Mixed Signals: April’s Market Dance

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]
  1. Moving the markets
[Chart courtesy of MarketWatch.com]

In today’s market session, traders witnessed a cautious upward trajectory with a hint of optimism. The major indexes, guided by selected mega-cap technology stocks, edged higher. However, beneath the surface, conflicting forces played out.

Tesla, the electric vehicle giant, surged nearly 11% after overcoming a significant regulatory hurdle related to its full self-driving technology in China. Meanwhile, Apple enjoyed a more than 3% boost following a bullish upgrade from investment firm Bernstein. However, other tech heavyweights—Microsoft, Alphabet, Meta, and Nvidia—struggled and traded lower.

The ongoing earnings season paints a mixed picture. Of the S&P 500-listed firms that have reported results so far, approximately 80% have surpassed expectations. This positive trend underscores the resilience of corporate America amid economic challenges.

Today’s action provided a reprieve from the recent market downtrend, yet it was marked by choppiness. The broad S&P 500 and tech-heavy Nasdaq are both poised to end April down more than 2%, while the blue-chip Dow faces a potential slide of over 3%. Investors remain cautiously optimistic, balancing short-term volatility with long-term prospects.

Later this week, all eyes will be on the Federal Reserve’s latest interest rate announcement, scheduled for Wednesday. While the central bank is widely expected to maintain borrowing costs unchanged, traders eagerly await Chair Jerome Powell’s post-announcement press conference. Will the Fed’s communication provide clarity on inflation concerns and the path forward?

Bond yields experienced a knee-jerk reaction, remaining below Friday’s close. The dollar initially bounced but ultimately retreated during the session. Gold maintained a quiet stance, treading water. Crude oil not only lost momentum but also dipped below the $83 mark. Bitcoin drifted lower but found support around $62,000.

As financial conditions ease once again, I wonder:

Will the Fed introduce any surprises on Wednesday? Inflation remains a persistent concern, and the central bank’s stance could sway market sentiment.

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ETFs On The Cutline – Updated Through 04/26/2024

Ulli ETFs on the Cutline Contact

Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.

The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (228 vs. 242 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

ETF Tracker Newsletter For April 26, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

BIG TECH EARNINGS PROPEL STOCKS: ALPHABET AND MICROSOFT LEAD THE CHARGE

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

In today’s dynamic stock market, Big Tech giants Alphabet and Microsoft took center stage, fueled by robust earnings reports. Alphabet’s stock surged over 10%, marking its most impressive performance since July 2015. Meanwhile, Microsoft posted a solid 3% gain on the back of strong fiscal third-quarter results.

The positive sentiment extended beyond individual stocks. Investors found encouragement in March’s core personal consumption expenditures (excluding food and energy), which rose by 2.8% year-on-year—surpassing the expected 2.7%. Personal spending also exceeded estimates, growing by 0.8%.

These developments helped major stock indexes regain their footing after yesterday’s downturn. However, the blue-chip Dow faced headwinds, sliding 375 points due to concerns about economic slowdown and persistent inflation but scoring a modest gain today.

Traders remain optimistic, asserting that rate cuts are unnecessary for the bull market’s continuation. Instead, they anticipate sustained economic expansion and robust corporate profits—already evident among market giants—to propel stock prices to new highs.

Remarkably, despite rising rates, higher inflation, and lower growth, stocks defied expectations. The combination of these factors painted a picture of stagflation, leading the Citi Economic Surprise index to deteriorate and rate-cut expectations to hit new cycle lows.

Bond yields surged across the board, with the 2-year yield still hovering around 5%. Interestingly, the Nasdaq outperformed, gaining 4%, while the Dow lagged.

The positive momentum received an additional boost from the most significant short squeeze since March’s first week. This propelled the MAG7 stocks up by over 5% this week, although META faced challenges and tanked. Notably, Tesla, Google, and Microsoft played a pivotal role in lifting the overall market sentiment.

Despite the market’s wild gyrations, the dollar ended the week unchanged. Gold, although slipping, found support at the $2,300 level, while crude oil finally rallied after two weeks of decline.

However, heightened volatility in recent weeks leaves me pondering:

Can Powell’s upcoming FOMC meeting restore calmness to the markets?

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 04/25/2024

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ETF Data updated through Thursday, April 25, 2024

How to use this StatSheet:

  1. Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
  1. Trend Tracking Indexes (TTIs)

These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.

  1. All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.

If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.

