An Early Breakdown Followed By A Late Breakout

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[Chart courtesy of MarketWatch.com]

  1. Moving the markets

The S&P 500 managed to find some footing, after a mid-day gag caused by surging bond yields, and scored another record close, powered by blowout earnings from the tech sector, namely Apple and Facebook. Despite their solid performances, the Nasdaq lagged the other two major indexes for the day by a wide margin.

On the economic front, we learned that 1st quarter GDP was reported at “only 6.4%,” which missed expectations of 6.6% but, is an improvement to the Q4 number of 4.3% The question that ZeroHedge posted “Is this all the growth that $2 trillion in stimulus can buy?” remains a valid one, and it casts doubt on the effects of future reckless money printing in terms what it can really accomplish.

Pending Home Sales disappointed due to low inventory, while last week’s Initial Jobless Claims totaled 553k, just a tad worse than the 528k estimated by Dow Jones.

Crowd favorites Uber and Lyft were manhandled today and got battered after Biden’s plan to make gig workers employees. Bond yields rode the roller coaster by popping and dropping as Bloomberg shows in this chart. The US Dollar roundtripped as well, sold off into the close but managed to eke out a gain. Gold followed suit but ended the session flat.  

While uncertainty played havoc with the markets intraday, in the end, the bulls managed to keep the upper hand when it counted most, namely at the close.

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Stuck In Limbo

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

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While the futures were flat, the regular session opened with a bounce for the S&P 500, while the Dow and Nasdaq hovered below their respective unchanged lines. In the end, all three indexes meandered aimlessly all day and ended slightly in the red.

The much-expected Fed announcement was a nothing burger with no changes in policy neither in terms of tapering bond purchases nor any potential hike in interest rates. The statement was dovish with optimistic soundbites being offset by downbeat ones, as ZH posted:

economic activity and employment have strengthened.

Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened.

The sectors most adversely affected by the pandemic remain weak but have shown improvement.

Yet:

The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.

And most importantly, “inflation has risen, largely reflecting transitory factors.”

In other words, there was no meat on that bone, neither for the bulls nor for the bears, so we ended up going nowhere.

The US Dollar slumped to two-month lows, according to ZH, with bond yields heading south as well, a combination which benefited Gold, but only moderately.  

The Nasdaq showed no bullishness either, despite Google parent Alphabet reporting better-than-expected earnings after the bell on Tuesday with its shares rallying 3%. That was offset by Microsoft topping analysts’ estimates as well, yet the stock dipped 2.8%. Go figure…

All eyes are now on Joe Biden’s $1.8 trillion plan in new spending as well as tax credits for families in need. Higher income tax rates and an increase in capital gains taxes will make tonight’s showing one to remember.

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Treading Water

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[Chart courtesy of MarketWatch.com]

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After having closed at record levels yesterday, the S&P 500 and Nasdaq traded aimlessly around their respective unchanged lines, with the Dow treading water as well. The Nasdaq has now finalized a rebound from its 11% correction, which began in February.

Tesla shares retreated some 3% despite the company posting a record net income, while UPS shares rallied over 10%, as the company’s revenue was up 27%.

However, this was just the warmup for the big boys with Alphabet, Microsoft and AMD reporting this afternoon, as Apple and Facebook are due up after tomorrow’s close.

On the economic front, we learned that home prices recorded their biggest gain in 15 years. Consumer Confidence also rose sharply to its highest since February 2020.

Despite the relative calm, SmallCaps had a wild ride on a bronco by pumping and dumping after the opening and again into the close.   

Ahead of tomorrow’s FOMC meeting, bonds sold off as yields rose with the 10-year being supported by its 50-day M/A, according to ZH/Bloomberg. This helped the US Dollar to finally rebound, causing Gold to dip slightly.

It’s been now the 11th straight day that Commodities have risen, as Bloomberg demonstrates here. Yet, the Fed refuses to acknowledge that inflation is accelerating, or could even be a threat to this economy, and considers it simply transitory. Yeah right.

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Modest Advances Ahead Big Earnings Week

Ulli Market Neutral ETFs Contact

[Chart courtesy of MarketWatch.com]

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Ahead of a big earnings week, two of the three major indexes managed to eke out some gains, while the Dow slid slightly into the red due to the consumer staples sector retreating over 1%.

The cause was surging commodity prices, which increased inflation fears, as corn and copper, among others, reached their highest levels in some 10 years. Of course, the Fed does not see inflation anywhere, but those of us that regularly buy groceries, fuel up our cars and use energy in our daily lives, have already experienced some of its effects.

Noted CNBC:

Bank of America data showed the number of “inflation” mentions during earnings calls this reporting season has tripled compared to last year, the biggest jump since 2004 when the bank started tracking the number.

On the earnings front, about 1/3 of the S&P 500 companies are set to release their quarterly report cards. Some of the big hitters like Apple, Microsoft, Amazon, and Alphabet are on deck as well.

The US Dollar rode a roller coaster and ended slightly lower, but it was enough volatility to give Gold a minor boost. Despite the overall positive tone in equities, bond yields stayed in a tight range and ended the session basically unchanged.

The continued bullish bias in equities has been supported by the easiest Fed monetary policy ever, as ZH pointed to in the below chart by Bloomberg:

Makes me go “hmm.” How much longer can that go on?

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ETFs On The Cutline – Updated Through 04/23/2021

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Below, please find the latest High-Volume ETF Cutline report, which shows how far above or below their respective long-term trend lines (39-week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 312 High Volume ETFs, defined as those with an average daily volume of more than $5 million, of which currently 253 (last week 253) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line (%M/A) from those that have dropped below it.

Take a look:                                                                   

The HV ETF Master Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms. If you missed the original post about the Cutline approach, you can read it here.      

ETF Tracker Newsletter For April 23, 2021

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ETF Tracker StatSheet          

You can view the latest version here.

RECOVERING AND RALLYING INTO THE WEEKEND

[Chart courtesy of MarketWatch.com]

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The futures recovered from Thursday’s “capital gains sell-off,” the mood of which carried over into the regular session, with the S&P 500 adding over 1% and thereby ending the week just about unchanged (-0.1%). The Nasdaq and the Dow gave back 0.3% and 0.5% respectively.

For sure, the proposed hike in capital gains taxes remained on everyone’s mind, but cooler heads determined that due to the narrow majority in Congress, this bill might face tremendous hurdles, and that the final version might be scaled back considerably. Goldman Sachs opined that a modest increase to 28% might be more realistic.

In economic news, we saw that New Home Sales exploded in March being higher by 20.7% MoM. YoY the number was an enormous 66.8%, which is misleading due to the base being the lockdown lows in March of 2020.

Bond yields were stuck in a sideways pattern for the past 3 days, while the US Dollar index continued its best imitation of a swan dive. Gold attempted to crack the $1,800 level but failed.  

The major indexes recovered nicely from Tuesday’s and Thursday’s sell-off with “value” and “growth” moving in sync this week, as Bloomberg points to in this chart. The VIX calmed down after some mid-week pumping, and right now equities seem to have found their bullish theme again—at least for the time being.  

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