Death Cross

Bell Weather Intel reported after the close yesterday and blew away estimates and offered positive guidance. The news sent futures higher and pointed to a positive open today, but a weaker than expected US retail sales report, the second month in a row, has stock markets on the defensive and as I speak, North American indices are trading in the red with an hour to go.

In the States, the S&P 500 moved into death cross territory on July 2, when the 50-day moving-average fell below the 200-day moving-average. Since 1929, death crosses have proven ineffective at predicting forward negative returns, whereas golden crosses have been a more statisticallhy significant precursor of positive returns. Death crosses last 9 months on average versus 16 months for golden crosses. Technical patterns need to complement fundamental factors such as profit trends and valuations. We would treat the S&P 500 technical reversal as further evidence to gradually add defence into portfolios.

Lastly, Credit Suisse has put together a report naming 23 contrarian stock ideas based on solid fundamentals. If you like a copy, ask us at yourlifeyourplan.ca or call 250-868-5525.

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