Bullish. April is the last month of DJIA and S&P 500 “Best Six Months.” It is DJIA’s best month since 1950, second best S&P 500 and fourth for NASDAQ. DJIA has been up 15 Aprils in a row. Remain vigilant as our Seasonal MACD Sell for DJIA and S&P 500 can occur anytime on or after April 1.
Supportive. Here in the U.S. vaccine rollout has accelerated and case counts have receded from their recent peaks which is supporting expanding economic activity. Weekly initial jobless claims have fallen to their lowest level since the start of the pandemic. Another massive stimulus package has been passed into law and funds are flowing. As of March 24, Atlanta Fed’s GDPNow estimate of Q1 growth stands at a solid 5.4%. Pushing back on the positives is talk of higher taxes and valuations in some areas of the market.
Diverging. DJIA, S&P 500 and Russell 2000 all closed at new all-time highs in March. NASDAQ did not. All four have been retreating since mid-March. NASDAQ and Russell 2000 have slipped below their respective 50-day moving averages. DJIA and S&P 500 are still above their 50-day moving averages. Profit taking and/or rotation is likely underway. Until this abates and all four indexes exhibit strength, meaningful gains could be hard to come by.
0 – 0.25%. No recent significant changes have occurred. The Fed has to walk a fine line to appease equity and bond markets and so far, it appears to be doing so as the 10-year Treasury yield has cooled. It seems reasonable to expect the Fed to unwind its current accommodative stance similar to the way it last did, slowly and well calculated.
Climbing. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors have rebounded to 57.4%. Correction advisors have slipped to 23.8% while Bearish advisors are at 18.8%. All of these numbers are about the middle of the range that has existed for months as there have been only a few bumps in the market’s rocket-like move higher off of last March’s lows. Current elevated bullish sentiment suggests a cautionary stance at least in the near-term.