Phases & Cycles Market Outlook – March 16, 2021
Our February 18th Market Comment headlined: “2020 was the year of New York. Will 2021 be the year of Toronto”. and concluded by “However, sooner or later it should give way to short “Corrective Phase” although probably not until mid-March.
The corrective phase was ahead of schedule, since it started almost immediately after the publication of the Market Comment. Within 10 working days, the S&P 500 (SPX) lost 3.7%, the NASDAQ 6.8% but Toronto (TSX) only 1.2%. Clearly Toronto won this round. Then, soon after these declines, the markets perked up and Toronto became a winner once again, as it rose 3.7% against the measly 1.4% gain by the SPX and an actual 2.9% loss by NASDAQ. It was not a surprise, as we forecast in the Feb. 18th Market Comment, that the majority of declines would come from the FAANG stocks.
The 10-day decline came so suddenly that the bears hardly had time to stir. It managed to bring our short-term Indicators to negative territory for a few days, but they just as quickly turned positive as did the Indices. During the decline there were no days when the Declining Issues had more than a 3-to-1 ratio of the Advancing Issues and it was the same for the Declining Volume vs. the Advancing ones. There was no “selling climax”. Furthermore, while the SPX almost had the same low on March 4th as it was at the end of January, the VIX never reached the 37.5 level of the latter. Looking at other statistics, it became obvious that the majority of market participants used the decline for bargain-hunting. There was not a day that the number of stocks (excluding ETFs, etc.) that reached new highs was less than 100. “So far so good” as they say, but let’s look ahead and see what this means for the rest of March.
The 10-day decline may have satisfied the need for a March low, but according to other measures, the possibility of another dip later on in March still exists. In Canada, it may be noticeable by a small corrective move in the Oils and the Banks, the two groups that dominated the 3.7% rise in the S&P Composite Index, and the ones that are somewhat ahead of themselves at this time.
PAC-20-198; MKT-501; March 16, 2021
Ron Meisels
Phases & Cycles Inc., 4000 Boul. De Maisonneuve West, Suite 2010, Montreal, QC, H3Z 1J9
Tel.: (514) 393-3653. E-mail: RonMeisels@phases-cycles.com
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