Toronto Stock Index ($TSX)


#1

Time to revisit my home market. I read somewhere that the $TSX was the best performing market in 2016 in the developed world. It is not a big surprise to me, and we talked at length in late January how that was setting up. See the link below for the Sentient Trader webinar hosted by David Hickson.

I speculated at the time that the pending low could also involve not just a 7 year cycle low, but a larger cycle period (2:1) harmonic of ~14 years. Rather than get into a Hurst’s nominal model discussion, let’s just say a larger cycle period and leave it at that for now. So I was looking for the outperformance and it came on the back of commodities, particularly materials and energy, and no shocker there as these sectors have had some miserable years. If this were in fact true, then could it be that somehow the $TSX and other commodity based or “inflation” markets are out of phase with the US markets and the $SPX. I say this because the 2008 lows should have been an $SPX 14 year cycle low (or Hurst 18 year nominal). Is this possible? I am not sure. Anyhow here is a look at the long cycles for the $TSX.

This was my preferred view back in January. I can give several reasons why this view could still work. The primary one is the stellar outperformance of the $TSX and all commodity markets from the 2001 - 2008 period. The $TSX tripled in this time frame while the $SPX was modestly higher. Obviously commodities were a big influence. The second observation is that the $TSX gives these severe right translated highs on the major cycles in question. And third the larger cycle period FLDs seem to be setup for a breakout into 2017, so the printing of new highs would suggest a larger cycle could be active for this to occur technically. None of this is based on fact. It is mere intuition and observation.

Here is a look with the larger cycles in another phasing with the major lows in 1982, 1994, and 2008.

This view shows the large cycle period lows similar to the $SPX. The composite still projects a modest breakout high for late 2017, but then an important top and a sideways to down market is likely for several years.

I will post more on this analysis, but for the time being, if anyone has any evidence to support one scenario vs the other would be welcome.

An important point to note. The 14 year FLD has provided support for $TSX since the seventies.

cheers,
john


#2

Here is one thought I meant to include in yesterday’s post. The 14 year FLD is touched on two occasions in the timespan shown coinciding with the 1994 and 2009 lows. This gives credence to the major lows (14 year cycle) occurring in those years.


#3

Here is a nearer term view of the $TSX. An intermediate high is due here and may have already been seen with the January 5th top. As I’ve been expecting crude oil to settle back here for a few weeks, this correction, which could be just more like a pause for the $TSX, would take us into a March low. Sentient has not pinned the high, yet from a peaks analysis it is looking for it now. I will not try to take any short trades here, but simply wait and look for the low to form in March. Bear in mind this analysis, like always, is driven by the correct phasing. Without the correct phasing, the market will show something different and this analysis will have to change. One noteworthy point is that the Brexit low late June is assigned as a 33 week low, which came early and is bullish. Price action should confirm this later in the year.

I expect the $TSX to break out to new highs in a few months time. TWT.

PS I will leave the long term phasing question aside for now.