Checklist Trading Review

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By James Helliwell, Chief Investment Strategist

I hope you’ve all had a good week!

I intend for this to be a relatively short post today, as I have just got back from having my COVID vaccination and will be taking it easy heading in to the weekend. On a personal level, I feel very grateful to have been protected so early on – not that I thought I would ever say it – but credit to the UK government! I hope that those of you who are wanting the vaccine are not too far off now too.

In terms of markets, not a great deal has happened when looking at the 1-week change in the S&P 500. Despite having traded +/-1.5% during the week, we are pretty much flat on where we were last Friday. Bond yields correctly sharply earlier in the week, before recovering yesterday. Similarly, growth stocks outperformed on Monday and Tuesday, before value returned to the fore. All told, there has been a lot of chop and not much direction – which confirmed my recent view that a more balanced, and long term approach was needed at a portfolio level to avoid getting caught up in the yield-driven churn.

Here’s an hourly chart of the US stock market over the course of the month. As you can see, it is around the same level that it was last Friday, but has clearly risen this month with a record high seen just last week.

This gain was anticipated by the positive setup presented by our corresponding Checklist as we entered March. Bond yields and valuations were identified as the only negatives, which were outweighed by the position of the other indicators we assess.

Our Business Cycle Checklist also supported the move seen in pro-cyclical assets, namely stocks.

Elsewhere, the key Central Banks were singing from the same sheet in terms of providing further stimulus to fuel gains in equities.

And our Market Risk Checklist was aligned with the bullish picture presented by the other scores.

Whist it therefore makes sense to see safe-haven bonds selling off (contributing to higher yields), the move in gold suggests that the move in the bond market was perhaps too extreme, with the precious metal managing to rise slightly this month as interest rates have come in a little to be more proportional to realised inflation (rather than speculative extremes in inflation expectations). Falling real interest rates are bullish for gold, and seem to have capped the relentless rise in the past few weeks.

This was one of the more interesting setups that appeared to present an opportunity once the dogmatic view on rates subsided.

With month-end just around the corner, we will be updating our Checklist Report for April with a new set of scores for us to analyse in our weekly videos. To learn more about our methods, and join me for more analysis in real-time, check out our MDT course and Trading Club pages where you can preview everything that we cover.

In the meantime, why not head over to our YouTube Channel for our latest FREE videos which I will be bringing to you each week in 2021! As there’s no charge for this content, it would be great if you could support the channel by leaving a comment and subscribing.

Have a great weekend,


Disclaimer: For educational purposes only. Even though we do our best to provide reliable data, you should not trade based on this information.

© Copyright 2021 Lex van Dam Financial Education. Further distribution prohibited.

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