Bear Market Rally?

Q2 earnings season kicked-off yesterday after markets closed with Alcoa and CSX reporting better than expected numbers; As a result stock markets are extending last weeks rally despite several analysts cutting their forecast numbers this morning. Cyclical stocks are on the rise; It was only two weeks ago they were leading the sell-off due to global economic concerns.

Back in May I posed the question: "Should investors be buyers or sellers of stocks?" Technicals had turned negative to support deteriorating economic fundamentals. My suggestion back then was to use the sell-off to ultimately add to long-term quality companies, but take profits on tactical or cyclical positions. The technicals today are still bearish, so this rally may be an opportunity to take profits if you failed to do so two months ago. With Q2 earning just getting under way, the rally could extend longer, but look for the 200-day-moving-average to offer some resistance.

If you'd like a copy of Scotia Economic's 'Global Forecast Update' or Scotia Capital's list of quality dividend paying stocks, ask us at yourlifeyourplan.ca or call 250-868-5525.

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