The Canadian economy is dominated by Financials and has a diverse and abundant exposure to natural resources. Despite the close proximity, the composition of the country's stock market couldn't be more different from that of the US.
They have a much higher relative exposure to areas like Financials, Energy, and Materials... Basically, all the things that are working.
On the other hand, they have significantly lower exposure to areas like Technology, Health Care, and Discretionary... Basically, all the areas that are NOT currently working.
It was John Roque who taught me this so many years ago. At least a decade if I had to guess.
We're NOT in a reversion to the mean business. This is a reversion BEYOND the mean business.
In other words, assets don't just get back to what is "average". They tend to overshoot. And that's the norm, not the exception.
This mean reversion we've seen in energy could be just that, a reversion back to the average. But if I've learned anything over the years, these things tend to overshoot.
We've been very vocal about this Value rotation, of course. But coming into the weekend, the big question I pose to myself, my team, and the market for that matter, is this:
Will Energy run into trouble at this logical level? Or will it not care what JC thinks is a logical level?
In our latest post, we highlighted the outperformance of Small-caps over large caps and shared a few ideas that we thought could perform well going forward.
Here is part 2 of the Small-cap actionable ideas. Let's see take a look at the names that have made the cut!
Nifty Small-cap 100 has been moving past crucial resistances. As can be seen from the chart below, we're tracking 7,850 as the risk management level with 9,650 acting as the next target.
In no market can prices rally without minor corrections, so as long as this index is trading above 7,850, our bullish view remains intact.
If there is one chart that stands out the most this year, it has to be the Growth vs Value relationship. We've been pounding the table about it for a reason.
We know what's happened over the past couple of weeks. But when you zoom out and see just where it's happening, that's the WOW!
I want to elaborate on a big theme of late that's been on my mind. We've written about it, discussed it internally - as well as on Clubhouse, and just this morning JC and Willie were both tweeting about it.
Considering what a mega-trend passive investing has become with the ETF boom over the past decade-plus, this is likely to impact investors far and wide... If they don't reposition themselves appropriately.
The reason for this is nuanced but in my opinion, it boils down to the argument that passive is really just active and there have been significant changes in market structure since the financial crisis that have resulted in the major averages being dominated by just a small handful of stocks.
Small-Caps are now the flavour of the season, or at least of the current market setup. With these stocks outperforming the broader market, we took a look at some stocks that could be actionable trades with good risk-reward ratios.
We've broken down this post into two parts to do justice to the number of ideas we're observing right now.
As the Small caps continue to outperform the market, the constituents belonging to this segment are expected to generate greater returns than the large-caps.
For now, it looks like this index is moving about in a market of its own. The next target that we're tracking is 9,650 and the risk management level is 7,850.
Click on chart to enlarge view.
Now let’s take a look at some actionable ideas at current levels that look attractive on the long side for the next few weeks and months.
The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.
The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.
From the desk of Steve Strazza @Sstrazza and Ian Culley @IanCulley.
We held our March Monthly Strategy Session last night which Premium Members can access and rewatch here.
In this post, we’ll provide a summary of the call by highlighting three of the most important charts and topics we covered along with commentary on each.
From the desk of Steve Strazza @Sstrazza and Ian Culley @IanCulley
We think it's time to buy Gold Miners again, specifically the VanEck Vectors Gold Miners ETF $GDX.
The yellow metal has not been a great place to deploy capital over the last 6 months as the environment has significantly favored stocks over rocks... and risk-assets over defensive ones in general.
Owning Gold or Gold Miners has been nothing more but opportunity cost. However, there is mounting evidence that suggests now might be the time to jump back into this trade.
First, Commodities have really been working as an asset class. We've been pointing this out for months now, from Industrial Metals and Ags to even petroleum-based commodities.
Although through the early innings of this Commodities resurgence, Gold and Gold Miners have taken a back seat as prices peaked all the way back in the summer of last year and have been trending lower since.
We've enjoyed a ton of success with our bottoms-up scans and the columns they've inspired over the past year.
We've already launched four columns around them since last summer, and we have more coming soon.
When we combine these scans with our traditional top-down approach, they make it almost impossible to miss profitable opportunities and key market themes.
Today, we're sharing one of our internal favorites with you. It's called "Fade The Street,"and we introduced it in a report last month which you can read here.
It was a big hit and there's been a lot of change since then, so we thought a follow-up was appropriate.
Our Fade The Street scan leverages buy/sell ratings and price target data from sell-side analysts to identify strong stocks with significant potential tailwinds that can propel prices higher in the future.
