Fish Market

This market is fishy. I have been very suspicious of this last move up. Since last year, people have been asking me if I think the market will ever go back to where it was. The real question people are asking is: Will the price of my stock ever make it back to where I bought it? There are still many folks who are feeling the pain of being under in their investment accounts despite the last big upward move in the market. My answer is, of course the market will make its way back up. I just don’t know when.

I thought the bounce that had begun after Christmas would be a short bounce before a big flush in January before we’d go up again. Nope. Thanks to a combination of positive factors, we just went straight up and in a big way.

This market has done my head in. There are many conflicting factors happening in the world impacting the economy that have a lot of financial experts arguing over the next direction of the market. As much as I’d like to take a position here or there, I’d been waiting for the market to take a breather and reset itself. It just continued to head up and up. All I can do is look at the charts for some guidance.

This is the S&P 500 Index on four different time frames. Each time frame tells me something different.

A: Daily Chart

We are trading above the 200-day moving average (MA) as seen by the little green squiggly line in Chart A. This means that the market is trading above the average closing price levels of the last 200 days. (Please note that this line could appear differently in other charts for explanations beyond the scope of this blog.)

This is normally a sign of a positive trend over the last 200 days (you can also use 100-day MA or 50-day MA, etc.). More conservative investors typically feel confident to be holding positions above this level. To trade below this would make investors more cautious. Given how quickly we got to this place (40 trading days at this point), I would say that most people wouldn’t feel too confident that we’re gearing to go up again without some challenges.

B: Weekly Chart

We have gone directly up for nine straight weeks with very little selling. We are now approaching areas where we had previously tried to go up further in October, November, and December last year — but failed to. I drew arrows where there will likely be minor sell-offs and attempts to move up again.

C: Monthly Chart

Big severe price swings in either direction as depicted in this sloppy monthly time frame usually means volatility. If I were to go by this chart alone, I’d say that the market is not stable.

Personally, I have been whipsawed out of positions when I tried to buy stocks with charts that looked like this. The trades with the best moves usually come from charts that have stabilized over a narrow price range for some time. This chart tells me to stay away from trading for a while and wait for some stability. However, if I do see an opportunity that seems too good to pass up, I would need to be really careful and use fewer shares with a shorter time horizon for my position.

D: Yearly Chart

You can look at this chart in two ways.

While you could say that we’ve gone straight up since 2009, we did have a small reset in 2015-2016. You could argue that this reset was enough to give us another burst of equal measure. If this is the case, we could just keep going straight just a tad beyond 3000.00.

If you’re cautious or even doubtful of the above scenario, then you would have noticed the big red candle that I’ve circled. It has a large topping tail which means a lot of selling happened here. From a technical standpoint, this pattern usually signifies the start of a reversal move down or a pause in the upward trend.

My Humble Opinion

As much as I feel better that we’ve been positive in the market, my gut tells me it’s not done flushing out all the over-buying that’s happened the last few years. It was fun cashing out on stocks late last year; however, there are still many investors who bought at the top who have not benefited from the last nine weeks. These folks are still itching to get out of their positions. The pain from the last moves down is still all too fresh. It would take a lot more for them to remain in their positions or even feel confident enough to invest again.

I’m actually really hoping that we’ll come back down below the lows of 2018. A substantial correction on a longer time frame usually means we’ll find way more buying opportunities after prices have come down more. Then we could count on another good move up in the market and hold our positions for longer stretches. If this correction on the yearly chart does not happen, I would at least like to see some more stable sideways action in the market before we were to move up again.

The Market Dumps

 

Dailies

The SPY, QQQ, DIA, and XIC ETFs on freestockcharts.com

While some investors have been freaking out, I’ve been casually checking the market and my portfolios. Is this the correction I’d been impatiently waiting for?

Looking at the daily charts of the SPY, the Qs, the Diamonds, and the XIC, you can see a few major things happening here. A big precipitous move often creates another one. Look at the XIC on Monday, Jan 29. It gapped down and just kept going. Something similar happened to the Dow on Tuesday. While there was some defending going on, it still broke its trend on Friday. The SPY and Qs had a huge down day like the others on Friday; however, their uptrends are still intact. It will be interesting to see if there’s a bit of a bounce before these go down even more and break their shorter-term trends.

 

Weeklies

When we pan out and inspect the weekly charts, it’s hard not to notice the glaring red candle on the XIC. Whoa, Canada! In one week, it wiped out all the gains made since mid-October. The other charts only came down past the gains from the last week or two. If this is the start of the move down for the US market, it might be wise to take some profits off your US stocks before they correct even further.

Monthlies

As for me, I’m just hanging onto everything and waiting for my next buying opportunity. In fact, I transferred more cash into my registered accounts so that I’ll be ready when I see a good trade is on.

I’m noticing some beautiful monthly corrections on the weed stocks. You can bet that I will be scaling into these before their next big move. If you have difficulty selecting which weed stocks to buy, then just buy the ETF, HMMJ. You can visit this link to get more information on the fund and its stock holdings. I created a watchlist on freestockcharts.com with all the stocks that are in the HMMJ ETF. I like to cruise through the charts and check out which ones are helping the portfolio or weighing it down.

Stock Picks

selloffs

Market ETFs: SPY, QQQ, DIA, and XIC on freestockcharts.com

The US market is making me nervous as the charts get higher with bigger candles. At some point, it’s gotta sell off, right? I notated on the charts the last months where the most selling happened.

Market cycles can either be four months for the shorter term, or eight to ten months. The SPY and DIA show their last major sell-offs were in March of last year. The Canadian market, on the other hand, looks like it could be halfway through its current move up. It could pause for a bit at the current highs before continuing its move. If the US market pulls back, it’ll be interesting to see how the Canadian market will react.

