Am I interpreting this properly?

[Schmuckie]

Hi everyone:

For the past week or so (at least in Canada), the blue chips have rallied quite well, and now I'm noticing volume coming back into the juniors.

With the juniors, the volume is rising, there's a bit less volatility and they're creeping up a few cents a day, whereas they were going down quite a bit on relatively low volume until very recently. Unfortunately, my Aussie juniors are a bit slower to respond (EQN, MOL, BMN).

My newbie investor interpretation is that we might be seeing the beginning of the end of the bear market. My reasoning?

1. Juniors would tail behind the blue chips in any market, bull or bear.

2. Still lots of people willing to sell the juniors, but buying is coming back into the juniors market and people are willing to pay ever so slightly higher prices, but are being cautious.

3. Buyers are recognizing that the premium juniors with proven resources are now very oversold and now have enough to step back into the market.

I'd appreciate responses from anyone who's "been there, done that" and been through a few market cycles. Is it the beginning of the end or perhaps just a temporary bear market rally?

 

[Sean K]

Maybe Schmuckie. Personally, I think a clear bottom of the bear could be some time off. I know economically the world is in for some pain for some time to come, but how much of that is factored in to current prices I'm not sure. No one could be. The uuber bears are calling for blood, the bulls say great long term buying opportunity now. Perhaps the answers somewhere in the middle. I'm not sure if any recovery and increased volume in specs is a sign of the end of the bear, or an opportunity to sell into a bearmarket rally.

 

[Spaghetti]

I read that the Canadian stock markets never actually entered bear market territory. It interested me as I thought perhaps Canadians were not quite as influenced by what happened on Wall Street as Australia is. If this is true then I would say what happens in Canada may not be an indicator of what happens here. Wish it was though, more in common with Canada than the USA.

 

[Schmuckie]

I read that the Canadian stock markets never actually entered bear market territory. It interested me as I thought perhaps Canadians were not quite as influenced by what happened on Wall Street as Australia is. If this is true then I would say what happens in Canada may not be an indicator of what happens here. Wish it was though, more in common with Canada than the USA.

Canada was actually protected from the bear market, to a certain extent, for a couple of reasons, but we're not immune. Starting around the end of June, we experienced declines in just about everything.

The reasons for subprime mortgage exposure was probably similar to Australia, just counter-parties buying CDOs and ABCP. We never did get into our own homegrown subprime crisis because mortgage interest is not tax deductible here, so there was no real incentive for Canadians to wade in and get mortgages they couldn't otherwise afford. A couple of our banks got hit by being stupid and buying ABCP to get higher returns, but have since paid the price. A few others were very conservative and avoided the problem altogether or got out in time.

One of the other reasons that the TSX composite appears not to have done as badly as the U.S. is because it is heavily weighted with commodity stocks. One of the biggest contributors to the composite is Potash Corp. of Saskatchewan, which softened the blow from the losses in other sectors. Oil stocks also did well, but are trading as if oil were $80 to $90 a barrel. Various analysts have said that if the key commodity stocks were removed from the index, we did experience a very similar decline to the U.S. Financial stocks were apparently hit out of all proportion to any actual problem in sympathy with the U.S. financial stocks.

Telecom companies are doing okay (but are way off their highs) since they're bread and butter, but consumer discretionary stocks aren't doing so well. We get a lot of U.S. television programming and magazines here, and with many consumers hearing the doom and gloom south of the border, they're less confident.

Over all, we are doing better over all than the U.S., bit it's still a bear market.

 

[Spaghetti]

Well have to admit that I do not know much about the Canadian Markets but after reading they fared better than most was intrigued as we also are viewed as a commodity economy. Not sure on weightings etc and degree of similiarity but would be interesting to see some analysis that did some sort of comparison.

Sp hopefully someone can enlighten us both.

 

[Schmuckie]

Well have to admit that I do not know much about the Canadian Markets but after reading they fared better than most was intrigued as we also are viewed as a commodity economy. Not sure on weightings etc and degree of similiarity but would be interesting to see some analysis that did some sort of comparison.

Sp hopefully someone can enlighten us both.

I've never been to Australia, but I'm also under the impression that are economies are similar. Both countries are internationally renowned for mining and Aussie and Canadian executives seem to hold each other in mutual high regard.

 

[bvbfan]

Can't for the life of me think of any big Canadian banks other than CIBC and TD. I guess financials aren't as big a percentage their.


I think I saw TSX was only down about 15% from highs so far, I guess a lot is due to greater energy, agricultural listings?

Disappointed with EQN, MOL but see that as another buying opportunity.