Don Vialoux, technical analyst at TimingTheMarket.ca and EquityClock.com
FOCUS: Technical analysis and seasonal investing 
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MARKET OUTLOOK

North American equity markets currently are following their traditional period of seasonal strength from mid-October to the first week in January. Sectors that historically have been strongest during this period are leading the way on the upside. These include technology, consumer discretionary, industrials and materials sectors. The FAANG stocks have been by far the strongest influence on U.S. equity indices. However, medium term technical indicators show that equity markets and sectors are overbought and fewer stocks outside of the FAANG stocks are moving higher. Despite favourable seasonal influences, now is not the optimal time to be aggressive buyers of North American equities. Seasonal traders will take advantage of strength between now and early January by taking profits.

A few sectors have not participated in the upswing in the North American equity market and have been under tax-loss selling pressures in recent weeks. Pressures likely will continue until at least mid-December. Thereafter, some of these sectors will enter into their period of seasonal strength. These sectors include energy, oil services and precious metals. Preferred strategy is to place equities in these sectors on the “radar screen” for possible purchase when they show technical signs of bottoming.

TOP PICKS

WHEATON PRECIOUS METALS (WPM.TO)
Seasonal influences are favourable between mid-December and the end of March. Technical parameters are positive: intermediate trend is up. Strength relative to the S&P 500 Index and TSX Composite is positive. Momentum indicators are trending up. 

VANECK VECTORS OIL SERVICES ETF (OIH.US)
Seasonal influences are favourable between mid-December and the end of February. Technical parameters are neutral: trend is flat. Relative strength and momentum indicators are neutral. Units complete a reverse head and shoulders pattern on a move above US$26.27. Recently, units have been under tax-loss selling pressures. Higher drilling activity triggered by higher crude oil prices will help fourth quarter 2017 and first quarter 2018 revenues and earnings.

CASH
It’s too late to be a buyer of recent outperforming equities/ETFs and it’s too early to buy stocks under tax-loss selling pressures. Patience will be rewarded. 

PAST PICKS: AUGUST 4, 2017

ISHARES S&P/TSX GOLD INDEX (XGD.TO)

• Then: $12.02
• Now: $12.33
• Return: 2.57%
• Total return: 2.57%

GLOBAL X FERTILIZER ETF (SOIL.US)

• Then: $9.71
• Now: $10.11
• Return: 4.12%
• Total return: 4.12%

CASH (or a 3-month Treasury Bill)

TOTAL RETURN AVERAGE: 2.23%

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WEBSITE: www.equityclock.com