The CDC, Jobs, and VIX Patterns: Get Ready for a Once-in-a-Lifetime April Rally

After enjoying a long weekend, the market kicked off the week stronger than ever.

S&P 500 futures shot up 60 points from the open today, and this activity shows that the future is strong.

Not to mention, it’s the first full trading week of April, the most profitable month in recorded history.

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At the core of this morning’s buying frenzy are five fundamental stories that should propel the entire market higher.

I expect this combination of five perfectly timed catalysts to immediately cause a 3% to 5% move up throughout the week.

On top of all of these events is earnings season, which will add even more fuel to April’s bull rally, and I’ve uncovered two specific stocks you’ll want to get right away.

Here’s why the market will rally even higher than expected this April.

1) The March Jobs Report Shocked Investors with strong numbers.

The market was closed on Friday, but that didn’t stop the U.S. Bureau of Labor Statistics (BLS) from releasing the latest jobs number, and they were good. Really good.

The key takeaway from the report is that it supported the outlook of an economy that is gaining momentum from reopening activity.

Wall Street expected around 625,000 new jobs to be created as restaurants, travel, leisure, and construction companies continue to hire more employees back for the re-opening.

The actual number, 916,000. Wow!

The unemployment rate dropped and wages increased, but neither too much, which made this report “just right” for an April surprise.

2) The S&P 500 broke through the 4,000 mark for the first time.

It may seem simple, but round numbers matter.

In fact, the more zeros they have, the more they matter. Last week’s rally above $4,000 will get a new round of longer-term investors excited about putting money into the market.

We’ve seen psychological tests that have proven investors follow this rule to a tee, even taking money out of the market if we move back below this large round numbered support level.

Helping the cause here is the fact that tax season normally sees an increase in investments from retail investors as they make contributions to their IRAs. Now, the one-month delay for filing your taxes may slow that cash flow into the market in April but expect to see those ETFs and mutual funds busy bringing in new cash.

3) The CDC changes their stance on travel and possibly cruise lines.

Last week during our April seasonality roundtable, I talked about the re-opening trade being in the third inning of a nine-inning game. The CDC may have just pushed us into the fourth inning with the announcement that vaccinated travelers will no longer need to quarantine when travelling, though you will still be required to wear a mask.

In addition, the CDC is also indicating that they are working with the cruise line industry on protocols to allow cruising on boats with vaccinated staff and passengers. This is a slight change in posture from the CDC’s previous outlook that had the cruise industry shuddered until October of 2021.

On an ironic side note, that would have had the cruise line companies launching their vaccinated voyages right in the heart of hurricane season. We’ll see if that date is lobbied forward a little as I suspect it will be.

4) The VIX posts multiple closes below $20.

For week’s I’ve been focusing on the patterns in the Volatility Index (VIX) for good reason. The constant pop-and-drop activity is eroding away at the $20 level, the point that has been the easy “short the market” signal for the last year.

That signal looks to go away now as the VIX is entering a “new old norm” of trading in a range that should widen to 12-20 over the next few months.

The historical volatility from the pandemic shifted the VIX‘s range to remain above $20. Now that we’re closer to some normalization of life, the economy, and the markets, we will begin to see the VIX act a little more normally – which includes lower signals.

The “unwinding” of the VIX should target a move to 12-13 before the market hits its seasonally slow June. That move from 20 to 12 will likely free-up another 10-15% upside potential for the S&P 500 and the small cap Russell 2000 ETF (IWM). Let’s keep a more cautious eye on the Nasdaq 100 as these stocks remain “over loved” and are crowded trades. This means that the Nasdaq will likely trail behind in performance.

5) Risk-ON! The IWM posts its second close above its 50-day and 20-day.

The markets have been tepid since March trading, and one thing has remained consistent – there’s been no leadership from the IWM.

The IWM shares have technically lagged the S&P 500 and Nasdaq 100 for the last 7 weeks, but that’s changing. Last week’s trading saw the IWM shares post two closes above their 50-day moving average. At the same time, the speculative small cap sector index closed above its 20-day which has slipped into a bullish trend.

What does that mean for you?

The risk-on trade is returning to the market. One of my commandments of trading states that “Bull markets are driven by speculation, not fundamentals.”

The return of speculative activity to the market means that the catalyst to break out of this wide trading range has also returned.

I’m expecting a 10-12% rally in the IWM over the next month as a catalyst for the broader markets.

And here are two different ways to play this profitable combination of circumstances…

First: Trade This Week’s IWM Outlook with ProShares Ultra Russell2000 (UWM).

Strength in the IWM suggests that we’re going to see a 10-12% rally in fast form.

The easiest way to lever that move is by using a leveraged ETF like the UWM.

This ETF provides double the one-day performance of the IWM shares without using an options account.

Buy the UWM shares using a limit price of $116.00

Second, Trade This Week’s Re-opening Outlook with U.S. Global Jets ETF (JETS).

The Transportation Security Administration’s (TSA) data shows another increase in air travel over the latest weekend as travelers are taking to the air.

Which is why your second trade recommendation is in JETS.

The airline ETF is bouncing from short-term term support after traders took profits over the last two weeks.

The aggressive vaccination campaign and warming weather should continue to fuel travel, especially as the most recent wave of infections starts to ebb as summer approaches.

Airline companies are already dialing-back their specials and flexible cancellation policies, which will help bolster revenue and earnings in the second half of 2021.

Buy the JETS shares using a limit price of $27.75

As usual, I’ll keep you updated with the latest news and development surrounding the market.

So, be on the lookout for my next Straight-Up Profits article.

Until next time,

Chris Johnson

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