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

Market. The Fed has June on the table for a rate hike, and the market is not anticipating that. They came off sounding quite hawkish that things were improving and a hike would happen if the economic conditions warranted it. Once again they are focusing on employment and inflation. Employment growth remains healthy in the US. Inflation is still within their targeted range. Because it is data dependent, there is a heightened sensitivity to any economic data that is released between now and next month. Her longer-term thesis is that the US economy continues to grow at a 2%-2.5% pace. She always thought the pace of the US Fed was going to be quite moderate and well telecast, and she doesn’t see a sharp spike in inflation, so expects it will be a slow, gradual entry. Canadian banks have underperformed and are very attractively priced right now. The energy play is still on the table and you still want exposure there, preferably through some of the infrastructure and pipeline stocks as a more defensive way to play it. If the US$ strengthens, it will be negative for gold. Gold stocks are up significantly more than the commodity, and if an investor wanted some exposure, she would go with the actual commodity.

Car companies? She doesn’t own any of the OEMs. They are very cyclical, and as a group tend to trade at single digit multiples. Through the cycles they can lose a lot of money. For the group as a whole, the overhang is that US auto production may have peaked out. If rates start to move up, that is going to hurt auto demand in the US. Her preference would be to buy a high-quality auto parts supplier, who supplies into all of the companies.

Markets. If we get a recession in the US and Canada, we are pretty well guaranteed to get a Bear market. The two go hand-in-hand. When looking at economic data, it is most important to look at the US because they have such a bearing on global markets and global economies. He watches indicators out of the US fairly carefully, and when they start to turn down that usually precedes a bear market for a 6-9 months’ timeframe, and precedes a recession for the same amount of time. February through until April was a great time for the market, a broad-based advance with lots of stocks taking part. A number of stocks had a breadth that was very strong, and it reached extremes he hadn’t seen in a number of years. When that happens, it is typically a strong precursor to returns going forward. However, it takes a lot of energy to get that kind of breadth number, and typically after he sees it, there is a minor correction (consolidation) for a few weeks. Looking out 12-18 months, that is where you really see the strong returns.

Markets. The Canadian market hit a 6 month high for a nanosecond this morning, but the US market is following the typical track of what happens during a US presidential election year. In the early part of a presidential cycle, the markets do not like it for a couple of months. By the end of May, it hits a fairly important low. After that the markets go higher right through until around September. This is followed by a drop, through until election Day, and then the markets move nicely higher. The Canadian market is still in a period of seasonal strength, which is until June 5 on average. Following that it technically goes into a flat line until around August/September and then down until the middle of October. Typically, as you get to US election Day, November 9, both Canadian and US markets move significantly higher right through until the end of the year.

Gold. Historically gold does not do very well at around this point in time, and usually goes flat to slightly lower. It does click in when you get around into the middle of July, and then goes higher from there. Technically the chart on gold looks great and has recently developed an upward trend. Has recently broken into new highs. You’ve got to stick with it, at least for now.

3 indicator setups for short-term intra-day trades? The whole idea on day trading is to use short term momentum indicators to indicate when markets are going in and out of their trends. He uses stochastics, RSI and MACD. These can be used in conjunction with each other. Stochastics is the fastest, where you get the most signals, but also the most false signals. RSI which tends to be a medium time momentum indicator. Usually it is very, very good but not as fast as stochastics or as low as MACD. MACD is the slowest. He likes to use stochastics when going into a seasonal trade, to get him into the trade. He will stick to it as long as stochastics, MACD and RSI are moving in the same direction. He normally would not get out of the trade until the MACD kicks him out. Stochastics and RSI tend to get stuck at a high or low range for a period of time, and can whipsaw you. The MACD has a tendency to move slower and keep you in the trade for a longer period of time.

Markets. Buffet bought into AAPL-O for about a $billion. He also added to IBM in the past. Larry would not chase what Warren buys. The massive boom in China is pretty much over. Let’s look to India over the next 2 to 3 decades. India is going to have the massive boom that China had. India is outperforming China. There is a transition to a consumer society in China so he has not exited China completely.

Canadian Tech ETF not too conservative and not too aggressive. Caller is moving from XLK-N. He recommends the First Asset Covered call Strategy ETF (TXF-T).

REIT Stocks Overvalued? He does not think there is any value whatsoever in the REIT sector. There will be trading rallies. He would not put new money into the REIT sector.

Educational Segment. Head and Shoulders Pattern. This is THE best pattern and the most reliable pattern. You get higher highs and high lows over a period of time and then you make a lower high and a lower low. The neck line is the trend from shoulder to shoulder. We had the S&P in an uptrend since Feb lows and then in April it had a head and in May it is having a second shoulder. You have a lot of support in the 1970 area and if you are going to buy in the next while, it will be a good time. However, he is worried about the market in September/October.

Markets. He has gone short in some of his hedge funds on energy. They seemed so oversold. A bottom is being formed. You are paying for $50 to $65 oil today. He worries about the banking system in China. It is an oversold bounce off the US$. He thinks money will come back to the US$. He has gone short on names like TCK.B-T and FCX-N again.

Big US Banks. They have been out of favour and under pressure recently. This is an area in the US where he feels comfortable holding stocks. Interest rates are probably going higher in the US and will benefit banks.

Oil. Goldman Sachs is calling for $50 oil on the back half of 2016. That gave a lift to oil, and it is about time. The combination of good demand and supply outages sets us up to the end of the year. It is going to take an awful long time for Nigeria to sort out its issues. Saudi Arabia and what they are going to do is an issue she has been struggling with. They want decent oil prices for their own country, but at the same time the Saudis and the Iranians are really not friends, and the easing of restrictions on Iran is making the Saudis feel threatened, which could have the Saudis increasing production. She is very cautious and still has a lot of cash, but a lot less than she did a month ago. Expecting some volatility in the market and wants to trade around it.

Natural Gas? Natural gas in the US looks quite encouraging. Production has destabilized a little. The contracting rig count has really helped the price at lot. Also, natural gas in the US has been improving quite nicely. They have started LNG shipments, slowly but surely, and there is going to be a lot more exports to Mexico, which is looking pretty good. Canada is a few quarters behind although Canadian production is still very robust. The Montney is one of the best resource areas in North America right now. Storage levels are at levels which would typically be in October. With the oil sands production coming off-line, natural gas demands weakened considerably. It would be prudent to wait on the Canadian natural gas producers.

Market. Earnings season has just wrapped up and the earnings recession continues. There was a 7% blended earnings decline, for the 4^th consecutive quarter. This hasn’t been seen since Q4 of 2008, so he feels growth continues to be anaemic. 2016 started off pretty rough. Now that there is some stability in China and in oil prices, the market is reflecting that. Expects we will continue seeing volatility over the summer. He went to 25% cash in the 1^st week of January, and started to put some of that back to work over the last few months. Currently has 15% in cash and is looking for some attractive entry points.