April is historically a great month for the stock market. And for those investors who are aware of its history, it can be a “golden egg.”

History has it that in the 16th century Protestant Reformer, Martin Luther took his congregation outside and the woman and children hunted for eggs when a woman stumbled upon the empty tomb and thus sprung the concept of the Resurrection. As a result, many families today have an Easter Egg hunt for their children and believe this tradition is integral to the Easter holiday.

Were you aware that of all months, April has been one of the three best months for the S&P 500 going back to 1928? (January and July are the other two).

April has an average return of 0.88% a median return of 1.12% and is positive 63.4% of the time. (July is the best with a positive 67.2% of the time).

However, wait…it gets better.

Over the past more recent two decades (2000-2020), April has been the best month of the year with an average return of 2.5% and a positive return 80% of the time. And in 2021 the bullish bias is in full force.

One of our Alpha Rotation models that trades the bullish and bearish trends on the major indexes issued a new buy alert on one of the major three (SPY, QQQ, and IWM) for Monday and the other two are already in long positions.

Our Risk Gauges are either 100% bullish or they have moved in the positive direction across the board.

So statistically speaking…the market is going into the bullish month of April feeling optimistic and hopeful. Are you ready for it?

Managing Risk

As we suggested in last week’s commentary, “Play Ball,” it is important to have an investment edge.  Whether through diversification, position sizing, or how you deploy your assets between models, we want you to have the home-field advantage.

MarketGauge is always performing its own Golden Egg hunt as we seek to uncover the stocks and ETF’s that have the highest likelihood to outperform.

Our confidence comes from our Risk Managed Process (RMP), which starts with a determination if we want to be invested in the first place.

Secondly, once we determine that we want to be invested, our three proprietary ranking and scoring tools, TSI (Trend Strength Indicator), RM (Real Motion) and TP (Triple Play Indicators) give us the analytical prowess to determine which are the best Golden Eggs.

Our job is to identify risk quickly and steer clear even if we must take small losses to do so as we did last month.

Last year, 2020, was a great lesson for us, and every investor as we got out of equities in late January and February before they peaked because our Risk Gauges indicated dangerous levels of bearish sentiment existed in equities.

When we pivoted out of stocks, we bought bonds. As you may recall, bonds melted up during the stock market’s collapse. This put our risk-adjusted returns in a class by itself.

By avoiding the turmoil, we had most, if not all, of our money to work with on the next leg up which began in earnest in April of last year.

In the long run, reducing or avoiding drawdowns like those caused by bear markets like early 2020 is as important as outperforming in bull markets like the second half of 2020.

Here are this week’s latest highlights:

• Two of our three Risk Gauges remain bullish with the third moving from bearish to neutral. And all US equity benchmarks are back in a bullish phase.
• Volume patterns across all four US equity benchmarks improved somewhat but remain in neutral territory.
• US equities were led by Semi’s (+9.93%) challenging the notion that big tech is dead.
• Soft Commodities (DBA) maintained its bullish market phase
• Gold and Gold miners bounced off recent lows and could be poised for more upside.
• Long Bonds (TLT) also held recent lows and held a critical long-term monthly moving average, and could be poised for more.
• The Modern Family was led by Semi’s with all family members doing well.
• Big Cap value (DIA) paused on its leadership +1.61% while the more broad-based S&P 500 was up +2.8% and made new all-time new highs.
• Market Internals moved back to bullish across most of our indicators.
• Sentiment indicators also regained their footings and are back to bullish.
• Energy (USO) which got hit hard last week bounced nicely off its 50 DMA.