Don Vialoux, Technical Analyst at TimingTheMarket.ca and EquityClock.com

FOCUS: Technical Analysis & Seasonal Investing

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MARKET OUTLOOK:

U.S. and Canadian equity markets began a shallow correction near the end of February. The correction is expected to continue to at least late May and, more likely, until October. Typically, first year of a President’s term involves longer than expected time needed to install a new cabinet and to launch a new mandate approved by Congress. When the new mandate finally gains traction normally in October, North American equity markets move higher.

Sell in May and Go Away? Sell in May and go away generally calls for North American equity markets to peak on average on May 5 and to bottom on October 27. In fact, North American equity markets during the past 20 years have peaked on average in mid-June and bottomed in mid-October.

Top Picks:

First Trust AMEX Biotech ETF (FBT.US)

FBT is an equally weighted Biotech ETF that is expected to respond favourably to seasonal influences between mid-May and mid-September. Technical parameters already are positive: intermediate trend is up and strength relative to the S&P 500 Index is positive. The sector benefits from a series of Health Care conferences between now and September where research on new drugs and medical devices is announced. Highlight is the American Society of Clinical Oncologist (ASCO) conference held from June 2 to June 6 in Chicago.

CAE Inc. (CAE.TO)

Seasonal influences are positive between now and the end of July. Technical parameters currently are positive: Intermediate trend is up and strength relative to the S&P 500 is positive. The stock has a history of moving higher prior to the annual airshow in Europe in anticipation of signing more aerospace training contracts. This year, the airshow is held in Paris between June 19 and June 25. An increase in Defense spending recently announced by the U.S. in its mini-budget improves longer term earnings and revenue prospects.

Cash

North American equity markets have entered into at least a short term correction between mid-June and mid-October during each of the past 10 periods. Triggers for the correction have been surprising events that vary each year. The trigger last year was Brexit. The trigger this year is unknown at this time: conflicts with North Korea, breakup of the Eurozone, trouble with Trump’s new administration? Owning a cash component in your portfolio makes sense.

Past Picks:  MARCH 15, 2017

iShares Emerging Markets Index (EEM.US)

• Then: $39.32
• Now: $40.18
• Return: +2.18%
• TR: +2.18%

Metro (MRU.TO)

• Then: $40.57
• Now: $46.47
• Return: +14.54%
• TR: +14.54%

Cash

Total Return Average: +8.36%

Twitter handle: @EquityClock

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