Keith Richards, president and chief portfolio manager, ValueTrend Wealth Management

Focus: Technical analysis

MARKET OUTLOOK

Trump’s tweets seem to be throwing the markets around quite a bit lately. Seriously, sometimes I feel he needs an editor to walk beside him and filter his ever-flowing brain fluctuations. Must he say everything that comes to his mind?!

Here is a link to my blog with a chart of the SPX. At the bottom of the chart is an indicator called the “Average True Range” (ATR). This indicator measures the range from close to close, then averages that range over a certain period of days. I chose to look back over 21 days as a fair representation of month-by-month volatility. As you will see on the chart, I’ve taken a three-year daily chart of the SPX with its 21-day trailing ATR.

Notice the pancake-flat ATR of the late 2016-17 period. The market was going up on (literally) record-low volatility. In fact, it (the low volatility during that time) was unprecedented, and people thought markets would be bullish forever. Well, as with all such events suggesting “now it’s different,” the easy markets came to an end. Since 2018 began, the average trading range (daily movements) has increased significantly. On the blog noted above, I reprint a chart from Goldman Sachs tracking Trump’s trade-related tweets since mid-2018. Trump’s tweeting increased in 2018 (coinciding with the trade talks coming on strongly at that point). And that coincided with an increase in the Average True Range of daily stock movement in the second half of 2018.

Perhaps I am drawing a false relationship between historic Trump tweeting and the markets. This is just an exercise of curiosity of my own. Shoot this down if you wish. I have no solid proof beyond the chart I found on the internet tracking his tweets — and it’s not as current as I’d hoped to find. But it’s a point worth considering when analyzing the markets. I will note that when the 21-day ATR indicator peaked between 140-180 in the past, this usually coincided with oversold/capitulation moments on the market. It’s at around 120 right now — so we may see more market malaise before autumn.

TOP PICKS

Onex Corporation (ONEX:CT)

We’ve held this for a while. We purchased it at around the current price. It’s been range bound, but that’s been okay in this market. Good entry point.

BMO Low Volatility Canadian Equities ETF (ZLB:CT)

This has been in our VTEP conservative platform for a year. It’s range bound right now. And again, that good! It’s a good mix of conservative stocks, including Onex (another top pick) amongst a couple of others we hold.

Cash

We are still 17 per cent cash in our VTEP (ValueTrend Equity Platform) and almost 50 per cent cash in our VTAG (ValueTrend Aggressive Growth Platform) models.
 

PAST PICKS: JUNE 20, 2019

iShares Nasdaq Biotech ETF (IBB:UN)

• Then: $108.62
• Now: $103.62
• Return: -5%
• Total return: -5%

Invesco DB Base Metals Fund ETF (DBB:UN)

• Then: $15.34
• Now: $14.58
• Return: -5%
• Total return: -5%

iShares Silver Trust (SLV:UN)

• Then: $14.45
• Now: $17.07
• Return: 18%
• Total return: 18%

Total return average: 3%