a break down below the pivot – the early August lows. The problem now is the S&P500 has just confirmed the A/D line break by also breaking below the early August lows

Now the pain is close to the end as the Russell 2000 (the first the break down) currently at about 1049 - is only 50 points above major support as viewed by a point & figure.

Market breadth – Still No Breakdown:

Just the repeat once again on market breadth “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

The last time we looked – the breadth problem was acute as we needed the A/D line to hold at the early August lows to complete a shallow A-B-C type correction. Now as displayed in the latest chart as of the Friday Oct 3, 2014 close, we can see both the S&P500 and the NYSE Advance / Decline line holding just above the respective early August lows. So far we have just a rolling sector rotational correction as the energy & materials trade inversely to the consumer, financial and health care sectors. Most notable is the Dow Transports bouncing back above the short 50 day M/A which is well above the longer 200 day M/A

Canadian Energy stocks and the big myth:

The big Canadian energy names, are they great long term investments? Well the experts seem to love them – go to stockshase.com and you will find the CNQ lovers – and I quote, “His favourite.  Superbly run, Thinks the market is really ignoring that this company gets a lot of their effective pricing from Western Canada Select, This, along with Suncor (SU-T) are probably the 2 premier energy stocks. Has done well this year, Cheap and generates cash flow. Pays a nice dividend. If this is in your TFSA and you are looking out a few years, this is a fine place to be, and - A very dominant producer in the western Canada space. International operations in the North Sea and West Africa. Extremely well managed.”

As for the Suncor lovers, and I quote, “With oil by rail, maybe Keystone does not matter.  They are a refiner with upstream and downstream operations.  This is a very conservative company.  They had very good dividend increases.  Worth buying here, Growth in cash flow over the next number of years is tremendous.  Suncor (SU-T) or Canadian Natural Resources (CNQ-T) for the growth? These are both excellent choices, His model price is $79, an upside of 81%. He is willing to be patient and wait for the value to be created. – and Likes it.  Even though he thinks oil prices are vulnerable, SU looks attractive in the long term.”

The quotes are out of context but the message is clear. The very long term charts display several years of no capital returns – both are components of the S&P/TSX60 index and among the worst performers of the index since their relative 2006 – 2007 price peaks. If you’re looking for growth such as we have in consumer, health care, industrial, financial and the technology sectors don’t look to the big energy names anytime soon – for traders only. Don’t get me started on Crescent Point