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

US. Thinks the US economic development is improving rapidly, especially in housing. He looks to them for continuous growth. Wages are up, hours being worked are up, more people are working and he thinks this is going to propel the US economy forward.

Energy. Weak energy prices are here to stay for some time. He is looking for anywhere from $55-$70 as a price over the next several years. Drilling costs have dropped like a stone and labour costs have dropped. Looking at the spread between whatever the energy price is, and the new cost base, it is a bit more encouraging than you might think. Will have to wait for a while for that to work through, but he thinks this is a positive. $30 oil is not going to happen. It may spike down to $35, but $40 is a long-term base.

Markets. In the big picture, he believes we are in a bull market. However, we haven’t had a correction since 2011 where he saw exactly the same symptoms. This correction has been very overdue and it is healthy. The financial crisis was part of a secular sideways market and 2011 was the 1^st proper correction in the bull market. Also, the technical indicators he was following were screening very similar signals to what had happened in 2011. The monster move down this morning created a little bit of a capitulation look. This is the beginning of a bottoming process. Often when you get these washouts, you get an immediate rally. This prediction is that very, very soon, if not beginning tomorrow, we will get a rally. It would not surprise him that if in the next week or 2 we got a rally that was followed by another leg down, and then it will probably be over.

Energy. There are certain support levels on oil, and the final one was around $38. He thinks we are very, very close to a bottom on oil, however there has to be a basing process. Nothing just V bottoms and then goes up, we usually get some sort of a process. If we get a basing at around $38 for a few months, that will indicate oil will probably put in a bottom.

Gold. This has been in a downtrend since 2011. It had support at around $1150 for almost a year, but blew through that recently. It has rallied back up to the $1150 area but the bigger trend is bearish.

Can technical analysis be applied to ETF’s? A lot of fixed income bond type ETF’s are baskets and they roll with bonds all the time, so you are dealing with something that is always moving and ever changing.

Keith’s rule of 3. An intermediate to short-term trader typically trades in 3-6 months time horizons and typically uses around 3 days or more on a break. If the break is to the downside, he is out. If it is a break from a level of resistance to the upside, he is in. He has a minimum of 3 days, but it is typically longer than 3 days. If you are a longer-term “buy and hold” type of investor, he would probably wait a couple of weeks, even up to 3 weeks.

Markets. He feels that the correction is healthy. It is necessary to have a healthy consolidation, a bit of a pullback, blow off some steam and shake “the loose leaves from the trees”, then continue to move forward. Everything gets a little ahead of itself. For example, Disney is down from its peak, but doesn't mean that it is a bad stock or company now. It just means that it got a little ahead of itself, so it was time for a pullback. The same thing has hapened to the market or sector.

Will the correction be higher than 10%? He recommends not getting ahead of yourself. He watches and listens to the market and doesn't try to tell the market where it should be going.

Markets. He is focusing on domestic facing companies, more domestic consumer interest companies. Focusing inside the US is a better strategy right now.

Will interest rates go up in September? We have a strengthening labour market, poor inflation firming not advancing too aggressively and reduced energy costs. There is a year lag when everything is balanced out. When you take these things into account and the need to move to policy normalization, the Feds have to do something in time. Regarding risk asset pricing, people are very nervous. People are sitting on their hands and waiting. There is a key note of uncertainity.

Markets. You want to be a little suspicious in August because volumes are normally light. Usually trading desks are being manned by younger people who are trying to move up. There are a bunch of areas between July and October that are good to be in. S&P 500 is still not in correction territory. He has been looking for that 2000/4000 level which happened around March/April. It has now broken down to the $1970 level. Are we going to have to visit the $1800 level? That is what next week will be about. Will it be broad-based? Will it be the pro-cyclical areas? Next week will be very important and what he expects to see is that it will probably keep pushing these downward levels to an extreme. There will be certain areas that might buck that trend, and those are the areas that he wants to identify, and which are good places to be. If the US joins the party, he expects there will be some bigger positions in some of those defensive spaces.

When asked about Ishare PHLX Semiconductors ETF (S0X-X). He believes that it is much more important to avoid big losses than to capture those big gain. He doesn't average down. He follows leadership. He believes when it is time to be out of the market it is time to be out of the market. Nothing wrong in sitting in bonds and cash. If you preserve capital, then you don't have to time that bottom.

US Markets. They have had fiscal pullbacks and monetary pullbacks. Thinks that the consumer is supported. Labour is firming. Gas pump prices are lower. They are doing okay.

Auto Sector. He wouldn't abandon the auto sector yet. It is sector that he has been a fan of. Magna on the Canadian side and Lear on the US side. The trend has been very significant and very positive. Lear has been taking positive steps recently. They have great cash flow creation and great capital return. Very constructive and positive moves. Average age of cars is 11+ years old . Sales rates for cars have been strong and continues to grow. These 2 companies look intact to him.