May 2021 Update

Money is a tool. It's something that supports your life!

This month we share a few interesting charts and tweets. We share our views on the extreme market buy climax and our view on a possible large pullback in the fall. We go over what we've sold and added in our Portfolios and their current returns as of May 6, 2021. Lastly, two articles are shared by Stephan Rochon and Lance Roberts, covering rising rates and the advantages of stock, and discussing forward rates of return.

We’re neither bullish nor bearish. We are indifferent to which way the market is headed. If it is rising, we’re long equities. When it reverses that trend, we will be underweight equities and long bonds and cash. 

 

Interesting Charts

1) As the vaccines roll out, there is logical hesitation. The below chart puts the current statistics into perspective...

 

2) Even in the midst of a global pandemic, Canada's housing market and pricing remains hot and at an all time high. 

3)  Sectors can experience highs and lows - sometimes to the extreme - very quickly. It takes professionals that monitor market and sector movements to help you decide on where your money is best put to work...


Image Source: Twitter post APril 29th 2021

Technical Comments

• Bear reversal bar after 5 consecutive bull bars. This week is a sell signal bar for next week.
• There have not been more than 5 consecutive bull bars in the year long bull trend, so this is an extreme buy climax. This increases the chance of profit taking soon.
• The Stop for many bulls is below the March 4 low, which is far below current levels.
• Easiest way to reduce risk is to reduce position size by taking some profits.
• Once enough bulls start to take profits, there will likely be a 2- to 3-week selloff.
• The Year long rally has been a Small Pullback Bull Trend, which usually does not last much longer than 50 to 60 bars.
• Current rally has lasted more than 50 bars, so increased chance of it transitioning into a trading range for a couple months.
• Small Pullback Bull Trend is a very strong bull trend. Traders want to buy the 1st 10% pullback.
• It usually does not reverse into a bear trend. It typically evolves into a trading range. Once there is a trading range, the bears would then have a 40% chance of a trend reversal down.
• Because the buy climax is extreme, many bulls will not look to buy again until after a 2nd leg sideways to down, like September and October last year.
• Therefore, while the initial selloff might only be 3 weeks, the S&P 500 might go sideways for a couple months.
• Since bull trend has been accelerating up for 2 months, increased chance that this is a blow-off top.
• That typically leads to a deeper and longer pullback. Therefore, once there is a pullback, it could be more significant than in September and October 2020. There is a 30% chance it could be 20% and last several months.

 

The Portfolios

April was a continuation of the de-risking of the portfolio. We sold Air Canada, Arc Resources, Curiosity, General Electric, Cliffs, the Global Value Index ETF, the TSX index ETF, and the Dow Index ETF. We bought the TSX Capped index ETF, Choice Property REIT, Dream Industrial REIT, Wabtec, Unity Software, Vanguard Ex-US World Index ETF, BMO Low Volatility US Index ETF, Vanguard Consumers Staples ETF and the BMO Canadian Low Volatility ETF. We trimmed our tactical S&P position to a 1/4 of its full position and added to our dividend growers.

 
Snapshot of some of the new names
 

Choice Property REIT: It’s the owner, manager and developer of retail and other commercial properties across Canada. They own 727 properties of which 320 are under the Loblaws banner..

Unity Software: Is a platform for creating and operating interactive, rea-time three-dimensional content.  The platform provides a set of software solutions to create, run, and monetize interactive, real-time two-dimensional and three-dimensional content for mobile phones, tablets, personal computers, and augmented and virtual reality devices.  

Wabtec:  Is the Westinghouse Air Brake Technologies Corporation.  It is a provider of technology-based equipment and services for the global freight and transit rail industries.

Screen shot of the individual stocks and ETF’s in the portfolio as of May 6, 2021 close

 

Returns on our 60/40, 70/30, and 80/20 portfolios before fees: As of May 6th, 2021

 

And Something Interesting...

This month we have two articles one written by Stephan Rochon discussing rising rates and the advantages of stocks and the other by Lance Roberts discussing the forward rates of returns.

Click here to read the article by Stephan Rochon.

Click here to read the article by Lance Roberts.