With TSX Sideways, Look for this Trade Signal

06/13/2017 2:57 am EST

Focus: STRATEGIES

Ziad Jasani

Managing Director and Partner, Independent Investor Institute

As TSX is in a sideways range, a break and close below 15,400-360 would be a strong sell signal for the swing portion of mid-to-longer-term holdings, asserts Ziad Jasani, Co-founder of The Independent Investor Institute, Toronto, in his weekly Trader video.

Here are some ideas for short-to-mid-term trade strategy.

Tariffs, Mortgage Market Risk, Oil weakness since early April, and Trumpflation are not re-igniting.

All are keeping the Toronto Stock Exchange (TSX) in a sideways range with a down-tilt. A recent test of 200-Day Average and bounce implies continuation to 50-Day Average (15,542) short-term (a few 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 a greater downside risk for the TSX.

Note: The TSX has broken an up-trend channel from November 2016, and had been under-performing the world IShares MSCI ACWI Index ETF (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 (-2.35% away).

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

Related Articles on STRATEGIES