US Markets Summary — 2021–03–26

Stock Markets — USA

The S&P 500 closed at a new ATH with the equal weight index confirming that move. The Nasdaq 100 remained weak and the Russell 2000 was the laggard having some serious volatility this week shaking me out of my positions too.

I want these to be three important lessons for me after this week.

1) Progressive exposure is key in an environment like this.

2) Selling into strength also works better when there’s so much weakness and chop in the market. (As opposed to buying into strength which worked wonderfully before the chop started.)

3) Sitting out is completely fine. Not just fine, that is the wise decision when the market is not favorable. Let others fight it out, you can enter after the water is clear.

S&P 500

The S&P 500 closed up at a new all-time high this week with a strong finish on Friday.

Equal Weight S&P 500 (RSP)

The equal-weight index also closed at a new high confirming the move.

I was curious to see more about what stocks actually do in the index. This chart shows the number of stocks above the 50-day MA. It actually does look strong with this new high by the end of the week.

Not all indices look so good on this front. Here are the NYSE stocks above the 50-dMA. Lower highs in 2021 while the index keeps climbing.

VIX

The VIX finally broke below that magic 20 level more significantly by the end of the week. That shows that the market could slowly enter a more normal, lower volatility regime.

Nasdaq 100

On the weekly chart, we’re still between the 10 and 20 EMA. This is the 5th week closing between these two moving averages. The direction of the next move out of this range could decide which way we’ll go next.

Equal-Weight Nasdaq 100

The equal-weight index managed to stay the week above the 10-week EMA as well as the 1.618 extension. While this is a positive, confirmation is needed.

Russell 2000

Small-caps got some serious shaking this week but by the end of the week, the damage doesn’t look so bad on the index level as it closed above the 10-week EMA and the 1.618 extension also held.

Since my watchlist is focused more on mid and small-cap stocks, I certainly see the damage on the individual charts.

I got shaken out of any positions I had on (with the exception of one). While I was only testing the waters, I ended up having more exposure than I should have had given the choppy markets.

I was planning to sit this chop out completely and having some time off since my last portfolio update.

It worked quite well before this week but I admit I felt that I need to start trading again. Very stupid. I was wiser sitting it out.

I want these to be three important lessons for me.

1) Progressive exposure is key in an environment like this.

2) Selling into strength also works better when there’s so much weakness and chop in the market. (As opposed to buying into strength which worked wonderfully before the chop started.) I was too slow to realize that, but now I’m patient.

3) Sitting out is completely fine. Not just fine, that is the wise decision when the market is not favorable. Let others fight it out, you can enter after the water is clear.

I ended the week having only one position on so I’m almost fully in cash.

Russell 2000 / Nasdaq 100

Three weeks ago I wrote:

“A very long downtrend could be currently ending. 10 and 20-month EMAs are turning up. A break is possible above the 0.236 retracement.”

That 0.236 retracement needs to hold now, or we could see a change in character in this relationship. 10-week EMA held so far.

High Yield Corporate Bonds / Treasuries

High Yield Bonds outperformed Treasuries in each of the past 4 weeks. That too shows a risk-on attitude in the market which is positive.

Given the chop, however, patience is needed to see which group is going to emerge as a leader.

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Full-time investor. Documenting my journey. Finance MSc, Liberal Arts BA. Working on CMT Level II.

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Anatman Trader

Anatman Trader

Full-time investor. Documenting my journey. Finance MSc, Liberal Arts BA. Working on CMT Level II.

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