Don Vialoux, technical analyst at TimingTheMarket.ca and EquityClock.com 

Focus: Technical analysis and seasonal investing
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MARKET OUTLOOK
Investors holding U.S. cash have lost 7.5 per cent since early June due to strength in the Canadian dollar relative to the U.S. dollar. Currency fluctuations do count!

Investors have been given lots to worry about this summer: North Korean threats, political battles in the U.S., NAFTA negotiations, etc. Now, another concern has surfaced. Equity markets have a horrible history of moving sharply lower in the summer and fall in years ending in “7.” On average, since 1930 the Dow Jones Industrial Average has dropped 14 per cent per period from late July to mid-November.

And now the good news: Seasonal analysis works when recurring events trigger their trends. To the best of my knowledge, there are no recurring events in years ending in “7.” Accordingly, concerns are unfounded. Seasonal investing requires a combination of seasonal, technical and fundamental analysis connected to recurring and anticipated events.

TOP PICKS

HORIZONS GOLD ETF (HUG.TO)
Seasonal influences are positive until early October. Technical profile is positive: Intermediate trend is up; strength relative to the S&P 500 is positive; short-term momentum indicators are trending up.

ISHARES S&P/TSX GLOBAL GOLD INDEX ETF (XGD.TO)
Seasonal influences are positive until the end of September. Technical profile is positive: Intermediate trend is up; strength relative to the S&P 500 Index is positive; short-term momentum indicators are trending up.

CASH
U.S. and Canadian equity markets have a history of moving lower between now and mid-October. Both equity markets are showing declining momentum. Holding a robust position in cash will eventually provide an opportunity to buy on weakness.
 

PAST PICKS: JUNE 2, 2017

FIRST TRUST HEALTH CARE ALPHADEX FUND ETF (FXH.US) (FHH.TO)
The sector and related ETFs reached its seasonal peak in the second week in July. Units are no longer favoured.

• Then: $65.86
• Now: $65.50
• Return: -0.54%
• Total return: -0.54%

IA CLARINGTON SARBIT U.S. EQUITY FUND
Right strategy, wrong security selection! The fund was recommended mainly because its largest position was cash with a 60 per cent weight. It was the wrong security selection because the fund was invested in U.S. dollars. Since June 2, the Canadian dollar has appreciated 7.5 per cent relative to the U.S. Dollar Index. Currency fluctuations can make a significant difference in the value of your investment portfolio.

• Then: $5.50
• Now: $5.51
• Return: 0.28%
• Total return: 0.28%

CASH
Since June 2, the S&P 500 Index has been unchanged and the TSX Composite Index has been down almost three per cent. Holding a healthy cash position proved to be the preferred strategy.

TOTAL RETURN AVERAGE: -0.08%