Bull Market Is Old At 7 Years

Miners meet at Toronto's PDAC convention 
The chase by Frances Horodelski:

“This is the first time you lied to me since you stopped lying to me.” – Tom Yates to Claire Underwood. Season 4 House of Cards done.

I’ll try not to lie to you this morning.

First, get ready for the celebration. This Wednesday marks the seventh year of this bull market if you count from the March 9, 2009 low. Some might count from August 2011 (when the S&P 500 dropped just slightly less than 20%). But on the seven-year basis (and the market closingFriday at 1,999.98722585876 according to the keeper of the data Howard Silverblatt at S&P/Dow Jones Indices), the market is up 195.62% (just under 17% per annum and 19.3% with dividends). Consumer discretionary is the best performing sector and maybe not surprisingly, energy is the worst. The average bull market lasts under 59 months – this one at 84 seems old but is only the third longest.

So what happens with this one? A couple of cautious items from traders. Russell Rhoads from the CBOE noted this week a VIX death cross (he’s looking at one year versus five year trend lines) – something similar happened in November 2007. The percentage of stocks trading above their respective 50 day moving averages has recently soared to just under 74% (the last time we saw it this high was November 2015). CNN’s fear/greed index is at 71. And there are lots of questions about the sustainability of the commodities rally, although this is my favourite quote from weekend reading on markets: “I've never in my career heard someone call an early rally off the bottom sustainable.” Trend & Cycle’s technical analyst at RBC notes that markets are “still early in an upturn” and that they “expect pullbacks will be relatively short-lived and shallow.” The S&P 500 is now just 6% off its all-time high – but 190 names (from Best Buy to Southwestern Energy) are down 20%+ from 52-week highs.

Meanwhile, the price of hops has more than doubled over the past seven years (doing better than stocks) – putting pressure on craft brewers according to the Financial Times. Now that’s a story.

This week’s action will focus on central banks (Bank of Japan, European Central Bank and the Bank of Canada). For Canada, the odds of another rate cut are low (less than 10%) but with the Canadian dollar’s big recent bounce, the workload shifts back to the bank (and of course, fiscal policy). With a budget coming down March 22^nd, unlikely the bank would move in front of that. For the ECB, traders suggest another cut deeper into negative territory (10 basis points to -40 bp) plus an increase in asset purchases by 10-20 billion euros (versus 60 billion currently) and an extension to March 2017. There is a 100% probability according to the tea leave reading of Eurozone OIS (overnight index swaps) of a cut. We’ll also hear from Mark Carneytomorrow on the consequences of Britain’s exit from the EU (he’s speaking to Parliament). Today, Fed governor Lael Brainard and Vice Chair Stanley Fischer give speeches – the last as the Fed’s quiet period starts before next week’s meeting (92% probability the Fed stays pat at current rate levels).

In things closer to home, the mining world will focus on Toronto and the Prospectors and Developers Association of Canada (PDAC) meeting. Andrew Bell will be bringing reports all day today and tomorrow. Later in the week, FirstEnergy’s East Coast Energy conference will shift our attention to oil and gas companies will a series of CEO interviews.

Earnings wise watch names like Square (Wednesday) and laggard retailers (Urban Outfitters today and Dick’s Sporting goods tomorrow but also a number of investor days including NCR, Chevron, American Express, United Technologies, General Electric Healthcare. Today, Canadian earnings calendar focuses on CargoJet and Pizza Pizza. There is little economic data today (Germany factory orders came in better than expectations although negative) but we’ll build to Friday’s jobs numbers in Canada (10,000 jobs expected). Tomorrow, Magna has an investor day. Iron ore jumps 19%, the biggest one day bounce on record. Torque.

Markets this morning are light of news and weak of price with the exception of Chinese equities which have bounced post-the People’s National Congress where 6.5-7% GDP growth forecasts were entrenched in the next five-year plan, the first time in 20 years that a range of growth has been targeted.

I’m sure there will be lot more to say as the week unfolds. From Research, RBC adds Agrium and Enbridge to their technical best ideas list. CIBC highlights the benefits of buybacks and notes that names such as Metro, Canadian Tire, Thomson Reuters, Agrium and CN Rail fit its positive stance (and these names are on the recommended list). Barclays has upgraded Power Financial (PWF) to overweight while downgrading Power Corp. (POW) to neutral—a popular institutional trade. SunLife has come off the restricted list and is again a buy.

And the day begins.

Every morning Business Day Host Frances Horodelski writes a "chase note" to BNN's editorial staff listing the stories and events that will be in the spotlight that day

Why the stock market is tanking right now, and what comes next

 It’s been one of the worst starts to the year ever for the world’s stock markets. All the more reason to keep your nerve

Look around the global market place and you’d be hard pressed to find anywhere in the green. Out of hundreds of major global indices fewer than 20 are positive; you have to look to Slovakia (up 5% year to date) to find one of the few bright spots.

Everywhere else, it’s red—blood red, if you ask anyone owning equities. Today alone, the S&P/TSX Composite at one point was down 4%, although it’s since eased back and finished the day down 1.33%. And it’s not just Canada that’s feeling the pain. The benchmark U.S. indices, likewise, aren’t far behind, with the Dow Jones Industrial Average down 1.56% and the broader S&P 500 down 1.17%.

Such single day losses are always tough to swallow, but these drops come after an almost continuous stream of losses since the start of the year, with barely a whiff of a positive market response to act as a buffer. It’s been like this since the opening bell on January 2, the first day of trading for the year. It’s as if the market turned the page on 2015 and entered an entirely new reality.

It’s not, of course. Here is what need to know about the selloff and what it’s going to take to stop it:

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