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Tuesday, April 10, 2018

Has Canada's TSX Index Reached Its Limit...Recession Looming?

* See UPDATES below...

Not much has changed with respect to price action since I wrote my last post about Canada's TSX Index, as shown on the following monthly chart. It's still dangling precariously outside of its long-term upward trending triangle formation, after dropping 7.22% from its record high set on January 4th. The momentum indicator is in downtrend, but remains above the zero level.

On a shorter-term weekly basis, the TSX is caught in between two horizontal price resistance and support levels of 16,000 and 15,000, respectively. The momentum indicator has made a lower swing low and is below the zero level...hinting of further weakness ahead.

On a political note (and one which may affect the TSX at some point), the Federal and BC governments may face court action from Kinder Morgan over its currently-halted Alberta/BC Trans Mountain pipeline construction project and there is much news covering that issue today...the following snippets are a small sample.

Source: Reuters via Investing.com

It seems to me that the development of Canada's national energy infrastructure is a matter of national security.

To allow such a project to be potentially thwarted by small, self-serving special interest groups (who do not represent the country as a whole, nor who are accountable to Canadians and investments in Canada), would be the equivalent to willingly accept a third-world kleptocracy-style of government in place of one with progressive and prosperous supporting policies to serve the national interests of all of its citizens.

The question I, and many others, have is, "Is Canada open for business, or not?"

Unless Prime Minister Trudeau stops dithering and starts carrying out his duties of protecting Canada's national security to fix these issues without further delay (even if it means mobilizing the army to provide security for the pipeline workers and the citizens surrounding the area), then he does not deserve to remain in office...failure to act would be tantamount to willful negligence of his duties.

As it is, Canada has ever-increasing taxes, choking regulations and lengthy permitting processes...not an attractive environment for business investment...and not one that Mr. Trudeau can continue to ignore by producing more out-of-control bloated budgets with higher deficits that stifle business expansion and private-sector job creation in the future...unless his intention is to attract a recession, which seems to be on the way.

* UPDATE April 15, 2018...

[Results of Prime Minister Trudeau's discussions today with Premiers Notley (Alberta) and Horgan (BC)]:

Following those discussions and during Prime Minister Trudeau's press conference today, he announced that the pipeline is in the country's national interest and will proceed, as was originally approved by both the Federal government and former BC government. We'll see whether this project proceeds and completes.

If BC Premier Horgan (NDP minority leader) continues to obstruct its construction, it seems to me that, not only would he be breaking these agreements, but he would also cause an unnecessary cost to Canadian taxpayers on many aspects, and, therefore, he should be held accountable to all Canadians. And, I doubt whether BC taxpayers would be too happy to foot the bill in any lawsuits that could, potentially, end up being filed against Mr. Horgan and the BC government.

Mr. Horgan will have to decide whether BC is "open for "business," or not. If not, he will be held accountable to the citizens of BC.

It also appears to me that if he insists on obstructing this project, he'd be jeopardizing PM Trudeau's position with respect to Canada's objectives in renegotiating the terms of the NAFTA agreement and, instead, aiding and abetting President Trump's "America First" agenda.

So, which side is Mr. Horgan on and will he honour prior Federal and Provincial government agreements that were made in good faith with Kinder Morgan and its commitments that were made in good faith to all Canadian citizens/taxpayers?

If not, is he prepared to bear the cost of political, financial and legal fallout that may await?

Source: cp24.com

* UPDATE April 16...

In his interview with BNN TV today, I found NDP coalition partner, BC Green Party Leader, Andrew Weaver's arguments against the construction of this pipeline to be weak and without merit. It sounds as though he will, along with Premier Horgan, continue to obstruct this process. He would also be equally culpable from any fallout from its failure to be completed. He will also have to answer to BC voters/taxpayers, as well as the rest of Canadians/taxpayers.

We'll see where it all goes from here...but right now, it looks like more harmful (to Canada and its national energy infrastructure matrix and economy) political grandstanding, obstruction and delays are guaranteed.

If any kind of "constitutional crisis" is created, as Mr. Weaver asserted in his interview, it will be as a result of his and Premier Horgan's regressive, costly (financially and economically) and reckless obstructionist actions. BC voters are also Canadian citizens and deserve the assurances that their financial, economic and national security interests are being protected. Right now, this is not the case. And, no doubt, potential investors in BC and Canada, as a whole, would need those assurances, as well.

So, Messrs. Horgan, Weaver, and Trudeau, voters have long memories and only so much patience for self-serving, costly political theatrics and games. Will each of you act with integrity and honour to fulfill your duties to the office to which you were elected and to all Canadians in good faith?

Or, will Canada's new national anthem become "Uh-Oh Canada?"

* UPDATE April 17 @ 1:05 pm ET...

Today's gap up puts the TSX at the upper edge of a downtrending channel on the following daily chart. The momentum indicator is trending up, so we'd need to see that continue on any breakout above the channel to confirm that a potential new uptrend may eventually materialize. Otherwise, look for more whippy, sideways consolidation, or a resumption of its downtrend.

* UPDATE May 29...

In an announcement today, the Canadian Federal Government commits to buying Kinder Morgan Canada Ltd's. Trans Mountain oil pipeline, together with its expansion and related pipeline and terminal assets, for $4.5 billion. The deal is expected to close in August. Construction will continue through 2018 and the Feds will sell it to one or more owners when "appropriate."

We'll see how this would eventually affect/benefit the Canadian economy, taxpayers, Canada's opportunities to expand oil production and exports to a variety of foreign markets, as well as attract new foreign and domestic investments...hopefully, favourably...perhaps a recession can be avoided after all.

You can thank BC NDP Premier Horgan and BC Green Party Leader Weaver, with their obstructionist behaviour and court filings (that continue to this date), for this unnecessary cost and burden to Canadian taxpayers. They will be held accountable for their actions in the next provincial election...if not sooner.

Source: BNNBloomberg.com