April is historically a great month for the stock market.

Over the past two decades, from 2000 to 2020, April has been the best month of the year with an average return of 2.5% and a positive return 80% of the time.

The SP-500 support now at 3870 area.

XLE

 

Today's price action looks like the beginning of the end of a long run.

Bullish seasonality for Nasdaq starting this week.

Early on in this morning's session we have a QQQ bounce coinciding with bullish seasonality but especially in conjunction with rates on the 10-Year Note relaxing. While the inverse correlation between rates and the Nasdaq may very well be overhyped (for now), it is also worth nothing that the trade may be a self-fulfilling prophecy at this point given how many eyes are watching the dynamic between the two markets. 

As a result, some of the best movers so far are in the Nasdaq. TSLA and SPLK are just two examples. And some beaten-down former monsters like OKTA and ZM are developing near-term potential double-bottoms on their daily charts.

In summary, the show goes on, this market clearly still belongs to the bulls, and the only confirmation left is a close above 3950 to set off the next leg higher. Since the SP-500 chart is the most important indicator, if it closes above 3950, it's an all-clear for the bulls. If that happens, SP-500 would have to fall back well into the previous trading range to cancel out that bullish signal.

# 4 Always Be Alert

Waiting in a steamship office to be interviewed  for a job as a wireless operator, a group of applicants filled the room with such a buzz of conversation that they were oblivious to the dots and dashes that began coming over the loudspeaker. 

About that time another man entered and sat down quietly by himself. Suddenly he snapped to attention, walked into the private office, and a few minutes latter came out smiling with a new job.

"Say," one of the group called out, "how did you get in ahead of us? We were here first."

"One of you would have gotten the job," the successful applicant replied, "if you had listened to the message from the loudspeaker." 

"What message/" they asked in surprise.

"Why the code," the man answered. "It said: "The man I need must always be on the alert. The first one who gets this message and comes directly into my private office will be placed on one of my ships as an operator.

The senate just cleared the next stimulus package. It then goes to the House this coming week where it is expected to also clear. Major stock averages are likely to resume their uptrend barring a last minute gridlock in the House.

'We've shifted to a market that's being driven by liquidity and emotion instead of valuation. Once the market drops valuation as a benchmark, it has lost its rudder.'

In summary, it seems likely that support at 3700 and perhaps 3630 will be tested. As long as those hold, one could argue that SP-500 is trading in a very volatile manner within a relatively wide trading range. Resistance at 3930 and support at 3700 to be watched closely. There are signals on both sides and some oversold conditions are building. A breakout of that range in either direction should be significant and would have some serious follow-through.

What now?

In summary, the SP-500 chart has been "wounded" a bit by falling below the January highs and by the fact that there is considerable overhead resistance at 3900-3950. However, that is not a bull market "killer." It could trade between that resistance level and 3630 and remain in a neutral state.

Whether or not a choppy Friday in today's context yields a crash Monday call over the weekend remains to be seen. And, frankly, should not yet be a factor until we at least see the afternoon action.

Observe, don't analyze and see, don't think; the third Friday in February of 2020 and this third Friday in February of 2021. SP-500 chart showing lots of similarities. January high is now support area to watch. For now, the line of least resistance continues to be to the upside. Move up the stops daily and enjoy the ride.

Years ago, the great Sir John Templeton said, “The secret of my success is that I buy when everyone is selling, and I sell when everyone is buying.”

In the market, you can make excuses or you can make money, but you cannot make both.

What do you want ?

The challenge for anyone interested in making progress, when you know what you want, is to simultaneously have; 

A - the confidence to go after what you want

B - the humility to accept who you are right now

C - the willingness to build skills that bridge the gap between A and B

# 3 Attitude Changes Everything

There was a poor widow who had two sons. This widow's livelihood depended entirely upon her sons' meager little businesses because she was so weak and frail. Every day she worried about their businesses. She fretted and hoped that they would do well. 

One son sold umbrellas. So the mother would waken in the morning and the first thing she would look to see was if the sun was shining or if it looked like rain. If it was dark and cloudy she would gleefully say, "Oh, he will surely sell umbrellas today!" But if the sun was shining, she would be miserable all day, because she feared that nobody would buy her son's umbrellas.

The widow's other son sold fans. Every morning the poor widow would arise and look to the skies. If the sun was hidden and it looked like a rainy day, she would get very depressed and moan, "Nobody's going to buy my son's fans today."

No matter what the weather was , this poor old widow had something to fret about. If the sun was shining, she felt terrible because nobody would buy her son's umbrellas. If the sun was not shining and it was cloudy, she also felt terrible, because nobody would buy her other son's fans. With such an attitude she was bound to lose.

One day she ran into a friend who said, "Why, you've got it all wrong, my dear. There's no way you can lose. If the sun is shining, people will buy fans; if it rains, they'll buy umbrellas. You live off both of your sons. You cannot lose!" 

When that simple, obvious consciousness gripped her mood, she changed. From then on, she was happy woman the rest of her life.

In summary, all four major indices made new all-time intraday and closing highs this week. SP-500 should have support at the previous all-time highs near 3870. Below that, there is support at 3700, the January lows and the bottom of that brief selloff at the end of January, and then the important support level at 3630, the December lows.

 

What is a reversal top?

When an instrument makes a new 60+ day high, closes near the intraday low, then the next day, it closes lower than the prior day low on better than average volume, that is a reversal top. It typically brings a 10% correction when confirmed.

Note: RTY was going for it in the morning , trading below previous day low, but reversed mid. day, volume gave a hint.

Market bubbles happen all the time. What is important is what doesn't happen all the time, risk management, discipline and selling. If you do those things, it doesn't matter if we're in a bubble or not, you won't let your ego ruin you. Enjoy the ride, but don't forget raising your trailing stops.

In summary, institutional cash, which is often deployed heavily at the end of January and the beginning of February, came rushing into the market. In just four trading days, SP-500 had recovered all of the losses and had closed at a new all- time high. SP-500 bottomed out almost right at 3700 on Friday, January 29th, so that is support. There is also support below that, at 3630. That is the one that is more important, because a violation of that level would take the market below its December lows typically the sign of an emerging bear market. For now, the line of least resistance is to the upside, so stay long and enjoy the ride.

Stay alert.

"Focus."

Where to focus:

For the beginner, execution.

For the intermediate, strategy.

For the expert, mindset.

 

In summary, stocks have struggled this week, but the SP-500 has managed to remain above support and the chart is still bullish, and that is the most important indicator.