For this week's SIA Equity Leaders Weekly, we are going to look back at the Silver Continuous Contract and also at a Canadian Long-Term Bond ETF to give us some insight on where the strength is within the Canadian Bond Universe. The continued drop and weakness in Crude Oil and other Commodities has been a topic SIA has talked about all year long and for more information about any of these topics, feel free to contact SIA directly at siateam@siacharts.com.
Silver Futures Continuous Contract (SI.F)
We have looked in-depth at Silver 4 times this year from March when it was trading around $21 to now where it is trading around $15.8 at the time of writing this article. Each of these outlooks has highlighted the near-term and long-term weakness potential of Silver. Since the last article in September, Silver Futures Continuous Contract (SI.F) has fallen around 11.4% to 5-year lows. SI.F now has support at the low of 2014 at $15.21 and also at the low from 2009 at $14.62. A move through both of these support levels could see another dramatic downfall towards support around $12.
However, the near-term strength SMAX score for Silver is currently showing a score of 6 out of 10. And with two support levels right below, a reversal could see the resistance levels of $17.13 and $18.91 come into play. So it may be important to see if this SMAX score remains positive or if it quickly declines again back to short-term weakness. But overall, Commodities have shown to be a higher risk asset class and have been ranked at the bottom (or very near the bottom) of the SIA Asset Class rankings for the last 3 years.
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BMO Long Corporate Bond ETF (ZLC.TO)
With Fixed Income almost always being a consideration for a client portfolio depending on their risk profile, it is important to understand where the strength is within the Bond Universe. Both in Canada and the U.S., long-term Bonds have provided extra alpha over both the Bond benchmarks and Equity benchmarks of late and YTD. In Canada, long-term Fixed Income ETFs are up between 2.35% and 4.45% over the last month and between 15.5% and 17.8% YTD. Compared to the TSX Composite Index which is down -6.8% over the last month and up only 1.76% YTD at the time of writing this article.
However, there is a difference between the different term bonds as well as short-term Bonds, which range from about 2% to 3% YTD, are obviously underperforming the long-term Bonds and about equivalent to the TSX Composite at this time YTD. There has been some substantial outperformance by having some exposure to long-term Bonds. In SIA's Canadian Fixed Income ETF report, long-term and high yield Bonds have been in the Favored zone for all of 2014 above short-term and mid-term bonds.
Taking a closer look at one of these long-term Bond ETFs, the BMO Long Corporate Bond ETF has been in a column of X's for all of 2014 on a 1% scale Point and Figure chart with Resistance above at $19.09 and around $20. To the downside, support is found at $17.63 and at $16.94. ZLC.TO is showing near-term strength against other asset classes except Equities with a score of 8 out of 10.
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