Don Vialoux, technical analyst at TimingTheMarket.ca and EquityClock.com
Focus: Technical analysis and seasonal investing
U.S. equity markets are expected to move slightly lower between now and mid-April, typical of performance in the year after a first-term U.S. president is elected. The shallow correction is related to uncertainties that frequently occur when new cabinet members are approved and Congress begins to introduce new legislation. Thereafter, U.S. equity markets are expected to move higher.
Canadian equity markets have a history of underperforming U.S. equity markets between mid-March and early May.
- (Alternative ETFs that trade in Canadian dollars include FDE and SHZ on the TSX)
- Seasonal influences for Emerging Markets are positive until near the end of April
- Technical profile is positive: Intermediate trend is up. Strength relative to the S&P 500 Index and TSX Composite Index is positive. Nice bounce recently from its 50-day moving average. Emerging country economies (e.g. Taiwan, China, Brazil, India) are growing faster than N.A.
- Seasonal influences are positive until mid-July
- Technical profile has just turned positive: Intermediate uptrend started earlier this week on a move above $40.50. Strength relative to the TSX Composite has just turned positive. The stock recently moved above its 20- and 50-day moving averages. Short-term momentum indicators are trending higher.
Events impacted by changing fiscal and monetary policy in the U.S. during the next couple of months are likely to cause uncertainty in U.S. equity markets, leading to a mild correction. Historically, Canadian equity markets have underperformed U.S. equity markets in March and April. In addition, North American equity markets are overvalued based on a variety of intermediate technical indicators. Holding a healthy portion of cash in a diversified investment portfolio makes sense.
PAST PICKS: JANUARY 20, 2017
PHYSICAL PLATINUM SHARES ETF (PPLT.K) briefly broke to a new high near the end of February, but subsequently sold off with all precious metals. Seasonal influences remain positive until late April. Hold.
- Then: $93.72
- Now: $91.45
- Return: -2.42%
- TR: -2.42%
ISHARES S&P/TSX GLOBAL GOLD INDEX ETF (XGD.TO) strengthened to the end of its period of seasonal strength from mid-December into the third week of February. Traders took profits then. Next period of seasonal strength starts in early July for a seasonal trade to late September.
- Then: $13.22
- Now: $13.10
- Return: -0.90%
- TR: -0.90%
CASH - Continue to hold a cash position for now. Political uncertainty in U.S. will continue to weigh down on U.S. equity markets until well into April.
Since January 20, the TSX Composite Index has declined 0.3 per cent. A move below 15,396 will complete a head-and-shoulders pattern with a measured technical target of 14,800.
TOTAL RETURN AVERAGE: -1.66%