Technical Analysis

Last week was historic as we witnessed the S&P 500 close above 4,000 for the first time ever. In last week’s Investors’ Insights and Market Update, we announced that the short-term resistance level was 4,020. The market almost hit that dead on the number closing at 4,019 last Thursday. This week, we have pushed the resistance level up to 4,050 with a support level of 3,980. Another important thing to watch for in the markets moving forward is the 50 and 100-day moving averages. The 50-day moving average is hovering a little south of 3,900, while the 100-day moving average is a little below 3,800. The reason we are watching those numbers closely is to see if these numbers stay like this since we now have a more consistent market. Technical analysis is just as important as the fundamental analysis of the market. We give the technicals every week because we watch those ranges and how the market is trading. Technical analysis is what helped us navigate through the 2020 year. Here we are now through the first quarter of 2021 and we are still watching the technicals very closely.

Market Momentum

There are five points that should be taken into consideration when you are reading about this current market environment. When we are navigating the market and portfolios in relation to our client’s financial blueprints, we take these five points into consideration. This market is experiencing low-interest rates, low inflation, improved earnings, federal fiscal stimulus, and central bank accommodation. Please hang onto this important information. These things are the reason for the strong momentum that’s currently behind this market and we fully believe that in the second quarter, it will be these five factors that will determine whether this market goes higher or not.

Inflation Conversation

As the economy is reopening, we are starting to see higher demand for goods which causes higher prices. Inflation has been a hot topic recently with the economy showing strength again. While we are not worried yet about overall inflation, we are watching inflation in certain areas. Usually, inflation reports cause a big yawn on wall street but right now inflation is causing a little bit of fear as the economy starts to open back up. One cause for concern is the pandemic causing a shortage of key business supplies. This has caused it to be harder for companies to produce enough goods fast enough to meet the high demand. We are looking specifically at the housing sector and the price of lumber which is up 300% in the past year. Copper is up 87% and the 10-year yield is up 89%. We are watching these increases carefully to see what impact they will have on the housing market, which has been red hot throughout the pandemic. We are watching to see if the rising costs in building supplies will lead to less spending in other parts of the economy which could impact the market. We will continue to talk about inflation fears as it evolves in the coming weeks. We expect to see demand increase as the economy is reopening. All these hot topics, we will continue to watch closely and if we start to see changes, good or bad, we are going to adjust portfolios accordingly.

A Growing Economy

Even though the markets were closed on Friday, the data kept coming out. We got a phenomenal job report, which is extremely important to that next step forward for the economy. Over the last year, we have seen a good bit of fiscal and monetary stimulus from Congress and the Federal Reserve which filled the output and consumption gap that was created by a huge drop in employment. We saw over 20 million jobs lost during the pandemic but quickly recovered 10 million of those jobs. Things stalled after that. On Friday of last week, we saw our strongest jobs report since August 2020. The report showed that 916,000 people returned to the workforce in March. That’s extremely positive to think about as the market goes from being stimulus-driven to economic-driven, where people have jobs, are making, spending, saving, and investing money, and naturally where we close the gap of remaining unemployment. One of the bright spots on the jobs report was the lowering of the average wages. Throughout the pandemic, we saw a spike in average wages. The reason for that was because the lower-income individuals were the ones that lost their jobs. The individuals that kept their jobs had higher average pay. When we see the average hourly pay drop that means that low-income individuals are finally getting back into the labor force, which is hugely necessary. We saw a large spike in leisure, hospitality, and education which are broad-based, very positive jobs. We also saw a spike in structure, which dropped back in February. We thought the drop was because of a deep freeze that hit the Southeast which turns out that appears to be correct. We have seen a spike in construction jobs with this recent report. In the past, where this has gotten rocky, the stimulus had stopped before the economy was able to stand on its own feet. It looks like we still have a good bit of positivity to help this economy turn back into a growing, traditional, and fundamentally driven economy.

 

 

Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here

Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here

 

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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