TSX TrendWatch Weekly

We’re happy to report some follow-through on the previous week’s gains. The S&P/TSX Composite Index rose another 2.4% as commodity prices are showing signs of recovery. The S&P/TSX Materials Index rose 6.8% over the week. Some of the more targetted indexes did even better…

• S&P/TSX Diversified Mining Index: +9.4%
• S&P/TSX Gold Index: +9.1%
• S&P/TSX Canadian Energy Trust Index: +9.5%

The S&P/TSX Venture Index rose 6.2%…  further evidence that commodities stocks have been fueling this recent rally.

And, it’s great to see our %-up index north of 50% again. That’s not to say that we should be jumping into equities at this point, but perhaps it’s time to start focussing on where your money should be going if this rally persists.  You’ll still be hard pressed to find individual stocks with respectable trend/consistency values in the DATA & CHARTS workbook.

Be sure to take a close look at those that look too good to be true, because they are likely takeover targets. Consequently, they’ll have no upside potential beyond the acquisition price.  International Petroleum Investment Company’s acquisition of NOVA Chemicals is a prime example.  NCX currently has a huge 10 week trend value of about 27%/week and a consistency value of 66%.  Because of the nature of exponential moving averages, these numbers are still reflecting the huge premium IPIC is will to pay for the company. On the other hand, the chances of a competing offer are small, so NCX’s stock price is unlikely to rise going forward.

This is why we always recommend due diligence when reviewing our data.

Here’s another example, where the trend/consistency pair appear justified.  Tanzanian Royalty Exploration Corp. (TNX) at $6.30 Friday has a trend value of 5%/wk with a consistency rating of 73%. This is the kind of situation one would want to look into further.  As it turns out the company has recently orchestrated a $1M private placement and has entered into a royalty option agreement with Songshan Mining Co. Ltd. of Duolun, Inner Mongolia, China.  This is the kind of fundamental “backup” that boosts the attractiveness of a stock with equally attractive trend/consistency numbers.  We’re not necessarily recommending TNX… just providing an illustration of how relative trend analysis™ (RTA) can lead you to potentially positive investment opportunities when paired with a bit of homework.

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CHANGES: The Standard & Poor’s Canadian Index Operations has announced changes to the consituents of the S&P/TSX Composite Index after it’s most recent quarterly review. Here are the results…

• ADDITIONS: ARZ, FNV, MFL, OSK, PRE, SXC
• DELETIONS:  CFW, CAS, CLL, FEL, GO, HW, ITX, KFS, NAL, OPC, POU, TWF.UN

The changes officially take place as of Monday, March 23, but we’ve implemented them already in this week’s calculations. The contents of the DATA & CHARTS workbook reflect the updated constituent list.