Morning Minutes 12/27/2018

Morning Minutes

TSX Returns to Trading as US Roller Coaster Ride Continues

December 27, 2018
8:45 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Being around the market I often hear that holiday-shortened weeks, when many participants are away and volumes are generally lighter, can be particularly volatile. This week appears to be turning out to be a case in point.

This week has been particularly volatile so far, especially in the US where Monday’s 653-point drop in the Dow was erased by yesterday’s all-time single-day points gain record of 1,086 points. As with this month’s previous turnaround attempts, however, the rally, appears to have been short-lived as Dow Futures have been trading down 400 points recently. There continues to be lots of noise out there knocking markets around. The partial US government shutdown continues with no end in sight, but on the positive side, complaints about the Fed from the White House don’t appear to be getting any traction and Amazon reported strong holiday season sales.

The VIX remains above 30 and volatility may remain high through the end of the year as last-minute US tax loss sellers, and portfolio managers forced into selling in order to meet recent record levels of weekly redemptions battle it out against window dressing, short covering and bargain hunting.

Today may also be an active day for Canada with the direction uncertain. One would expect that since Canada was closed and didn’t participate in the Boxing Day rally, the stage would be set for a big catch-up rally in the S&P/TSX indices today. With the US already giving back a good chunk of yesterday’s 5% index gains, however, the TSX rebound may not be as strong. The closest comparable index in terms of composition to the S&P/TSX, Australia’s S&P/ASX 200, gained 1.8% overnight. One of the key sectors to watch for direction in Canada today is Financials. The largest non-resource sector of the market has been struggling lately and the TSX could have a hard time really turning around unless Banks and Insurers are ready to participate.

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