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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (52430)

6/3/2016 10:53:58 PM

From: Johnny Canuck

Read Replies (1) | Respond to of 67640

Market Call: For video, market analysis and more click here
Jason Mann, CIO and Co-Founder at EdgeHill Partners

FOCUS: North American Equities

MARKET OUTLOOK:

U.S. Dollar remains the chart to watch – its change in trend this year (from rising to falling) has been the primary driver of the equities trends we are seeing (strong commodities, cyclicals, weak growth styles). Despite prospect of Fed tightening, we think USD dollar trend is biased lower.

Market weakness to start the year was based largely on the fear of a U.S. led recession.

U.S. earnings have been weaker, but largely because of currency (strong U.S. dollar hurts), energy, and stronger wages (hurts profit margins). Stronger wages is a good thing for the bulk of the economy and should lead to stronger discretionary spending eventually.

The U.S. services sector which is far more important remains strong, and employment remains strong. Absent services showing weakness we think probability of recession is low.

We geared up risk in March and we think the rally has legs from here – cyclical value stocks are still cheap, and the Q1 soft patch in GDP appears to once again be seasonal with the Atlanta “GDPNow” indicator tracking 2.9 percent.

We’re approaching all-time highs again in the U.S. and we’ve seen strong market “breadth” where virtually all sectors have participated AND small caps have participated.

This is a rally that no one trusts. JPM estimates there is $1 Trillion of short exposure, we’ve had net outflows of $100 Billion in equities YTD (BAML) and AAII sentiment survey of “bulls percentage” at 17 percent - the lowest ever recorded.

Historically when AAII bulls are below 25 percent (about 10 percent of the time) the forward 6-month returns have been +9.2 percent.

Lots of pessimism built in – markets tend not to decline much when so much selling has already occurred.

All of this becomes rally-fuel as participants are forced to buy the market when it doesn’t trade down. The “pain trade” is rising markets.

Top Picks

WestJet ( WJA.TO)

Manulife ( MFC.TO)

WalMart ( WMT.N)

Click here for more information on Jason Mann's top and past picks

Market Call Tonight:
For video, market analysis and more click here
Jon Vialoux, Research Analyst, EquityClock.com

FOCUS: Technical Analysis and Seasonal Investing

MARKET OUTLOOK:

Major equity benchmarks in the US, such as the S&P 500 Index, remain within a massive area of supply around present highs. The S&P 500 Index is bound by a range that spans from 2040 to 2130, a range that has seen multiple tests over the past two years, each one resulting in swift selloffs shortly thereafter. Stocks are likely to require a catalyst to break free. Fortunately, or maybe unfortunately, the potential catalysts in June are many with the FOMC meeting mid-month, the Brexit referendum vote, and the start of the ECB Corporate Sector Purchase Program. The end of the second quarter and the anticipation that surrounds the coming earnings season are other factors to consider from a seasonal perspective. The summer is not known for many market moving events, at least not positive in nature, but with the political landscape and uncertainties over monetary policy, there will continue to be events on the calendar that should keep investors on their toes through the months ahead.

As for the performance of stocks closer to home, the TSX Composite continues on an intermediate trend of higher-highs and higher-lows stemming from the January bottom, following the improving trend in commodity prices. Recently, resistance at 14,000 was exceeded, potentially clearing a path toward psychological resistance around 15,000. The Canadian benchmark may face some headwinds in its attempt to move higher over the next few months. Seasonally, the TSX peaks, on average, at the start of June, following the release of quarterly reports from the major banks and the spring run-up in oil prices through the month of May. The benchmark typically trades flat to negative into the end of October. Recently, momentum indicators for the Canadian index began negatively diverging from price, suggesting trend exhaustion as buying pressures fade.

Top Picks

BMO US High Dividend Covered Call ETF ( ZWH.TO)

BMO Aggregate Bond Index ETF ( ZAG.TO)

Metro Inc. ( MRU.TO)

Click here for more information on Jon Vialoux's Top and Past Picks

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