TSX TrendWatch Weekly

Wake me up when the equities markets start moving again!  I might as well be as sedated as the major indexes have been over the past few weeks. (Yes, there’s also a passing reference to the Ramones here, but don’t read much into it.)

WEEKLY REVIEW…  The S&P/TSX Composite Index rose a minuscule +0.1% last week, while the S&P/TSX Venture Index  drifted lower -0.3%.  The US markets fared a little better, but we’re still just talking about +0.6% (S&P500) to +1% (DJIA).

FINANCIAL SERVICES  are at the top of the sector list trend-wise… gaining +1.1% per week. So much for stodgy old banks and insurance companies. HEALTH CARE is pretty much tied with FINANCIAL SERVICES as a leading sector. Last year’s favourites, MATERIALS and ENERGY are at the bottom now, but you’ll find lots of exceptions at the individual stock level. Commodities in general have been on the decline lately, with the CRB index down -2% last week, and trending lower at -0.4% per week at the moment. This could be due to temporary strength in the $US recently, but if it persists, the resource-heavy Canadian equity markets could feel some downward pressure.

Our percentage of stocks trending higher has risen slightly to 67%.  The median weekly trend value is +0.5%. That certainly doesn’t mean though that there aren’t a whole lot of stocks doing better than that. Obviously 50% of them are, because that’s what medians are all about! Check out the DATA & CHARTS workbook to find the winners.

BIGGEST RALLY in 76 YEARS… Did you miss it? Is it too late to get onboard?

The answer to the first one should be obvious if you stayed on the sidelines from March 2009 to the present. The answer to the second question is less obvious to be sure. Let’s look at some facts that might help. Investment guru, Laslo Birinyi, has calculated that the past 12 months have been the best stock market rally in 76 years. The S&P500 has risen 70%. Compare that with your 1% gain in your savings account.

If you missed most of that, you may be crying in your beer; but the show may not be over yet. Obviously the markets do pause and pull-back from time to time, so the current malaise may be well justified before the next push upward.

Another hot-shot money manager, Barton Biggs, maintains that stocks are still cheap relative to forecast earnings. He predicts another 10-15% gain near term.

So how much further could this bull market go? Birinyi looks at the potential duration as opposed to price appreciation. His numbers show that the historical average bull market runs 1,023 days. Assuming this bull is just “average”, that would mean that it could last until April 2013. We’ll see!

I don’t often reproduce a S&P/TSX Composite Index chart here, because you can find one just about anywhere.  It’s here today to make a few simple points. In the three year horizon shown above, the S&P/TSX Composite Index topped out at around 15,000 and fell to just under 8,000… roughly a 50% drop. Those who didn’t get out when we did would have noticed a decline in their portfolio of roughly that magnitude.

But now we’ve soared back up to 12,000 from that bottom… a 50%+ gain. This brings us to an often overlooked fact… a 50% gain does not offset a 50% loss!  Once you’ve lost half your money, you need a +100% gain to offset that -50%. So we’re definitely not there yet.  You can see that we have another 3,000 points to go to get back to that previous 15,000 high in early 2008… up 20% from here or 100% from the March 2009 bottom.

Let’s hope though, that this is a better than average bull market and regaining former highs will just be a launchpad for even higher levels.

THIS WEEK… The State Street Confidence Index (SSCI) for March comes out tomorrow (Tuesday). We’ll Twitter out the key numbers. The SSCI is based on actual buying behaviour of large institutional investors… not simple surveys like most other confidence indicators.

This entry was posted on Monday, March 29th, 2010 at 5:30 pm and is filed under Uncategorized.