A Notable Reversal Day

Author Larry Berman

Posted: 9 Aug 2012 re-posted from etfcm

Just as the TSX looks like it can exceed recent highs, we see a notable reversal day. In this case, a good open near the highs of the day and a close at the low of the day reversing most of the previous day’s advance. Recall the bulk of Tuesday’s advance happened during the holiday Monday, so Tuesday’s gains in the TSX were mostly playing catch up. So like we have seen for the past few months, the TSX probably drifts back towards the trend of recent rising lows. Nothing to worry about in the grand scheme at this point, just more trading noise.

The most notable reversal was in the overbought energy sector. Our view is WTI has no business being at $95 when supply and demand fundamentals point to $85 as a reasonable average price given subpar growth for the next few years coupled with increasing domestic supply. The insurers are reporting sloppy earnings and banks are not going to be any better. The TSX remains stuck in the mud for a while.



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