Epilogue 4/6/2021

Today was a picture-perfect demonstration of our morning expectations and projections. The market does not always please us with such predictable compliance. Before we get into that, I want to repeat and expand our ongoing, market-generated narrative – emphasizing the big picture from 30,000 feet.

Contextually, we continue to rise out of the gates of the 20-week cycle low (March 5th) and the retest of that low on the 20-day cycle loop (March 25th) – this remains bullish. Besides the positive fact that the lows came in almost to the day and on schedule, negative sentiment spiked on both days as measured by the CBOE Put/Call ratio and the CNN Fear/Greed index, furthering our confidence that both of these lows would hold. We had Navigator Algorithm and positive momentum buy signals on these lows in the indexes and many related “growth” sectors – another bullish sign. We were transitioning from March – which traditionally favors more defensive or “value” market sectors to April, typically the best month of the year for the stock market, “growth,” and technology. Clearly, we were bucking the market’s “value” style popularity, interest rate fears, and rising inflation narrative. It can be advantageous to fade these “ruling reasons” at important cycle turns.

On April 1st, we closed on the day’s highs for both the NASDAQ 100 and S&P 500 indexes and on top of the previous day’s spike – unbelievably bullish. On April 2nd, the market was closed for Good Friday, but overnight activity in Globex (the overseas markets were open) carried us much higher – bullish. Then yesterday, we had a Gap and Go with a strong close and no gap fill, leaving a long line of single prints and a long “P” formation (typically a positive trending continuation pattern), not to mention a virgin (untouched) point of control – mostly bullish. Many single prints indicate somewhat desperate, emotional buyers that were likely panicking to cover their short positions.

Perhaps the only negative was that yesterday’s structure was shaky with all of the single prints, and the overseas markets were closed, leading to light volume. But overnight activity in Globex last night was balancing in a small range, barely testing a portion of yesterday’s lower single prints – which was mostly bullish and showing acceptance of yesterday’s higher prices overseas. Moreover, we obliterated the latest market narrative that the NASDAQ 100 was linked to interest rates and inflation expectations.

The reality is that the Nasdaq 100 is waking up from a period of sleep – with most growth stocks consolidating since last August. Buyers are engaged with plenty of catalysts to support their activity. The structural implications also give us plenty to work with in terms of one of our favorite counter trades, “When What Should Happen Doesn’t.”

Note from the market and volume profiles below that the NASDAQ 100 rose a bit higher today as predicted, but the Weekly Expected Move high became the obstacle and is likely to contain the market for the rest of the week. The action today was otherwise a bullish follow-through, adding to the narrative.