It’s been a hectic week for me and I’m gearing to go back to work tomorrow. I managed to do a quick search and I found some decent charts to check out:

  • BB.TO
  • PD.TO
  • ACBN.TO (watch for a consolidation setup on the daily chart)
  • ENB.TO

Be sure to check the sector and do your necessary research and take the right amount of risk so that you can feel confident in your trades/investments.


Oh, and happy new year!

 

Trading this Market

On Monday, JP went through all the Canadian stocks and gave me a list to check out. I went through it and thought the following were great charts:

  • RME.TO
  • FRU.TO (A royalty company.)
  • LCS.TO (A fund)

The next day, he asked me which one(s) I was going to buy. I told him none of them. He couldn’t believe I was just going to sit on a bunch of cash without investing it. Of course, I had some explaining to do. It was very simple: I didn’t like the market. I figured the market was going to offer hokey bullishness all week which it did, ending with a big hoorah day on Friday.

 

Market Monthlies

The XIU, SPY, QQQ, and DIA ETFs on freestockcharts.com

Here are the monthly charts for the Canadian XIU ETF, and the U.S. ETFs: the SPY (S&P 500), the QQQ (the NASDAQ), and the DIA (Dow Jones Industrial Average). There are seven trading days left in this month. If we close at new highs with lower volume, then I will happily wait for a correction next month.

I noted on the charts the months when we last saw a correction or a reset. On the DIA chart, I put a star over March 2017. Even though there wasn’t a proper sell-off/ correction, it consolidated and traded sideways for the following three months, which is often a good setup for another run.

Out of all of them, Canada’s XIU looks the best. If the U.S. markets undergo a correction, then trading Canadian stocks could be the next best play. I’d keep a close eye on the Canadian financial stocks, though, to see whether they reset or have a substantial sell-off that could weigh down the Canadian market.

For the rest of the week, JP kept asking me for my contribution of picks in return. I flat out declared I’d rather sit on cash than to buy anything right now. (Honestly, I was too lazy to look, but we both knew that.) He agreed that although the market looks overbought, sector rotation could keep it churning and that unless something fundamental changes in world economics (like a big war), we’re going to keep going.

I found some charts worth watching over the next week or two:

  • CCO.TO (Needs better setups on daily, weekly, and monthly timeframes.)
  • MX.TO (Could tighten up on the monthly, but decent daily and weekly charts.)
  • ALA.TO (Nice monthly, but it went up a lot already on the daily and weekly.)
  • ATZ.TO (I own this already. This must set up on all timeframes.)
  • H.TO (I own this already. The monthly chart is meh.)
  • DRT.TO (I own this already. The weekly isn’t that clean.)

JP’s picks definitely look better than mine. However, I feel these are worth watching as they had more recent corrections on the monthly timeframe. None of these have great patterns on all their daily, weekly, and monthly timeframes. I find that often when the pickings are slim, we’re due for a correction. By the time the correction or reset comes around, these picks could be even tighter. That’s the benefit of having cash ready and waiting in your account: you’ll be ready to go once the best opportunities are there. You can always afford to be patient.

 

 

 

 

 

Stock Markets and Stock Picks

Marks

Monthly charts of market ETFs: XIU, DIA, SPY, QQQ on freestockcharts.com

The Markets

I typically like to analyze the XIC ETF as it consists of more TSX stocks. The XIC is very much like the SPY ETF for the S&P 500 index. When I want to know how the tech-focussed stocks are doing, I check out the QQQ.

I admit, I rarely look at the XIU (the TSX’s top 60 large cap stocks) or the DIA (the U.S. ETF for the Dow Jones Industrial Average). It’s an old habit of mine as my trading background was more focussed on shorter timeframes and bigger price action. There is less price action in these indexes that cover the large-cap, blue chippy stocks. Molasses moves faster than some of these stocks’ prices — this is because there are so many more shares to go through at each price level before the price moves up or down. Less price action, though, doesn’t mean less money. It’s just more stable. I really should watch these ETFs more because this is where big money, like funds, tends to go. With investing, it’s often good to follow the big money.

I drew horizontal lines on the charts for the XIU, DIA, and QQQ to show where those stocks had reset. The XIU has been “resetting” for a long while now, pretty much since February. The DIA (often called “the Diamonds”) had a reset in April and the Qs had one in July. Look at the SPY’s trendline that goes straight up. When is the SPY going to take a breather? If we’re going by season, then perhaps in the fall?

Observing the timing of these corrections demonstrates well the cyclical nature of markets. To get a better idea of what drives these differences means to take a closer look at the sectors and specific stocks that dominate their respective markets.

I worry that if the SPY makes a correction, it will affect the Canadian market. If I didn’t concern myself with the U.S. market at all, I have to say that I like what the charts tell me for the Canadian market. It’s been rationally pulling back for over half a year now and moving sideways for three months. It could be gearing up for another bullish move up. Let’s hope that if and when the SPY comes down, investors move into the Canadian stocks and start a new investment cycle.


Stocks to Check Out

Here are some stocks with nice-looking monthly charts:

  • TCW.TO
  • CVE.TO
  • SJR.B.TO
  • HSE.TO
  • IPL.TO
  • POU.TO
  • MG.TO
  • THCX.V (I own shares of this one already.)

Now, keep in mind, most of these are oil stocks. If you’re considering trading any of these, keep a close eye on the sector. And as I always advise, do your own necessary research on the company, the sector, and the markets. Consider how your choices fit into your grand plan and decide on the appropriate time horizons and how much you can safely risk for your portfolio.