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Market Analysis For Week of April 12, 2021 [Premium Articles]

Market analysis for week of April 12, 2021. Access to full article requires Premium Articles subscription.

Report contents

  1. Weekly summary and recap.
  2. Analysis of major indexes.
  3. Popular ETFs.
  4. Sector, Factor and Asset ETFs
  5. Commodity ETFs.
  6. Spot currency pairs.
  7. Chart of the week

1. Weekly summary and recap

  • U.S. stocks were higher on the week.
  • Bond yields were little changed.
  • Commodities were mixed.
  • Crude oil ended the week lower.
  • The U.S. dollar index reversed course.

Recap (April 5, 2021 -April 9, 2021)

Large caps moved higher with S&P 500 rising 2.7% to new all-time highs. Dow 30 and NASDAQ-100 also made new all time highs. High beta large caps were up 0.4% on the week while low volatility large caps gained 1.4%. Russell 2000 fell 0.5%.  Commodities ended the week flat but gold rebounded and crude oil fell. Bonds were little changed. The S&P 500 and Dow 30 are overbought in the daily timeframe.

2. Analysis of major indexes

VIX fell 3.7% to close at 16.69 for the week.

Three weeks ago I wrote:

[V]olatility may decrease in the medium term and VIX may fall towards 2020 lows around 15 during the year.

The volatility mean reversion that started a month and a half ago may continue for a few more weeks towards the end of the month. Lower implied volatility fuels borrowing to increase leverage and at some point the trade may become too crowded and a correction will follow but not necessarily a change in market trend. There is talk about excessive leverage levels in hedge fund space but it is hard to know how the data are collected, analyzed and what they represent.

An extensive period of relentless permabear analysis especially during 2010 – 2013 period induced fear and kept many passive investors out of the market. The talk about over-leveraged funds may be similar narrative. These narratives mainly target a large crowd that is displeased with the system and hopes the market will implode. There seems to be more demand for gloom and doom than unbiased analysis. Market participants should be especially skeptical of dual-axis charts because in most cases they compare apples to oranges and are not forecasts. The market may enter a correction or even form a major top but these dual-axis charts with economic indicators and other price series usually have conflating factors. The market as a whole is too complex, stochastic and non-linear to describe with two random variables of unknown distributions.

The U.S. dollar index fell 0.9% on the week.

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Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No updates to charts will be provided if market condition changes occur that affect the levels on the charts and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker

Data provider: Norgate Data

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