Phases & Cycles Market Outlook: April 20, 2021
We hardly had time to enjoy the headline of our last Market Comment (WELCOME to 4000 and 19,000) when, within the next eight trading days, the S&P 500 Index (SPX) put on a 4.8% rush to almost reach another 100-point rise to Friday’s high of 4191. The NASDAQ (NASD) kept pace with a 4.3% move, but not Toronto, where the S&P Composite Index (TSX) only managed to add 2.0% to 19,381.
Looking at the statistics for the March 25th to April 16th rise, during which time the SPX rose from 3854 to 4191 (8.0% rise), we find that the technical indicators kept pace with the rise. The percentage of stocks above their 10-week Moving Averages increased by 8.3% to 69% and the “Bulls” increased from 57% to 63%, a somewhat over-bought signal (courtesy of Investors Intelligence). The AAII (American Association of Individual Investors) statistics show a rise from 40.3% to 56.9% among those who foresee a Bullish condition up ahead. By itself this is not a major increase, but it is a surprisingly large jump, given that this number stayed in the lowthirties since November!
As the charts on page 2 indicate, the SPX and the TSX have both traded within a rising uptrendchannel since mid-November. For the first time, the SPX moved out above the upper part of the channel. This, in addition to the above-mentioned statistics and the passing of the 1Q earning season and the oncoming “seasonal top” period (sell in May) suggest a “pause” in the long-running Bullmarket for the next two months. We expect the bears to surface halfway through this period.
The SPX is likely to revisit the bottom of the channel at 3950, which would be a 5.8% decline; a similar decline for the TSX would be a loss of 4% to 18,600; probably lead by a minor correction in the Banks.
PAC-20-198; MKT-501; April 20, 2021
Ron Meisels
Phases & Cycles Inc., 4000 Boul. De Maisonneuve West, Suite 2010, Montreal, QC, H3Z 1J9
Tel.: (514) 393-3653. E-mail: RonMeisels@phases-cycles.com
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This article was prepared by Phases & Cycles Inc. and does not necessarily reflect the opinion of iA Private Wealth Inc. The opinions expressed are based on an analysis and interpretation and do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors.