Sid Mokhtari, chief market technician at CIBC Capital Markets.Supplied
Seasonality is working in investors’ favour as July has historically been a strong month for equity markets.
However, tariffs represent a potential headwind that could disrupt seasonal trends. The upcoming earnings season may offer investors further insight into the potential impact of tariffs on corporate earnings growth and the economy.
To help navigate this uncertain environment, The Globe and Mail reached out to Sid Mokhtari, CIBC’s chief market technician for his technical take on the markets. His recommendations have consistently outperformed the broader index across a wide range of market conditions.
Mr. Mokhtari publishes a monthly report with his Top 10 stock ideas and his disciplined process continues to lead to portfolio outperformance. He screens and selects stocks from the largest 100 members by market capitalization within the S&P/TSX Composite Index. In the first half of 2025, his portfolio of stock selections delivered a return of 17.06 per cent, compared to an 8.61 per cent gain for the broader index. His basket of monthly top picks outperformed the TSX index in five of the first six months of 2025. His stock selections also outperformed the S&P/TSX Composite Index in 2024, 2023 and 2022 by 5.8 percentage points, 6.3 percentage points and 2.7 percentage points, respectively.
For July, his Top 10 stock ideas include seven additions: Bank of Montreal (BMO-T), Brookfield Corp. (BN-T), CAE Inc. (CAE-T), CCL Industries (CCL-B-T), IA Financial (IAG-T), Keyera (KEY-T) and ONEX Corp. (ONEX-T). And there are three carryovers: Killam REIT (KMP-UN-T), NGEx Minerals (NGEX-T) and Shopify (SHOP-T).
On July 3, I spoke with Mr. Mokhtari who discussed his near-term outlook for markets and investment opportunities, including a pair trade with two Canadian bank stocks.
July is historically a strong month for North American equity markets. You noted that over the past decade, North American markets are up between 80 and 90 per cent of the time. Could you share the return statistics for July with our readers?
On a 10-year backtest of average monthly returns, the TSX has an 80 per cent hit rate (a hit rate is a measure of frequency of observations) with an average return of 1.8 per cent. The same set of observations is valid for the S&P 500 and Nasdaq Composite with a 90 per cent positive hit rate and an average return of 2.7 per cent for S&P 500 and 3.9 per cent for the Nasdaq. So, the Nasdaq has clearly led when it comes to seasonally adjusted returns over the past decade, and I wouldn’t be surprised to see the same occurrence this year because we’re already seeing breakout patterns within some of the large-cap technology names.
And your analysis suggests that the first few weeks of July, in particular, are strong.
Correct. The first two to three weeks of the month are typically the strongest part of the month. If there is a summer rally, July is the month that will carry it by historical measures, and I think that’s the setup that we are in because not only are we getting participation from large-cap technology stocks but we’re also seeing very strong leadership resumption within financials.
Would you say those two sectors, technology and financials, will be the leaders or are there others as well?
There are others as well.
When we looked at 30-year average returns for the GICS sector members in Canada and the U.S., financials had a 70 per cent hit rate in the month of July and average return of 1.6 per cent for the TSX, and a 67 per cent hit rate and 2 per cent average return for the S&P 500. The industrials sector is running at a 70 per cent hit rate with an average return of 1.7 per cent for the TSX, and a 70 per cent hit rate with an average return of 1.3 per cent for the S&P 500. Technology is slightly lower at a 60 per cent hit rate with an average return of 1.2 per cent for the TSX, and a hit rate of 67 per cent and average return over the past 30 years of 2.3 per cent for the S&P 500.
So, all the right cylinders of the market are at play right now.
You noted solid returns for financials, industrials and the technology sectors. Is breadth also strong in these sectors?
Absolutely.
We’re advocating that investors remain more offensively tilted rather than defensively tilted. Offense-oriented sectors, those being industrials, financials, technology, and by some measures even consumer discretionary, are outperforming other sectors in the S&P 500 and the TSX.
Your target for the S&P/TSX Composite Index is between 27,235 and 27,500, and your target for the S&P 500 is 6,475 to 6,600, implying there is higher upside potential in U.S. equities.
This is consistent with your observation that you discussed in a recent report, which showed the SPDR S&P 500 ETF (SPY-A) strengthened and entered your improving quad. And days ago, the S&P 500 exhibited a bullish ‘golden cross’ with the 50-day moving average rising above the 200-day moving average. Given the positive technical setup, do you believe we will see a rotation with U.S. equity indices potentially outperforming the S&P/TSX Composite Index in the third quarter or in the second half of 2025?
The composition of the S&P 500 is heavily weighted to technology, financials and industrials – a much heavier weighing in the U.S. compared to Canada.
In Canada, energy stocks collectively carry over 15 per cent of the TSX index weight, and from a performance perspective, they are not doing much.
So, at least in the next quarter, the S&P 500 should be able to outperform the TSX index.
The S&P/TSX Composite Index is very close to your target of between 27,235 and 27,500. If you’re correct that July is going to be seasonally strong for stocks, what is your next target if the TSX index breaks above your target range?
Indices are mostly in price discovery mode. It is difficult to gauge durability of momentum but we can estimate that the next bigger levels for TSX may be calculated toward 27,900 and a potential extension toward 28,000.
What’s interesting is that although the TSX index is trading at or near record highs, when I looked at your list of around 50 Canadian stocks with the largest alpha and technical scores, only a handful of them are in overbought territory. This seems to support a continued uptrend.
To your point, stocks are not excessively overbought in many cases - particularly in the U.S. And that keeps it, in my opinion, still rather buoyed from a trend-continuation perspective.
