April 2021

A Look Back At March 2021

Below are the 20 stocks that were favored for the month of March and how they performed from their February 28th close through their Wednesday, March 31st close:

Only 6 stocks outperformed the S&P 500's average March return of 4.20%. The QQQ (ETF tracking the NASDAQ 100) gained 1.59% in March, much closer to the average gain of our Seasonality stocks for March.

The best performer from our March group was CenterPoint Energy (CNP), which was able to reverse its prior downtrend on seasonal tailwinds:

While CNP's March performance was excellent, it was likely due more to the resurgence of utilities (red circle in bottom panel) than it was to its own performance.

A Look Ahead At April 2021

S&P 500 Performance

Here's a breakdown of the annualized performance of the S&P 500 (since 1950) during the month of April:

April 1-6: +31.41%

April 7-11: +18.54%

April 12-18: +41.19%

April 19-24: -6.37%

April 25-30: +13.03%

The stock market trades during April in similar fashion to most other calendar months. The biggest difference is that there doesn't seem to be a profit taking pause after the initial first week surge. Typically, the 7th to 10th represents a pullback for the S&P 500 in most calendar months. That's not the case in April, as you can see from the numbers above. The pre-earnings advance doesn't seem to want to pause as institutions gather shares before major earnings releases that usually begin around mid-month.

Sector Performance

Before we look at individual stocks, let's get an overview of how the various sectors and industries have performed during April over the past decade (during this bull market):

Sector Heat Map:

The numbers reflect how much a sector, on average, outperforms or underperforms the S&P 500 over the past 10 years. The dark green shaded area shows significant outperformance (1.0 or greater). The light green shaded areas shows solid outperformance (from 0.5 to 1.0). The orange shaded area shows underperformance (-0.5 to -1.0). The red shaded area shows significant underperformance (-1.0 or greater). Where there is no shading, there tends to be more neutral performance (-0.4 to 0.4).

Following the historical strength that we typically see in defensive sectors in March, and which we saw again in March 2021, money tends to flow back towards our more aggressive areas in April, especially consumer discretionary. It's also worth noting that while energy has been a significant underperformer during the past 10 years, April has been a panacea for the group. If that's the case again in April 2021, just beware that May tends to be just as strong - but to the downside.

Industry Performance

Let's look at the industry group Heat Map for the best aggressive sector in April - consumer discretionary(XLY):

Heat Map - XLY:

The three industry groups that show the most April relative strength - broadline retail ($DJUSRB), travel & tourism ($DJUSTT), and automobiles ($DJUSAU) - look quite differently from a technical perspective. The DJUSTT appears to already be in an established uptrend, while the DJUSRB and DJUSAU are looking to turn back higher. The latter did climb just barely above its 20 day EMA as we closed out March:

Outside of consumer discretionary, here are other notable industry groups from other aggressive sectors that have a tendency to perform well during April:

Technology (XLK):

• Renewable energy, software

Communication services (XLC):

• Broadcasting & entertainment

Industrials (XLI):

• Marine transportation, railroads

Financials (XLF):

• Full line insurance, consumer finance, life insurance, specialty finance

Technically, industrials looks very solid as we enter April. Seasonality, however, argues against the group as 9 of its 16 industry groups have averaged trailing the S&P 500's April return by more than 1 percentage point. While railroads tend to perform well, the other modes of transportation, namely airlines ($DJUSAR) and trucking ($DJUSTK), do not.

Stock Performance

We've selected our Top 20 seasonal stocks for April from the S&P 500 and NASDAQ 100. Several names represent sectors and industry groups that have been discussed above. Others simply stand out in April on their own.

The stocks this month are as follows:

A "Seasonality - April 2021" ChartList will be available for download on our website later today. You must be a StockCharts.com Extra or Pro member to download our ChartLists. Basic members and non-StockCharts.com members can view the charts one at a time. The charts have been annotated with one or two key support levels to watch.

Happy trading!

Tom