US Snaps Right Back 

General Comments 

Last week was unpredictable, to say the least. We have felt that the US market was in need of a pullback for a few weeks, and early November showed it grinding around in a range before finally showing some downside the week before last. Then with the Paris terror attacks, one would think the generally unsettled nature of markets combined with an extended condition could easily push things lower again.

Of course, at that point, markets rally, as it is never part of their duties to please the expectations of the majority. Last week was also a flip in the sentiment of the retail sector, with strong results from Nike, among others, changing the tone from the prior week.

For such strong week, there was very little additional news or actions that would add so solidly to market averages. Yet markets were stronger every day. Even Canadian markets were dragged higher, after hitting recent lows the prior Friday, down over 10% for the year at that point. There was little explanation for this either, as crude was mixed on the week, and financials only managed a meagre bounce from an oversold condition.

These are the times where trying to predict short term moves in the indexes is very difficult. We still think that the most likely outcome is some renewed weakness before a year-end rally, but that scenario was definitely thrown into some doubt last week. This is why we look at things on a stock by stock basis. Of course the overall condition of the market is a consideration, but at times like this when the short term behavior of the overall market is even harder to call than usual, it is comforting to have a real strategy to base decisions on.

When quality stocks that meet our fundamental criteria also fit in with our technical buy parameters, we buy them. When they get extended on the upside and hit our most optimistic target prices for the next 6-12 months, we sell them. This is by no means perfect, but generally affords us some buying power during market declines, with the funds raised in the last strong rally. It also leaves us with funds to buy groups beaten down by short term sentiment that still fit our earnings demands.

Healthcare is a great current example of how this works. The group has been on the downside since the summer, after having Wall Street sing its praises loudly in the spring after a sixth month rally. Now, when value has been restored, there is little interest in the group. We disagree and see opportunity here, despite the overall market near its highs for the year.

Source: Dorsey Wright and Associates

Source: Dorsey Wright and Associates

Source: Thomson Reuters

Source: Thomson Reuters


Our longer term indicators are all positive.

The shorter term signals are now negative, though I don’t think this lasts for too long.

While the October rally ground a little higher than expected, the breather we were looking for two weeks ago now seems to have started in earnest. If the market is down again this week, the media hand wringing will gain strength. But this would simply be an expected reaction to an overbought situation.


TSX Chart Nov. 20, 2015

Chart courtesy of

Interest Rates 

Bonds were stronger on the week after two poor weeks. The TLTs finished at 120.70, with the ten year yield at 2.27%.

Utility stocks found support at recent lows and started back to the upside. We continue positive on them here, but our expectations on the upside are more modest than they were in the summer. Getting back to the top of recent range still represents an upside of nearly 15%.

While there is no change to my expectation that that more will come around to our long standing view that it is a lot better to get a 5% dividend than a 2% interest payment, it is clear that these shares are much more volatile than I expected to see.


The Canadian dollar was flat last week. Our view on the dollar has turned much more bearish. Anyone without the benefit of US currency investments at this point is encouraged to do so. The Canadian finished at 75.22, and we are still a long way from our preferred level to convert more funds. Our hope is that an energy rally back to the high 50s might drag our dollar back toward 80c. We would be aggressive sellers there.

The Euro was lower at 107.35, as the US dollar continues to gain ground on the expectation of an interest rate increase, however small. Still, I am more open to Euro share purchases now that one third of the air has been removed from the Euro, but they are not in the ‘must have’ category in my opinion.


Gold finished unchanged at $1,081, and is now back at the bottom end of its range, after challenging and failing at resistance a few weeks ago. The shares have followed bullion fairly closely recently. Gold could mount a bounce in the coming week or two but that is for traders only.

Base metals shares also fell. Copper was lower at $2.05, nickel at $6.00, and zinc at $0.76. We still have no interest in the metals shares.

S&P 500

S-P 500 Chart Nov. 20 , 2015

Chart courtesy of


Crude finished the week at $41.75, which was flat with last week. Natural gas was lower at $2.37.

Energy shares were softer, although continue to hold above levels they were at when crude was this level last time.

We are more negative on energy than we were a month ago. Our outlook for crude prices is not as bright as expected due to stubborn oversupply from OPEC. Also, the election result is substantially bad news for the energy sector in Canada, despite the best efforts of all to pretend this is not the case.

Canadian Stock Focus

Stocks in buy range are: Gildan, Magna, Martinrea, Keyara, and Richie Brothers.

US Stock Focus 

US Shares in buy range are: Ciena, Wells Fargo Bristol Myers, Cambrex, Korn Ferry, UnderArmor, Lowes, Acadia Health, Mylan Labs, Jabil Circuit, and Gilead.


Overall, it was a great week for US markets that recovered a lot of the ground lost the week before. I still tend to think we see more softness before a year-end rally, but the timeframe is getting tight for that.

We will continue to add non extended names where appropriate, and will take any opportunity to increase US exposure in the weeks ahead.


This newsletter is solely the work of Greg Radovich for the private information of his clients. Although the author is a registered Portfolio Manager with Dundee Goodman Private Wealth, a division of Dundee Securities Ltd. (“Dundee”), this is not an official publication of Dundee, and the author is not a Dundee research analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and they have not been approved by, and are not necessarily those of, Dundee. Forward-looking statements are based on current expectations, estimates, forecasts and projections based on beliefs and assumptions made by the author. These statements involve risks and uncertainties and are not guarantees of future performance or results and no assurance can be given that these estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.
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These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.