-- The Toronto Stock Exchange returned to winning ways Friday, rising for the seventh session in the last eight, as investors seem to still see fundamental value in the broader market, even amid the noise created by continuing tariff disputes and lingering geopolitical tensions.
The resources-heavy S&P/TSX Composite Index closed up 218.05 points, or 0.65%, to 33,695.76. Ironically, perhaps, the index was led higher by Base Metals, up near 1.7%, and Energy, up 1.5%, even with commodity prices lower and with Rosenberg Research flagging a bearish bias on WTI Crude Oil possibly continuing into August and only a short-term relief rally in gold "within a still-developing medium-term downtrend".
BMO Capital Markets chief economist Douglas Porter, in his regular 'Talking Points' note, noted the Middle East conflict began nearly six weeks ago. He said "despite the wild swings in oil prices over that period, perhaps the big surprise is what little impact the war made on other financial markets." Porter noted the gold-heavy TSX was down about 2% from six weeks ago, but added "that's barely a ripple", given that bullion prices are down more than 9%, "shattering gold's reputation as a safe harbour".
On the economic front today, most focus here was on the release of employment data for March. But Derek Holt, Head of Capital Markets Economics at Scotiabank, published a note entitled 'Markets Rightly Ignored Canadian Jobs' after the data released early Friday showed Canada added 14,000 jobs, with "mixed details". Among highlights to his note, Holt noted "sickies and weather remained as drag factors" for the month, which "may point to later gains". Holt also noted wages "exploded" but with "two-sided interpretations" as Statistics Canada said wages were distorted by compositional shifts.
According to Holt, Bank of Canada watchers should continue to fade backward data. "Markets largely ignored Canadian jobs numbers as they should. They're backward looking and peering into the abyss where surging commodity prices in a commodity producing country dominate attention alongside the outlook for the US economy and trade policy," Holt said.
On commodities, this week's issue of 'Technicals with Dave' from Rosenberg Research focuses on commodities. Author Walter Murphy notes the 14-commodity S&P GSCI Equal Weight Select Index continued to post multi-year highs since the last Rosenberg Research commentary. But, he says, its weekly Coppock Curve is leading that for the S&P GSCI Commodity Index, and he adds it would "not be surprising to see it move into a confirmed downtrend either this week or next". As a result, Murphy says, last week's rally through 592-630 resistance could prove to be a "last gasp". That range is expected to provide initial support for a coming pullback. Additional support areas of note are the recent 566-551 gap and the 521 breakout point, he notes.
On WTI Crude Oil, Murphy notes in its March commentary, the research noted there was important resistance in the US$87.64 to US$95.03 per barrel range and that the weekly Coppock Curve had the potential to continue higher over the next four to five weeks. In the five weeks since then, he says, oil initially rallied above resistance intra-day but quickly settled back and has had a difficult time pulling away from resistance on a daily closing basis. "While we could easily make the case that oil decisively left that range behind late last week, Wednesday's reversal casts doubt on the decisive nature of the breakout," he adds.
Murphy says the Coppock indicator "still has some life left in it, but probably not much". His sense is that it could peak within the next two to four weeks and be in a confirmed downtrend by late May. "From there, it would not be a surprise to see the resulting bearish bias continue well into July, and potentially into August," he adds.
Murphy notes previous US$87.64 to US$95.03 per barrel resistance is now support. Below that, Rosenberg Research would look to the US$84 area and then the US$78.40 breakout point. He says there is a "decent amount of chart and Fibonacci resistance" in the US$113 to US$129 area on an "arithmetic chart". The US$129 level is the point where the current rally from December's low will be 61.8% of the 2020-2022 uptrend, he adds.
On gold, "what a difference a couple of weeks makes", says Murphy. He noted the early-March comment noted gold, which was then at US$5,149 per ounce, had been on a point-and-figure "buy" since September, but the weekly Coppock Curve was positioned to be in a confirmed downtrend by the end of that month. Murphy noted the resulting bearish bias could continue into June, and gold subsequently broke down below US$5,000 and continued to as low as US$4,098 before recovering. He says that decline generated a point-and-figure "sell;" the Coppock indicator has continued its downtrend.
Murphy adds: "The overbought and deteriorating Coppock Curve is still on pace to be weak into late May or early June. At the same time, the oversold and improving daily indicator could begin a topping process by the middle of this month. This combination is an indication that any further strength in the days immediately ahead will prove to be a short-term relief rally within a still-developing medium-term downtrend."
Murphy notes previous US$5,064 to US$4,700 per ounce support will likely act as strong resistance to the relief rally. Second resistance is on the order of US$5,419 to US$5,608.
He says gold's recent decline to US$4,098 per ounce was only a brief break of US$4,550 to US$4,275, adding that breach is not regarded as decisive, and US$4,550 to US$4,275 is still important support. "That said, a decline back through $4,098 would be a trigger for further weakness to the $3,885 area, and potentially beyond."
Of commodities today, West Texas Intermediate crude oil closed lower amid doubts over the state of the ceasefire between Iran and the United States as Israel continues its attacks on Lebanon and the Strait of Hormuz remains closed. WTI crude oil for May delivery closed down US$1.30 to settle at US$96.57 per barrel, while June Brent oil was down US$0.60 to US$95.32.
Gold futures had eased by midafternoon on Friday even as the dollar weakened after a report showed U.S. inflation surged in March on higher gasoline prices, cutting hopes for a cut to interest rates from the Federal Reserve. Gold for May delivery was down US$40.00 to US$4,778.00 an ounce.