From the desk of Tom Bruni @BruniCharting
The TSX Composite is down roughly 6.75% year-to-date, with stocks getting hit hard since their July 13th, 2018 high. Only one sector is positive over that time period, but I think its recent action gives us a really good perspective on the type of market environment we’re in.
For some additional context around performance, below is a table with some metrics of the major sectors and indexes year-to-date, since the TSX Composite topped on July 13th, 2018, and about 52-week highs and lows.
Click on table to enlarge view.
Click on chart to enlarge view.
In mid-October the sector fell roughly 36% from high to low in 11 trading days, causing the 200-day to flatten out and momentum to get oversold.
Is this an actionable setup right now? No. My point here is that if the sector showing the most relative strength is experiencing a massive drawdown and is joining the rest of the sectors in oversold territory, we’re probably not in an environment where we want to be buying stocks.
Until we start to see new leadership emerge, the weight of the evidence continues to suggest a neutral/bearish approach in Canada remains best.
Thanks for reading and let us know your thoughts!