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moneysense.ca, 10/09/08
Are media headlines signalling a TSX bottom?
When the main stream media prominently features the market action on the front page, it may be an excellent cover story indicator that a market bottom (or peak) is close at hand. Tuesday’s 487 point drop on the TSX could mark a bottom because many media outlets put the story on the front page:
- The National Post put a “market meltdown” graphic with an accompanying column titled The bubble has burst on the front page.
- Peter Mansbridge kicked off the CBC newscast by asking viewers to “sit down for this” and headlining the market rout.
- The Toronto Star noted “Drop in oil sends TSX tumbling” in the front page but the main story was pushed into the business section.
- The Globe and Mail was the other holdout, putting the headline (“Commodities rout brings out the bear”) in the front page but burying the story in the business section.
Note that this is meant as a fun post and it’s not worth paying any attention to any prognostication of short-term market trends.
moneysense.ca, 10/09/08
What would be the catalyst to stop the declines?
USA had caused the current crisis, and until there’s a light at the end of the American tunnel, the declines will continue.
I bought a couple of oversold silver- and gold-mining stocks, and will add oil (will add more Pennwest), but only for a bounce. In my opinion this is not the end.
The media used to be a good indicator, when you’d receive Maclean’s for example, but right now everything happens and is reported in real time. Not sure media can be used as an indicator of anything anymore.
I’m glad you pointed out that this was a ‘fun post’
Normally I like the idea of buying when stock market declines are front page news, but I think the TSX is so heavily weighted in commodities, which have had such a nice run, that this week’s drop is not significant. If the U.S. market had a similar drop, I’d be buying with both hands.
MG: As I commented in yesterday’s post, with low or negligible energy exposure, our Canadian equity portion didn’t participate in the market tumble. The financials having dropped the most already, didn’t fall much. For instance, XFN is trading right around where it was in the end of August.
And other parts of the portfolio are doing ok except VEA andVWO. Exactly what a diversified portfolio is supposed to do.
The ‘cover story’ indicator is part of the larger body of technical analysis tools. For a brief period some time ago, I was interested in technical analysis, and even spent some money on a book about it. I would not say it was money wasted – the lack of rigor and evidence soon cured me of the affliction, as well as published results (I can never remember the authors of these publications, only the conclusions) by a group of mathematicians that back-tested technical tools and found that “…these methods have no predictive capability whatsoever.”
Watch what happens to the TSX if oil falls below $100. The great deals keep on coming…
Bring on $60 oil!
The road will be bumpy till the year end for sure and I’m not sure it’s all over yet, especially in the energy, materials and financial sectors.
NN: Amen to that! This is simply a fun post; I don’t claim any predictive powers to this method at all.
If oil does fall sharply and oil stocks follow suit, which companies would you consider attractive? I’ve owned CNQ many years back but don’t follow these stocks anymore.
CC: I’ve been following your blog for some time and know you don’t subscribe to any of the popular daytrader tools, was just sharing my own brief experience with the subject
(I better get a proper smiley face…)
I don’t currently follow any stocks in the market, unfortunately locked into a group RRSP. Will open a RRSP account for my wife soon though (thats how I discovered this blog, researching RRSP’s), so will start to take more notice then.
We are resent additions to the Canadian population. All my investments are thus tied up in my home country, an ‘emerging market’ also heavily weighted in resources. I keep track of my investment performance there with simple spreadsheets not unlike the one(s) you have illustrated here. A strange thing has been happening – at first, I would get exited when prices went up, willing them higher. As time went by and I read more on the different investment philosophies, I gravitated towards the Graham/Buffett school of thought. The daily movements of the market started to get less relevant to me and I updated my performance spreadsheets less often. As the current turmoil started to unfold and prices started to go down, I only felt the slightest pinch of anguish, which could quickly be quelled. With time, I started to get excited by the decreasing prices (we have recurring investments), and worried by sudden rallies, but even this ‘contrary emotion’ is too much – I believe emotion can get me in trouble…
[...] The markets took a real pounding this week – my portfolio is in the basement. Canadian Capitalist wonders (in jest) if media headlines are signaling aTSX has finally bottom. [...]