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Market Update
Nuke test and loss lips sink the market
What rattled the stock markets on Friday? Was it North
Koreas nuclear test or the Federal Reserve Bank of Boston President Eric Rosengren statement that a reasonable
case can be made for tightening interest rates? In the end,
the nuclear test put investors in a foul mood, but it was
the Federal Reserves hawkish comments that tipped the
market into a decline. In addition, Rosengrens statement,
the Federal Reserves most dovish governor, Lael Brainard, will be making a previously unannounced speech
Monday at The Chicago Council on Global Aairs. When
such a dovish governor makes an unannounced speech, it
HBB
HFR
Holdings
Canadian Dollar Exposed Assets
Bonds
Horizons CDN Select Universe Bond ETF
Horizons Active Floating Rate Bond ETF
% of NAV
13.7%
8.4%
Commodities
HUG
14.4%
HBT
9.1%
XLP
Equities
Consumer Staples Select Sector SPDR Fund
9.4%
-0.4%
45.3%
100.0%
** Reects gain / loss on currency hedge (Notional exposure equals 33.0% of current NAV)
The objective of HAC is long-term capital appreciation in all market cycles by tactically allocating its exposure
amongst equities, xed income, commodities and currencies during periods that have historically demonstrated seasonal trends. The Thackray Market Letter is for educational purposes and is meant to demonstrate the advantages of
seasonal investing by describing many of the trades and strategies in HAC.
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Seasonal Opportunities
Consumer Staples - broken trend line hit STOP
and HAC out
The consumers staples sector is typically a good hold
during the summer months due to its defensive nature.
The problem is that anything in the market that is paying
a higher yield has been bid up, including the consumer
staples sector. In other words, the consumer staples sector
is expensive. The current P/E for XLP is 21.5 according
to State Street Advisors. This is expensive for the sector.
Sometimes being expensive is okay, but being expensive
makes it susceptible to a correction. On Friday September
9th, the stock market corrected sharply and the consumer
staples sector went down more than the S&P 500. Its defensive characteristics did not help. HAC was stopped out
on its position. It is possible that the sector could revive
itself relative to the stock market as historically, since
1990, the sector has on average been the best performing
major sector in the stock market in October.
My Call: The sector will probably perform at market in September. When the market regains its footing, the consumer staples sector will probably moderately outperform the S&P 500.
CAUTION: On average, October has been the weakest month of the year for gold bullion and gold miners since 1984. Historically, a lot of the weakness was
generated by central banks selling large blocks at this
time of year, because of the yearly allotments by the
Central Bank Gold Agreement ending in September.
The negative October trend has still persisted at times
when central banks have collectively not been active
sellers. For more information on the Central Bank Gold
Agreement: https://www.gold.org/reserve-asset-management/central-bank-gold-agreements
Currently, $1300 is support for gold. From a seasonal perspective, it is sometimes better to exit a position before
support is touched, if the timing is such that the end of the
seasonal period is close and the following period tends to
be negative.
Shopping List
Seasonal Strategy Shopping List
The seasonal strategy for the shopping list is largely dependent on what takes place in the stock market between
now and the beginning of October. As mentioned on the
rst page of this newsletter, the last few years we have
seen corrections in September that have lead to good opportunities to enter the stock market earlier than the start
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Canadian banks - already performing well - seasonal period starts October 10th
For so long Canadian banks had to ght the headwinds
of a possible real estate correction (still might happen),
a large correction in the energy sector hurting their balance sheets, and short sellers mainly in the U.S. Well, the
banks produced very strong earnings in August which has
helped the sector to perform well.
The earnings bump squeezed the short-sellers.
Defn: Short selling is the act of borrowing securities from another investor and selling the securities
with the expectation of buying them at a lower price
in the future.
There is still a sizeable short position against Canadian
banks, which should help support the banks if they move
up in price.
Recently, the energy sector has been performing relatively well which has helped the banks. At todays oil prices,
there probably is not a lot of loan loss risk. If we get down
to $30 West Texas...that is a dierent story.
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My Call: The technology sector will probably perform well in its seasonal period. Investors should
be cautioned that the sector often underperforms
starting at the beginning of December. Given its recent early seasonal run, investors should anticipate
this possibility.
Brookes Rant
Blame it on Stanley
the S&P 500 hits 2200, or 2300? You may be cynical and
say that 2300 is over-the-top because of TINA, but investors have been using the TINA excuse for a few years
now as stock markets have climbed higher. The economy
has been at and earnings have been going down and the
stock market has been going up. The rationale: TINA.
Eventually the excuse will not work. TINA will no longer
be able to drive the market higher. Just as the neighborhood Stanleyexcuse was outed, the TINA excuse will
also be outed.
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Disclaimer: Comments, charts and opinions oered in this report are produced by www.alphamountain.
com and are for information purposes only. They should not be considered as advice to purchase or to sell
mentioned securities. Any information oered in this report is believed to be accurate, but is not guaranteed.
Brooke Thackray is a Research Analyst with Horizons ETFs Management (Canada) Inc. (Horizons ETFs).
All of the views expressed herein are the personal views of Brooke Thackray and are not necessarily the views
of Horizons ETFs, or AlphaPro Management Inc., although any of the opinions or recommendations found
herein may be reected in positions or transactions in the various client portfolios managed by Horizons ETFs,
including the Horizons Seasonal Rotation ETF. Comments, opinions and views expressed are of a general
nature and should not be considered as advice to purchase or to sell mentioned securities. Horizons ETFs has
a direct interest in the management and performance fees of the Horizons Seasonal Rotation ETF (the ETF),
and may, at any given time, have a direct or indirect interest in the ETF or its holdings. Commissions, trailing
commissions, management fees and expenses all may be associated with an investment in the ETF which is
managed by AlphaPro Management Inc. The ETF is not guaranteed, its values change frequently and past performance may not be repeated. The ETF may have exposure to leveraged investment techniques that magnify
gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the ETFs prospectus. The prospectus contains
important detailed information about the ETF. Please read the prospectus before investing.
While the writer of this newsletter has used his best eorts in preparing this publication, no warranty with
respect to the accuracy or completeness is given. The information presented is for educational purposes and is
not investment advice. Historical results do not guarantee future results
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