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

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). 

Last minute push extended markets to record highs on Friday (May 17). Next week will present upcoming earnings, and will be indicative of economy. Many companies outside of "Big Tech" are reporting record earnings - which means strength in economy is extending past tech. Retail blue chip stocks like Target & Walmart are looking strong as well. NVIDIA earnings report next will is what everybody is waiting for. Indicates strength in generative A.I. & accelerated computing. Chips from NVIDIA are stronger than anything on the market - so in some ways, company deserves valuation. However, expect volatility from NVIDIA - would advise investors to "own" the stock rather than trade it. Bottom line is that lots of upcoming earnings coming up. 

Market Update:

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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Everything's great right now in equity land. Market's are at all-time highs, with pretty broad-based strength across the board. Stick to the winners and let them run. Market's a bit expensive if you look at the PE ratio, but that's driven by the dominance of the Magnificent 7.

Under the surface, lots of value. Interest rates have peaked out. Profit margins and earnings margins are going higher. That's a healthy market, and we should see it higher by the end of the year.

It always comes down to the valuation on the stock. Earnings are what drive the stock. As long as PE ratios are sticking within historical levels, he'd keep holding as long as the earnings outlook is good. 

Inflation is starting to come down. Weakness is starting to creep into consumer spending and the labour market. Ultimately, that's what the market and the Fed want to see. Powell was right not to talk about rate hikes, the focus should still be on cuts. When those cuts come through, they'll drive a rebound in the consumer.

Know the companies you own really well, and allocate capital appropriately as you navigate the markets.