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Bear Market for Canada TSX


Earlier I described my criteria for a bear market: there's confirmation of a bear when the index stays below its 200 day moving average for 6 months. This has now happened for the TSX. Canadian stocks are in a bear market as of December 2015.

I also mentioned in the earlier post that you cannot trade upon this lagging indicator. So what's the point of identifying a bear market?

The reason is that Bear Markets Are Dangerous! Certain adverse events are more likely to occur: economic turmoil, market instability, tighter credit, individual stocks crashing to zero, and corporate bankruptices.

Already, based on charts I can identify several stocks that are at high risk of collapsing to zero: BBD.B, BNK, POU, PRE. If the bear market continues, these stocks could get wiped out. I do not advise shorting them. I'm just saying that the charts indicate that investors are fleeing them.

I continue to advise great caution until the bear market is over. Reduce all of your risk-taking activities.

Fun fact: my bull index signals said to sell the market back on June 11, 2015. Since then, XIC (TSX Composite) is down -12% and XEG (energy) is down -25%. There is no buy signal on the horizon yet.


2015-12-09