Don Vialoux: The Bottom Line

Posted by Don Vialoux - Timing the Market

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Most equity markets, economic sensitive sectors and commodities reached an intermediate bottom on or about Tuesday August 25th. Markets have been volatile and likely will remain volatile until after the next FOMC meeting. Ironically, an increase in the Fed Fund rate at that meeting likely will be greeted favourably by equity markets. The much anticipated negative event finally will have occurred. Equity markets are developing base building patterns. Any weakness into the month of September should be considered a buying opportunity, particularly in sectors such as Canadian bank stocks/ETFs, “gassy” stocks/ETFs and fertilizer stocks/ETFs.

Economic news is not a significant influence this week. Traders are preparing for news on Wednesday September 16th from the FOMC meeting. 

Seasonal influences for most equity markets, sectors and commodities during the first half of September generally are neutral. 

Short term momentum indicators for most equity markets and sectors are mixed.

Intermediate term technical indicators (Bullish Percent indices, Percent of stocks trading above their 50 and 200 day moving average) are oversold, show signs bottoming/recovery.

Third quarter earnings and revenues are not promising. According to FactSet.com, 77 S&P 500 companies have released negative third quarter guidance, while 30 companies have released positive guidance. Year-over-year earnings are expected to decline 4.1% and year-over-year revenues are expected to decline 2.6%. Prospects are slightly better in the fourth quarter. Earnings are expected to increase 1.7% while revenues are expected to drop 0.6%.

International events will influence equity markets. Focus is on China. Volatility in Chinese equity markets remains extreme.

….click HERE or the image below to see the positive sector analysis like this example below:

Agrium (AGU)

Fertilizer stocks such as Agrium have a period of seasonal strength from late August until early January. Technical parameters for stocks in the sector recently became encouraging. Strength relative to the S&P 500 Index and TSX Composite Index has turned positive. The stock recently moved above its 20 day moving average. Short term momentum indicators are trending up.

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