Bulkowski's 2021 Forecast April Update

This is a graph of the chart pattern indicator (CPI) against the S&P 500 index. Briefly, the CPI counts the number of bullish patterns to bearish ones in the belief that at significant market turns, the bearish patterns will outnumber the bullish ones, or vice versa. The thin blue line at the bottom of the chart is the CPI.

Mark Theriault made an interesting observation about this chart in an email today. Notice how the red and green stripes are closer together this year compared to last year.

What does it mean? Clearly it's a sign of heightened volatility because the signals switch from buy to sell in a week or so compared to a month (last year). Other than that, it's just a guess. It could mean a trend change is coming. A period of lower volatility might follow if you believe in Bollinger bands (periods of high volatility follow periods of low volatility, and the reverse). So maybe we'll see larger swings up and down which take longer to complete.

This is the Dow Industrials in black and the prediction in red.

Until the start of March, the index was tracking the prediction quite well. This past month (March) they diverged with the prediction dropping to a low at A and the industrials rising to B.

If you ignore the scale, we can see that the index should gather strength going into mid May (C) and then struggle until the September low.

Here's a chart of the Nasdaq.

Compare the last chart to this one and recall that the information technology sector dropped from first to last (11th) place for performance. The Nasdaq is known as a technology-heavy composite.

The forecast peaked at A whereas the index reached a high a bit later, at B. Then both dropped for a time. The index bottomed at C and the forecast hit ground at D.

Looking ahead we see the Nasdaq rising to E in mid May if the Nasdaq follows the forecast.

Here's the S&P 500 (SPX, really) on the daily scale.

This chart resembles the Dow industrials chart. On the way to a forecast low at B, the index only reached D before rising to a high at A. The index should continue to rise to C, if it obeys the forecast (and if you ignore the scale). Just expect continued strength going into the early summer or late spring (mid May).

Also notice that all three market charts forecast a significant drop going into September. We should have a bullish ride for 6 weeks before it gets harder to make money on the long side.