Javed Mirza, technical strategist, Raymond James
FOCUS: Technical analysis
Top Picks: Tamarack Valley Energy, Peyto Exploration & Development
MARKET OUTLOOK:
Our technical work indicates an intermediate-term (one to three month) corrective phase is attempting to take hold, which suggests that investors should adopt a more defensive stance, in conjunction with previous market leaders showing signs of stalling. A multi-day close below the 50-day moving average on most North American equity indices would strongly suggest an intermediate-term equity market correction was underway and would open the door for a test of major technical support near the 200-day (around 40-week) moving averages on most North American equity indices. A multi-day close below the 200-day moving average would be consistent with a four-year cycle reset taking hold.
Despite equity markets recently making new highs, market internals have been trending lower. Investor sentiment indicators are showing signs of greed, and the VIX recently triggered a new short-term mechanical buy signal, indicating potential market turbulence ahead. In addition, bond markets are also weakening. Higher bond yields are likely to be a headwind for equity markets and would also support weakness in bond proxies and other rate sensitive equities. While North American markets have recently outperformed global equity markets, our technical work suggests the recent “Trump bump” may have been the “last hurrah” before a potential four-year cycle reset. A four-year cycle reset is the contraction phase of the business cycle and typically lasts around 34 weeks and sees a drawdown of around 15 per cent.
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TOP PICKS:
Tamarack Valley Energy (TVE TSX)
Peyto Exploration & Development (PEY TSX)
Pfizer (PFE NYSE)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| TVE TSX | N | N | N |
| PEY TSX | N | N | N |
| PFE NYSE | N | N | N |
PAST PICKS: JULY 12, 2024
Metro (MRU TSX)
- Then: $79.25
- Now: $90.84
- Return: 15%
- Total Return: 15%
Hydro One (H TSX)
- Then: $40.30
- Now: $44.25
- Return: 10%
- Total Return: 11%
Choice Properties REIT (CHP.UN TSX)
- Then: $13.57
- Now: $13.43
- Return: -1%
- Total Return: 1%
Total Return Average: 9%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| MRU TSX | N | N | N |
| H TSX | N | N | N |
| CHP.UN TSX | N | N | N |