Major Long Term Opportunities Brewing In The Canadian Market

Although broad stock market indices in the U.S., U.K. and Germany have broken out strongly we still see some huge potential in indexes that are on the verge of a big breakout. We observe the most juicy opportunity in Canadian markets, in the S&P/TSX Composite index.

The historical TSX Composite chart shown below shows that the index has moved inside the long-term parallel uptrend channel.

After breaking out of the consolidation period 1987 to 1993 the index made its way to the 2000 dotcom bubble and the subsequent collapse.

After the 2008 financial crisis the index once again fell in a consolidation mode until October 2017, will we witness again another bull run if this index breaks out? We feel it is a strong possibility though we will not be surprised if it will be preceded by a correction to the lower triangle.

A breakout suggests that 20,000 points in next two years is achievable though not in a straight line up.

On top of that, let’s look at the various sector charts in the Canadian TSX index.

Industrial is definitely the current leading sector, it is still thrusting upwards.

Consumer Discretionary is not far behind with a fairly high level of bullishness.

Financial sector helps to establish the rotational bullish trend during a bull market.

There are 3 sectors which we would classify as “bulls in the making”. They have a fair chance of breaking out.

The Real Estate sector chart shows that price rebounds from the lower triangle which we reckon it will make another attempt to break out.

Consumer staples seems to be in a consolidation within a major uptrend.

Utilities sector is supported well currently, a breakout will confirm the uptrend.

There are 3 lagging sectors: Energy, Material and Healthcare.

The Energy chart above shows it is in no-man’s land which is largely due to the oversupply of oil as well as shale oil.

Is the material sector in the process of forming an inverted right shoulder? We will know in a couple of months, cautiousness is warranted.