Attached is TD Wealth's latest edition of The Technical Take prepared by Ryan Lewenza.
Highlights of today’s (Volume 16) report include:
• Despite the recent weakness in the U.S. equity markets, the S&P/TSX Composite Index (S&P/TSX) has held up considerably well. The S&P/TSX remains in a bullish upward channel, but continues to encounter resistance at 14,300. A decisive break above 14,300 would be very bullish from our perspective. Conversely, a break below 14,050 would make us more cautious.
• The Nasdaq Composite Index (Nasdaq) has beared the brunt of the U.S. market weakness, down roughly 7% from its peak. The Nasdaq broke its year-and-a-half uptrend and declined through its 50-day moving average (MA). We believe the index needs to move back above its 50-day MA (4,220) to declare the pullback over. If the Nasdaq fails to break above its 50-day MA and declines, its price pattern will form the right shoulder of a head and shoulders top pattern. A subsequent break below its neckline at 3,980 would complete the pattern, implying a further decline to roughly 3,600.
• The S&P 500 Index (S&P 500) has held up much better than the Nasdaq, which points to a stock market rotation, rather than a deeper market correction. Overall, the technical outlook for the S&P 500 remains bullish. The index is in an uptrend and above key MAs. However, we believe the U.S. equity markets are overdue for a soft patch (the S&P 500 has not experienced a decline of 10% or more since October 2011), which could occur over the historically weak summer months.
• U.S. Treasury prices have been strong in recent weeks, resulting in an important technical breakdown for the 30-year yield, which to us, is a bearish short-term signal for the stock market. The ongoing strength in the bond market could be signaling a more challenging trading environment for equities in the coming months.
• In this week’s report, we highlight Hewlett-Packard Co. (HPQ-N), and Suncor Energy Inc. (SU-T) as attractive buy candidates and recommend investors trim/sell Amazon.com Inc. (AMZN-Q).
