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

FOCUS: Technical analysis 

MARKET OUTLOOK:

We’re holding a bit of cash (seven per cent), but we are forced to continue legging in so long as the uptrend stays intact. We’re focusing on value plays that are coming off of a solid support base rather than chasing the hot sectors.

Our risk/reward indicator, known as the bear-o-meter, reads three out of a potential eight points. That’s a low-neutral score. But there’s a reason why the bear-o-meter reads only a three, even though we are in a seasonably good time of the year and the trend is up. Underlying all of that good news of late are some warnings.

Specifically, we are looking at various breadth indicators showing weakness, some sentiment indicators suggesting investor complacency, and momentum studies suggesting a stretched price. I think what this means is that we’d better be prepared to sell if the trend starts to reverse. The underlying structure isn’t there to support anything but a perfect environment.

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