How high can the S&P/TSX Composite Index reach?

The S&P/TSX Composite index has staged a strong recovery, helped by the rising hope that global central banks have stopped hiking interest rates. After dropping to a low of $18,690 in October, the blue-chip index has surged by over 8% to over $20,245. 

Blue-chips are rising

The S&P/TSX Composite index’s top constituent companies have been in a strong rebound recently. Shopify, a leading player in the e-commerce stock, has led this charge as its stock nears its February 2022 high. Its shares has jumped by over 50% from the lowest point in October and by 115% from the year-to-date low.

Canadian bank stocks have also roared back. Royal Bank of Canada stock has surged to $120.53, to the highest point since September 23rd. Similarly, Toronto-Dominion and Bank of Montreal (BMO) have also surged. Other top-performing companies in the index are Thomson Reuters, Canadian Pacific Kansas City, and Canadian National Railway.

Companies in the mining industry are also doing well as some commodities bounce back. Brent and crude oil prices have moved back to $80 after crashing hard a while ago. Most analysts believe that OPEC+ will slash production in a bid to boost prices.

The next important catalyst for the S&P/TSX Composite index will be the upcoming Canadian Consumer Price (CPI) data. Economists polled by Reuters expect the data to show that the headline CPI dropped from 3.8% to 3.2%. Core inflation is expected to come in from 4.4% to 4.3%.

These numbers mean that the Bank of Canada will maintain rates intact for a long time since inflation remains above the target of 2.0%. 

The other important event to watch will be the upcoming FOMC minutes. These minutes will provide more color about the state of the economy and what to expect in the coming meetings. 

S&P/TSX Composite Index Forecast

TSX chart by TradingView

The daily chart shows that the TSX index has made a strong recovery in the past few days. Along the way, the shares have jumped above the 50-day and 100-day Exponential Moving Averages (EMA).

The index has moved above the crucial support point at $19,687, the lowest swing on August 22nd. Also, the Relative Strength Index (RSI) is nearing the overbought point at 70. Therefore, the outlook for the index is bullish, with the next point to watch being at $20,670, the highest point in October.

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