Jeff Parent, chief investment officer, CastleMoore Inc.

FOCUS: Technical analysis 

MARKET OUTLOOK:

The pandemic turmoil is subsiding. Many commodity prices, inflation and economic indicators are heading back to normal levels. Tightening policies are persuading consumers to slow down their spending. This is a potential set-up for the markets to make new highs by the end of the year.

Not for decades has there been so much impact on the economy from government and bank interventions. The unprecedented demand and supply imbalances created an uncertainty that continues to make valuations difficult. Over the next year, analysts will be focusing on the top line and margins. In the bigger picture, many indicators we rely on have a long lag and while we can extrapolate trends, there are still a lot of potential areas of concern leading to the continuation of volatility.

We expect inflation will hover around the three per cent range in the short term, and bank rates will decline this year. For a trading plan, the bullish sentiment will return in force if the S&P 500 can sustain itself above the 4,600 level. Alternatively, the index needs to stay above the 4,200 support, or we may be in for another bear market. 

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TOP PICKS:

Direxion Daily 20+ Yr Treasury Bull 3X (TMF NYSEARCA)

This is a play on inflation and bond yields. Longer-term yields look like they are topping, and may decline below four per cent in the near term. This is a very volatile investment. Sell if it goes below $5.

Carnival (CCL NYSE)

Demand seems to be continuing past the post-pandemic bulge. Pricing is firm. Debt looks manageable. The pullback from the recent $19 level looks like a short-term opportunity. Sell if it goes below $15.

Gibson Energy (GEI TSX)

Trading down to support. Great dividend which looks sustainable. Begin selling if it trades below 18.

PAST PICKS: January 3, 2020

Marvell Technology (MRVL NASD)

• Then: US$26.67
• Now: US$60.58
• Return: 127%
• Total Return: 131%

BCE (BCE TSX)

• Then: $59.70
• Now: $55.36
• Return: -7%
• Total Return: 14%

McDonald’s (MCD NYSE)

• Then: US$200.08
• Now: US$284.38
• Return: 42%
• Total Return: 54%

Total Return Average: 66%

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