Nasdaq Outlook ~ March-April, 2021

Jan 21, 2021

NDX

NASDAQ has continued to reach new highs. The weekly chart shows higher highs in price accompanied by lower lows in relative strength. Traditionally, March and April are two of the worst months for stocks as investors seek to consolidate portfolios and close out last minute positions while getting ready for tax season (although there are clear indications that deadlines to file will be very lenient this year based on our unprecedented circumstances surrounding the COVID pandemic). This spring consolidation differs from the traditional momentum seen at the end of a calendar year where institutional investors get rid of losing investments and invest bigger in winning investments so that fund managers, etc. can improve the numbers relating to returns--leading to a end-of-the-year spike.

It's probably no surprise that we've seen record-breaking highs on the tech-heavy NASDAQ as carbon-neutral technologies and investments (for example) have become slightly more popular (probably as a result of the incoming Biden administration's policy stances relating to environmental issues--investors are seeking to get in early and benefit from new regulations that are surely forthcoming in the next few years). Another plausible explanation is likely related to increase in demand for virtual solutions to allow human connection in the midst of social distancing.

Some correction would be healthy, and a short-term correction seems to be supported by the technical indicators. Then again, we're in "uncharted" territory lately. I'll be watching as we hit the upper resistance of the rising wedge that's formed here.