Keith Richards, president and chief portfolio manager, ValueTrend Wealth Management

FOCUS: Technical analysis 

MARKET OUTLOOK:

Here’s a question for readers: if the economy is strong then why are typically defensive groups like consumer staples and utilities, which perform well in recessions, doing so well?

Meanwhile, why are sectors that outperform in a strong economy like consumer discretionary, transports, and financials underperforming by so much?

As far as the stock market goes, for us technical analysts, there’s no arguing with a breakout to a new high. As I have noted numerous times on this blog and in my online course, we must remain fluid, and free from themes in our trading strategy. We must be willing to change our prognosis as the market dictates. Case in point, I correctly called a pullback in early April. I then correctly anticipated the follow-up rally. As far as the target for that rally, my suggestion on this blog was that large resistance for the S&P 500 Index lay around 5,120-5,150. Clearly, now that the former highs on the S&P 500 Index near 5,200 have been taken out, until proven otherwise, we must consider this a bullish sign.

But we can change our strategy when the market changes. You can’t predict, but you can prepare. Of note, ValueTrend has been producing market-beating performance throughout the recent volatility. 

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TOP PICKS:

Hershey (HSY NYSE)

Awesome breakout from a base. Cocoa pricing strains pushed the stock to undervalued levels. We bought this when everyone hated it – I wrote the book (literally) on contrarian investing, and this was one such trading example. Extremes are always correct.

Global X Silver Miners ETF (SIL NYSEARCA)

Starting to shine after lagging the golds. And you know I love those base breakouts, baby! Note that this is a pretty thin trader, so buy/sell orders should be done with limit prices.

BMO MSCI China ESG Leaders Index ETF (ZCH TSX)

Ever the contrarians, we started buying Chinese equities when the world was panicking over them. Now, it's breaking the downtrend. Lots of potential we think.