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Bill Carrigan.Kevin Van Paassen/The Globe and Mail

Bill Carrigan is a technical analyst at Getting Technical Info Services.

Top Picks:

Focus on the dominant theme – aerospace and health care and one washed out sector – the junior gold miners

CAE Inc. (CAE TSX)

CAE is an overlooked play on exposure to military and commercial aerospace with new positive relative performance versus the S&P/TSX composite.

BMO Equal Weight US Health Care ETF (ZUH TSX)

ZUH is a basket of biotech, pharmaceutical and health care companies with long established positive relative performance versus the S&P/TSX composite.

BMO Junior Gold Index ETF (ZJG TSX)

ZJG is an out-of-favour washed-out group that may provide inverse market protection – note the current extreme negative relative performance versus the S&P/TSX composite.

Past Picks: October 2, 2013

First Quantum Minerals (FM TSX)

A diversified metal producer that has concluded a long flat 24-month bear – relative perform is improving and the money flow numbers are positive. No exposure – still a buy now.

Then: $18.61; Now: $22.00 +18.22%; Total return: +19.00%

AG Growth International (AFN TSX)

A grain handler with a new 52-week high, a youthful bull and improving money flow numbers. No exposure – prefer, but Alliance Grain (AGT) is stronger

Then: $39.85; Now: $43.94 +10.26%; Total return: +16.32%

BMO S&P/TSX Equal Weight Banks Index ETF (ZEB TSX)

A diversified price momentum play on the Canadian banks of which TD and BMO posted new 52-week highs in spite of the negative U.S. news. No exposure – still a buy now.

Then: $19.91; Now: $23.93 +20.17%; Total return: +24.09%

Total return average: +19.80%

Market outlook:

The prime market driver is powerful U.S. dollar rally of July through September.

The strong U.S. dollar has crushed most of the commodity complex including gold, crude, grains and the base metals. The major exception is lumber which is operating in cyclic opposition to the broader commodity complex.

Some negatives would be the smaller caps underperforming the large caps and the flattening of breadth as measured by the NYSE advance decline line. The strong dollar has investors fleeing the North American energy sector.

Some positives would be the current strength of both the NYSE and TSX financial sectors along with the strong consumer and technology sectors all enjoying the benefits of lower energy prices.

Strategy: Avoid market timing and over-weight the strong sectors such as financial, health care, technology and lumber – using sector ETFs when available.

Also get exposure to the longer term dominant themes – such as aerospace, health sciences and the counter cyclical lumber space.

Examples:

Financial exposure – ZEB TSX & ZUB TSX

Health Care – ZUH TSX

Aerospace – PPA NYSE

Lumber – WOOD NYSE or West Fraser and Weyerhaeuser