Toronto Market Weaknesses: Gold, Tech, Utilities, REITs

06/08/2017 2:53 am EST

Focus: STRATEGIES

Ziad Jasani

Managing Director and Partner, Independent Investor Institute

The most vulnerable in our Toronto Stock Exchange: Gold Producers, Technology, Utilities, REITs, Telecom, and under-performance is expected, asserts Ziad Jasani, Co-founder of The Independent Investor Institute, Toronto, in his weekly Trader commentary and video.

What’s ahead for the Toronto Stock Exchange (TSX)? Tariffs, Mortgage Market Risk, Oil weakness since early April, and Trumpflation are all keeping the TSX in a sideways range with a down-tilt.

A recent test of 200-Day Average and bounce implies continuation to 50-Day Average (15,552) short-term (days-to-a-week).

Remember, our market is more reactionary to Global-Macro catalysts. Currently, sentiment towards global growth is fragile and key to holding prices up at these market highs. The TSX has arguably fully priced-in Trump’s plans wherein any negative shifts in sentiment towards these plans pose greater downside risk for the TSX.

Note: The TSX has broken an uptrend channel from November 2016, and had been under-performing the world (ACWI) and the S&P 500 since 2017 started with a small round of out-performance March 20–late April.

Out-performance was led by the defensive sectors (REITs, Utilities, Staples, Telecom). Defensives are now dislocated and expensive while cyclicals are cheaper on annual routines, suggesting a top or if Trumpflation resumes, a pop.

A break and close below 15,400-360 would be a strong sell-signal for the swing-portion of mid-to-longer-term holdings and signal closure of any long-side trades in the short-term; the next expected support would be below the 200-Day Average at 15,110 (-2.15% away).

Outlook Mid-To-Longer-Term (Weeks-to-3 Months+)
The TSX is dislocated and expensive on long-term routines with the S&P 500, but has neutralized vs. the world iShares MSCI ACWI Index Fund Global Equities (ACWI). This implies underperformance is more likely over the next month vs. the S&P 500 (sideways to down-trending action).

The most vulnerable spaces in our market are Gold Producers, Technology, Utilities, REITs, Telecom, Staples.

And these Industrials:
iShares S&P TSX Global Gold Index (XGD)
iShares S&P/TSX Capped Information Technology Index ETF (XIT)
BMO Equal Weight Utilities Index ETF (ZUT)
iShares S&P/TSX Capped REIT Index ETF (XRE)
iShares S&P/TSX Capped Consumer Staples Index ETF (XST)
iShares S&P/TSX Equal Weight Industrials Index ETF (ZIN)

Telecom and others above are now all dislocated and expensive on annual routines and under-performance is expected.

Our Energy sector is relatively cheaper on annual routines and suitable for short-term bounce plays but not longer-term investing; as iShares S&P TSX Capped Energy Index Fund (XEG) peaked in December 2016 and Oil is likely stuck in a long-term sideways range.

iShares S&P TSX Capped Financials Index Fund (XFN) is on the cheaper side of annual routines after under-performing since late February 2017 (Trumphoria dissipating), making bounces on positive headlines viable; however, a break and close below support at $34.80 would be another sell-signal.

Today’s video summarizes events and early market actions Thursday (June 8), including TSX, energy equities, bonds, gold, US Treasury yields and overnight swing-calls.

View the latest videos from Ziad Jasani of the Independent Investor Institute here...

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