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

S&P 500 Technical Analysis - The next big level of support. We need to test the February lows. We are testing recent lows today. If we go below that we have to go back to the February low. We also have to test the February low for the NASDAQ. He does not think we can move higher until we test that.

Educational Segment. Will the FANG stocks take the Market Down. Markets are a sum of the parts. You have to look at the parts to know what it will do. He focusing on FANG. The FANG ETF plays the Internet and Tech. There have been no net gains in a year. You are not seeing higher highs. 50% of the NASDAQ is the FANG stocks. Trump is pretty aggressive against AMZN-Q. The trend is not broken on the QQQs. We have to test the February low before this market can gain re-leadership and run (150 level on the QQQ). AMZN-Q has had an unbelievable run. When it breaks it is most likely to find support at the 2017 highs. FB-Q can fall 15-20% more. This could do a lot of damage and Trump will do that if he has his way. AAPL-Q has already rolled over. It has pretty important support at $150. If it breaks it goes to $135. GOOGL-Q may be a target also of regulators, failed to make a new high and broke to new lows. But it would just be a correction in a longer term trend. FB-Q has already rolled over. $127.40 is the highs from 2017 to $106 is somewhere that it will find strong support. It is a big question mark for the market. If we get below the $150 on QQQ it would take us back to $145. The FANG group is 15% of the S&P500 and would take it back to the lows and possibly under cut it. The vast majority of earnings growth will come from Tech.

Market. The technicals are telling us lots of things. In the near term we want to watch the 200 day moving average as it was a support level for the S&P 500. It is at the lows of February now (Mid $2500s). If we hold above that we are good. There is a pattern that leads markets into correction and we are following that perfectly. In 2010 and 2011 we had this pattern. We had a correction in February and now in April and that is in line with those years. His thoughts are that we are headed into a healthy 20% correction sometime this summer. Don’t confuse this correction with a bear market. It is just a normal correction. Bull markets normally go more than 10 years. He thinks we have a significant bull to go but 20% is a significant correction.

MACD – What it is it and how do you use it. 12 and 26 are two moving averages. MACD is a moving average convergence / divergence. If the 12 is moving up, it is getting closer to the longer moving average. It tends to go up as they converge and goes down as they diverge. If MACD is moving in the direction of the market, you are fine.

Moving Averages. He uses the 50 day and 200 day moving averages because they are the classics, but he pays more attention to the 200 day. So many follow it that it becomes a self fulfilling prophecy. He pays attention because others do.

Start of Q2 with deep volatility: the markets started 2018 strong after an also strong 2017. This is now a healthy reassassment and putting fear into the market, which is healthy. Earnings are pretty good and interest rates, despite rising, are still low. Companies around the world are having a pretty good go at it. Yes, there are trade tensions. FANG stocks are beaten up, but starting to look pretty attractive. People are scared, but he's actually getting excited about the markets.

cannabis: The whole cannabis space is a bubble. There's a lot of speculation in this space with crazy deals. It's a mind trap. The more powerful you make the weed, the less you need to smoke. And we don't know the laws of impairment yet. There are lots of crazy expectations out there and he's pretty sure that some people have already lost money. There will be big drops in share prices.

Market. Canada had a surprised economic contraction based on housing. He is not too concerned about that. The stock market today is really concerned about global growth and whether Trump will derail this nice cocktail we have had with trade wars. One month’s data and especially based on housing does not surprise him. In 2017 we were third last in the world in terms of market performance. Now we are up to 12^th worst. We have uncertainties and headwinds that cause money to be moved outside of Canada. It has created a market that is at the same point as where it was 14 years ago. He has been hanging out in Canada and it has been a very happy story.

Balance sheets always matter. You want to look at a company relative to the peer group.

Market. It’s a real market again. This is when you get opportunities. This separates the men from the boys. Markets are governed by fear and greed and over the last year was all greed. When there is fear lots of investors make irrational decisions and there are opportunities with irrational price movements. Buy what you understand. If not, hire a professional a good money manager that makes money off the mistakes that other people make. This year is all about individual stocks. Stock specific more than sector specific for this year. Yield is great, but fundamentals is what matters and there are very good opportunities now in the Canadian Market.

Grandfather buying for (grand)children's future? Start conservatively, like TD which offers dividend growth with Canadian and US operations which can benefit from rising interest rates in either country. Also CN Rail. Don't gamble with, say, a marijuana stock which could go under. A TD Bank won't.

Market. He is hoping the Ontario budget will show some tax relief and improvement on the provincial debt, but doubts it will come. He hopes there will be something for small business owners dealing with rising taxes and electricity charges.

How are you dealing with higher market volatility? He tries to understand the companies they invest in and try to determine fair market value. So when the market volatility negatively impacts good companies, they will step in and buy. They currently have between 5-7% cash available at any time, which is higher than the 1-2% level when market volatility is lower. They play defensively by favouring dividend paying stocks that show growth in their dividends.

How will REIT distributions be impacted by higher interest rates? It depends on the health of the sector. A hotel REIT in a growing economy can see earnings continue to grow and not be impacted as much by higher interest rates. It also depends on the health of the balance sheet. How much debt is on a floating rate? Generally speaking, rising short term interest rates are an indicator of an improving economy. He does not think the rise in interest rates will be much higher and companies with good balance sheets and good cash flows will be able to fund distributions.

When he looks at today's valuations, he sees that earnings have to rise for two years to return to equilibrium. The market will correct or goes sidewaks for a while. With more volatility all around, step back and look at your stock price targets; and if a stock doesn't reach that target, then move on and buy something else. This is the perfect opportunity to take advantage of cheap prices. Important: Have cash to deploy during those 10-20% dips. He holds 20% cash. Investing is about how much you avoid on the downside more than how much you make on the upside. Don't chase yield. Few stock markets are up for 2018. He likes companies that generate free cash flow that's growing.