The market is in its nine-year bull run. I’ll use the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and iShares S&P/TSX 60 Index Fund (TSX:XIU) as representations of the markets, respectively.
The annualized market returns have been about 9.5% for the U.S. market and about 7% for the Canadian market.
It’s not surprising that the U.S. market has outperformed the Canadian market in the long run because the U.S. market is much more diversified, while the Canadian market is usually weighed down by commodity stocks, including mining companies and oil and gas producers.
All this means is that investors need to be extra careful in picking the right prices to buy those companies or the Canadian market.
You might have noticed the general market represented by the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is trading in a sideways channel between roughly $185 and $209.
In fact, Financial Visualization’s daily chart marks a double top, which technically means it’s going down from here. There’s a strong support at $180, but if it falls through that, there will be more downside.
OK, so all of this is like reading tea leaves. How does the market look fundamentally?
The S&P 500 that represents the U.S. market is near an all-time high which might make stock investors nervous, especially when the market has been trading sideways. What should stock investors do? The short answer is to ignore the market and focus on individual companies. The long answer will come later in this article.
The S&P 500 has been trading in a sideways channel since August 2015. Right now, NYSEARCA:SPY is back at the top of the channel, and if it doesn’t break above the US$208 resistance persistently, it will head back down. If SPY falls past the US$185 support persistently, this will mark the top of the market for the time being.
SPY Weekly Chart
Investors have been piling on to the consumer staples and utilities as the select ETFs have been hitting new highs. See the Consumer Staples ETF (NYSEARCA:XLP) and Utilities ETF (NYSEARCA:XLU) charts below.
Consumer Staples ETF Weekly Chart
Utilities ETF Weekly Chart
Both the Consumer Staples ETF and Utilities ETF look like they’re losing steam as they hit or are near overbought territories. Read More