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Bank of America Merrill Lynch’s “Bull & Bear” gauge of market sentiment has fallen to 1.8, a level the U.S. bank’s strategists describe as “extreme bear” territory that has triggered a “buy” signal for equities.

This is the first time the “buy” signal for risk assets has been triggered since June 2016 when the Brexit vote sent global markets spiralling lower, the strategists said on Friday, adding it was “time to buy.”

The note came as markets rallied strongly after blowout employment figures from the United States lifted some investors’ concerns about slowing economic growth.

BAML said global equities have tended to rise after their “buy” signal was triggered. Their median performance the following three months – in the 15 occurrences since 2000 – has been 6.1 per cent.

Investors should buy the S&P 500, Chinese stocks, German stocks, U.S. small-caps, semiconductor and energy shares, U.S. and European high-yield bonds and emerging currencies, all of which are “very oversold,” the strategists said.

They saw the S&P 500 rallying to 2,650 points.

Global markets have had a torrid December and difficult start to 2019 as trading was marred by a slowing global economy, and multiplying signs of the impact of a U.S.-China trade war, the most recent of which was a revenue warning from Apple Inc.

--Helen Reid, Reuters in London

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Stocks to ponder

Transalta Corp. (TA-T). This utility stock is currently oversold and the stock’s price has consistently responded to Relative Strength Index buy signals over the past 24 months. A November 2016 buy signal was followed quickly by a 56 per cent price rally to January 2017. A buy signal in April 2017 successfully predicted a 20-per-cent rally to early July. In 2018, a February buy signal led to a quick 16.5-per-cent appreciation in the following weeks but importantly, the 200-day moving average trend line acted as resistance to further gains and the stock declined again. Scott Barlow reports (for subscribers).

The Rundown

Cannabis stocks took over the TSX in 2018. This chart proves it

If cannabis stocks were a curiosity in 2017, then in 2018 they went mainstream. For proof, take a look at daily trading activity on the Toronto Stock Exchange. In volume terms, a cannabis stock was the most-traded TSX-listed equity on the exchange in 144 out of 251 sessions in 2018, or 57 per cent of trading days. Aurora Cannabis Inc. was the clear standout, accounting for all but 11 of those sessions. In dollar terms, cannabis stocks were at the top in 94 sessions, with Canopy Growth Corp. accounting for 56 of them. Matt Lundy takes a look at the charts.

How 142 currencies performed against the Canadian dollar in 2018

For the most part, 2018 was a rough year for the Canadian dollar. The loonie dropped 7.8 per cent against the U.S. dollar, finishing the year just above 73 cents U.S. It wasn’t just the greenback, either: Nearly 80 per cent of global currencies, or 112 of 142 currencies tracked by Bloomberg, strengthened against the Canadian dollar. If there was a silver lining, several major currencies fell against the loonie, including those of such countries as Australia, Brazil, India and Russia. Matt Lundy reports (for subscribers). See also: Canadian dollar hits two-week high as investor optimism about trade talks lifts stocks

Apple’s stock plunge hurts Warren Buffett’s book value

The plunge in Apple Inc’s share price will likely cause new pain for Warren Buffett’s Berkshire Hathaway Inc, after the conglomerate suffered a big quarterly decline in its net worth that will hit its bottom line. Berkshire’s Class A shares fell 5.6 per cent on Thursday because Apple, its largest common stock investment, slashed its revenue forecast after demand fell in China and fewer customers upgraded their iPhones. Apple tumbled 10 per cent. The decline in Berkshire shares reflects Apple’s impact on the Omaha, Nebraska-based company’s book value, which measures assets minus liabilities and which Buffett uses to gauge growth.

Others (for subscribers)

Friday’s Insider Report: CEO invests over $480,000 in this stock yielding nearly 9%

Friday’s analyst upgrades and downgrades

A lift from the ‘January effect’? These nine U.S.-listed stocks look oversold

Ask Globe Investor

Question: I will not have enough cash to use up all $6,000 of my new TFSA contribution room in January. Can I transfer some of my stocks instead?

Answer: Absolutely. Just remember that, if you transfer shares in-kind to your tax-free savings account, it is considered a disposition and you are still responsible for paying tax on any capital gains (based on the difference between the price when the shares were transferred and the adjusted cost base of the shares). Unfortunately, if the shares have an unrealized loss and you transfer them to your TFSA, you are not permitted to claim the loss for tax purposes. In such cases, it may be better to sell the losing shares and contribute the cash to your TFSA. You could then wait 30 days to repurchase the same shares in your TFSA, or buy a similar, but not identical, security immediately. In either case you could claim the capital loss.

--John Heinzl

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What’s up in the days ahead

What to make of this week’s volatile - and at times stomach-churning - markets? Ian McGugan this weekend will look at the conflicting signals about where stocks are heading next as the tug of war between bulls and bears intensifies.

Click here to see the Globe Investor earnings and economic news calendar.

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Compiled by Gillian Livingston

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