technically speaking - may 13, 2015

8/9/2019 Technically Speaking - May 13, 2015

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Technically SpeakingMay 13, 2015

Inside this ReportS&P/TSX Composite Index: In Short-term UpwardChannel But Approaching Resistance .................. ......2

S&P 500: Rising Wedge Pattern Should ResolveSoon ...........................................................................3

WTI Oil Price: Recovering But Overbought In TheShort-term ..................................................................4

Copper Price: Approaching Key Resistance ...............5

Gold Price: Range Bound ................. ................. .........6

US Treasuries: Oversold And Due For A Bounce ......7

S&P/TSX Capped Utilities Index: Expecting A BounceBut Trend Remains Negative .....................................8

S&P/TSX Capped Health Care Index: Trend RemainsBullish .........................................................................9

Glossary ................................................................... 10

Important Investor Disclosures ................. ................ 12

Ryan Lewenza, CMT, CFA

SVP, Private Client Strategist

Highlights The S&P/TSX Composite Index (S&P/TSX) has traded in an upward channel since its December lows. However,

the S&P/TSX continues to face stiff technical resistance around the 15,525 level. For now, we’re neutral on the

S&P/TSX as it’s trapped within the 200-day moving average (MA) and horizontal price resistance.

The S&P 500 Index (S&P 500) has been trading in a “rising wedge” pattern for much of the last year. It is quickly

approaching the apex, so we soon expect a resolution of this pattern. We remain constructive on the S&P 500

with the index in a well-defined uptrend.

WTI oil prices recovered sharply in April, surprising many who were calling for US$20-$30/bbl (not us!). In the

short-term, momentum looks stretched with an RSI reading of 66 and an elevated MACD level. As such, we

expect some backing and filling to work off the short-term overbought condition.

Copper prices have recovered sharply since the January lows, with copper breaking above its intermediate

downtrend and 200-day MA. However, copper prices look extended in the short-term with an elevated RSI

reading. We expect some short-term profit taking in copper.

The gold price has done little over the last year, as it consolidates between US$1,140/oz. and roughly

US$1,300/oz. Seasonal trends begin to improve during the summer, but we see continued range bound trading

for gold over the next few months.

There has been a dramatic sell off in government bonds over the last two weeks. For example, the US 10-year

Treasury yield has risen 40 bps since mid-April. However, in the short-term, US Treasuries are oversold and we

expect a trading bounce.

Canadian utilities have sold off in recent days on the back of higher government bond yields. Utilities could

experience a rally in the short-term; however, we would look to reduce utilities exposure into strength, as we

see government bond yields moving slowly higher over the next 9 to 12 months.

The S&P/TSX Capped Health Care Index has recently pulled back to its 50-day MA helping to work off theoverbought condition. With the sector continuing to outperform the broader market we would use the

weakness to add exposure. We added Valeant Pharmaceuticals (VRX-T) to our Guided Growth Portfolio on May

1, 2015.


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Technically Speaking May 13, 2015 | Page 2 of 12

S&P/TSX Composite Index: In Short-term Upward Channel But Approaching Resistance

Source: Stockcharts.com, Raymond James Ltd.

The S&P/TSX has traded in an upward channel since its December lows. The index is trading above its 200-day MA, while the 50-day MA is above the 200-day MA (technical

positives).

However, the S&P/TSX continues to face stiff technical resistance around the 15,525 level which represents the July 2014 and April 2015 highs.

For now, we’re neutral on the S&P/TSX as it’s trapped within the 200-day MA and horizontal price resistance. We require a breakout of this range to more confidently

forecast the S&P/TSX’s next move.

Lastly, we are cognizant of the approaching weak seasonal period for the stock market (May through October), and therefore are closely monitoring the downside. A break

below the 200-day MA (14,929) and 14,606 (March lows) would be concerning, and could trigger us to get more defensive in the short-term.


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S&P 500: Rising Wedge Pattern Should Resolve Soon


The S&P 500 has been trading in a “rising wedge” pattern for much of the last year. It is quickly approaching the apex, so we soon expect a resolution of this pattern.

On a shorter term basis, the S&P 500 continues to face stiff technical resistance at the 2,110 to 2,120 range. A break above this range would be positive as it would resolve

the consolidation pattern seen YTD. In this scenario, we would project an upside price target of roughly 2,200, which is based on the upper trendline projected forward.

We remain constructive on the S&P 500 with the index in a well-defined uptrend. Additionally, the S&P 500 remains above the rising 100-day MA, which has provided

important technical support for the index since Q4/13.

Key supports for the S&P 500 include 2,072 (100-day MA) and 2,030 (200-day MA). A break below these levels would be bearish, and likely cause us to revisit our bullish

stance on the US equity markets.


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WTI Oil Price: Recovering But Overbought In The Short-term


WTI oil prices recovered sharply in April, surprising many who were calling for US$20-$30/bbl (not us!). With the recent surge, WTI has broken above its short-term

downtrend, the 50-day MA, and horizontal price resistance of US$54/bbl.

