Master The Game

April 11, 2021

Weekly Market Outlook

By Keith Schneider


blankThis week, another sporting event, The Masters, invokes the steep tradition many avid fans anxiously await. Many golfer friends are glued to the TV Saturday and Sunday on Master's weekend.

I am not a golfer, but the true talent that we see each year is a testament to practice, training, coaching, and hard work.

Like trading, golf is an individual sport, and the victor in each must wrestle with their emotional state of being. It takes similar mental characteristics to compete on the golf course as it does trading. One mistake can be costly.

The markets are complicated, tricky, uneven, hard to master, and can be punishing when the wrong trades taken. Losses can add up quickly if position sizing is incorrect, losing trades aren't closed quickly enough, or when stops are not diligently placed and executed.

In golf, you can see it in the low scores, mental anguish, and tough competition at Augusta National in Georgia.

We (MarketGauge) can also see it when we hear about the low winning percentage of trades, emotional frustration, and difficult trading stories from hedge fund buddies, friends, family members, and new subscribers.

There are clear similarities between golfers and traders, and they share many of the same successes and frustrations.

Similarly, during the Masters, I often hear the golfers, when interviewed, say…

"I have to stay within my game, mitigate mistakes and not let my minor mistakes throw me off course."

Folks, the exact same thing is true for traders whether you are new, very experienced, or a professional full-time trader and investor.

You must control your risk, and not get too complacent or too confident, or scared by recent losses so that you start changing your game plan and set yourself up for failure.

Like the hallowed grounds that very few golfers can master, the markets have their own twists and turns and are as difficult to read as the greens at Augusta.

We built MarketGauge so you don't have to guess what the markets are going to do in the near future.

Here are this week's latest highlights:

  • Risk Gauges remain bullish as equities were very strong +2.5% on average, except for small caps which were down on the week
  • High yield debt has lost leadership over the US Long Bond and could be flashing warning/risk-off if further weakness prevails
  • XLU (Utilities), a risk-off indicator, weakened against equities which is bullish for stocks
  • Semiconductors and the Retail sector are leading the Modern Family's new leg up. Speculative Biotechnology (IBB) trending downward.
  • Volume patterns showing accumulation in the DIA while the once leading small caps have had zero accumulation days over the past two weeks. This is a byproduct of the rotation back into big tech
  • Sentiment and Market Internals are both in bullish modes
  • US equities were led by the Tech (XLK +4.6%) and Consumer Discretionary (XLY +3.9%) sectors, which confirms our Risk-On readings
  • Sentiment and Market Internal are both in bullish modes
  • Gold and Gold miners bounced off recent lows and could be poised for more upside as a double bottom looks to be in place
  • Long Bonds (TLT) is holding recent lows and needs to hold its 200-week moving average to keep a longer-term bullish outlook
  • Emerging Markets (EEM) could be renamed to submerging as US equities are once again leading global equities higher
  • Seeing very low volatility, good for stocks, but this complacency can also produce a volatility spike. Keeping us "onguard" for that potential.
  • The number of S&P stocks above their 200 DMA has hit high numbers in the mid 90's yet again. Not so with NASDAQ and Small-caps. Look for more room for these stocks on the upside.
  • Value stocks are still taking a breather; growth stocks are taking leadership yet again.

Have a great weekend and best wishes for your trading.

Keith Schneider
CEO
MarketGauge.com

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