THE BOTTOM LINE
The odds are favorable for assaults on new all-time highs as the calendar turns toward summer. However, the progress higher may develop as “baby steps”, and the net price gain may be perhaps muted, even if they are achieved. Lowry Research indicators have recently strengthened, so the bottom line is new all-time highs are likely, but volatility and the amplitude of price movements may increase as spring gives way to summer, which would seem to favor some tactical trading in client accounts.
Our investment committee continues to search for opportunities in emerging disruptive trends in response to a stock market giddy with euphoria, and historic over-valuation. Should the new Administration succeed in passing its legislative agenda, or large portions of it, then most of these emerging trends will likely benefit, hence our interest in investing in front of them. If even a modest percentage of the emerging new technologies we are investigating are implemented, then the world will be changed comparable to the level of change during the industrial age, the jet-space age and the internet (I-phone) age, as our government joins others around the world in mandating a more rapid change from fossil fuels to (electric and AI) transportation as a service (TaaS).
My generation will not likely power these looming changes, but younger generations, which grew up with I-phones, I-pads, the internet and ride sharing will likely speed the implementation of these changes only dreamed about in science fiction movies of a decade or so ago. So, although our committee does not know, which of the competing companies in this space will turn out to be the big winners, we do know all the competitors will need the “picks and shovels” necessary to mine the multi-trillions of dollars of “gold” represented by the adoption of these technologies. And, those areas are the focus of where we are looking for opportunities.
Soaring Higher for Now
We have been advising investors to expect volatility and renewed assaults on all-time highs, and that pattern is likely to continue. However, before new all-time highs are assaulted again, the month of May is likely to see some weakness in the form of corrective activity, or perhaps a sideways consolidation to relieve some overbought conditions, then the probabilities favor new highs during the summer.
New bull markets experience sharp markups in the price, as buyers rush in to scoop up perceived bargains. As a bull trend matures the price tends to travel in baby steps both higher and lower, but at the end of a typical month the price is more likely to be up than down. We are in a maturing trend from the March 23, 2020 low, and although new all-time highs are likely as the calendar turns toward the summer, that does not mean necessarily the market will be substantially higher by summer. However, a bull trend by any other name is still a bull, so for now the stock market would appear to have the wind at its back.
TATY — A REPRESENTATIVE OF A FAMILY OF STRATEGIC SUPPLY AND DEMAND INDICATORS
TATY is shown above in Snapshot-273 in yellow with the S&P-500 overlaid in red and blue candle chart format. TATY finished the week lower at 138, which is marginally below the red zone.
There are options for TATY here. TATY may begin to form bottoms near the red zone and tops near the blue zone at the 160 level, which would be very favorable for the extension of the bull trend. Or on the contrary, TATY may issue a new “Big Chill” warning, which would imply a potential correction looming during the summer and fall. Given that Lowry Research measures of supply and demand have recently improved, and have remained favorable for weeks, we are expecting some potential consolidation to reinvigorate demand, and then new assaults on new all-time highs to follow.
SAMMY — A REPRESENTATIVE OF A FAMILY OF TACTICAL SUPPLY AND DEMAND INDICATORS
SAMMY is shown above with the S&P-500 in Screenshot 227 and 228 in weekly and below in daily format. In Screenshot-227 the down sloping dashed magenta line dramatically shows the developing weakness under the surface as the price continued to touch new all-time highs prior to the February 2020 top. The down sloping orange line shows an even longer and deeper negative divergence with the price has developed since the rally began off the March 23, 2020 low. This remains a concern, and continues to be a frustration as the indicator has refused to confirm the new all-time highs.
Screenshot-228 shows SAMMY in daily format with the S&P-500 in the lower panel. This indicator tends to diverge both positively and negatively before the price, hence its value. It often, but not always, gives investors a few days warning that a change of direction may be brewing. I’ve left some recent examples on the chart. The dashed green lines show the indicator rising in the advance of the still declining price shown by the down sloping dashed red lines. The recent negative divergence shown by the down sloping dashed magenta line did yield some weakness, but then then the price spiked to new highs, as the indicator also spiked higher. However, by the end of the week the strength in the indicator had faded and SAMMY had resumed its decline, as the price remains marginally below new all-time highs. This implies some more weakness may be needed in the price to rejuvenate demand.
Please stay safe!