Last month, you highlighted a new addition to your top 10 best ideas list for June, MDA Space (MDA-T), and said it was “poised to breakout”. Your technical target was between $34 and $36. On May 30th, the share price closed at $28.39 and a month later, on June 30 it closed at $35.11, right in your range. The stock was the sixth best performing stock in the S&P/TSX Composite index in June, rising nearly 24 per cent. Are there other stocks either in your top 10 best ideas list or outside this basket whose charts suggest they might breakout soon?
NGEx Minerals is a name that we have a higher conviction for given its technical setup.
We are generally in the offense camp with a preference for cyclical equity exposure and copper stocks fit that narrative. NGEx is not only a good technical name but also well-liked by the Street as a potential takeout candidate. There is good positive sentiment for the stock, particularly given the recent higher grade drilling results. We also note that the seasonal factors for NGEX are favorable. So, it’s a high conviction name for me.
I believe your technical target price is over $18 for NGEx?
Yes, that is a technical level for it on a measured move.
However, when we add stocks to our basket, we want to make sure that we produce alpha, we don’t necessarily look for target prices.
NGEx was a carryover from last month. Are there any new additions to your top 10 best ideas list that you would like to highlight?
When we published our sector ranking for July, we noticed that financials have come up sharply in our ranking process. From a sector ranking perspective, financials are now positioned as number two in the U.S. Our work suggests that BMO, given its material U.S. exposure, is going to play a very good role if we are correct in our positive views for U.S. financials.
Our model has 40 per cent exposure to financials this month, reflecting our sector ranking preference. Breadth has notably improved within financials, and BMO stands out from a technical perspective for us.
I noticed in your technical analysis, all the banks are ranking well. BMO, TD and CIBC are in the leading quad, while Royal Bank, Scotiabank and National Bank are in the improving quad. BMO is the one bank stock that made it onto your top 10 best ideas list. Could you pull up the chart and please give me your assessment of where BMO’s share price might be headed?
For BMO, we have a technical measured move objective closer to $169.
I also want to highlight that from a pair trade perspective, I’m finding that the ratio between BMO and TD is becoming quite attractive. In other words, I wouldn’t be surprised to see some selling pressure for TD over time and buying pressure for BMO. A pair trade effectively is a sector neutral execution, whereby you buy one name and sell another name within the same sector. And that pair trade for us today is to buy BMO and sell TD against it.
Last month, you highlighted several gold and silver ETFs, which you said tend to rise late in the summer. Are there other thematic ETFs that have surfaced in your technical screens, which may be potential buying opportunities?
We are noticing that Bitcoin ETFs and crypto ETFs are sharply improving in our work so I wouldn’t be surprised if we make a new high for Bitcoin.
Ranked number one in our ETF rankings is BLOK, Transformational Data Sharing Amplify ETF (BLOK-A). Ranked number two, which has picked up 13 points of delta, is iShares U.S. Broker-Dealers and Securities Exchanges ETF (IAI-A). And ranked number three is ARK Innovation ETF (ARKK-A).
These three ETFs reflect the offense-oriented tilt in the market.
Last time we spoke, you said Bitcoin could rally to between U.S. $137,000 and U.S. $150,000. Is that still your call?
I am very much of the same mindset. I do think the setup for it is good. The environment for it is good. There’s a lot more leniency toward cryptocurrencies in the U.S. and more investors are starting to use Bitcoin as an asset and are putting some allocation toward Bitcoin or cryptos.
Is there a factor or a technical chart that you’re closely monitoring?
I think the U.S. dollar is technically fractured and it will probably stay fractured for quite some time.
So, is the Canadian dollar’s momentum against the U.S. dollar going to continue, pause or retreat? What does the chart suggest to you?
The Canadian dollar is currently sitting at 73 cents against the U.S. dollar.
I do have an upside potential projection that can reach as high as 74.80 cents, 75 cents, but here you are reaching very rich, overbought levels against the U.S. dollar, which is a function of the U.S. dollar and not so much the Canadian dollar.
I don’t think we’re going to see a major mean reversion in the U.S. dollar. Hence, I don’t believe that the Canadian dollar will have a major mean reversion either.
Your basket of top 10 best ideas has outperformed the S&P/TSX Composite Index by more than 8 per cent year-to-date. Why do you believe your analysis has proved to be so successful?
We have had an active market in Canada, in particular, that has been able to be rewarding for people who can use a process in their work.
We’re very process-driven, and we make sure that all our matrix factors are seasonally adjusted. I have a trend following style to my work, with an emphasis on alpha capture metrics.
We often run our ideas by our fundamental team to see whether our technical ranking and scoring system are in sync with the fundamental narrative in any given month. We certainly don’t want a negative catalyst surprise and that’s where fundamental data plays a big role. We fully adhere to our own process but also comb through our selection for fundamental validation.
For example, if the fundamental analyst tells us a company is going to be reporting soon and there’s the potential of a miss, we are mindful of such situations.
Is there anything else that you want to highlight to our readers that we haven’t discussed?
If readers take one message away it is that internals are still very positive and are broadening out.
Let me explain this. The Elliott Wave Theory has five waves, three of them are directional and two of them are countertrend. The latest breakout that we are witnessing within benchmark indices in the U.S. as well as Canada is considered to be the fifth wave, which is typically a late breakout condition and should be able to eventually be met with a bigger consolidation phase. So, I’m very mindful that the upside of 6,475 to 6,600 for the S&P 500, once that’s achieved, we may fall into a much bigger consolidation pattern or wider range trading.
This Q&A has been edited for clarity.