What Happened in Canadian Markets:
The TSX lost 3.7%, not quite matching last week’s 3.9% loss; the S&P500 lost +5%. Volumes were elevated and losses were widespread.
The CA selloff was driven by specialty traders and risk parity funds, strategists think the worst may be behind us now – additional selling capacity thought to be running low.
- Energy lost a dramatic 7% (-19% TYD) as oil plummeted near 10% (long futures positions continue to grow however). Materials also lost 5% as precious metals prices lost ground.
- Health Care the only space to end in the green, +5%. Bond proxies (REITs, Telcos, Utilities) received a good bid and outperformed despite the rising yield concerns.
- Yields took a breather and decreased slightly on the week.
- CA ETF’s – broad market ETF’s saw the heaviest weekly outflows since early 2016 (Oil @ $30),
- Financials saw surprising inflows however. US ETF’s – S&P500 ETF saw some of its heaviest outflows in the last few years, Tech, Energy and Industrials were the worst off.
- C$ lost +1%, though speculative long positioning continues to grow.
What's to Come in Canadian Markets:
- The 15,000 technical support level for the TSX continues to hold, for now; further weakness would move us to the 14,600 level.
- Heavy earnings week, especially on Thursday, some of the most notable names this week include – QSR, FM, EMA, H, X, TECK, SLF, G, BAM, ABX, WCN, TRP, CVE, BBD, DTS, CSU, SHOP, ENB, FFH, IPL, AC.
- CA economic calendar is light this week, just manufacturing and housing. The U.S. will see CPI and retail sales headlining this week (look for a yield reaction to CPI).
Futures are set for a lower open - oil lower, precious metals higher, C$ slightly lower, yields lower.
The below graph shows U.S. & CA short interest as a % of S/O for all dual listed TSX Composite constituents (LHS) vs oil prices (RHS):
- U.S. investors remain more bearish on CA equities than CA investors
- Following a divergence of bearish sentiment, shorts have started to move in lock step w/ one another
- Differential b/w CA vs U.S. short sentiment remains at its widest since September 2015.
Nasdaq Advisory Services Canadian Team Prab Sagoo
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