Canadian stocks moved sharply higher on Friday

Image Source : Krish Capital Pty Ltd

Index Update: The benchmark S&P/TSX Composite Index showed a strong move to the upside in morning trading and remained firmly positive throughout the day. The Index jumped 221.72 points or 0.9 percent to 25,067.92, closing higher for the fourth straight day.

Macro Update: The recent retreat by treasury yields came as the U.S. inflation data released over the past few days led to renewed optimism about the outlook for interest rates.

Adding to the interest rate optimism, Federal Reserve Governor Christopher Waller told CNBC the central bank could lower interest rates multiple times this year if inflation eases as he is expecting.

Canadian investment in foreign securities rose by $17.8 billion in November, the highest since March 2024, while foreign investors acquired $16.4 billion in Canadian securities, driven by record money market inflows.

Top Movers: TD Bank surged 4.4% following the announcement of an accelerated CEO transition and strategic review under Raymond Chun, signaling renewed focus on growth and compliance. Heavyweights RBC, Enbridge, Brookfield, Thomson Reuters, and Canadian Natural Resources also advanced between 0.8% and 1.7%.

Our Stance: the index remains in a favorable position, trading above its 21-period Simple Moving Average (SMA), which is indicative of a bullish trend. Currently, the index is testing a crucial support level around 24,500. The ability to maintain this level is important for sustaining the upward momentum. A breach below 24,500 could signal a retracement risk, with key support levels on the weekly chart identified around 24,000 to 23,800.

Commodity Update: Asian stock markets were cautiously positive on Monday, with investors awaiting policy announcements following Donald Trump's second inauguration. The dollar remained firm as Trump set to take office at noon Eastern Time, promised a "brand new day of American strength." In commodities, gold slipped 0.21% to $2,743.10, silver dropped 0.24% to $31.06, and copper decreased 0.41% to $9,155.50. Brent crude fell slightly by 0.07% to $80.73 per barrel, as expectations that Trump may relax energy sector curbs on Russia in exchange for an end to the Ukraine war outweighed concerns about supply disruptions from sanctions.

Technical Update: On Friday, the S&P/TSX Composite Index posted a gain, advancing 221.72 points to close at 25,067.92 marking an increase of 0.89%. This positive performance was supported by strong trading volumes, reflecting sustained investor enthusiasm and confidence in the market. A standout contributor to the day's gains was the utilities sector, which rose by 1.36%, suggesting growing optimism in this space. From a technical perspective, the index remains in a favorable position, trading above its 21-period Simple Moving Average (SMA), which is indicative of a bullish trend. The Relative Strength Index (RSI) stands at 66.08, signaling strength in the market but without reaching overbought conditions, leaving room for further gains. Currently, the index is testing a crucial support level around 24,500. The ability to maintain this level is important for sustaining the upward momentum. A breach below 24,500 could signal a retracement risk, with key support levels on the weekly chart identified around 24,000 to 23,800. For the bullish trend to remain intact, it is essential for the index to hold above these support levels, ensuring continued growth potential in the near term.