Is last weeks market rally about to end?

Today we will look at my target for the current rally, which I originally predicted in my April 20th blog. We’ll also look at the Canadian dollar.

Quick notes

Ask Us Anything question deadline is Sunday night (April 28th – midnight). Click here to submit your questions:

ASK US ANYTHING! – ValueTrend

Also: New video posted.  I reviewed the sector rotation model–learn which sectors are the best bets. Here’s the Youtube clip:

Sector Rotation Model – Today’s Best Sector ETFs (youtube.com)

SPX neartermed timing

On Saturday April 20th I posted a blog entitled “Sell the rip”. In that blog, I suggested the market had a very, very likely potential to rally last week, and possibly a wee bit longer.

You read it here first!

I noted that ValueTrend had taken in a small position in a tech stock on the previous Friday (in our Aggressive Strategy). The intention was to buy the dip that had occurred in the first half of April. Then sell into my predicted rip in the following 1-2 weeks.

This week, we saw my suggested move (the rip) on the market. So: Is it now time to sell the rip, or is there still room to go?

Lets look at the chart.

My Near-termed Timing Strategy, posted on the April 20th blog, showed us my short termed buy signal of a coinciding Bollinger Band lower band position along with RSI and Stochastics hooks on the daily chart.  Currently, the three indicators are hooking up, as was anticipated.

When to sell the rip

To time selling a rip, I typically keep and eye on the 3 indicators with an eye on approaching (not necessarily touching) the upper-zones (sell zones). More important than the indicators is neartermed resistance!! I’ve marked 5120-5150 with the horizontal arrow as a potential target. That’s the intersection of the 20 day SMA (middle line of the BB) and old support on the daily chart. We saw an intra-day high of 5116 on Friday – aka very near the 20 day SMA and technical resistance. That may be it for the rip – the rally may be over.

The 3 indicators often go back to a level near the top of their zones in a rip. This changes in a strong bear trend!  Such as seen on the left side of the chart in September. There, the market stayed oversold for a while.

Conclusion: I am ready to pull the sell trigger Monday or Tuesday if the market shows no sign of a continued rally. If the SPX continues to rally, I will hold. The odds are 50/50 for either case. That’s not great odds – so I will be quick to sell if I don’t see continued positive momentum. But, if we see more price upside, I expect that to end shortly, especially as the 3 indicators near their upper zones. Again – you read it here first.

Mid-term outlook: As the market develops a risk-off mentality (except for this short rip), we should be aware that we are moving closer to the “Sell in May” seasonal period.  Adding to that are a number of earnings reports coming in which may add to up/down volatility.

I envision a repeat of the Sept-October 2023 pattern- see above – left side of the chart. That means this rip will likely reverse shortly, and we will see another thrust down. My target remains 4800, and possibly as low as 4600, on the S&P 500.

Loonie Bearish

“The Liberal government in Canada is perfect triumph of imagination over intelligence.”

A recent interview on Financial Post reflects the industry-wide concern about the recent capital gains tax. Specifically, it addresses the potential for a very significant drop in the loonie over the coming decade.

The FP interview echo’s my thoughts posted on this blog.  The recent budget will crush our already low productivity, and discourages new business from entering Canada, along with high income skilled professionals such as doctors, tech experts, etc . Canada’s production and debt/GDP is now worse by international standards – even judged against other spendy socialist governments! Its a tragedy. Especially for the C$. Canada should step out of taxpayer funded business expenditures. That, and reel back on the Marxist style taxation. Its a proven fail.

Speaking of fails…

Technically, the C$ must not fail its very strong support point at $0.72. If it does, it targets its $0.68 lows of 3 years ago. Or lower.

 

Loonie outlook From David Rosenberg:

“Canada’s Survey of Employment, Payrolls & Hours (SEPH) showed a -17.7k decline in February, making fools out of the BoC members who believe that the Canadian economy is on a solid footing. On this basis, job creation has nearly flattened out over the September to February period. Both the goods-producing and service sectors posted a contraction in employment during the month. In fact, 70% of the industries showed declines during the month, so the weakness in breadth matched the softness in magnitude. The YoY jobs trend has been pared from +4.3% a year ago to a stall speed of just +0.9% currently. The workweek for salaried employees was flat at 37 hours for the third month in a row; and dipped -0.3% MoM for hourly workers to 31.3 hours. Average hourly earnings cooled to +0.4% MoM from +1.1% in January. Job vacancies are down -21.4% from year-ago levels in another signpost of reduced labor demand. All-in, this is more supportive evidence for the BoC to make its move, with or without the Fed, and we would be sellers of the Canadian dollar on any undeserved positive hiccups.”

 

 

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