TSX TrendWatch Weekly

It is my opinion that the business or financial media do not serve investors well.. whether on TV (BNN, CNBC) or via print (Globe&Mail’s Report on Business, National Post’s Financial Post, Wall Street Journal, etc). Radio business coverage might as well not exist.. it is so inconsequential.

So that will be my rant this week after bringing you up to date with last week’s market events.

WEEKLY REVIEW…   While we had a minor pull-back of -0.3% on the S&P/TSX Composite Index last week, all 10 sectors continue to have positive trend values. HEALTH CARE is at the top of the list now, due mainly to SXC Health Solutions Corp. (SXC), which is currently climbing at about +7% per week with 90% consistency.

INDUSTRIALS, INFORMATION TECHNOLOGY and FINANCIAL SERVICES continue their upward momentum as well. FINANCIAL SERVICES has been in the top 5 of the ten sector indexes for 23 weeks now, resulting in a year-to-date gain of 33%. INFORMATION TECHNOLOGY is the only one of the ten with better year-to-date gains (42%), but that small group is up that much due to Research in Motion.. up 62% year-to-date and the highest weighted tech stock in the index.

The S&P/TSX Venture Index was modestly up last week (+0.1%), while the major US indexes declined somewhat more than the S&P/TSX Composite Index.

Those nervous about volatility in the markets will be happy to hear that the VIX (a popular volatility measure based on the S&P 500) declined another -2% last week, bringing it’s year-to-date drop to -38%.

NEW CHART…   New isn’t quite the right word, but we’ve super-imposed another line on our regular chart. While I’ve always liked the naked simplicity of just charting the percentage of stocks with positive trend values (the red line and right axis), this time I’ve added the median trend value of S&P/TSX Composite Index stocks as well (the thin black line, left axis). Reader feedback on this addition would be appreciated.

It should come as no surprise that the shape of both curves is essentially the same and by fiddling with the scale, I could make them look like they’re practically superimposed on each other. So, what is the additional value?

Basically, it adds a “how much?” component. It’s great to know that as of the end of last week, 81% of stocks in the S&P/TSX Composite Index have positive trend values, but how fast are these stocks moving up on average?  Through the additional line, we can now show you that S&P/TSX Composite Index stocks are rising at 1% per week on average (remember… black line, left scale). Multiply that by 50 and you’d be looking at 50% annualized gains… for the average stock. Think about what the outperformers will be returning!!

I think that you will find additional value in the revised chart, but let us know if you think it’s confusing.  Here are some of the pluses…

• You could do your own average trend value calculations by downloading or cutting-and-pasting the Trend list from the DATA & CHARTS workbook. But why not let us do that for you and include it in our weekly chart?
• Spikes in the original chart have been somewhat problematic. It happens when many stocks have trend values very close to zero and one week of significant price moves will tilt many of them above or below the zero trend value. The spikes I took time to talk about in detail in my weekly updates were the spike up in the first week of January, and the peculiar spike down in July. The “thin black line” will now let you see the consequences of those spikes on the average stock. In January the spike drove the average stock price trend value to about 1%/wk from essentially zero.  In July, the down-spike brought the value of the average trend value to just slightly below zero, before it bounced back.
• Keep in mind that even sideways moves in either curve mean that your stocks are probably still moving up, not sideways… provided that the red line is above 50% and the thin black line is above zero.  This is what makes our chart quite different from, say, a simple S&P/TSX Composite Index chart.

MISLEADING MEDIA…  I like to read Bill Carrigan’s column in the Satuday Toronto Star. Although I’ve never met him, we seem to have a few things in common. We’re both independent investors and market analysts, and we both seem to share a belief that investing doesn’t have to be all that complicated.  The math might be complex in some cases, but the concept behind it should always be simple.

Perhaps more importantly, we both try to remind investors that the mainstream press (print, TV, Internet, etc) often “get it wrong”. They dwell on the exceptions instead of what is really happening. Bill used two examples in his “Getting Technical” column Saturday… Mark Mobius (via Bloomberg) predicting a 30% drop in equities, and Nouriel Boubini (”Dr Doom”) predicting a double-dip recession on CNBC if oil prices rise.

So, what is an investor supposed to do with that “news”?  Panic and sell everything when 80% of all stocks are rising by 1% a week or more on average? I don’t think so, but the media insist on playing with investors’ emotions, rather that simply providing objective material that rational investors can use. Based on journalists’ pathetic incomes, it’s obvious that none of them have any disposable income to invest anyway, so why should we trust them to tell us what to do?

Imagine a journalist neck-deep in water after his city has flooded… recommending that people refrain from buying boats, because they’ll be so much cheaper after the water goes away.  Sadly, that reflects a large part of financial news coverage today.

And, why would the typical investor want to watch BNN cover Garth Dabrinsky’s trial 5 hours/day? Or how many years in prison he might get? Is that going to have an impact on any investor’s buy or sell choices that day?  Of course not!  It’s pure sensationalism with no practical value whatsoever!  It’s all about sensationalism selling advertising.  Investors don’t need drama queens (of either sex), so we’re grossly under-served by business news coverage.

What we probably need is an Investors Channel, not a Business Channel. Let the Investors Channel bring us multiple perspectives from market gurus and plain objective data.  Let the Business Channel go ahead and cover the investor who fell down a well.

TWITTER… Don’t forget that you can follow us on Twitter too, for worthwhile comments and links to useful material between these weekly updates. We’ve set up several accounts for you to follow depending on your interests…

• “Umbrella” topics of relevance to all ProfiTrend Enterprises web sites… @ProfiTrend
• TSX TrendWatch… @TSXtrendwatch
• ETF TrendTracker… @ETFtrendtracker
• Income Trust Trader… @IncTrustTrader