Cory Venable of Venable Park Investment Counsel
Biography: Cory is a Fellow of the Canadian Securities Institute (FCSI) with over 18 years of market experience. He has also earned the Canadian Investment Manager (CIM) designation. A Chartered Market Technician (CMT), Cory has developed a quantitative risk management method used by Venable Park Investment Counsel, to address price risk. Cory is a member of the Canadian Society of Technical Analysts (CSTA), The American Finance Association (AFA), and the Market Technicians Association (MTA) based in New York.
Q: Mr. Venable, in the face of the recent volatility in the stock market, a number of Elliot wave practitioners are calling the recent rally from the lows a bear market rally and that we are now in a secular downtrend (with respect to the TSX and S&P 500), does your technical analysis concur with this view?
A: I would agree with the thesis that we are currently in a Secular Bear market that started in 2000. The S&P500 failed to make a meaningful higher high in 2007 over its high in 2000. I believe that the data suggests an environment similar to that of 1966-82. The similarities however may be similar in price only, as we may in fact have the mirror image from a macro-perspective. i.e., deflation rather than the inflation that occurred during 1966-1982. The catalyst for deflation this time would be low savings rates, negative home equity and a de-leveraging economy, as the Western consumer is now taking a break from torrid spending to re-build personal balance sheets.
Q: What is your near and long term outlook for the Canadian Dollar with respect to the US Dollar? While the general viewpoint of most market commentators calls for a decline in the US Dollar, I have heard a few technical analysts (primarily the Elliot wave practitioners again) call for an uptrend in the US Dollar, once again, does your analysis concur with this view or not and why?
A: I suspect it may be a classic case of herd mentality and extrapolation that everyone is now bearish on the U$. It must be as crowded a trade as history has seen; except for perhaps tulips! Over-crowded trends can however extend grotesquely beyond the fundamentals; therefore it is difficult, in fact dangerous to suggest when the bottom will occur. It will no doubt occur when it stops dropping or when the dollar-weighted vote suggests it has gone far enough. Lest we forget: pricing is set by a secondary market in which the future earnings of all asset classes are auctioned off every day, week, quarter.
The price behavior of the U$ index since the Jan 2005 weekly low of 80.81 to now, is very similar in behavior to the bottoming process that occurred in 1991 to mid 1995. Three distinct lows took place over a 4 year time frame. If the bottoming process is similar to now it would suggest a test of the ultimate early 2008 low of 71.61 will fail to go as low and likely find support between the 73-75 levels. An un-winding of the U$ carry trade would be a likely catalyst. The other potential fuel for a U$ bounce would be the obvious fact that seems to go unnoticed by U$ bears: ITS AN OLD OLD STORY. Its strikes me as odd that we believe the market can be an efficient discounter of future macro events, yet forget to acknowledge that fact when contemplating the price behavior of the U$. At some point there will be a time of maximum pessimism which also equals maximum opportunity for buying U dollars. A turn at 73-75 on the U$ index and breakout above 76.15 area may prove very painful to those holding hard assets. Markets that are commodity-centric will suffer greater declines.
Q: With oil at approximately $76 and gas hovering below $4, what is your outlook and forecast for these 2 commodities?
A: It’s all about the US Dollar. If the dollar strengthens then commodities priced in dollars will decline. Long term support for oil is $40; not a forecast, that’s just where resistance has been for over a decade and now, suggests support.
Q: With gold hitting new highs, what is your outlook on gold - is it a good time to get in or get out? Also, why do you think the gold stocks are underperforming when compared to gold bullion?
A: Anecdotally when every 3rd commercial on TV is someone holding a fist full of dollars as a result of jewelry sold at a gold party, and that Central Banks are buying gold to prop-up their reserves to counter depreciating U$ holdings, I get nervous. Parabolic price moves go 2 ways; the second part of that is nothing I want exposure to. If you hold it, put in tight stops or sell 1/2 your holdings. If you don’t, look for opportunities in the counter trade areas: things that will appreciate when gold prices drop. Remember in 2000-2002, Central Banks were sellers of their gold reserves when it was below $300/oz. Now they’re buyers above $1,000/oz. Support for gold is in the 700-725/oz area if 1,000-1031/oz level is breached.
Q: Lastly, can you please highlight 2 stocks/themes that you think offer the best value moving forward and your reasons for liking it?
A: After a pullback of at least double digit, look at assets that pay you well to hold them. (XTR:TSX, XRE:TSX, XDV:TSX) while keeping your eye on the 30-year treasuries for a move down in price as this would suggest a change in the outlook for interest sensitive stocks.
Thank you Mr. Venable!
Disclosure: I do not hold any positions in the stocks mentioned in this article.
Share This Post:
