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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Saturday, September 14, 2019

Canada's TSX, Election and Trade Fever

From the information shown on the following two historical charts, it appears that Canada's consumers have done the heavy lifting over the past 10 years since the 2008/09 financial crisis, as foreign investment slowed and has since been quite volatile. It's likely to continue to slow due to the global economic slowdown currently underway and unresolved global trade wars.

Although the USMCA trilateral trade deal was signed by the leaders of the U.S., Mexico and Canada on November 30, 2018, it has still not been approved by the U.S. Congress. If it's not done before the Canadian Federal election on October 21, and if there's a change in government, will the new Prime Minister scrap the agreement and leave Congress holding the bag?

With Canadian household debt to disposable income near all-time highs, how much longer can Canadians afford to take on more debt? If this slows, will this change the dynamic of the USMCA and cause the Canadian government to re-think any of its negotiated terms?

It would seem that time is of the essence for Congress to approve the agreement before it's, potentially, too late.

Canada Households Credit Market Debt to Disposable Income
Source: tradingeconomics.com

Canada Foreign Direct Investment
Source: tradingeconomics.com

Compared with other G20 countries, Canadian household debt is at the higher end, as shown in the last table.

Source: tradingeconomics.com

Canada's TSX Index closed at an all-time high of 16,682.42 on Friday, after making an all-time intraday high of 16,756.11, and after launching off the median of a very long-term uptrending channel at the beginning of November, as shown on the following monthly chart.

It still has a couple of hundred points to go before it runs into its next major resistance level in the form of an external Fibonacci retracement level of 1.236% at 16,972.52.

To monitor such a possible move higher, I've shown the MOM and RSI technical indicators with their normal input values to gauge when they hit prior overbought levels. On the other hand, I've shown the ROC and ATR indicators in histogram format and with an input value of one period, which may spike exceptionally high to signal exhaustion and a potential trend change when/if MOM and RSI reach overbought conditions.

Whether all those line up to co-incide with price tagging the 1.236 external Fib level is anyone's guess...but ones that can be followed on this longer-term timeframe if price continues its breakout rally...especially ahead of Canada's October election...and as Canadians, perhaps, reflect on their debt burdens.