Bullish Breadth & Squeezing VIX: Weekly Nifty 9

Welcome to another trading week!! In appreciation of all of our daily readers of finomgroup.com content, we offer the following excerpts from our Weekly Research Report. Our weekly report is extremely detailed and has proven to help guide investors and traders during all types of market conditions with thoughtful insights and analysis, graphs, studies, and historical data/analogs. 

Research Report Insight #1

While the S&P 500 index ETF (SPY) is up a robust 76% since the March 2020 lows, the Russell 200 index ETF (IWM) is up more than 127% over the same period. There is a lot of like-minded positioning in the market presently that points to economic recovery, earnings recovery, and growing risk-on appetite. Additionally, don’t miss the point that small caps leading the cyclical recovery validates the new cyclical bull market, which may prove easy to overlook based on the outsized performance of the IWM. Lastly, don’t assume the outperformance of small caps is over, but rather look for the opportunity to ride the next leg higher should a pullback present itself near-term. 

Research Report Insight #2

As has been the trend, the cyclical/reopening trade continued this past week with most defensive sectors finishing in the red while the growth and cyclical sectors charged higher. This trend has been validating the new bull market for months now and has proven investor-friendly. As it pertains to the Consumer Staples sector ETF…

The Elliott Wave Forecast (A, B, C model) projects some more downside for XLP. It remains favored to extend higher, long-term, while above 63.94 low. Currently, a pullback to correct the January 2021 low is in progress, but as long as it remains above the noted level, the technicals suggest accumulation and higher prices in the future. In the coming week, Wal-Mart (WMT) will report Q4 2020 results. Wal-Mart is one of the more heavily weighted stocks within the XLP

Research Report Insight #3

Firstly though, from the former chart in last weekend’s Research Report, here is what the Value Line Geometric Index has done since:

That chart shows a 9-trading day rally. This is actually more common than you might think. Therefore, what better way to align our understanding for potential S&P 500 returns than with something that just happened. (See study below) It’s probably as good a time as any to recognize that one of the best features of quantitative studies, such as these, is the exoneration of emotion and personal bias. Historic data shows us that despite our bias, our experience, our confidence levels, or the unique set of circumstances surrounding the market; human behavior is rather constant!

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