There are a few near termed signs suggesting that we may indeed see a typical spring peak, followed by an early summer selloff. On the daily S&P500 chart, note the squeezing of the Bollinger Bands (often denotes a near termed change pending), the divergence in RSI and MACD momentum, and the very, very narrow volume in the recent weeks. Adding to the contrian sentiment signals discussed in Monday’s blog, sentimentrated.com just posted a chart noting the ratio of equity: money market mutual funds. The current ratio is approaching similar levels to 1999 and 2007. These are all potential signs of a shift in direction coming.
One reader of this blog asked me this week what sectors might appear most attractive, if my call for a correction comes true. At this juncture, I would suggest that we form a shopping list for a POST correction purchase, rather than go looking for new positions to add right now. On my shopping list would be the utilities sector, as mentioned on last week’s blog: https://www.valuetrend.ca/?p=2002
I’m also watching the rails. I sold my CNR position last week, given its early signs of weakness after an overbought condition. But a healthy pullback to its 200 day MA (green line) and trendline in the mid-low $90’s would provide an entry point for this up trending stock. CP rail remains overbought, and I would expect that a correction to near its 200 day MA area. The $105-$110 area might make it attractive. They are on my shopping list.
A few oversold technology stocks might be worth putting on your watch list as well. INTC has bounced off of $18-20 several times over the past 4 years. Near termed resistance lies around $22-24, which would be a good trade if one could catch the full range of that movement.
AAPL continues to intrigue me. Support does seem to come in near $420. Is this stock as undervalued as the APPL bulls think? Watch the earnings reports for signs of stability, and watch the charts for continued support over $420. This one might be worthy of a bottom fishing exercise, should it break the trendline to the upside.
I also continue to watch the Canadian Banks (which I sold recently – per past blogs). While perhaps a bit early yet, it will be interesting to see if this sector can again provide an equally profitable entry point as they did last year. A break of $18.50 on the BMO Bank ETF would imply a $17.50 target – and perhaps a good entry point.
Belleville Ontario Library book talk: I’m speaking in Bellville at their public library as part of my book promotion tour. Come out and join the discussion if you can – its this Thursday at 6:00 PM.
BNN MarketCall: Tune in to BNN this Friday at 6:00 PM. You can email questions now at [email protected] or call in during the 1-hour show at 1 855 326 6266
Vancouver Moneyshow: I’ll be at the Moneyshow on Friday April 19th at 12:15 PM speaking about the technical profile of the stock markets. Its at the Conference Center.
West Vancouver Library book talk: I’m speaking at the West Vancouver library as part of my book promotion tour. Come out and join the discussion on Saturday April 20th at 10:00 PM.