Always consider hidden risks
TSX60, Cdn Dollar and SP100: Canadian Stocks Cheapest since February 2005 ?
July 10 ( From Trading View )
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The Canadian Economy has been caught in a Perfect Storm in 2014:
World demand slowing,
Commodity prices weakening and
Canadian consumers extremely leveraged...
And the Canadian Markets reflect it...
On a relative basis, the last time it was that cheap for the Canadian Stocks was in February 2005. ( See 2nd chart below )
And for the Canadian Dollar, it was in March 2009.
Canada’s economy performed relatively well in the aftermath of the financial crisis, as low borrowing costs spurring a credit boom, much
of which was used to buy houses.
But with household debt at record levels, and Canadian consumers really stretched financially, they are beginning to pullback in terms of consumption to more normal levels.
Commodity prices have been declining in 2014 and 2015 and didn t help at all the Canadian Situation... And the oil price fell tremendously in 2014, making the Canadian markets to underperform the SP100 back then. Canadian Assets are extremely Cheap on a relative basis to US Stocks but not a buy signal yet : we need the 20 DMA ( Day Moving Average - Yellow Line ) crossed the 50 DMA ( Red Line ) on the upside....
To be able to observe the huge difference in performance, let s look at it now on a ratio basis.
What I did is taking the TSX60 index times the Canadian Dollar Futures divided by the SP100 index to give us a valuation from a US investor considering the Canadian Market with the currency risk.
As we may observe, Valuation came back to the level of February 2005 for the spot Level.
The 20 DMA ( Day Moving Average - Yellow Line ) crossed the 50 DMA ( Red Line ) on the downside on November 10 2014, not a good technical sign indeed as shown by the chart below...
We are not yet a Bottoming Out Pattern.
Having the 20 DMA Weekly close above the 50 DMA will be the ultimate confirmation of a turnaroud ( outperformance of the Canadian equities over the US equities - Red Line - Chart Below ).
TSX60 index times the Canadian Dollar Futures
/ The SP 100 Index
TSX60, Cdn Dollar and SP100: Canadian Stocks Cheapest since February 2005 ? $SPY, $SPX, $ES_F, $TSX.CA, $MACRO, $STUDY, $USDCAD $FXC, $6C_F
First, let s see on a weekly chart that began at the end of 2008 three financial data:
1) TSX60 Index
2) SP100 Index
3) Canadian Dollar
It is obvious that since 2012, the SP100 index outperformed the TSX60 by a strong margin as shown by the chart below...
( Candles )
( Grey Area )
Canadian Dollar ( Red Line )