Primary Trend Still Up, But with New Leaders

“Markets change minute by minute – Human nature barely changes millennium-by-millennium. There’s your edge.”  -Jim O’Shaughnessy


Bottom Line: The current regime is still one of a bull-market. That’s it.


In the Markets

  • I continue to think that there is a major cyclical and economic recovery underway.
  • Rising bond yields and oil and copper in longer term uptrends are signals to support this.
  • For now it appears that a commodity/infrastructure up-cycle is underway as well.
  • Markets have been very rotational and choppy through March (more on that below) but some trends are resuming, oil/copper/commodities and other, new ones are making themselves clearer (big cap, lower valuation technology/cyclicals on pullbacks like our Oil names).
  • Pullbacks in the leading cyclicals should be buyable, as long as they trend above the rising 50 day moving averages.
  • In technology stocks we are changing the focus on larger cap tech names which have gone sideways since summer 2020 but are now at or near breakout levels.
  • These stocks generally have lower valuations and appear to be coming back in favour, I think because as economic activity picks up the market can find earnings growth at much lower valuations.
  • Overall, I view the broader equity markets as constructive, and while pullbacks can always happen the intermediate to longer-term charts are set up well, especially in the cyclical sectors and in many tech and growth stocks now as well.
  • Our stops were hit on many names in the last few weeks with the correction experience mostly in technology, but also in other growth areas.
  • We continue to believe that both growth and value sectors can work here and going forward and will look to maintain a balance between the two, as prices dictate.
  • Our Trending Value portfolios are diversified between the two and look to be set up well going into the strongest month of the year for stocks.


Booms Start with Some Tie-in to Reality

I will never forget the late 1990s, the abandonment of caution and the transference of proper speculation into pure gambling. Nothing mattered anymore and everything was going to go up forever. It was easy and it was going to keep going. Such was the prevalent thinking.

John Templeton said that bull markets “die on euphoria” and I’ve heard the current market described as euphoric. I’m here to tell you there is no way this market is euphoric. Certainly, some Reddit users and “stimulus” check recipients are gambling on Gamestop Inc. or whatever the story stock of the day is, but “euphoric” does not describe this market.

I will never forget  whenI was a little younger in 1999 advisors and clients both telling me things like “Price to Earnings ratios do not matter anymore.” There is nothing like price to change sentiment and the late 1990s had changed the mentality of an entire generation to one of easy money, with no regard to laws of economics.

Today, the consistent message I hear from people is fear. Concern over Covid, unemployment, lockdowns, China or whatever is trending in the news. The late ‘90s was euphoric. Even 2006-2007 had a broader euphoric element where risk, excess speculation and leverage were simply not a concern. That was then,  and today is not in the same league, a piker in the pool of enthusiasm is today’s experience.

I’ve been thinking of the relative periods a lot lately and my comparisons reminded me of a quote by Economist John Kenneth Galbraith when he said:

“Booms start with some tie-in to reality, some reason which justifies the increase in asset values, and then–and this is the critical feature of speculative mood– the market loses touch with reality.”

Today, a few postulate that we are entering a “roaring twenties” of our own so when I came across this comparison of the Nasdaq market in the 2000 era and today, I thought I would share it.

Does this time have to mirror the subsequent 100% rise? Of course not.



Having said that, with economic growth accelerating and the digitalization age transforming every industry known to mankind, well who knows what is next? No one does, which is why trends must be followed. That’s all there is to it.


SWM Primary Trend Indicator (PTI)

With all the things we could look at and talk about the fact remains that we are in an expansionary environment for stocks. The primary items that drive market cycles which we discuss in The Raps Sheet are largely supportive of further expansion.

Now, I will throw in the unchanging caveat for possible market corrections. Our Buying Power Indicator suggests one may be imminent. This might be a good time though to remember Peter Lynch’s comment that “More money is lost waiting for corrections than in them.”

I’m not suggesting that we abandon concern about potential market corrections, but we have to be aware of a few things. Market corrections happen and are mostly a good thing as they renew and refresh. Just as stocks now begin to rally after the recent rotational correction, giving us an opportunity to get on the new leaders that are emerging.

Either way, while our Buying Power Indicator is negative, we will continue to have tighter stop losses, and stricter criterion for buying. However, a large correction in stocks, let alone a bear market, cannot happen unless the short-term component of our PTI break down.

Our Primary Trend Indicator is just that, a trend system, so it will always lag, but the Thrust component of our PTI is sensitive to a deteriorating market.

You can see below how and when it signaled a problem developing in 2020, and how it looks today.

For now, the trend remains positive. Even the percent of stocks above the 20 Day moving average is close to reconfirming a bullish signal by crossing 90% positive which would eliminate the only questionable short-term trend signal in our PTI. We’ll keep you posted.




The world will be a very different place in 2030 and it’s important that we understand that today, and position accordingly.

For now, we will continue to carry some cash due to the negative reading in our Buying Power Indicator, but that has been reduced due to an expansion in strength in our PTI.

We will continue to buy into great companies with great chart setups hoping to hold for months to years. Whether the market is finished its digestion or not and whether the next up leg starts at these levels, or from a lower level, I still expect it to be higher this year based on the weight of evidence we can see today.

We remain completely open to any eventuality that the markets bring and will work endlessly to make sure your portfolios benefit from change, rather than fall victim to it.

Our strategies, tactics and tools will help us to successfully navigate whatever happens as we focus on monitoring supply and demand signals that the market provides us.

Happy Easter weekend to all, and if you have any questions about this update, or anything else please do not hesitate to reach out.


Peter Schenk, CMT, CIM | Portfolio Manager


Words we operate by:


 “Deliver to the world what you would buy if you were on the other end. There is huge pleasure in life to be obtained from getting deserved trust. The way to get it is to deliver what you would want to see if you were on the other end.”   -Charlie Munger


 “Strive not to be a success, but rather to be of value.”  Albert Einstein




Share on linkedin
Share on facebook
Share on twitter
Share on print
Share on email

Recent Posts

The opinions contained herein are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Wellington-Altus Private Wealth. Assumptions, opinions and information constitute the author’s judgement as of the date this material and subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. All third party products and services referred to or advertised in this presentation are sold by the company or organization named. While these products or services may serve as valuable aids to the independent investor, WAPW does not specifically endorse any of these products or services. The third party products and services referred to, or advertised in this presentation, are available as a convenience to its customers only, and WAPW is not liable for any claims, losses or damages however arising out of any purchase or use of third party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus. Wellington-Altus Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. All trademarks are the property of their respective owners.