Young and Frederick - ScotiaMcLeod Whitby

Please find below and the latest edition of Equity Market Update.

ACTIONS SPEAK LOUDER THAN WORDS

When I first entered this industry over 24 years ago a wise gentlemen once warned that an analyst is someone who will stand in front of a crowd and tell them where the market is headed, while a good analyst is someone who watched the market and reacted to what it is doing.    That is the theme of this message. 

In our last comment we said good things seemed to be developing in the market and over the latest forecast period that continued to be the case.  Despite all the gloomy news about a slowing economy the underlying health of the market continued to improve.   Why?  

Well, as we know the market is a forward looking vehicle.  Whatever is happening today was forecast 6 or more months ago and reflected into equity  prices at that time.  Today the big money is looking ahead 6 months or more  and pricing that forecast into the market.   So how do we know what the "big money" or institutions are doing?  Well as long term readers know one of the indicators I track is money flow.  Money flow works on the basis that during a consolidation Selling pressure in the market will expand while Buying pressure will contract.  Basically a detailed analysis of supply and demand.  If there is more supply then demand prices fall and visa versa.  This factor when combined with others can work to give us a good reading of what the big money is really doing, not what they are saying. 

So what is happening? Well over the last 2 weeks we have continued to see strong evidence of expanding buying power and declining selling pressure. This combination historically is very positive.  While this is not definite proof of the end of the bear market it is an important sign on the road.

So where do we go from here??

The TSX is entering a period of traditional seasonal weakness and as of today several measures are showing the market overbought (in need of correction).  Our longer term forecast (updated in "Checking the Road map" sent out to readers 2 weeks ago) outlines that a bottom is expected sometime in this quarter.  Are we there?  Not yet.  

THE BOTTOM LINE:  the market is showing signs of wanting to go higher but in the short term not enough of the indicators we follow have combined to give us a buy signal yet.   Keep your powder dry and wait for the momentum of the market to turn to ensure a low risk entry point has been seen.  Upside target over next 2 weeks 12,000 TSX, Downside potential down to 11,500.      

As we enter August and the time to think about school for our children and grandchildren now is an excellent time to review your RESP goals and performance.  Please view the RESP and education planning video link, and visit the library on our website www.onestrategy.ca to discover more. 

Until the next time happy investing everyone.