S & P 500 record high profits even with a short break in US stocks–what is the strong sector?

This article is a reprint from “Toushiru” provided by Rakuten Securities, “Understanding in TOP 3 Minutes! Today’s Investment Strategy”. Today’s point yellow traffic light? : S & P 500 Index divergence rate from 200-day moving average The US market’s “improvement in financial conditions” has supported the bull market. 2021 corporate performance is expected to reach record highs. Introducing the views of Chief Global Strategist Mutsumi Kagawa. Yellow traffic light? : S & P 500 Index Deviation to 200-Day Moving Average In the US market, the S & P 500 Index hit a record high on the 16th and then turned down. It seems that the adjustment was due to the overlap of profit-taking sales while the high price caution was widespread. Chart 1 shows the transition of the S & P 500 index and the 200-day moving average. Even if the long-term trend is upward, if the “upward divergence rate” from the 200-day moving average rises excessively, stock prices often fall or are forced to adjust daily. The “average deviation rate + 2σ” (σ = 1 standard deviation), which is considered to be the upper limit of the deviation rate for the 200-day moving average of the S & P 500 index after 2016, is calculated to be + 16.2%. Looking back on 2020 and beyond, stock prices fell back in mid-January, early September, mid-November, mid-December, mid-January 2021, and late February 2021, when the divergence rate approached + 16%. Once the stock price rises faster than the trend, adjustments are likely to be triggered. In fact, on April 16, the index’s 200-day moving average divergence rate reached + 16.1%, indicating a feeling of overheating. However, there is a possibility that US stocks will return to a solid trend after a daily adjustment, driven by “expectations for a recovery in business performance” following the “easy financial situation” described later. It is highly probable that a phase in which stock prices will fall will be an opportunity for “buying in a squeeze” or “buying more.” Source: Created by Rakuten Securities Economic Research Institute from Bloomberg (early 2020-April 21, 2021)