EB Daily Market Report - Friday, March 26, 2021

Quick Note

I will be out most of the day today, but I wanted to get a quick note out this morning. Futures were pointing to a mixed open, once again favoring the more value-oriented stocks on the Dow Jones and S&P 500, with the tech-laden NASDAQ down slightly.

As we move towards April, I thought I'd provide a little "sneak preview" of seasonality tendencies. Both consumer discretionary (XLY) and materials (XLB) have performed well during April over the past decade, most of which falls in the current secular bull market. The XLY and XLB have averaged gaining 3.6% and 3.3%, respectively, during the month of April. I know my next question would be "well, what about technology (XLK)?" The XLK has also been strong, though not as strong, with an average April return of 2.3% over this recent 10-year period. The better news for technology fans is that the XLK performs much better than the XLY and XLB during May to make up the difference.....and then some. So with a seasonally-strong two-month period coming up for the more aggressive stocks, I'm expecting the NASDAQ to begin to right its ship. But we do still have another week to go before we welcome in April.

Here's a quick seasonality chart for the XLY:

Seasonality certainly provides us no guarantee, just as technical indicators provide no guarantees. But it's knowledge worth having, especially if we see the NASDAQ and many component stocks reverse their recent slide and start to trend back above key price resistance or 20-day EMA resistance. That's what I'll be looking for in the days ahead.

One other thing to watch for - earnings warnings. If we see few of these as we head into April, that's a fairly decent sign that the majority of tech companies will likely beat their quarterly estimates. If that's the case, I find it difficult to believe that the current environment of selling technology continues. But the market is anything but sane in the short-term as we've seen over and over again throughout the years.

I'm wishing everyone a great weekend ahead. Enjoy it with family and friends (safely, of course).

Happy trading!

Tom