Market review 23.04.02

The pieces fit and the trades keep working.

Hello everyone,

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Comments have been enabled on these posts for members, and I will look into creating a private chat group in the future. I’ve also begun using Grammarly to catch spelling mistakes.

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It was a strong week for equities across regions and sectors. Friday also gave us new weekly, monthly, and quarterly charts, some of which we’ll look at.

I want to begin with the weekly chart for XGRO (a Toronto-listed ETF consisting of 80% global stocks and 20% bonds).

This chart very cleanly summarizes the picture for the broad market:

• In June of last year, many stocks stopped falling.

• In October, broad stocks retested their June lows.

• By the end of Jan, most stocks produced double-digit returns off the Oct lows.

• Then for 6 weeks, we saw a healthy pullback to support levels.

• We’re now seeing stocks resume their uptrends.

The chart below gives us another way to see this market. It displays price (QQQ), breadth (Nasdaq Summation Index, “NASI”), and sentiment (AAII net bulls) all in one.

After QQQ printed an 11% gain in Jan, sentiment got elevated while NASI gave a sell signal in early Feb. But now, QQQ is breaking out, NASI gave a buy signal, while sentiment is low.

While broad equities are constructive, it’s important to understand what’s going on internally to keep finding the best opportunities.

Looking under the hood

For the past month, we’ve been looking at the increasing bifurcation between leaders (tech, gold) and laggards (regional banks, energy, REITs). I want to keep discussing this, as the evidence for these trends just keeps building.