The consensus is in: Our Canadian market is due for a pullback. Friday’s Special Video Presentation explaining five techniques for identifying market turns generated some great discussion during our regular weekly Q&A webcast yesterday (Tuesday, March 22). Note: Click here for the webinar recording and also see the attached slides below.
We started the webinar with a Quick Poll. Our Quickpoll results showed more than 51% of attendees expect a market pullback of varying severity. Was today the start of it?
Remember, our Quickpoll and analysis was early yesterday, well before today’s sell-off, especially in oil and gold. As you can see, the largest number of webinar attendees believe a pullback of the MTI (Market Timing Indicator) to around 1.0 is likely in the next two to three weeks. Another 15% believe the pullback will be even sharper. They expect the MTI to fall closer to 0.60.
Well, if today is any indication, the MTI might get down to 1.0 sooner than later. Remember, the MTI is on a 0-2 scale. Today, one day after our webinar, the MTI has fallen to 1.36 from 1.42. Historically, that’s a huge one-day decline. But then historically in Canada, it’s been years since the MTI pulled itself above 1.30, nevermind 1.40. So the MTI was indicating an vastly overbought market; ripe for a pullback.
Now, one day does not make a trend. But here is what our Market Timing Graph is telling us:
Also, interesting today is that money flowed out of oil and gold and into some blue chip dividend payers. For example, 26 of the 40 stocks in the WOW Dividends Special WatchList managed gains led by BYD.U-11.52%, CCL.B -4.37%, ATD.B – 3.04%, NFI – 2.77% and PBH – 2.32%.
So today we have a Primary Wave Down (PW/Dn), indicating the short-term trend has turned from up to down. What does it all mean? Foremost, VectorVest does not advocate buying any stocks at this time. If the market continues to fall, consider tightening your stops. In other words, take some early profits and also consider selling outright any stocks that are behaving poorly. If you don’t want to sell, you can hedge or protect yourself by buying Contra ETFs or placing option trades.
Stay tuned, and remember to keep your eye on the MTI.
Presented by Stan Heller, Consultant, VectorVest Canada
DISCLAIMER: The information contained in this Blog is for education and information purposes only. Example trades must not be considered as recommendations. You should always do your own analysis and invest based on your own risk tolerance, investment style, goals and time horizon. There are risks involved in investing and only you know your financial situation, risk tolerance, financial goals and time horizon.
Click on link below to download a PDF of PowerPoint slides from yesterday’s webinar.