Weekly Market Analysis: Recap and Forecast. The Week of April 1, 2024

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Welcome to Spring everyone as we’re heading into 2^nd quarter of the year, the S&P500 booked a 10% gain the 1^st quarter of the year and is now right at all time high. However we see the VIX, the measure of volatility index is still at its low, right around 13, compared to its average around 17. Since the VIX is a gauge of “Implied Volatility,” it reflects how volatile traders expect the market to be over the coming month, not how it is currently. Therefore, the VIX can bouncing around and remain low even as the market is climbing up.

We notice that while Big Tech is slowing, cyclical sectors like industrials, financials and energy stocks are picking up the slack. These three sectors, along with information technology and communications services, outperformed the S&P 500 during the first quarter. That’s up from just three sectors outperforming the index in 2023. Financials, industrials, materials, three sectors typically classified as cyclicals, have all notched records in 2024, as have healthcare stocks, which are typically classified as defensive. Information technology stocks are also trading in record territory.

As the Federal Reserve moves closer to cutting interest rates, some portfolio managers expect mid and small caps, which were some of the biggest beneficiaries of the “everything rally” in November and December, could soon retake the lead. We were prepared as we mentioned on last week’s forecast, and we took a position in $IWM and have locked in nice initial profit last week. We will continue to monitor the market condition for follow-through into spring per plan.

With the PCE numbers released on Friday showing producer inflation index a bit elevated. However, Fed came out and sounded a dovish tone with expectation of cutting rates are still on the table this year. The question is WHEN? However, with PCE data coming in higher than expected could challenge the narrative that Fed Powell put out at his press conference because the window is closing on when policymakers can start this rate-cutting cycle if they want to get three cuts in this year, that 90% of Wall Street experts are expecting with 61% probability of 25bpts cut in June.

Last week, $SPY held $519 and traded to $524-$525 per our forecast and $QQQ just move sideway. This week, we may see the sentiment move as the result of the PCE numbers until Friday when payrolls and employment reports come out. $SPY needs to get over $524-$525 for next leg up to $528-$530. Rejection at $524, it can trade to $520-$519 and under $519 look for $516-$515. $QQQ may continue to tap dance around $442-$447 this week until Friday. If it can go over $447 again look for $450-$451. Failing to hold $442, it may step down to $439-$438 and hold there to stay in the uptrend.

Currently, we have $IWM, $TSLA, and would take $AMD trade if it goes over $182. Market may have no direction this week until Friday. Thus, we want to be quick on lock in profit in our Singles and will focus more on credit spreads and day trades. We’re working on the transition of company management and back-end adjustment for efficiency and to support new goals of increasing productivity and service enhancement for our members. Indeed, we’d ask for your patience and understanding at this time. Thank you! Namaste!!