What I'm Watching ( Week of 12.29.14 )

This week it's simple. I'm watching/waiting for volume to reenter the market and confirm or reject last week's holiday action. 

Last week ( SPY, DIA, QQQ ) all traded to new 52 week highs with my short target ( EWC ) bouncing significantly in sympathy.

( OIL ) price action appears to have moderated a little in terms of downside volatility; buyers and sellers that remained haven't shown conviction one way or the other yet.

There is good reason to be skeptical of last week's broad market moves. See the disparity between relative volume and average volume across the board. Below I've highlighted the lack of volume of some popular ETF's I'm tracking. 

Except for ( OIL ) which traded at 1.7x average volume the other ETF's experienced anywhere from 0.5x to 0.2x their average volume during the last session. With this week's market open minutes away we will find out if conviction has returned via volume/relative volume throughout the week.  

What I'm Watching ( Week of 12.15.14 )

Canada iShares ( EWC )

Canadian assets are facing major headwinds in the current environment. 

1. The fall in global oil prices hurt producers' bottom line. Alberta is bracing for a decline in GDP into next year as a result. Click for links to articles.

Quarter of new Canadian oil projects vulnerable if oil falls below US$80: IEA 

With oil trading below US$60, provinces brace for impact of global oil price shock

The above chart shows that there are some producers' breakeven Oil price as low as $45. That estimate may well be tested. My concern is that Canada has the lowest return on net cumulative capital cost according to Barclays et al. 

Bottom line, low prices make new projects uneconomic and projects with a higher cost basis return even less than before. This is a net negative. 

2. The $USD continues to strengthen relative to other global currencies. This is especially true for the commodity currencies of Australian and Canadian dollars. 

Therefore $1 USD will in effect be able to buy more Oil when priced in CAD effectively increasing U.S. purchasing power for Canadian production. 

I'm actively looking for a trading opportunity here to the short side. Oil prices are weak, and the producers' currency is declining in relative value. Here are the setups I'm watching in charts.