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Keith Richards.
Keith Richards.

BNN Market Call

3 top picks from ValueTrend’s Keith Richards Add to ...

Keith Richards is portfolio Manager at ValueTrend Wealth Management. His focus is on technical analysis.

Top picks:

First Capital Realty Inc.
I’m sticking with this one. It was my top pick last show; great trend, great dividend (4.4 per cent). I bought it last summer at $18.70 – little risk, good long-term hold, steady cash flow.

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Starbucks Corp.
A neckline breakout past $54 (where I recently bought in late December) targets old highs of $60-$62 minimum. It’s a high-growth stock, with lots of momentum in a rising market.

Horizons S&P/TSX 60 Index ETF
I bought this in late December at $10.60. It’s a broad play on the Canadian market – which may outperform the U.S. in the first half. I may buy oil individually soon, which is setting up nicely for a seasonal entry point in February, and this is an indirect play on oil plus materials that look to be moving up in the near term.

Past picks: Dec. 07, 2012

Activision Blizzard Inc.
Then: $11.34
Now: $11.17
Total return: –1.50 per cent

BMO Equal Weight Utilities Index ETF
Then: $15.50
Now: $16.12
Total return: +4.40 per cent

First Capital Reality Inc.
Then: $18.80
Now: $18.87
Total return: +1.49 per cent

Total return average: +1.46 per cent

Market outlook:

In a nutshell, I think the TSX will hit 13,000-ish and the S&P500 will hit 1,550-ish in the first half (if not the first quarter) of this year. Thereafter, the picture weakens. I am bullish for the first quarter or possibly first half of the year, but much less so going forward.

My belief is that the Fed’s and IMF’s bailouts and money printing strategies in 2012 have simply deferred the pain of a bear market (or at best a sideways period) into the future, and that future is almost here.

The TSX, which has been a relative under-performer, may do better in the next quarter or two than the U.S., but likely will be influenced by the larger U.S. trends in 2013.

In the near term, the relief rally from the “fiscal cliff” dilemma resolution may continue, since it coincides with strong seasonal influences for markets to rise in the first quarter. Positive effects of the U.S. and EU financial/QE programs will likely provide some further upside to markets in the first half of the year.

In the longer term, there are a few indicators that suggest deterioration within the broader markets at this time:

1) The NYSE index (which tracks the aggregate market value of all NYSE-listed common stocks) has failed to take out its 2011 highs while the much more concentrated S&P 500 index has exceeded its 2011 levels. In other words, the broader picture as an overall indication of stock market health is bearish, despite the rising S&P 500.

2) Key economically sensitive commodities such as oil and copper have diverged down in price while the S&P 500 continued up over the past two years. The decline in these significant commodities suggests a weakening picture for the markets. (See the charts here.)

3) The past 15 bull markets have averaged 3.8 years in duration and a 136.4-per-cent gain (Investech Research). We are now 3.8 years since the March ’09 bottom, and the S&P 500 has almost doubled in that time. This bull is getting old.

4) Strong technical resistance for the S&P 500, which has failed to be taken out in 2000 and 2007, comes in at 1,550.

5) There appears to be a five-year cycle on the S&P 500 that looks ready to peak in the first quarter of 2013 – which could coincide with the 1,550 resistance mentioned above.

 
  • FCR-T
  • SBUX-Q
  • HXT-T
  • ATVI-Q
  • ZUT-T
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