The big dramatic low of 2020 for equities was March 23rd -which was the moment that panic and fear from the outbreak of covid-19 took over our world.
Interestingly, this occurrence coincided with an important seasonal date on the calendar, the Spring Equinox. (1 of the 4 cardinal points on an annual calendar)
Historically, markets have had a tendency to change trends on or about these points in time. (Summer/Winter Solstices & the Fall/ Spring Equinoxes.)
Given that last March was a massive capitulatory event for equities & took place on the Spring Equinox, we as traders should be acutely aware of this anniversary.
It appears the market may be setting up for a potential top and it's looking like it may be ripe for a significant drop in this upcoming time period.
Markets vibrate or oscillate much like sound waves or waves in an ocean. They exhibit a natural periodicity or frequency.
In that regard, much of what the Federal Reserve (monetary policy) and the Federal government (fiscal policy) have done with coordinated efforts over the past year was to counterbalance natural forces that would have brought forth an even greater economic contraction than what we experienced.
The public tends to equate a bull market with a good economy. But is this always really true?
In a laissez-faire system where markets are left on their own, with little intervention, it may indeed be true that it's clear optimism and good times.
But in a world of constant economic intervention, it's less clear that the market strength is from bullish prospects, and just as likely it's induced by government monetary and fiscal policy.
In a previous post, we covered the Decennial Cycle & the tendency for weak markets in the first couple of years of a decade. (2001-2002 come to mind)
Additionally, there is the Presidential Cycle Effect, which historically has seen the stock market perform poorly in the 1st year of a new administration.
All these historical facts are lurking and add to the reasons for caution now.
Already, there is talk in Congress that after passing the massive 1.9T bailout bill -they may want to raise our taxes to help pay for it!
No matter what the political reasons are... one thing is sure: increasing taxes has a depressive effect on stock markets.
Watch out for what may be termed class warfare headlines.
Acrimony and divisiveness are never good for markets.
Be nimble and be careful.
Be aware of the calendar…and its history
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