Report prepared by:
Ryan Lewenza, CFA, CMT North American Equity Strategist
Technical Commentary (Pages 2
10) Technical Almanac Trading Ideas (Pages 11
13) Sentiment Indicators (Page 14) Overbought/Oversold Stocks (Page 15) Market Statistics (Page 16)
This Document is for distribution to Canadian clients only. Please refer to Appendix A in this report for important information.
AAII Investor Sentiment Bearish %
Source: Bloomberg Finance L.P. As of October 30, 2013
Last reading of 17.5% is well belowlong-term average of 31%.
Volume 8 Highlights
The S&P/TSX Composite Index (S&P/TSX) broke above a key technical resistance level of 12,900 in October. We view this breakout as an important event for the S&P/TSX, as we believe it is now in a new higher trading range. With the recent strength, the S&P/TSX is now technically overbought and we expect some near-term backing and filling for the S&P/TSX; however, we are growing more bullish on the S&P/TSX.
We have been bullish on the Canadian financials sector; however, we believe the sector is due to take a breather in the coming weeks. Given the recent strong gains and overbought condition, we could see some near-term profit taking.
We continue to believe that the U.S. Federal Reserve`s (Fed) asset purchases are providing a significant boost to the equity markets,
and with our expectations of the Fed “taper” being pushed out until
Q1/14, we see the potential for continued strength in U.S. equities. In the near-term, however, we see the potential for a pause in the rally and more likely, some short-term profit taking.
Bearish investor sentiment has dropped to levels not seen since early 2012. Currently 17.6% of investors surveyed are bearish, which is well below the long-term average of 31%. Overall, investor sentiment is heavily skewed to the bullish camp, which could be foreshadowing a short-term pull back in the equity markets.
In this week’s
report, we highlight
Corning Inc. (GLW-N)
Teck Resources Ltd. (TCK-T)
as attractive buy candidates and recommend investors trim/sell
International Business Machines Corp. (IBM-N). Chart of the Week
The Bears Have Gone Into Hibernation
November 4, 2013