View from Toronto Video: Watching Oil, USD, S&P for Signals on TSX

02/07/2018 6:00 am EST

Focus: MARKETS

Ziad Jasani

Managing Director and Partner, Independent Investor Institute

On annual relative routines the TSX is dislocated and cheap vs. the S&P 500. Oil, the USD and the S&P 500’s bounce are key to watch to time our swing-low entry on the TSX. More from Ziad Jasani of the Independent Investor Institute, writing and videocasting on Monday.

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The TSX has pulled-back -4.97% from January 4, 2018 intra-day-all-time-highs. On annual relative routines the TSX is dislocated and cheap vs. the S&P 500 (SPX), and has returned to neutral on long-term relative routines.

The S&P/TSX Composite Index (TSX) is closer to a stronger bounce vs. the S&P 500. However, a breach below the 200-day average and support at 15,600-570 would portend a move down to major-support at 15,400-360 (-1.57% away from Feb. 2 close).

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Oil, the USD and the S&P 500’s bounce are key to watch to better time our swing-low entry on the TSX. Oil must remain above $63, the U.S. dollar/Canadian dollar (USD/CAD) currency pair must strengthen, and the S&P 500 must ideally give us a strong bounce up off of 2,715 to help the TSX re-trace to its 50-day average (16,152 +3.5%). Odds favor the preceding taking place.

The biggest wild-card is Oil, where speculators are 12 to 1 net long Oil while Global Equity Markets are in peril. The real issue here is an aggressively rising USD that will most likely pressure Oil down.

UK Inflation along with Chinese Producer Prices (Feb. 8) may serve to take the edge off the USD and may also introduce more signs of inflationary pressures.

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