by Ryan Lewenza, CFA, CMT, Private Client Strategist, Raymond James
Highlights
• The S&P/TSX Composite Index (S&P/TSX) is trading in a short-term downtrend and is approaching both the 50- and 200-day moving averages (MA), which we expect to provide technical resistance. With weak momentum, stiff overhead resistance and negative seasonality through the summer we are not expecting much upside in the near-term. Overall, we expect the S&P/TSX to trade range bound between 13,700 and 15,500 through the weak seasonal summer period.
• The S&P 500 Index (S&P 500) rallied off the 200-day MA following news of a possible Greek bailout deal and is approaching short-term resistance around the 2,130 level. Since February, the S&P 500 has traded in a tight range of 2,045 to 2,130. For us to get more bullish in the short term we would need to see the S&P 500 break above 2,134.72 (May high), thus breaking out of this well-defined trading range.
• European stocks significantly outperformed in Q1/15, but then succumbed to selling pressure in Q2/15 due to fears of a Greece debt default. With the STOXX Europe 50 Index remaining above its 200-day MA, and seemingly a Greek deal being finalized, we believe investors should look to increase exposure to European equities.
• Despite the recent negative headlines of a potential debt default in Greece and Puerto Rico, the price of gold has failed to rally and is now testing a critical support level at US$1,140/oz. We believe gold needs to hold the critical level of US$1,130/oz to US$1,140/oz, or it risks falling significantly from here, with the next technical support level coming in around US$1,000/oz.
• In our June 18 report we correctly called for lumber prices to pull back in the short-term given the overbought condition. With the lumber price down 5% since that recommendation we would look to add exposure to the industry on this weakness.
• The S&P/TSX energy sector has pulled back since its oversold bounce in Q1/15. It is now approaching the December 2015 lows around the 190 level. With the sector oversold and at technical support we expect a trading bounce in the short term. However, the longer term technical profile remains negative and we note that on a relative basis (versus the S&P/TSX) that the sector recently made a new relative low.
• The S&P/TSX Capped Telecommunications Services Index has outperformed the S&P/TSX since early May. However, with the recent gains, the sector is now trading back at technical resistance around the 132 to 134 level. With the sector technically overbought (RSI at 68.47) and at resistance we expect some short-term backing and filling.
Read/Download the complete report below:
Technically Speaking - July 16, 2015
Copyright © Ryan Lewenza, CFA, CMT, Private Client Strategist, Raymond James
