TD Waterhouse's Portfolio Advice and Investment Research Team has released its Technical Outlook for 2013.
Attached is their 2013 Technical Outlook, which they will be presenting in today's morning conference call. Highlights include:
· Given our belief that U.S. equity markets remain in a long-term sideways trading range, we believe the S&P 500 Index (S&P 500) will be capped on the upside at 1,550-1,575 in 2013. On the downside, we believe the S&P 500 could find support at 1,265-1,275. Key levels to watch on the downside include 1,380-1,390 (intersection of the long-term uptrend and 50-week moving average), and 1,343 (November 2012 lows). Overall, we expect volatility to increase in H1/13 as investors refocus their attention on U.S. politics, with U.S. lawmakers having to address the debt limit and sequestration in February/March. Improving seasonality and increased clarity around these issues could lead to a stronger second half of the year, resulting in modest gains for U.S. equities in 2013.
· With our expectations for modest economic growth and range-bound trading for commodity prices, we see the S&P/TSX Composite Index (S&P/TSX) trading in a range of 13,500-11,250, with the index posting modest gains for the year.
· Favoured U.S. sectors include Health Care and Financials, and in Canada, Industrials and Consumer Staples. At risk U.S. sectors include Telecommunications and Energy, and Utilities and Health Care in Canada.
· The key to the equity markets this year will be what unfolds in the bond market, in our view. Following the release of the December Federal Reserve (Fed) minutes, which hinted that Quantitative Easing (QE) could end in 2013, the 10-year U.S. Treasury yield surged to 1.91%, resulting in the benchmark bond breaking above its long-term downtrend. We believe the 10-year Treasury yield will continue to trade range bound between 1.60% and 2.40% through 2013.
· Gold has been in a short-term downtrend since hitting an important technical resistance level of roughly US$1,800/oz. in September 2012. We attribute some of the recent weakness to the December Fed minutes, which captured an increasing concern from some Fed officials over its asset purchases. Overall, we believe gold will make another attempt at the US$1,800/oz. level, and possibly the all-time high of US$1,900/oz.
· U.S. stock picks include Ford Motor Co. (F-N), Pfizer Inc. (PFE-N), Qualcomm Inc. (QCOM-N), and Norfolk Southern Corp. (NSC-N). Canadian stock picks include Precision Drilling Corp. (PD-T), Franco-Nevada Corp. (FNV-T), Alimentation Couche Tard (ATD.B-T) and Goldcorp Inc. (G-T).
You can read or download the complete report below:
