TSX TrendWatch Weekly

April and May, when about 70% of S&P/TSX Composite Index stocks were trending upward, seem so far away now, as we move into the final month of 2008.

Last week we lost 10% on the S&P/TSX Composite Index…. a move that would have been considered almost unimaginable as recently as the beginning of the year. Nowadays, we take such moves for granted.

With last week’s decline (and similar moves on the Venture exchange and the major US indexes), the S&P/TSX Composite Index is currently declining at about 4% per week on average with 65% consistency. In other words, don’t expect a complete reversal of that trend anytime soon.

All of the sector indexes have negative trend values as you’ll see in the DATA & CHARTS workbook. The trend values range from -0.6%/week for CONSUMER STAPLES down to  -4.9% for FINANCIAL SERVICES.

So, the end-point on our chart above is now back down to 10%.  Those out on a limb selling stocks short have 90% of those listed on the S&P/TSX Composite Index to choose from, with varying degrees of consistency.  The dilemma is that any equities that haven’t fallen catastrophically already will likely be the ones to lead in a recovery, and those that have fallen catastrophically are pretty close to zero already.  Would you short 20,000 shares of a 50 cent stock in hope that it goes to 25 cents?  The $5,000 (50%) reward may look attractive, but an intra-day jump to 75 cents (for whatever reason) could mean a margin call and/or a loss of $5000… and that assumes that there’s enough stock available at that time for you to cover.  If not, you’ll be looking at further losses. A risky business to be sure!

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INVESTING FORUMS….  In recent weeks we’ve suggested a few activities for investors as we wait for some sort of recovery…  reading what the gurus have to say, or watching video coverage of them being interviewed, looking into new strategies for your investment toolbox, and even back-testing some of those strategies if you have the software to do so.Another possibility is getting involved in online investors forums (if you’re not already), or more involved in a variety of them if you already like the concept.Essentially, you’re chatting with other investors about just about any topic that you’d care to raise or reply to. Just don’t expect everyone to be as enlightened or polite as you are.  There are always some bad apples, but you might find the experience worthwhile.  Here are links to some of the more popular ones….

• Stockhouse.ca… a favourite in Canada. There are forums (called Boards), blogs and other community-related features. A great place to start.
• (Canada) Stockwatch… the name has been shortened to Stockwatch, but there’s still a Canadian emphasis, especially on penny stocks.  Forums require registration, and a free 30-day trial will also give you access to historical data on both US and Canadian exchanges. Subscriptions beyond that start at about $6/month.
• ZeccoShare.com… another free community site with lots of features and a US market emphasis. You can also open an account for trading there (US residents only).

Participation in any of these is optional in the sense that you can read submissions without contributing anything; but you might find them more valuable if you do interact with a few folks that have similar interests.You may get some additional spam (offers of investment services) as a result of providing your email address during the registration process for any of these services; although they’ll often claim otherwise. If you’re concerned about that, simply put in a fake address, and nothing will reach your inbox.

Participation is optional in the sense that you can read submissions without contributing anything, but you might find them more valuable if you do interact with a few folks that have similar interests.

I want to briefly mention two other interesting sites that you might find useful. They both have community features, but the main goal is to have you set up a portfolio to and track your performance over time…

• MarketGuru.com… members are ranked by their peers. Become a guru yourself, or copy the portfolio of an already established hotshot.
• Marketocracy… similar, but perhaps more directly oriented to the challenges of being an actual mutual fund manager than an individual investor.

Both of these go far beyond any investment games or simulations you may have seen elsewhere.  I plan to use one or both of them to refine my relative trend analysis™ (RTA) methodology and to test whether short-selling is still a viable alternative in current market conditions.

Although these sites never provide the stress and exuberance of using your own money, they can be a great learning experience.

VIDEOS… I’ve added a few more videos to Video Jukebox.  Jim Rogers is still a personal favourite, so you’ll see more from his recent interviews. The 4-part series was just added to YouTube last week.