1. Moving the markets

As has been the meme for the past few weeks, an early rally gave way mid-day to a broad sell-off despite positive earnings reports, which simply could not stem the downward momentum. Several last minute attempts to reverse the tide failed, and the major indexes dove into close scoring the lows for the session.

25 of the 30 Dow components ended up in the red, joined by all 11 S&P sectors, the downside leader of which was Healthcare with -1.6%. Even energy, which previously had shown some strength due to the uncertainty in the Middle East, had no bullish support and ended flat.

For April, the returns for the major indexes were anything but noteworthy, but at least we eked out some green numbers. The Dow added 0.3%, as did the S&P 500, while the Nasdaq scored a gain of less than 0.1%

So far, more than 50% of the S&P’s companies have shown their report cards with 79% of them beating Wall Street’s expectations. That is a solid percentage, which makes it somewhat concerning that the markets are showing nothing but a lackluster attitude and reaction to good earnings.

Of course, let’s not forget the host of distractions that have placed a blanket of worry over Wall Street. I am talking about protectionism and geopolitics along with concerns that global economic growth might be slowing down further. Higher bond yields are not supporting the bullish equity theme, although over the past few trading session, we’ve seen the 10-year yield back off from its 3% level, which is widely recognized as a hindrance to further upswings in the equity market.

While our Trend Tracking Indexes (TTIs) are still in “Buy” mode, we now have reached a level where we reside in striking distance of a new “Sell” signal. I have no idea whether that event will materialize in May, but I am prepared to act should a signal be given.

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1. Moving the markets

While rising bond yields continued to wreak havoc with the markets early on, a slow but steady climb, supported by strong corporate earnings and dip-buyers, proved to be saviors for the session by pushing the Dow and S&P 500 into the green by a small margin. The Nasdaq ended slightly lower, which was its 5^th straight close to the downside, its longest in over a year.

Rising interest rates remain at the core of the problem for stocks with the 10-year bond yield now passing the 3% marker to reach a point last seen in December 2013. Again, if yields rise because of stronger economic growth that is not as worrisome as when they rise due to stronger inflation, which is the scenario we are in.

So far, the earnings season has been one with mixed results. More than 80% of the S&P companies who have reported have beaten forecasts. However, those results have not inspired enough confidence in Wall Street traders to go on a buying spree and push equities higher as general nervousness about the markets has prevailed.

Thanks to the rebound, our directional indicators, the Trend Tracking Indexes (TTIs), were not affected, and we remain in “Buy” mode—that is for the time being.

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