Is it Time to Bail on TSX-Tracking ETFs?

The S&P/TSX Composite Index fell 30 points on March 4. The index rallied from a sharp drop in the early afternoon but still could not avoid a red day. Still, the index has had a fantastic start to 2019.

The ETF was born in Canada with the iShares S&P/TSX 60 ETF (TSX:XIU). The ETF began trading in 1990 as the Toronto 35 Index Participation Fund. Since then, the investing world has seen a massive flow of funds from mutual funds to ETFs. Those who have been tracking the TSX Index in 2019 have been in good shape. The index was up 11.9% in 2019 as of close on March 4.

The iShares S&P/TSX 60 ETF, which aims to replicate the performance of the S&P/TSX 60 Index, fell 0.08% on March 4. The ETF has climbed 11.9% in 2019 so far.

TSX followers will recognize the most heavily-weighted constituents: Royal Bank (TSX:RY), Toronto-Dominion Bank (TSX:TD), and Enbridge (TSX:ENB) round out the top three.

If we glance at its technicals, the iShares S&P/TSX 60 ETF looks overpriced right now. The ETF is trading at the high-end of its 52-week range, and last boasted an RSI of 64. This puts it close to overbought territory as of close on March 4. However, this rally may have some longevity if a rumoured U.S.-China trade deal hits in March.

Canadian Gross Domestic Product growth was a paltry 0.4% in Q4 2018, and Q1 2019 is also expected to disappoint. Top banks passed through a lukewarm earnings season, and there continues to be pessimism when it comes to the oil patch. Investors with TSX-tracking ETFs should consider taking profits in early March.