In the short-term, momentum looks stretched with an RSI reading of 66 and an elevated MACD level. As such, we expect some backing and filling to work off the short-term

overbought condition. Ideally, WTI will hold the US$54/bbl level on the expected pullback, with resistance then becoming support. We do not envision WTI retesting the

March lows of US$42.41/bbl.

While we’re constructive on oil prices longer term we see stiff technical resistance in the US$67 to US$68/bbl range. The US$67.34/bbl level represents a 38% Fibonacci

retracement level while the 200-day MA comes in at $68.23/bbl. We expect this will provide formidable resistance for WTI, at least initially.


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Copper Price: Approaching Key Resistance


Copper prices have recovered sharply since the January lows, with copper breaking above its intermediate downtrend and 200-day MA.

However, copper prices look extended in the short-term with an elevated RSI reading. Additionally, copper is trading at an important technical level at $3/lb.

We expect some short-term profit taking in copper, possibly taking copper back to its short-term uptrend and 50-day MA around the US$2.70/lb.


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Gold Price: Range Bound


The gold price has done little over the last year, as it consolidates between US$1,140/oz. and roughly US$1,300/oz.

Gold remains below its long-term 200-day MA while the 50-day MA remains below the 200-day (technical negatives).

Seasonal trends begin to improve during the summer, but we see continued range bound trading for gold over the next few months.


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US Treasuries: Oversold And Due For A Bounce


There has been a dramatic sell off in government bonds over the last two weeks. For example, the US 10-year Treasury yield has risen 40 bps since mid-April.

Looking at the TLT, our proxy for the US government bond market, it has broken below its long-term uptrend and its 200-day MA (technical negatives).

However, in the short-term, TLT is oversold with its RSI reading of 30.01. As such, we expect a trading bounce in US Treasuries.


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Head-and-Shoulders Formation

A reversal chart formation that looks like a head and shoulders (with both a defined left and right shoulder). Head-and-shoulders formations can occur at both the bottom and top of a

trend.

MACD

The moving average convergence/divergence determines turning points in a trend by differencing two exponential moving averages of specific periods. The trendline of the MACD can

also signal continuation or reversal trends for share prices.

Moving Average

A statistical tool that plots smoothed prices to signal future price trends. 50-day and 200-day moving averages are the most common indicators.

On Balance Volume (OBV)

A cumulative indicator that adds volume on up days and subtracts volume on down days. OBV shows buying or selling pressure. An upward sloping OBV confirms an uptrend, while a

downward sloping OBV confirms a downtrend.

Resistance Level

A technical level that prices may have trouble rising above (i.e., where the price may experience selling pressure).

Rounded Bottom

A bullish reversal pattern taking the shape of a U. Ideally, the rounded bottom should be accompanied by a similar volume pattern.

RSI

The relative strength index measures the velocity of directional price movements with extreme values indicating overbought and oversold conditions. The trendline of the RSI can also

signal continuation or reversal trends for share prices.

Support Level

A technical level that prices may have trouble falling below (i.e., where the price should have buying support).

Trendline

A line connecting a series of ascending lows (in the case of an up trendline) or descending highs (in the case of a down trendline).


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Important Investor Disclosures

Complete disclosures for companies covered by Raymond James can be viewed at: www.raymondjames.ca/researchdisclosures.

This newsletter is prepared by the Private Client Services team (PCS) of Raymond James Ltd. (RJL) for distribution to RJL’s retail clients. It is not a product of the Research

Department of RJL.

All opinions and recommendations reflect the judgement of the author at this date and are subject to change. The author’s rec ommendations may be based on technical

analysis and may or may not take into account information contained in fundamental research reports published by RJL or its affiliates. Information is from sources believed to

be reliable but accuracy cannot be guaranteed. It is for informational purposes only. It is not meant to provide legal or tax advice; as each situation is different, individuals should

seek advice based on their circumstances. Nor is it an offer to sell or the solicitation of an offer to buy any securities. It is intended for distribution only in those jurisdictions

where RJL is registered. RJL, its officers, directors, agents, employees and families may from time to time hold long or shor t positions in the securities mentioned herein and may

engage in transactions contrary to the conclusions in this newsletter. RJL may perform investment banking or other services for, or solicit investment banking business from, any

company mentioned in this newsletter. Securities offered through Raymond James Ltd., Member-Canadian Investor Protection Fund. Insurance products & services offered

through Raymond James Financial Planning Ltd., not a Member-Canadian Investor Protection Fund.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual funds. Please read the prospectus before investing. Mutual funds are not

guaranteed, their values change frequently and past performance may not be repeated. The results presented should not and cannot be viewed as an indicator of future

performance. Individual results will vary and transaction costs relating to investing in these stocks will affect overall performance.

Information regarding High, Medium, and Low risk securities is available from your Financial Advisor.

A member of the PCS team responsible for preparation of this newsletter or a member of his/her household has a long position in the securities of BRP Inc. (DOO-T).

RJL is a member of Canadian Investor Protection Fund. ©2014 Raymond James Ltd.
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technically speaking - may 13, 2015

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