iShares S&P/ TSX 60 Index ETF meeting resistance near $21.00

May 27th, 2016 – 1 Comment

6o large companies from 10 industry sectors


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Morning Lou,
Did I hear you give a thumbs up to Questrade?

Have you ever read http://www.taxtips.ca/stocksandbonds/recommendedstocks.htm where they recommended a mix of XIU SPY VGK VPL VWO and XLU?

If you are not a heavily active investor are ETFs a risk?

Final question, do you believe 2016 volatility will continue or is it your impression the markets are calming down ?

Regards,

Roger

 

Hey Roger,

You must have heard my endorsements of Questrade on AM640. They offer various services to investors and I recommend that you check them out and see if they meet your needs. Here’s a link to their portfolio review service :

http://www.questrade.com/portfolio-assessment-free

 

I will examine the ETFs you have cited starting with the iShares S&P/TSX 60 Index ETF (XIU TSX) and work through the others over the next number of sessions. With respect to how you can use an ETF they are not specifically designed for high frequency trading. The founding principals that led to the development of the exchange traded fund was to offer index investing with low management expense ratios. There are leveraged ETF’s on the long and short side of certain markets that need to fully understood to ensure proper use.

 

When you look at the components of the XIU you need to appreciate that you are buying 60 large companies in ten industry sectors. Here is a list of the components :

https://en.wikipedia.org/wiki/S%26P/TSX_60

Finally to the question of volatility I believe that you should expect it to continue. We are a long way from having unravelled the mess that followed the financial crisis of 2008. The low interest rate policies that were used to manage the crisis have taken us to generational lows. In December of 2015 when the  U.S. Federal Reserve tried to raise rates it sent markets on a wild ride.

When Ben Bernanke was chairman of the Federal Reserve he said that the central bank was undertaking financial experiments and that there was no certainly as to the outcome. I took that to mean that we are all lab rats and there is little concern for our well being.

An audit of the charts for XIU will help better understand the trend, support, and resistance related to this ETF.

 

 

 

 

XIU

The three-year chart depicts the downtrend that ran from April of 2015 to January of 2016 where XIU hit a 52-week low of $17.07. The MACD and the RSI generated buy signals as the units started a new leg up that has met resistance near $21.00.

 

 

 

 

 

 

 

XIU2

The six-month chart highlights the buy signals from the momentum indicators in January and the golden cross that formed in April. What we need to see is a move up and through $21.00 with conviction. The dividend yield on XIU is 2.93% so you are at least getting paid to hold the units.

I would advise that given the current economic environment you need to determine your personal investment profile and your investment horizon before committing to any particular investment vehicle.

 

Next time I will explore the case for  SPDR S&P 500 ETF (SPY NYSE).

 

Make it a profitable day and happy capitalism!

 

 

 

 

 

 

 

 

 

Next time I will investigate the charts for

 

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