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Morning Market Outlook 04012024

Good morning, everyone, and welcome to Monday morning. It’s Stephen Whiteside here from I hope you had a wonderful long weekend and you’re ready to get back to watching the markets. In the pre-market this morning, stock index futures and gold are trading above fair value while we’re seeing a small pullback in crude oil on Monday morning. Let’s start off today’s presentation taking a look at a weekly chart of the VIX, which is still on a weekly sell signal. That’s supportive for higher stock prices. We had an inside week last week, and so we’re going to remain long term bullish on the market as long as the VIX does not close above 15.23 this coming Friday. Now, if you haven’t been with us for very long, we watch the VIX on a daily and weekly basis. Now, the last time we were on a weekly buy signal was back in the fall. And of course, once we’re on a weekly buy signal, we’re long term defensive or long term bearish on the market. We went through six weeks of fear And once it ended with a weekly sell signal, we’ve been on a weekly sell signal ever since.

So we’ve had 21 weeks fear free. And of course, when the market is fear free, we expect it to move up. And of course, when there is fear in the market and the VIX is rising on a weekly basis, we expect the market to head down. So that’s exactly what happened. So if you’re a long term investor, you want to watch the VIX on a weekly basis. If you’re a short term investor or short term trader, then you want to watch the VIX on a daily basis. Coming into Monday’s trading action, we’ve got the VIX still on a daily sell signal. That is supportive for higher stock prices. That could change on Monday if the VIX were to close above 13.89. Now, notice the upper channel line is pointing down. So if we come back here tomorrow and the VIX did not close above 1389, that upper channel line will continue to trail lower. Now, looking at the seasonality chart for the VIX, typically we see a nice big up move in the VIX in the month of March, and then a move down into the month of April. We didn’t have that big up move this year, and there’s no guarantee that we’re going to have it.

Some people are looking for a time shift, looking to see what should have happened in March, may happen in April, but there’s certainly no sign of that starting to happen coming to the first trading day of the month of April. Now, year to date on the S&P 500 is up a little over 10% year to date. The big winner on the S&P 500 has been Super Micro up over 255 %. On the Nasdaq 100, it’s been NVIDIA up over 82 %. On the Dow, it’s been Disney up over 35 %. On the TSX composite, Celestica is up over 56 %. On the TSX 60, it’s First Quantum. I know it’s hard to make this out, but it is up over 34 % since the year started. It is on a weekly buy signal, and It’s going to stay on a weekly buy signal as long as it doesn’t close below $12.32 this coming Friday. Now, at the start of the year, we talked about a trading strategy using leveraged ETFs. That gives us the opportunity to make money, whether the market is going up or going down. Now, a lot of people have some negative things to say about these ETFs as long term investing tools, and they should never be considered long term investing tools.

For those people who are willing to buy and hold, leveraged ETFs are not for you. If you’re willing to buy and hold them through the signals, then they make the perfect tool for long term investors. If we look at the baseline of the S&P 500, it’s up a little over 10 % year to date. So the 3X ETFs should be up approximately three times that amount, and it is currently up over 28 % year to date. And then if we look at a 2X on the TSX, you can see that the 2X is up nearly twice the baseline. So they don’t exactly match over the long term, but they get pretty close. And of course, we will be willing to sell these on a weekly sell signal and buy the bear ETF when that time comes. It is certainly not coming on Monday morning. When we look at the Nasdaq 100, it is up over 8% year to date. The 3X is up over 21%, and the 2X trading in Toronto is up over 14% year to date. So not performing as well, but still getting the majority of the expected move, which is really what you care about.

Now, looking at the TSX-60, year to date, it is up just under five and a half %. Anything close to 11 % would be pretty good. And looking at the Horizons Beta Pro Bull ETF for the TSX-60, we’re up just under 11 % year to date. And so that is pretty good. Now, when we’re looking at diversity If you’re a US investor, of course, if you’re playing the S&P 500, you’re dealing with a lot of global companies. For the Nasdaq 100, you get exposure to tech and biotech, and then anything small cap is really local. If you’re a Canadian investor, we’ve got the TSX-60 is really our local investment. Then the S&P 500 is global, and the Nasdaq 100 gives us tech and biotech exposure. Of course, there are other ETFs that we can on track. In Canada, we don’t have a lot of diversity. We’ve got the commodity sector with energy and gold. In the US, we’ve got many more choices. We’ve got small cap, for example, if you want to go local. Then we’ve got biotech. We’ve got semiconductors. We’ve got the FANG stocks. You can get a 3X ETF for the FANG stocks.

Then we’ve got technology itself. So there are opportunities in sectors outside of the three major stock market indices that we follow on a daily basis. Now, each one of these ETFs, of course, have a corresponding bear ETF. Typically, we don’t expect to be in the bear ETF that long, but typically, stocks fall three times faster than they rise, so it’s usually a sharp move to the downside as opposed to the long and steady move that stocks usually make when they’re in a bull market. We don’t expect to be in the bear ETF for that long. Last fall, that was certainly the case. You get a couple of weeks of a sharp down move, and then the market starts to turn around, so you want to lock in profits quickly. Let’s finish off this morning’s presentation, taking a look at some daily charts. The indexes were fairly quiet on Thursday, new closing high for the TSX-60. For the Dow, had a very quiet day, very quiet day for the S&P 500, very small pullback, and a small pullback for the Nasdaq 100, having an inside day. So certainly no changes in trend for the major indices on Friday.

On Thursday, we were talking about Meta, which generated a very quiet sell signal on Wednesday. We did see fall through to the downside on Thursday. So Meta is certainly on a sell signal right now. Shopify in New York and Toronto ended Thursday on sell signals. Again, very light sell signal. You may want to wait for the next close below the lower channel line before executing that sell signal. Okay, folks, that is all for this morning’s presentation. Everything’s looking pretty bullish, whether you’re looking at weekly charts or daily charts, so no reason to be overly concerned about anything on Monday morning. Enjoy the rest of your day. Next time you’ll hear my voice is on Tuesday morning. Wednesday morning.

Stephen Whiteside
Monday, April 1, 2024

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