Bill Carrigan, technical analyst, Getting Technical Info Services
FOCUS: Technical Analysis
Market Outlook:
The current rebound bull is about 50-plus months or 1600 days old. A rebound bull is a powerful linear advance that follows a granddaddy bear such as the crash of 1987, the technology bust of 2000 and the financial bust of 2008.
The previous rebound bull of 2002-2007 ran for 60 months which is longer than the historical 48 month U.S. business cycle perhaps due to the forces of the global economy.
The current rebound bull may be predicting a global recovery which would allow the U.S. Fed to slowly wind down their quantitative easing program.
As this bull ages look for normal sector rotation to return as the global recovery becomes a reality.
The normal sector rotation order is:
Leading Stock Sectors - Financial, utilities and telecom
Coincident Stock Sectors - Consumer, health care, industrial and technology
Lagging Stock Sectors - Energy and materials
Strategy:
Plan for the “great rotation” as investors move away from the utilities, telecom and consumer sectors and toward the industrial, energy and materials sectors in response to gradual return of an inflationary environment.
TOP PICKS:
XMA is a basket of base and precious metals miners, lumber and potash producers. The XMA will benefit from a return to an inflationary environment.
LUN is a copper producer which is diversified geographically in Europe and North America. Lundin will benefit from a return to an inflationary environment.
ATA, like Martinrea (a past pick), is an Ontario manufacturer that will benefit from a return of manufacturing to Ontario. ATA will provide exposure to some dominant themes like autos and aerospace.
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