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View from Toronto: Nibbling on Equities, Commodities, Defensive Sectors

03/05/2018 3:34 pm EST

Focus: MARKETS

Ziad Jasani

Managing Director and Partner, Independent Investor Institute

If the S&P 500 E-Mini Futures Index is able to remain above 2,675 to start the week, we are likely nibbling long further. More on global markets from Ziad Jasani of the Independent Investor Institute, writing and videocasting on Monday from Toronto.

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We ended last week (March 2) with eight high-level insights. View this week’s video commentary here:

1. Merkel’s coalition and the Italian election are likely to be a non-event leaving the euro stronger, while Trump’s trade tariff wars keep the USD suppressed.

2. In the short-term (days-to-a-week) we are likely to see the USD ↓ and U.S. Treasury yields ↑ = Supportive to Commodities, Bonds & Equities.

3. The Global Equity Market closed with a bullish-reversal pointing us north this week; implying Scenario B for the S&P 500 Futures = > 2,662-52 (support) but < 2,745 (resistance) and Scenario A for the TSX = > 15,400.

4. Poloz is unlikely to take a rate hike on March 7. However, the $CAD is likely supported (bounces) with Oil and Commodities, but a weak bounce is expected as trade tariff issues keep a dark cloud above.

5. Australian and Chinese trade balance data evening of March 7 is likely to show some fractures in the synchronized growth story, testing Mr. Market’s ability to play out a bounce as strong as Feb 9.

6. Draghi will not be able to convince Mr. Market he is dovish enough (March 8) and the EUR/USD likely strengthens = USD ↓.

7. The Bank of Japan (BOJ) is likely to preview a new way to dilute their currency March 8 = weaker yen.

8. U.S. topline jobs data (March 7 ADP, March 9 Official) meets-to-beats consensus; however, the average hourly earnings report has a lower probability to significantly beat consensus (March 9) = keeps the USD under resistance of its 50-day average.

This week: nibbling on equities, commodities

The above insights and expectations translated into the following actionable decisions on March 2 that we are looking to build on at the front end of this week:

1. After being stopped out of our Feb. 9 Bounce-Trades on Feb. 28 with handsome profits (+5% to +20%) we received a bullish-enough reversal on March 2 to start nibbling long on equities again. In fact we signaled the buy-entry  between 10:20 am – 10:30 am (EST) on March 2 Live. The primary spots we entered and held onto were: SPY, QQQ, IWM, XIC-T, XBI, XPH, IYW

2. With VIX and the USD pointed down we also suggested commodity-laden areas to nibble on as well: Oil (HOU-T), Natgas (UNG, HNU-T), Steel (SLX), a Hold-To-Buy stance on Gold/Silver/Miners (GLD, SLV, CGL-T, XGD-T, GDX, SIL), TSX (XIC-T, HXU-T), Energy Equities (XLE, RYE, XEG-T, ZEO-T), and Emerging Markets (EEM).

3. With the Global Bond Market readying for a bounce up off major support, and yields remaining stuck under resistance, a small door opened to play defensive equity sectors: XLU, XLP, XLRE, VNQ, IYZ, XST-T, ZUT-T, BCE-T, XRE-T.

If the S&P 500 E-Mini Futures Index is able to remain above 2,675 to start the week, we are likely nibbling long further.

If we see a re-test of support at 2,662-52 and a swing-low formation develops, we’ll be adding there. Similarly, if the TSX is able to bounce up off support of 15,400-360 and the USD persists weaker we’ll be adding further.

However, if said support structures do not hold, we will be flipping from long to short/inverse trades!

Video recorded 11 am March 5, 2018

View the Independent Investor Institute trading ideas and strategies videos here.