Keith Richards is portfolio manager at ValueTrend Wealth Management of Worldsource Securities. His focus is technical analysis.
iShares Global Agriculture Index ETF (COW.TO)
Just initiating this positon. It pulled back to its trend line and successfully bounced off. Some of the holdings such as the fertilizer stocks can be seasonally in favor right now, while others such as Deere and Bunge do better later in the season. But we like the chart at this point, so that influences us to buy at this time.
Keyera might be considered a little "unfairly" beat up on oil's recent selloff. The company doesn't actually have a great reliance on commodity process. It's a tolling operation. Essentially its processes gas, stores it and transports it. The stock sold off on the energy selloff late last year, and has been steadily moving in an uptrend since December. It's at the bottom of the uptrend right now, making it a decent entry point. Collect a 3 percent dividend while you wait for it to rally.
We have been moving between 35-50 percent cash over the past 6 weeks or so. We expect to continue trading certain opportunities, yet still maintaining a high cash allocation until the fall.
Past Picks: July 8, 2014
Utilities Select Sector SPDR ETF (XLU)
Utilities typically add stability to a portfolio during a volatile summer. We bought at around $43, then watched it test and bounce off of its September lows of $41.50 during the recent market madness. We expect this sector to be stable on a relative-strength basis to other sectors should things get choppy again. We'll sell in the fall at the end of its traditional seasonal period. It pays a 3.5 percent dividend.
Then: $42.99; Now: $42.93; -0.14%; Total return: +3.38%
Cominar REIT (CUF_u.TO)
We still hold it, having bought around current price levels. It just tested its December low of around $17.70 and is bouncing off of that level. We don't see a ton of upside, but do expect the share price won't have much downside while we collect its dividend over the summer.
Then: $18.65; Now: $17.99; -3.54%; Total return: +4.25%
We're at around 40 percent right now.
Total Return Average: +2.54%
The trading range looks likely to continue for the S&P 500 for a while yet. Recent market malaise has brought the market down to the bottom of its range, after noting on June 25 in my blog that my near termed trading signals were peaking. Now it looks like we're coming off of the bottom of that range. It will be a challenge for the S&P 500 to break above the top of the range, which lies around 2130. However, near termed strength in China and a reprieve from European news may inspire investors to push the S&P 500 back to that 2130 level shortly.
Technically, a couple of indicators are suggesting a setup for the S&P to rally. Sentiment indicators have shown an increase in "smart money confidence". These are the sophisticated investors and traders who are usually accurate in their predictions. We're also getting a few oversold oscillator signals that indicate the potential for a possible return to the top of the trading range. This does not suggest that I am in any way "bullish" for the summer. I merely see a potential setup for a near termed rally at this time. A return to the bottom of the trading range in the 2040 area, or possibly as low as 2000, may occur after the excitement of the Greek deal passes. A weaker than expected Q2 earnings season (Thomson Reuters shows a three percent decrease in expected earnings for Q2 2015) may be a catalyst for a selloff back down to the bottom of the range.
We continue to hold a fairly high allocation of cash, given our outlook for continuing volatility over the summer.