Above is a Thomson chart of the BMO ZEB equal weight bank index (stock price only with no dividend reinvestment). I’ve applied a 1-year cycle tool to this relatively short termed chart. Banks have been peaking predictably around this time of the year, and have sold off thereafter. The pullbacks have been significant for this group. The 2010 decline was 13%, the 2011 decline was 20.5%, and the 2012 decline was 10%. Despite the bull market, this index is more or less flat over the last few years. While investors collected a reasonable dividend yield (currently about 3.6%), the better plan was to trade the Canadian banks. Technical resistance does seem to be hitting the group yet again at the cyclical high point of the year—the banks hit their high in early March. I’ve been out of my banks for a month, as mentioned on my February 6th posting here: https://www.valuetrend.ca/?p=1847. I’ll buy back in late summer or fall if/as/when the opportunities present themselves on the group.
Lumber and US housing
Back on February 13th, I had guest columnist Bruce Joseph offer his insights on the outlook for Canadian real estate. Here’s the link: https://www.valuetrend.ca/?p=1865
Canadian real estate aside, the US real estate recovery has attracted some real attention over the past year – particularly since last summer. The charts below show us that the US Homebuilders Index is on a nice tear, along with the lumber futures contract. Both of these charts showed overbought condictions, as indicated by the stochastics and RSI indicators. Lumber has already begun pulling back after bouncing off of its upper Bollinger band. A chart available at www.equityclock.com suggests that lumber may experience flat to weak returns after mid-March – with the best time to buy in mid-October.The Homebuilders index is likely to correct in the nearterm, although the momentum oscillarors are not yet rolling over. Higher highs and higher lows suggest a continued postive trends for these two charts. Watch for support at $370 on lumber and $27 on the Homebuilders index to ensure a continuation of the trend.
Keith speaking in Creemore
Don’t forget to stop by and visit the Clearview Health and Leisure Showcase, where I will be speaking this Saturday March 23rd @ 2PM.
I will stick to my intial plan and look to get back into the lumber and home builders sectors in mid/late October again.
Your $LUMBER chart is excellent. While I see the trend is still intact, there is a divergence in the CSI and the MACD (not shown).
WFT shows some similarities with a slight divergence but still has a very strong strong trend – and it still outperforms the TSX by a side margin. Boy did I ever sell that one too soon.