Javed Mirza, Quantitative/Technical Strategist, Raymond James
Focus: Quantitative/Technical Strategy – Global Macro
Top picks: Canadian Natural Resources Ltd., West Fraser Timber Co. Ltd., Pembina Pipeline Corp.
MARKET OUTLOOK:
Our longer-term cycle work suggests that a rotation into Phase 2 of the Market Cycle Model is underway and is reinforced by a breakout to new all-time price highs last week by the TSX Composite and the Russell 2000.
A rotation into Phase 2 should be consistent with a strengthening economy and a broadening of the rally in equity markets, particularly into Phase 2 plays such as industrials and basic materials. However, the tech heavy Nasdaq 100 has yet to follow suite and push above its October highs. A breakout to new all-time price highs by most North American equity indices reinforces our view that the corrective phase from October to November is over, and the transition into Phase 2 of the Market Cycle Model is underway.
Rotation Out Of Growth Into Value: The deteriorating technical profile of the Schwab Large-Cap Growth ETF (SCHG) in tandem with the strengthening technical profile of the Schwab Large-Cap Value ETF (SCHV) suggests portfolio managers are de-risking ahead of the historical choppiness in equity markets from January to February.
Rotation Into Value - Consumer Staples and REITS: Last week we highlighted the improving Relative Performance for both the Consumer Staples Select SPDR (XLP) and the Real Estate Select SPDR (XLRE), consistent with portfolio managers rotating into safe havens ahead of the historical choppiness in equity markets from January to February.
- Market-moving news, fast: Get the BNN Bloomberg App now
- Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
TOP PICKS:
Canadian Natural Resources Ltd. (CNQ TSX)
West Fraser Timber Co. Ltd. (WFG TSX)
Pembina Pipeline Corp. (PPL TSX)
A new intermediate-term (three to six month) rally phase is attempting to get underway on these stocks as price momentum is positive, relative strength is trending higher versus the TSX Composite, and volume shows signs of buying pressure, as institutional investors are accumulating positions.
In addition, the intermediate-term price trend is strengthening as the stocks are trading above an important technical level at their respective 40-week (approximately 200-day) moving averages. All of these are technical positives that are supportive of further upside.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CNQ TSX | N | N | N |
| WFG TSX | N | N | N |
| PPL TSX | N | N | N |
PAST PICKS: JAN 31, 2025
Imperial Oil (IMO TSX)
Then: $96.67
Now: $137.03
Return: 42%
Total Return: 45%
Waste Connections (WCN TSX)
Then: $267.05
Now: $230.87
Return: -14%
Total Return: -13%
Agnico Eagle Mines (AEM TSX)
Then: $135.08
Now: $288.95
Return: 114%
Total Return: 116%
Total Return Average: 49%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| IMO TSX | N | N | N |
| WCN TSX | N | N | N |
| AEM TSX | N | N | N |
