Market at a Glance

Market at a Glance - 3/31/2022

By: Christopher Mistal

March 31, 2022

Seasonal: Bullish. April is the #1 DJIA and S&P 500 month of the year since 1950. Third best month for NASDAQ (since 1971) and Russell 2000 (since1979). Average gain in all years ranges from 1.7% by S&P 500 to 2.0% by DJIA. DJIA has been up 16 straight Aprils, 2006 – 2021. Midterm year performance has been softer with average performance sliding to –0.1% by NASDAQ to 0.7% from DJIA and Russell 2000. April is also the last month of the “Best Six Months” for DJIA and S&P 500. Our Seasonal MACD Sell Signal can occur anytime on or after April 1.

Fundamental: Murky. Russia’s Ukraine invasion persists. Commodity and energy prices remain lofty. Inflation is running at multi-decade highs with little evidence pressures will abate anytime soon. U.S. growth is slowing, and the Fed is tightening monetary policy. However, employment data and corporate earnings forecasts remain respectable. Federal infrastructure spending is also likely to give the economy a boost. If conflict in Ukraine comes to a resolution sooner rather than later, the outlook would likely greatly improve quickly.

Technical: Rebounding. After spending the majority of the first quarter in retreat, DJIA, S&P 500 and NASDAQ appear to have found support in March. All three index charts have a death cross formation (50-day has fallen below 200-day moving average) on them, but the intra-day lows of February 24 held. The brisk rally has brought DJIA and S&P 500 back above their respective 50- and 200-day moving averages, but NASDAQ has not reclaimed its 200-day moving average yet. Given the magnitude and duration of the rally a pause here at the end of Q1 is not out of the question. If NASDAQ can reclaim and hold its 200-day moving average, then the rally could have further room to run.

Monetary: 0.25 – 0.50%. Some might say “it’s about time.” That is what the Fed finally said too at its March meeting when it announced the first rate increase of what is likely to be a series of increases. The higher and the longer inflation runs above the Fed’s target the more credibility they likely lose. Russia in Ukraine and ongoing supply chain disruptions are likely to challenge the Fed’s ability to rein in inflation. Recent comments from Fed members have also indicated a willingness to move at a quicker 0.5% hike interval if needed. In the end, it is likely the Fed only gets to 2 to 2.5% before pausing, likely sometime next year. Considering historical interest rate levels, this would still be rather accommodative monetary policy.

Psychological: Neutral. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors have climbed to 37.7%. Correction advisors stood at 28.2% while Bearish advisors numbered 34.1% as of their March 29 release. Historically, extreme bearish sentiment has frequently been an excellent buying opportunity. This doesn’t appear to be the situation any longer as bullish sentiment has modestly improved, and the market has swiftly rallied off the March lows.