Market Analysis (06 March’21)

U.S. stocks surged Friday, ending a wild week during which investors continued to rotate out of big technology shares and into the cyclical sectors that tend to thrive in a recovering economy.

S&P500: A POTENTIAL BEAR TRAP?

The S&P500 futures have potentially formed another Bear Trap on Friday. The index dropped below the 3800 level on Thursday and got all the way to the 3720 level. This level was once again re-tested on Friday, which led to a big bullish reversal. As a result of Friday’s bullish action, the index reclaimed the lost 3800 level forming a potential Bear Trap (see chart below). The early next week will decide on what happens next: if the index can hold above the 3800 level during the next several sessions, we might see a resumption of the bull trend.

ES, 1h

TREND REVIEW: INDICES STILL IN A DOWNTREND

After Friday’s price action, all four indices remain in a DOWNTREND on the daily and weekly Heikin Ashi charts. On top of that, Nasdaq is also in a DOWNTREND on its monthly Heikin Ashi chart.

S&P500: Monthly, Weekly, Daily Heikin Ashi Charts

Nasdaq: Monthly, Weekly, Daily Heikin Ashi Charts

Russell: Monthly, Weekly, Daily Heikin Ashi Charts

Dow Jones: Monthly, Weekly, Daily Heikin Ashi Charts

REFLATION TRADE RESUMES ITS MOMENTUM

The energy and finance sectors continued to post gains during the last week as the ‘Reflation’ trade resumed its momentum among the market participants, especially after Fed Chair Powell stuck to his dovish tone.

Sectors: Comparative Performance, Last 90 Days

XLE, 1d

XLF, 1d

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