Both my mother and father were Italian Immigrants in the 1950’s. Part of my mother’s family settled in Canada.
I promised my Canadian family in Toronto that I would write a post specifically for them, so here it is.
The Canadian Charts, specifically the Toronto Stock Exchange represents the performance of the Canadian stock market overall. And like the S&P500, it can help both gage and guide both long-term investors and traders around the world. So, let’s take a look at how we do this for the TSX.
First, I want to clarify that you should not trade based on this post. Second, it’s important to note that both traders and long-term investors should be aligned with the direction of the broad market trend.
We do not want to fight the primary broad wave of the market. The monthly level of a market is where the long-term trend is defined. The monthly level distinguishes the dividing line between what we would call a bull or bear market. Swings from bullish to bearish are far less common and usually sustain for a minimum of 3 months. They commonly can last much longer.
So, we start by looking at a Monthly chart first fo find the markets actual Long term direction. As you can see below, the Monthly chart went bullish in April/May (Green Light) and remains Bullish.
The Weekly level of a market is where most portfolio analysis begins. Large investment portfolios cannot move big positions back and forth for a minor reaction over the course of a few days. For this reason, the daily trend can become bullish or bearish while the weekly trend could remain the opposite. Differences simply suggest that a change in the longer-term trend has not been confirmed. Matching conditions on the daily and weekly level is not a confirmation of a change in long-term Monthly trend.
Now let’s turn to the Weekly chart and take a quick peek:
As you can clearly see, our Canadian Weekly chart also performing very well and turned bullish the first week of May and supports the larger bullish Monthly direction.
The Daily trend of any market may swing from bullish to bearish and back again as many as 50 times during the course of a trading year depending on the market. Any market naturally moves up and down regardless of the markets broader cyclical trend. Nothing moves straight up or down forever without making reactions along the way. Therefore, this chart is great for those interested in extremely short-term trading patterns, higher volatility, and risk.
So, as you can see in the Daily chart, the (Red Light) is stating that there may be a reactive short-term decline ensuing. How long could it last, no one knows, but it is warning of a short-term loss of market momentum.
So, based on seeing the Monthly, Weekly, and Daily charts on the Canadian TSE, what action would you take?
- Would you short the investment based on the Daily signal?
- Would you sell your investment and go to cash based on the Daily signal?
- Would you ignore the red light and stay invested because both the weekly and monthly are still bullish?
- Would you ignore the red light and stay invested because both the weekly and monthly are still bullish. And then watch the action over the next several days and buy more at a lower price?
There really is no right or wrong answer because no one can see the future of the market.
So, send us your opinion.