Javed Mirza, technical strategist, Raymond James
FOCUS: Technical analysis
Top Picks: Lundin Mining, NuVista Energy, Russel Metals
MARKET OUTLOOK:
The breakout to new all-time price highs by the S&P/TSX Composite Index, in conjunction with new weekly “mechanical buy” signals on the S&P 500, TSX, Nasdaq 100, and Russell 2,000 strongly suggests a new intermediate-term rally phase is taking hold in North American equity markets. This would be reinforced by a multi-week close above the 40-week moving average by the S&P 500, Nasdaq 100, Russell 2000, and Dow Jones Industrials Average.
In tandem with yields pushing higher, the iShares 20+ Year Treasury Bond ETF (TLT) closed below important technical support around 84.67. This sets the stage for a test of major support near the October 2023 lows around 78.08.
Ongoing strength in yields would suggest market participants are betting on a U.S. Federal Reserve hiking cycle in the second half of 2025, consistent with an attempt to combat persistent inflation.
Our longer-term technical work strongly suggests that interest rates globally are in a new secular uptrend. In our view, it is this secular uptrend in yields that will ultimately lead to the demise of the ongoing secular bull market in equities, as higher rates crowd outgrowth and investment.
The U.S. dollar is stalling at key technical support around 99. A multi-week close below this level sees next downside technical target around 95 and should support further strength in Commodity prices.
Our technical work remains constructive on natural gas, copper, precious metals and lumber. Given the longer-term breakout above key technical metrics in the ratio of hard assets versus paper assets, we view near-term weakness in gold and gold stocks as an opportunity for longer-term investors to add exposure.
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TOP PICKS:
Lundin Mining (LUN TSX)
A new intermediate-term (three to six month) rally phase is attempting to get underway on Lundin Mining Corporation.
NuVista Energy (NVA TSX)
Russel Metals (RUS TSX)
Price momentum is positive, relative strength is trending higher versus the TSX, 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 (around 200-day) moving averages. All of these are technical positives that are supportive of further upside.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| LUN TSX | N | N | N |
| NVA TSX | N | N | N |
| RUS TSX | N | N | N |
PAST PICKS: April 12, 2024
Alimentation Couche-Tard (ATD TSX)
- Then: $75.43
- Now: $72.99
- Return: -3%
- Total Return: -2%
Alamos Gold (AGI TSX)
- Then: $20.97
- Now: $37.96
- Return: 81%
- Total Return: 82%
Finning International (FTT TSX)
- Then: $42.69
- Now: $50.74
- Return: 19%
- Total Return: 22%
Total Return Average: 34%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ATD TSX | N | N | N |
| AGI TSX | N | N | N |
| FTT TSX | N | N | N |
