SIA Weekly: Another Look at U.S. and Canadian Equities

by SIACharts.com

For this week’s SIA Equity Leaders Weekly, we are going to re-examine both the broad U.S. Equity Market via the S&P 500 Composite Index and the broad Canadian Equity Market through the S&P/TSX Composite Index. When we last looked at these at the beginning of 2016, the broad equity markets were experiencing a sharp pull back and both the S&P 500 and the S&P/TSX Composite were approaching critical support levels.

S&P 500 Index (SPX.I)

The last couple of times that we looked at the S&P 500 we commented on it being range bound between 1,836 and 2,151, and that it was approaching the strong 1,836 support level – which it bounced off of both in August of 2014 and August 2015. The S&P 500 has since broken through that 1,836 support level, signaling the potential for further downside. It will be important to watch the movement of the SPX.I in the coming weeks to see if there will be a rebound or further weakness. Support can now be found at the 1,700 psychological level.

Remember: while we are in an Unfavored Equity Action Call, we are likely to experience higher volatility, both to the upside and downside. Over the last month, SPX.I has had a strong positive correlation with the price of oil, but it is also important to pay attention to what the Federal Reserve is saying. We have seen recently that any talk of raising rates or hawkish tones have had a negative effect on the equity markets. With an SMAX score of 3 out of 10, the S&P 500 is not showing any near term strength against the other asset classes.

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S&P/TSX Composite (TSX.I)

Since we last commented on the TSX.I, it has approached and bounced off critical support level at 11,733. Based on the chart it looks as though TSX.I may become range bound with support at 11,733 and resistance levels at 12,954. Further support can be found around 11,000 and resistance around the 14,000 level.

Going forward, commodity prices will be important to note for guidance as to the direction of the Canadian economy. The TSX is showing some near-term strength against the asset classes with an SMAX score of 6. Even though we have seen some short-term strength in the TSX.I, it is important to recognize the top-down risk management approach by first assessing the EAC (Equity Action Call), and then the asset classes. We do not want to be chasing short-term rallies and taking on any unnecessary risk, but rather investing in those areas that have nearer-term and longer-term relative strength.

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SIACharts.com specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment. None of the information contained in this website or document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. Neither SIACharts.com (FundCharts Inc.) nor its third party content providers shall be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon.

For a more in-depth analysis on the relative strength of the equity markets, bonds, commodities, currencies, etc. or for more information on SIACharts.com, you can contact our customer support at 1-877-668-1332 orsiateam@siacharts.com.

 

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