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View from Toronto: Scenarios, Strategy & Tactics for This Week

10/15/2018 3:41 pm EST

Focus: MARKETS

Ziad Jasani

Managing Director and Partner, Independent Investor Institute

During our Strategy Workshop (Oct. 12) we laid out rationale supporting any Equity Market Bounce this week resolving to a lower high and/or consolidation pattern rather than a new sustainable up trend forming into year’s end, writes Ziad Jasani Monday.

View my weekly strategy session video here.
Recorded: Oct. 15, 2018.
Duration: 1:14:12.

A combination of the rising cost to borrow, slowing global growth, weaker earning’s expectations and more expensive economic inputs (Oil, USD) keeps our active investing community thinking short to mid term trading rather than longer term investing.

We start this week with a simple “game plan” for swing traders of Equities, Bonds, Commodities & Currencies:

  1. Conduct live analysis of Markets in our Trading Room, to determine whether a macro market swing low formation (bounce) is in place/confirmed.
  2. Take on Equity Bounce Trades that are congruent with the likely direction of Bonds, Commodities, and Currencies as earnings and economic data unfold what high level behaviors are required for a macro market swing low this week?

• Stabilization of the Global Bond Market; specifically seeing the 10-year U.S. Treasury yield remaining below 3.2%, the U.S. Long Bond ETF (TLT) > $113.46, while High Risk Credit (JNK) at minimum remains > $35.46.
• USD giving way to Commodity-Laden Currencies (AUD/USD, USD/CAD), while the EUR/USD remains above 1.155. Key watch outs that can pressure the USD up and stunt a bounce are US Retail Sales (Oct. 15), Eurozone Economic Sentiment (Oct. 16) and the FOMC meeting minutes (Oct. 17)
• Technical levels: S&P 500 > 200-day average (2,766) but ideally > 2,795 85
• Technical levels: Global Equity Market (ACWI) > $70.80 (bottom of side ways range)
• Technical levels: Oil > $71
• Volatility (VIX) < 23 What are our focal areas to accumulate/maintain on a swing trading (bounce) basis?

• We entered long Precious Metal, Miner and yen trades on Oct. 9-11 and maintained them over the weekend. We look to accumulate more GLD, SLV, CGL T, GDX, SIL, XGD T, XME while Gold sustains above $1,230 and more yen (FXY) while the USD (UUP) remains below $25.50.
• We suggested long Oil (HOU T, USO) viable above $71.15 and look to accumulate more above $72.53 along with Energy Equities (XEG T, XLE); Inventories are likely supportive to price this week.

• Equity Markets outside of North America have a relative advantage this week: EEM, EPI, FEZ, EWG.
• Within North America, it’s about Technology, Biotech, Small Caps, Materials, Discretionaries, REITs, and Cannabis: QQQ, XLK, IYW, FNG, XIT T, IBB, XBI, IWM, XLB, XLY, XLRE, XRE T, ZRE T, TLRY, HMMJ T.

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