A Comment -- General Comments From an Expert (A Commentary)

People are getting increasingly bullish on gas. It's hard to get the timing right, as gas is not at robust levels right now. Because of LNG Canada, next year looks much better. But he feels that now's the time to start accumulating. He has probably a 25% weight in natural gas right now, plus about a 10% weight in services, which is an indirect and cheaper way to play a bullish call on natural gas.

Everyone's chasing NVDA and AI right now. If you're bullish those things, you should be bullish natural gas because it's going to lead to a 7-14% increase in nat gas demand between now and 2030.

Not all names have the same upside potential. It's a stock-picker's market right now.

It was all about the picks and shovels. But now it's spread out to what people are calling the AI grid, so the whole energy grid and how energy is going to be sucked over into the AI ecosystem. Everyone's starting to participate.

If AI revolution started back in the fall of 2022, when OpenAI came out, you'd think that by now the software companies would have been able to get some traction. But the end users are still trying to figure out how to monetize the opportunity.

So the best opportunities for this year remain with picks and shovels, such as chip suppliers, designers, data centres. There aren't that many participants when it comes to the real data centres, the two main ones are EQIX and DLR.

Recent US Federal Reserve minutes seem to be self-fulfilling prophecy. Negative comments reflecting higher inflation being felt by markets. However, important numbers (inflation, job numbers, retail sales) pointing in the right direction. Many areas of the markets performing well including commodities and broader areas the market - not just big tech. Consumers are turning out to be very robust - not showing weakness as expected. If US Fed paid closer attention, would notice that inflation is cooling, and customers are starting to stay home. Strong Walmart & TJX sales indicating customers are starting to search for "value" options. Major news today is NVIDIA - recording earnings continue to power stock performance. However, time will tell how much of share price already had earnings baked into share price. 

Shopify First Quarter Highlights: 

Looking at high level metrics of revenue and EPS, SHOP appears to have had a solid quarter. No one would have guessed just by seeing these numbers that SHOP’s stock would decline by over 20% following the release. Additionally, breaking out total revenue by solution type; merchant solutions and subscription revenue both displayed strong growth of 24% and 34% from the prior year and beat estimates. What the market had issue with was SHOP's outlook. Particularly gross profit margin outlook for Q2, which the company forecasts declining 50 basis points. SHOP also said it expected revenue growth in the 'high-teens,' which was disappointing to some when estimates called for growth just under 20% for Q2. Additionally, the company raised its operating expenditure guidance which further probed cause for concern. A 20% drop in price is definitely a strong reaction to this news, but due to SHOP’s expensive valuation the market will be highly reactionary. We continue to like SHOP and the quarter in itself was good, while the company continues to have a solid growth profile.
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To him, it's a sign that maybe the economy's slowing. We're seeing that in the US when you look at sales and such. And it's showing up on the charts when he looks at the sectors. The defensives can be leading indicators.

If you look at the bottom of a market and the bottom of an economy, it's the growth stuff that'll pick up a little early as smart money starts picking it up. So just maybe smart money is starting to move out of high beta and into defensives.

We just made a new high on the S&P. As a technical guy, he can't ignore that. He's in. But there are signs, such as the VIX, which is hovering around 12, very low. 

Historically, if it stays below 12.5 for too long, you almost always end up with a market correction. Don't worry about a few days, but if you get a cluster it means there's complacency in the market and you ought to be worried. He's a bit concerned, given how fast things are moving these days.

Yes, and that's largely looking at resources like gold and stuff. TSX has a slightly different profile than the S&P 500, which is mostly high-beta tech.

It's interesting. In his blog, he said that he thought the market would pause around 5150. It went right through 5200, the old high, and here we are just over 5300. It doesn't matter what he thinks or says, the market's going to do what it's going to do.

You're not allowed to have a theme. You have to follow what the tape is telling you. The tape's telling us that it's a new high, with more momentum moving into the market. For the time being, we must remain bullish. He's still long the market, but there are signs telling him that things are a bit stretched, and that the party could end in the next month or two. We'll see.

Nothing's absolute. The tape's the tape. If it's over 5200, he has to stay long the market. But he's aware of the signs and, just as in Star Trek, he's prepared to "take evasive action" and move. Keep an eye, but don't argue with the tape.

He loves oil. Seasonally, can take a pause over the summer. And after the move we've seen, likely to see it move sideways or even a pullback. Longer run, say 1-2 years, he's very bullish. 

Thinks it will get back to $100. Tons of potential for it to get there, and lots of resistance space before it does. Have to break though $88-90, and once it does, $100. Then who knows, $120 and beyond. One thing at a time. Seasonally, seeing it a little soft now. End of the summer, should start to see it pick up.

See his blog. He writes a lot about commodities there.

American Depository Receipts. Foreign stocks, usually giant companies. If you own an ADR, and the currency in the original country declines, that could affect the stock price. So you do have to take into account potential currency moves. Before buying, he looks at the chart of the country's currency.

He's a technical guy first. Does respect and use seasonality, using it as a background. Consumer staples and utilities are defensives, but also tend to do OK during the summer on a relative basis. Look there first. They're leading the market right now, they're defensive, and primed for seasonality.

Only be concerned if a stock breaks the trendline, and for more than a couple of days. He uses a 3 and 3 rule to tell if there's a breakout to the upside or a breakdown to the downside. He needs a minimum of 3 days. If it breaks out, he'll ignore it for 3 days. If it breaks down, he tolerates it for 3 days. But if that continues for 3 weeks, he definitely wants out sooner rather than later.

Throughout the years, indexes and the stocks have gone up and down in random intervals. Recent market highs appear to be breaking records - without a reason. One reason might be due to new investors who don't have a memory of markets crashes from the past. Biggest concern is that market gains are only led by a handful of stocks. However, it appears market strength is broadening out. Traditional stocks are seeing strength despite numerous interest rate hikes. Traditionally, bears have been proven wrong in the total history of American capitalism. However, is a balance between optimism with realistic expectations. 

Market View: Is Inflation Cooling?

The Producer Price Index (PPI) in the US rose 2.2% in April, coming in line with market expectations, indicating rate cut may eventually come as inflation gets back to the target level. In addition, the US inflation eases as the consumer price index (CPI) rose 3.4% in April, in line with expectation but down from 3.5% last month, marking the smallest increase since 2021. The Canadian dollar was 73.5 cents USD. The U.S. S&P500 ended the week up 1.2%, while the TSX was up 0.3%.

It was a mixed week of greens and reds. Materials rose 2.6%, while financials and technology gained 0.5% each. Consumer discretionary edged up by 0.2%. Industrials slid by 1.3%, while energy and real estate gave up 0.8% and 0.3%, respectively. Consume staple ended the week flat. The most heavily traded shares by volume were Tilray Brands, Fission Uranium, and Bitfarms.
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Remains bullish on markets. Markets have had consistent gains since October 2023. Markets appear to be strengthening outside of big tech. Companies with high dividends tend not to growth as much - would rather slow & steady dividend growth (to keep up with inflation. With rising interest rates, important to screen companies that are sensitive to this. Energy, materials & industrial sector's are presenting large amounts of opportunity (Price/Cash Flow very low).