  1. DOMESTIC EQUITY ETFs: BUY— since 11/21/2023

Click on chart to enlarge

This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +6.89% and is in “Buy” mode as posted.

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Inflation And Growth Concerns Rattle Markets: Eyes On Google And Microsoft

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

In the financial markets, Thursday’s atmosphere was tense as stock futures took a nosedive in response to the latest economic data from the U.S. This data painted a picture of a slowing economy coupled with stubborn inflation. The trading day was characterized by significant selloffs, yet the major indexes managed to recover somewhat from the day’s lowest points.

The U.S. economy’s growth rate, as measured by the gross domestic product (GDP), was reported at a mere 1.6% for the first quarter, according to the Bureau of Economic Analysis. This figure, the lowest in two years, fell short of the 2.4% growth anticipated by economists.

The Personal Consumption Expenditures (PCE) prices, a key indicator of inflation, rose by 3.4% in the first quarter, following a 1.8% increase in the previous quarter. More strikingly, the core PCE price index—which excludes the volatile food and energy sectors—jumped to 3.7%, surpassing even the highest analyst estimates and the expected 3.4%.

These indicators have heightened concerns about ongoing inflation and cast doubt on the Federal Reserve’s ability to lower interest rates in the near future. Considering this, traders have tempered their expectations for a loosening of the Fed’s monetary policy, now predicting only one rate cut for the year.

The disappointing GDP data has added to the pressures facing a market already anxious about a downturn in technology sector earnings—a situation that some are interpreting as the onset of stagflation. Following a significant drop in Meta’s stock value, other major tech companies, collectively known as the MAG7, experienced a similar downturn but later managed to pare back some of their losses. The trajectory was echoed by the most heavily shorted stocks, with the tech sector closing slightly lower overall.

In the bond market, yields surged as inflation concerns became more pronounced, with the 2-year yield once again surpassing the 5% mark, though it failed to maintain that level at the close. Meanwhile, the U.S. dollar experienced a volatile session but ultimately ended slightly higher. Gold prices saw a rally, Bitcoin rebounded from its overnight slump with a 1.2% gain, and crude oil prices made a strong move towards the $84 mark.

Given the day’s volatility and the looming question of inflation, investors are now turning their gaze towards the upcoming earnings reports from tech giants like Google and Microsoft. With the market at a crossroads, one can’t help but wonder:

Will the earnings from these industry leaders steer the market towards recovery or further uncertainty?

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Market Stalemate: Searching For The Next Decisive Move

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the markets

In today’s trading session, the Nasdaq experienced a burst of energy at the open, thanks to Tesla’s post-earnings jump, which propelled the tech-centric index upward. This surge was sparked by Tesla’s announcement of a strategic shift towards more budget-friendly electric vehicles, causing its stock to soar over 13%. Despite this, the initial excitement seemed to fade as the session progressed, with the Nasdaq barely maintaining its position in positive territory by the close.

Tesla’s significant rise, however, came with a caveat; the company fell short of expectations on key financial metrics for the latest quarter, casting a shadow over its impressive stock performance. This mixed outcome reflects the broader market sentiment, where uncertainty seems to be the prevailing mood.

Amidst this backdrop, over a quarter of S&P 500 companies have shared their earnings, with a promising 79% surpassing analysts’ forecasts. This robust performance has ignited a glimmer of hope among traders, suggesting that a strong earnings season could be the catalyst needed to bolster market confidence.

On the economic front, the data painted a somewhat optimistic picture. Orders for durable goods saw a significant uptick of 2.6% in March, a sharp increase from the previous month’s revised figure of 0.7%. However, the impact of this positive news was dampened by substantial downward revisions, rendering the apparent victory less consequential.

The day’s trading can best be described as chaotic and directionless. Major indexes struggled to find their footing, with the Dow notably trailing in the quest for gains. The MAG7 stocks experienced a volatile session, ultimately ending flat. Meanwhile, bond yields edged higher, the dollar saw moderate gains, and Bitcoin, despite a slight decline, managed to hold steady at the $63,000 mark.

Gold and crude oil, typically seen as safe havens, were unable to provide a respite from the market’s indecisiveness. Both commodities traded within a tight range and eventually succumbed to the same fading momentum that characterized the day’s trading.

As the dust settled, the session concluded with little to show in terms of progress, leaving market watchers to ponder the future.

One can’t help but wonder, what will be the decisive factor that either propels the markets forward or triggers a retreat from current levels of support?

Here are some headline options for this market summary:

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