According to the Wall Street Journal, 57% of Americans say they pay too much tax (Gallup). 55.5% of Americans don’t pay tax (Tax Policy Center). What?

BNN today will focus on the markets and why Canada has wind in its sails again (TSX and the Canadian dollar at the high of the year). We’ll also discuss the technical patterns behind the market, we’ll parse the earnings (from JNJ, United Health, Goldman Sachs,Netflix, IBM, Rogers with Intel and Yahoo after the close). We have a Valeant bull (a scarce breed indeed these days). We’ll talk Hogs (Harley Davidson Canada). We’ll talk oil and gold on Commodities.

W

A perfectly formed letter W is the Dow Jones Industrial Average pattern over the past year with the two lower points anchored at August 2015 and February 2016. Now at 18,000, the question is “can it continue to move through to the upside?” The bulls say yes! Margin debt is down, short interest is high, sentiment is modest, the link with oil has recently weakened, the earnings bar is so low almost any company can step over it and it’s April, the best month for the Dow. But don’t forget, May follows April and sometimes that means…sell and go away. If you think the equity markets go higher – it will likely be driven by the reflation trade (cyclicals, manufacturing, industrials, technology and financials). According to Scotiabank’s weekly “Dashboard,” the TSX remains overbought with very few components oversold (exceptions include Imperial Oil, Agrium, Empire). Equity markets are higher pretty much everywhere in the world this morning and North American futures are in the green too.

Oil at $40

Saudis want it there or below to bruise the American frackers? Undermine Russia and ISIS? All out economic war with the U.S. (their ostensible ally)? Pick your reasoning (laid out in a Forbes magazine online article today). Oil +1.5% this morning

Canadian dollar

Traders are watching yesterday’s reversal, the correlation with oil (which has widened to an almost perfect 0.95 from 0.71 a month ago) and awaiting Governor Poloz and Deputy Governor Wilkins testimony before a committee of Parliament this afternoon. According to CIBC, April has seasonally been a strong Canadian dollar month (with nine of the last 10 seeing appreciation). The bulls are chasing, the cautious say be careful.

Cheap or dear?

The Wall Street Journal highlights that stocks are expensive using a forward p/e of 16.7x which is higher than any time since 1985 and with bond proxies (safety investments) like Coke topping the most expensive list. But relative to bonds and other assets, stocks are cheap. So you can go either way – stocks are expensive but other assets are even more so.

Greater fool theory

Who is buying bonds at negative interest rates? It’s the guy who believes that while it might be stupid at minus five basis points, it will look like a smart move when someone is willing to buy at minus 10 basis points. According to Bloomberg, 500 million people live and invest in countries with negative rates. Consensus right now is that there will be no further moves deeper into negative this week from Mario Draghi – but you never know what the future brings – and expectations are for further cuts over the months ahead. Reflate, reflate, reflate. Anyway, it can be done – it must be done.

Loved and hated at the same time

Maybe these companies were expensive at the highs but given sharp price declines and still favourable outlooks (a preponderance of buys from Bay Street), maybe there are some names to put on your buy list. Here is a select listing of stocks that are down more than 10% from 52-week highs but are buy rated on the Street. Hudson’s Bay (-43% from high), Air Canada (-42%), Linamar (-34%), Magna (-28%), Element (-27%), CP Ltd. (-23%), Boardwalk REIT (-12%) and Gildan (-15%).

Analysts’ actions

Barclays is downgrading the fertilizers this morning with Potash and Mosaic both sells; CLSA downgrades to sell Teck Resources and Freeport McMoRan; EBay downgraded to sell at Morgan Stanley; Blackrock upgraded to buy at Citi ($410 target); Gluskin Sheff now buy at Scotiabank with $22 target; and the question of the day, will the performance gap between gold and oil continue to close in favour of oil? On a one-year basis, gold is up 3% while oil remains down 28% although that gap as was much wider in February. The gold/oil ratio is well off the high of 47:1 (a multi decade high reached earlier this) but at 31x is still well above the 2013 low (12) and the long-term average.

Let’s go. But always be careful out there.

Every morning Business Day Host Frances Horodelski writes a "chase note" to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins (Mobile users click here: http://bit.ly/1L8f2L6).