TSX Breadth Shifts: What the Data Reveals

The Canadian equity market, as measured by AltraOne's analytics, is signaling an important shift in its underlying texture. The Altra Market score, which assesses market-wide momentum by tracking the percentage of stocks trading above key Exponential Moving Averages (EMAs), currently stands at 67.9, indicating an "Improving" regime. Crucially, the 15-day trend for this score is a positive 6.8, suggesting a notable increase in bullish momentum across the TSX.

This upward trend supports the view that market breadth is improving, prompting traders and investors to be selective and favor high-quality setups. While the overall landscape points to a growing bullish undercurrent, a deeper dive into the data reveals areas of strength and areas where caution is still warranted.

Market Breadth Indicators

Looking closer at market breadth, the data indicates a healthier environment. Exponential Moving Averages (EMAs) are widely used technical indicators that smooth price data to identify trend direction. A significant percentage of stocks trading above their EMAs suggests broad participation in an upward trend. On the TSX, 76.67% of stocks are currently trading above their 20-day EMA, while 73.33% are above their 50-day EMA, and 68.33% are above their 200-day EMA. These figures underscore the improving short, medium, and long-term technical postures of a majority of TSX constituents.

However, it's worth noting the daily advances and declines, which stood at 21 advances versus 39 declines. This suggests that even within an improving market, selectivity remains paramount, as not all stocks are participating equally in the upward momentum. The market's overall Altra Score trend is strong, but individual stock performance can still vary significantly.

Sectoral Momentum

The Altra Sector analysis provides valuable insights into which parts of the market are driving or lagging momentum. This score, applied at the sector level, also includes a relative-strength rank against other sectors within the same market, helping to identify leadership. Currently, the TSX features 2 bullish sectors, 0 neutral, and 4 bearish sectors out of 6. This distribution highlights that while the market's breadth is improving, strong, broad-based bullishness has yet to take hold across all segments.

The sector rankings offer a clearer picture:

• Financials remain the #1 ranked sector, holding steady from last week and maintaining its status as a Confirmed Leader. This sector continues to demonstrate robust momentum.
• Energy has moved up two spots to #2, also solidifying its position as a Confirmed Leader with accelerating momentum. This suggests increasing strength in energy-related stocks.
• Consumer Staples dropped one spot to #3. While still lagging relative to the top two, the sector is starting to show signs of turning up, indicating potential for improving momentum.
• Utilities similarly slipped one position to #4. Like Consumer Staples, it remains a lagging sector but is beginning to turn upward, hinting at a potential positive shift.
• Technology holds at #5, categorised as lagging with its momentum weakening further. This suggests continued underperformance for the tech segment.
• Materials remains at #6, also lagging, with its momentum weakening further. This indicates a challenging environment for materials stocks.

In summary, the TSX is exhibiting clear signs of improving breadth and a shift towards a more bullish underlying texture, driven by solid performance in key sectors like Financials and Energy. While the overall trend is positive, the mixed performance across sectors, particularly the continued weakness in Technology and Materials, reinforces the need for a selective approach to uncover high-probability setups.

What is the Altra Market score? The Altra Market score measures overall market breadth — the proportion of stocks in an index trading above key moving averages. A score above 60 signals broad market participation and a healthy momentum environment. Below 40 signals broad weakness. It is updated daily after market close.

Track these scores daily on AltraOne — momentum analytics for NSE, S&P 500, and TSX, updated every trading day after market close.

Altra Score is a momentum indicator reflecting EMA alignment and RSI trend across daily, weekly, and monthly timeframes. It is not investment advice. Past momentum does not guarantee future performance. Please consult a SEBI-registered advisor before making investment decisions.