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

Seasonality for Gold is strong from end of July until the end of September. The seasonality conked out very quickly. Stay away from it.

Oil. Seasonal strength from Jan to July/August of each year. But the seasonal trade was truncated. Now the trend is down, it is underperforming the market and below its 20 day moving average. Seasonally it starts to go down until Jan of each year. Get out of crude oil, but not necessarily out of the sector.

Nat Gas is interesting. It is bottoming and showing strength in a difficult market. Nat gas does well from end of September to end of December each year. Technicals are finally starting to turn positive.

S&P. It has had a 4 year upward trend and we are testing the bottom of the trend. We are very close to 1930 and he thinks we will test it in the next two weeks. If it holds then it is very bullish. It is below its 20 day moving average (in fact the 50) so there is technical selling coming into the market.

Markets. The strong US dollar is an indicator of a stronger US economy. It has recently widened the gap between it and world economies. The US dollar is telling us that interest rates are going to rise. For multinationals it is a headwind in terms of repatriating profits. We have to look at balance sheets closely in terms of leverage and debt servicing. There are some negatives of a higher US dollar, but it means a better US economy. It gives companies pricing power. You can’t look at any one indicator in isolation. Most people think rising rates are negative for companies, but it also means that the economy is good and in that case small negatives are overwhelmed by positive economic growth.

Markets. Things have played out exactly the way he thought they would. He is half invested and nibbling away. S&P is in a bullish trend. The TSX broke out from its old highs, but now we are seeing resistance in the resource stocks. He thinks you are better to look on the US side, but avoid NASDAQ and US small cap stocks. The IWM-N ETF showed slightly lower highs through the summer, while the S&P continued up. This divergence suggested a correction coming. We are in a massive bull market with another 5 to 10 years left, even if there is as much as a 20% correction in it. These are buying opportunities. S&P has support around 1960 and we are approaching it. It is quite healthy here.

Gold. Short term is the right way to look at it. There may be some support at the old lows of a year ago. He would not like to see that level broken as it could mean more trouble. It is trying to base. There is a descending triangle. He would not touch gold, but if you wanted to you could trade it off the bottom.

Venture Exchange. (JX-T) It has been treading water for some time. It is a tight base and going nowhere fast. Don’t assume a breakout or break down is going to happen.

Markets. Sell off in Hong Kong weighs on other world markets. They hear news, sell and ask questions later. Last week had the biggest tick in volatility this year. But September is the worst month seasonally. The Russell is Down, but the S&P is up so money is rotating into the large caps. The longer term things are starting to rebalance their portfolios. July had the lowest VIX of the year, but it spiked recently. 20% of US citizens are on food stamps, so the economy is not fixed. He thinks if the Fed were to try to raise interest rates next year the economy could collapse. The unemployment rate has come down because people drop out of the work force. Jobs are almost all in the fracking process. The employment rate has gone up proportionate to the population growth. You should rebalance into something that allows to still sleep at night.

REITs. A great place for dividends. They are linked to interest rate sensitivity. If the risk of trade is there, everything interest rate sensitive will come off. Thinks there is a 5-7% downside before the next area of support. Prefers preferreds.

Canadian Dollar. Caller says gov’t wants it to drop to $0.85. The government does not have a policy of having a weaker dollar. He thinks the dollar will in fact get weaker. He suggests buying a money market ETF to play this. You could buy anything with very low volatility and hold it in US$.

Gold vs Oil as an investment for 3 to 4 months. He does not know if one is better than the other and you have to be diversified. Get into the gold sector at an $1175 gold price. If crude oil futures drop below $90 and we get another 5% down on the energy sector, then that is when you want to step in there. He likes both sectors.

Educational Segment. Sleep at Night Factor. You need to take the risk down at times, but if you go to cash and markets go up then you miss out. He wants to take money out of the banking sector and get it into the energy sector and get the same dividend yield.

Markets. He is looking for a good correction. He would be happy with a 10% correction. Valuations were getting out of whack. He could not find anything in North America he wanted to buy. There had been internal corrections going on in small and mid caps. In the US an equal weighted index had been declining before the S&P. Now the whole market is correcting. A correction can take 6 to 10 weeks so it could keep going. This correction is based on valuation, rather than on anything bad.

Markets. He is seeing buying opportunities now in small cap growth. This is where the market has left behind these. Some are 2012 stories and the market doesn’t want anything to do with them. The industrial exporters should be benefiting from a weakening Canadian dollar. Today he noticed the VIX spiking at 16-17. Every time it hits the 200 week average it usually falls and this time it kept going and the markets rallied off it. Thinks there are people that are off side and are willing to plug their nose and get in. Seasonally this is the best time to be in stocks. This is the best time to get in, typically. After the first two weeks in October you usually get the best returns. He sticks to Canada for small caps because he knows management teams better. Investors still need to be careful this time of year. If we do rally from here it will not be a repeat rally of what we saw from the beginning of the year. We saw strong commodity prices and falling interest rates. Interest rates have now bottomed and commodity prices have fallen so this is a different playbook. He recommends non-commodity, industrials, technology and anything that benefits from a strong US dollar revenue base and a weak Canadian dollar expense base. Stay away from consumer, and commodities in Canada.