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August 30, 2005

EWC, the Canada ETF, Tues., August 30, 2005, 7:18 PM

Very few traders have enjoyed the performance offered by EWC, which is an ETF that represents the Canadian equity market index. Earlier today I made reference to EWC as petro-driven, which it is, but not as much as you might think.

Let's look at the track record, admin details, and major stock components:

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With 25 pct in energy, which came down early this month before having a Katrina recovery, and about 37 pct in financials, including big banks like CIBC that got hammered on their Enron settlements, it is clear that EWC has been good for a ride.

I'd say traders who are long EWC (or Canada) oought to be thinking about selling it outright (over $20), where it is today, (to go to cash). I think EWC will come down quickly after the energy market peaks out in the next couple weeks, as I expect.

The 1-year and 3-year gains have been superlative, as the exhibit shows, but traders who are long should not want to hand them back to the market.

If some traders want to short, I'd be careful unless you plan to hang in for a year or more, and you hedge with long positions in some of the most promising of the heavy-weighted stocks in this Fund. Canada, you know, or ought to, is in very good fiscal shape.

The problem with Canada's equity market today is that the Cdn economy is intertwined with America, and America is slowing quickly, possibly headed for recession.

Really, Canada is California North, and probably 33 pct of the population (including me) wish it were so. Except Canada has hockey eh? Here in the dog days of Summer, fully two-thirds of the first two pages of the sports section of the country's biggest newspaper (circulation about 700,000) are all about hockey.

Canadians even enjoyed a hockey night out at the fights this week. First prize was $65,000 to the knuckle-duster who could take out five straight opponents at centre ice in a small city in Northern British Columbia. VIP seating was $200 each, and the arena was sold out. I was going to say that apparently the northerners have nothing better to do with their time, but I understand that attendees flew in from across Canada, and stood cheering the whole night.

Only in Canada!

But there is little to complain about other than high unemployment. The banks and financial regulators and central bank are all first-class. The government is totally stable, and fiscally prudent, having surpluses in each of the past eight years, and, according to a recent statement by the Finance Minister, for at least the next five years.

As to the EWC, the long-term chart reflects the superb 3-year performance, as well as a toppiness that concerns me.

The 30-Minute data chart, however, shows a roller-coaster this month. There is also the RSI getting up into the 70-pct level. Should RSI turn down for this chart, plus the 60-Minute and Daily data charts, then I believe that the long-term cycle will be terminating.

Remember the Reversion to the Mean concept: what goes up, comes down. It's been a nice ride up....

Posted by Posted by Bill Cara on August 30, 2005 07:18:14 PM | Category: Canada , ETF

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