Seasonal Trends, Earnings Trends… Weekly Nifty 9

Research Report Excerpt #1

Speaking of Friday’s pullback, Finom Group has identified what may have caused or catalyzed Friday’s downturn, the biggest Permanent Open Market Operation (POMO) of the Fed’s bi-weekly calendar cycle. This is what is commonly known as the Fed’s Quantitative Easing operation for which every 2 weeks the Fed is buying assets in a single day of roughly $12.5bn. For whatever reason, and since it began in April 2020, institutional investors have sold into this particular POMO operation. Finom Group’s chief equity strategist Seth Golden has highlighted this many times in the past:

Finom Group anticipates the now 3-week long consolidation phase to continue into May, based on a variety of seasonal factors. The significant market breadth has resulted in time consolidation, which is preferred above price consolidation. A follow-up to this expectation is that we also anticipate more new, record levels for certain of the major averages, including the Nasdaq (COMP). In a nutshell, this points to choppy price action akin to what we’ve seen over the last 3 trading weeks, whereby record highs have been achieved, but ultimately the major averages have gone sideways through time. While our track record for forecasting is strong, be it intermediate or long-term, we’re not impervious to misinterpreting the macro-environment, which can skew the market’s performance from it’s prevailing trend.

Research Report Excerpt #2

The Nasdaq Daily Sentiment Index fell below 60 for the first time in more than 3 months toward the end of February. Historically, long streaks of elevated sentiment always led to more gains for the Nasdaq over the next 3 months (QQQ).

What we care mostly about, however, is how the index performs after the DSI falls below 60 for the first time in at least 3 months. Here are the results, based on a recent study from Troy Bombardia:

Research Report Excerpt #3

Our last study will come from Wayne Whaley himself, the famous quant and mathematician who discovered and named the Whaley Breadth Thrust and TOY Barometer. In his hunt for the most reliable statistical edge for determining the S&P 500’s forward returns, he found that the dates between November 19 and January 19 of the following year lent to the most probable outcomes.

Indeed, the bullish signal was fired for 2021. The only thing left to discover is how the forward quarterly and annual return will unfold for investors. The statistical data for the TOY Barometer is displayed in the most updated table below from Wayne Whaley himself:

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