This week we have a stock market forecast for the week of 4/11/21 from our friend Bo Yoder of the Market Forecasting Academy. Be sure to leave a comment and let us know what you think!
The S&P 500 (SPY)
The understanding that the Federal Reserve will stop trying to fight and rather accept inflation coupled with the new round of stimulus has caused the S&P 500 (analyzed here using the SPY) to react with a gap up and run type surge.
Initially, the buying wasn’t connecting to an equal surge in internal bullish energy, but that changed later in the week as short squeezes and new longs brought their buying orders to the market.
This creates a confusing and artificial reality right now for the forces of supply and demand. Printing vast amounts of money puff up stock prices without really strengthening the underlying economy. Just like taking a big dose of caffeine stimulates your mind and body but isn’t really the same thing as being wide awake and well-rested. We are also starting to see the crowding-out effect of these stimulus programs on the hourly workforce as the difference between working and cashing a stimulus check are pretty darn close for many.
These pressures create an environment where the crosscurrents of short-term demand and long-term profit-taking make forecasting too inaccurate in this index to be useful. I will be sitting this week out in the S&P as I focus on opportunities in individual stocks.
Coca-Cola (KO)
Coca-Cola (KO) is testing my patience, but in spite of my boredom, the stock continues to work within the action of last week. It pushed back up to retest (and fail below) the $54 area as forecast last week. This week’s action seems to be confirming its recent top, which bodes well for this short forecast.
I’m most excited to see how well this stock resisted the runaway market we saw in the S&P as the results of government intervention. This relative weakness should deliver some nice downside performance as the market begins the next profit-taking bearish cycle.
As the stock continues to trade within the Red Zone, I still consider it as a short opportunity as long as it doesn’t take out the highs near $55. If that were to happen, it would be considered a stop-out.
Gold (GLD)
Gold, (analyzed here using the GLD) launched higher along with the stock market indexes and then gapped back down into the green zone on Friday to offer a “second chance entry” for anybody who missed the initial forecast. Gold is likely to become an area of focus as the Fed shifts its posture towards inflation from defensive to acceptance. If the price continues to push up to news highs next week, I believe it will attract a lot of attention and liquidity to this market.
I still very much believe this is a significant bottom for gold, so I don’t have a specific profit target set for this trade yet. I’m just waiting for a catalyst to gather the attention of the momentum crowd and light a fire in this market…After that happens, I’ll be in a position to take a set of measurements and get a better sense for the odds and scope of the rally longer term.
Regeneron Pharmaceuticals (REGN)
The theme of this week has been patience and process. In keeping with this, the stock of Regeneron Pharmaceuticals (REGN) didn’t accomplish much, and just stayed channel bound as it chopped the week away.
I can pretty much just repeat what I shared in last week’s forecast about “being right and sitting tight”.
By making a plan and sticking to it, I am committing to my forecast. Unless there is specific and credible evidence of failure, I know I put myself into a position where the odds were firmly in my favor and so it’s my job to do the hard thing... NOTHING (and let the math do the rest)!
Cerner Corporation (CERN)
Cerner Corporation (CERN) offers an interesting short-term play to the downside. Price keeps pushing up in an attempt to break out to the upside and keeps getting rejected. At some point, the bulls will get disheartened and begin selling, and the supply/demand internals that I can measure with my market forecasting tools indicates that this selling will likely kick in next week.
That would take the price down first to take out the stops below $71, which would trigger a wave of selling and a retest of the liquidity pool near $69 per share.
Any price in the green zone would be considered a shorting opportunity for this forecast. If price takes out the highs of the green zone then stop-loss orders should be triggered.
While the odds for the target zone (Red Zone) to be tested are a bit lower than I would normally look for, this trade should pay off with a 2 to 1 or better outcome. At that level of profit, a win rate of just 34% would produce a break-even result. So think of this as a lower probability/higher reward entry possibility.
To Learn How To Accurately and Consistently Forecast Market Prices Just Like Me, Using Market Vulnerability Analysis™, visit Market Forecasting Academy for the Free 5 Day Market Forecasting Primer.
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Bo Yoder
Market Forecasting Academy
About Bo Yoder:
Beginning his full-time trading career in 1997, Bo is a professional trader, partner at Market Forecasting Academy, developer of The Myalolipsis Technique, two-time author, and consultant to the financial industry on matters of market analysis and edge optimization.
Bo has been a featured speaker internationally for decades and has developed a reputation for trading live in front of an audience as a real-time example of what it is like to trade for a living.
In addition to his two books for McGraw-Hill, Mastering Futures Trading and Optimize Your Trading Edge (translated into German and Japanese), Bo has written articles published in top publications such as TheStreet.com, Technical Analysis of Stocks & Commodities, Trader’s, Active Trader Magazine and Forbes to name a few.
Bo currently spends his time with his wife and son in the great state of Maine, where he trades, researches behavioral economics & neuropsychology, and is an enthusiastic sailboat racer.
He has an MBA from The Boston University School of Management.
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation for their opinion.
How come nobody ever, ever mentions the advance/decline numbers? That gives you a much better feel for how the overall market soundness is weak or strong. Not to say you have to also consider some of the other indicators. Determining if it's a primary or secondary market sure helps you in which areas to consider in doing your business. Years ago that used to be one of the primary indicators to gauge the health of the overall market. Am I not thinking correctly anymore. Still trading @ 84!
It's so exciting to hear that you are still trading into your 80's! I certainly intend to keep doing this for as long as I can! Peter, I started out trading back in the late 90's when the market was still human driven and order flow went through the specialist system. Tick, TRIN, Level 2, advance and decline ratios were all very valuable tools for market forecasting.
Now, we have a very different environment where ETF's and options and complicated derivatives all create order flow that "makes no sense" in a traditional technical analysis approach. It's a bit like if every day were "triple witching" 20 years ago. There are a lot of folks who are hedging or taking profits on derivative positions using baskets of individual stocks. This muddies the waters for these traditional supply/demand tools and make them too inaccurate for my taste these days.
What my partner at Market Forecasting Academy, Roger Khoury has done is develop a set of tools that allows me to get a real time snapshot of supply and demand forces...no matter why they are present. This allows me to wait patiently for those moments in time where a market gets very biased in one direction and the odds for directional movement are super high.
This is also why I can produce accurate and confident forecasts in certain situations....The rest of the time I can see a bias but the odds are too low to put capital to risk on a 60/40 situation.
I hope that helps!
This is first time I read what Bo had to say so I will follow along for a while to try to form an opinion.