Keith Richards, President & Chief Portfolio Manager, ValueTrend Wealth Management
Focus: Technical analysis
Top Picks: Alcoa, Pembina Pipeline, Global X Cash ETF
MARKET OUTLOOK:
On Aug. 31, I posted the ValueTrend monthly “Bear-O-Meter” (BOM) risk reading on my blog. The meter examines 11 indicators under six technical categories. The meter can move from “0” (relatively high risk, less upside potential) to 8 (relatively low risk, better upside potential). The lower the score, the worse the outlook is for the S&P 500, and vice versa. On Aug. 31, the BOM fell to “1”. This puts it firmly in “cautious” territory. Since that reading on Aug. 31 , the market has been negative. Risk is growing on a macro level.
The main culprit is market breadth. We still have the divergence in the transports versus industrials as seen in the July BOM reading. Now we see the cumulative broad index (NYSE) advance versus decline line falling against the SPX. Add to that: Fewer than 15 per cent of S&P 500 stocks trade near their one-year highs while the index itself hovers within five per cent of a five-year high. Technically, these are bearish signs.
Add in that the potential for a Fed rate change. Historically, this has led to market corrections. Technical support of 7,600 for the S&P 500 is being challenged as I type this. If that level cracks, I would anticipate a target of 7,300. The TSX300 may hold out a bit better due to its energy and materials sectors, although it will still be pressured.
ValueTrend is holding about 20 per cent cash in our Equity Platform at this time. We are focused on hard assets, value, and defensive stocks.
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TOP PICKS:
Alcoa (AA NYSE)
Bottomed and bounced, looks like US$58 target is reasonable.
Pembina Pipeline (PPL TSX)
Basing after a pullback. We think all of the Canadian pipelines are undervalued and setting up for a rally.
Global X Cash ETF (CASH TSX)
This is just a High Interest Savings Account (HISA) ETF for holding cash.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AA NYSE | Y | N | Y |
| PPL TSX | Y | N | Y |
| CASH TSX | Y | N | Y |
PAST PICKS: JULY 14, 2026
Microsoft (MSFT NASD)
Then: US$384.93
Now: US$501.84
Return: 30%
Total Return: 31%
Coca-Cola (KO NYSE)
Then: US$83.08
Now: US$88.45
Return: 6%
Total Return: 7%
Merck (MRK NYSE)
Then: US$120.78
Now: US$142.60
Return: 18%
Total Return: 19%
Total Return Average: 19%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MSFT NASD | N | N | N |
| KO NYSE | Y | Y | Y |
| MRK NYSE | Y | Y | Y |
