Javed Mirza, technical strategist, Raymond James
FOCUS: Technical analysis
Top Picks: Imperial Oil, Waste Connections, Agnico Eagle Mines
MARKET OUTLOOK:
The S&P 500 Index scored a new closing high last week, a strong technical positive. However, the S&P/TSX Composite Index and most major North American indices failed to follow suit. We would be looking for the TSX Composite, Nasdaq 100, and Dow Jones Industrial Average to score new closing highs to confirm a new intermediate-term (three to six month) equity market rally phase was developing. The S&P 500 and TSX Composite are turning up at oversold levels in conjunction with U.S. 10-year yields and U.S. dollar triggering new short-term “mechanical sell” signals. A short-term easing in rates should support the current equity market counter-trend bounce.
However, we remain cautious as the CBOE Put/Call Ratio is showing signs of greed and previous market leaders (namely homebuilders and semiconductors) have failed to follow the S&P 500 to new highs. A breakout to new price highs by the S&P 500 and TSX Composite would cause us to change our current cautious stance. Five technical negatives remain in place that suggest an intermediate-term (one to three month) corrective phase is taking hold on most North American equity indices. This is reinforced by new weekly “mechanical sell” signals being triggered on the S&P 500, TSX Composite, Russell 2000, Dow Jones Industrials and Dow Jones Transports. This supports investors adopting 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 be consistent with an intermediate-term equity market correction getting 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.
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TOP PICKS:
All three stocks have strengthening technical profiles as price momentum is improving, relative strength is trending higher, and volume is showing signs of institutional buying pressure.
In addition, all three stocks are trading above their 50/200-day moving averages confirming short and intermediate-term price trends are up, a strong technical positive.
Imperial Oil (IMO TSX)
Waste Connections (WCN TSX)
Agnico Eagle Mines (AEM TSX)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| IMO | N | N | N |
| WCN | N | N | N |
| AEM | N | N | N |
PAST PICKS: Oct. 17, 2024
Parkland Corp. (PKI TSX)
- Then: $35.33
- Now: $33.29
- Return: -6%
- Total Return: -5%
Gibson Energy (GEI TSX)
- Then: $23.88
- Now: $25.05
- Return: 5%
- Total Return: 7%
West Fraser Timber (WFG TSX)
- Then: $134.69
- Now: $126.42
- Return: -6%
- Total Return: -6%
Total Return Average: -1%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| PKI | N | N | N |
| GEI | N | N | N |
| WFG | N | N | N |
