Make sure you check back later tonight as I will be expanding this outlook considerably. For now, I want to dash off a couple of quick notes to set the stage. The founders currently have 40% allocated to the S&P 500 futures.
Call it a slow grind requiring lots of patience, but we finally started firing on all cylinders Wednesday and Thursday. The patterns and algorithms are all constructive. The main question now is where we throttle back to prepare for the 18-month cycle peak.
As you can see from the projections below, we are already close to the perfect time zone for a peak, though the price is still a bit short of the projections. Just be ready for a signal as I might reduce exposure at various price targets. Otherwise, a daily close below the daily 5-Day Exponential Moving Average will serve as a stop.
As pointed out the past week or so, the NASDAQ 100 was in a positive volatility squeeze that fired long – leading to higher than normal upward momentum. No doubt, there was some short-covering driving prices higher as well. The index is now at a resistance level that price must conquer to prepare for a test of the all-time high. The founders currently have 20% allocated to the Nasdaq 100 futures. We look forward to some sputtering tonight and tomorrow as we attempt to conquer the 13350 level.
Energy, currently 10% of the Founders Group position in call options, was the best performing sector fund in Thursday’s run. Energy looks to be in a solid pivot higher from a much needed pullback. This is the first entry opportunity from energy’s latest, nearly parabolic run that started with the Biden Administration taking office in January.
Financials, another 10% Founders Group position in call options, also appear to be pivoting from their recent pullback into the 20-week and 20-day cycle lows. The sector is poised to move higher – perhaps even to their recent highs. Financials are a Goldilocks play – interest rates need to be higher for banks to profit – just not too high to cause concerns about discounting the revenue stream.
Last but not least is our new position in gold taken on Friday. As you will see, it is coming off a classic “h” pattern. We may be a bit early, but it is poised to take out the Algo trigger line in a solidified buy signal. Likely, this will be a reflex rally, as gold has clearly been in a downtrend sympathetic to bond prices. Gold has a lot more work to do for a valid trend reversal to be at hand – so this is likely to be a very brief hold.
That covers all of our current positions. So the issue for me to resolve today, and I will add this commentary later tonight, is how much interim fluctuation to stomach on the way to reasonable price targets in light of the 18-month cycle peaking risks.
Likely, the market will go higher than we think, just as it climbed the “March wall of worries” that we predicted. In fact, historically, the defensive sectors almost always outperform the risk-on sectors in March. Just as true, the risk-on sectors usually find April to be the best month of the year.
So, we will roll into earnings season and see what happens. In the meantime, I am sorting the list of companies expected to benefit from the proposed infrastructure plan. When the government targets another $2.5 trillion in spending, it is wise to pay attention to the money flows – beyond the usual political bribes.
Interest rates seem to be losing their impact, as evidenced by the NASDAQ 100 decoupling last week. We need to see if this is a one-off event or whether the decoupling portends something more positive.
Last week, being a shortened holiday week, saw lighter volume on some of the breakouts. Having said that, so many institutions are trading through so-called dark-money pools (where volume does not get reported) that volume is no longer a reliable indicator.
More later…
A.F. Thornton