Checking The Roadmap....                                                                                                              PDF VERSION

A special edition of Technically Speaking exclusively for our clients 

Good analysis and forecasting is like going on a long road trip its generally a good idea to look back at the map to ensure you are on the right road. This special edition of Technically Speaking is to provide you with our review of where we have been, and more importantly where we are going. Where appropriate we will include discussions on the indicators we follow and how we use them and more importantly identify why we think we are closing in on a turning point for the market. 

The good news is so far 2010 has shaped up pretty well as expected. The bad news is the market is down. That bad news however, is not all that bad. Let’s take a moment and recap what our expectations were for 2010 and why.

At Young & Frederick Investment Solutions we entered 2010 with a strategy that significant risk still existed in markets. We felt clients would be better served by keeping away from trading rallies until the low risk re-entry point for the next bull market clearly presented itself. Since the market set a bottom back in March of 2009 at the 7556 level we have believed that the first bounce off that bottom was not a low risk opportunity. Yes the market has moved up sharply, but the risk in the market had not been removed. Nothing had been done about the runaway financial institutions in the U.S. which were the root cause of the decline in the first place. The gamble could have been a very expensive one. 

TSX Market Review and Forecast June 2010

It’s all Relative…

Market Review

As expected, the TSX continued to pullback in the month of May. Despite good earnings reported by most firms, the market found itself in a position of having already reflected those numbers. The net outcome was a yawn by the market for good earnings, and punishment for those companies that failed to hit expectations. Witness the performance of Royal Bank. After reporting earnings that rose 40% year over year, but slightly below expectations, the stock dropped $4.08 dollars or 6.8% in 2 trading days.

The market correction in Canada continues to be led downward by falling commodity prices. Copper prices and oil prices have both hit multi-month lows in price. Oil in particular hit a 9 month low. These two commodities have a huge impact on Canada and investors can watch them for clues as to the direction of the TSX.

Where do we go from here?  

First the good news, last month the 11,337 level on the TSX was outlined as the first level of support for the TSX as it corrected. That closing level on the TSX held firm in May. Unfortunately, that is also the bad news.   Why? Well, on three different occasions during the month, the TSX traded sharply below the 11,388 level before rallying by the close of the day to remain above this important technical indicator. This is bad news because this indicates that weakness is indeed the order of the day. Further reinforcing the negative tone to the market is the big volume on down days which dwarf the buying volumes on up days.

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