Daily Summary – April 27, 2021 - Which Way Do We Go?

   Daily Summary – April 27, 2021 - Which Way Do We Go?

So I had a really nice write-up tonight but somehow I managed to lose about half of it, and I unfortunately don't have time to redo it, so sorry about that.  Anyway, here's an abbreviated piece... 

US equity indices vacillated around unchanged levels today with small caps finishing a bit green and larger caps a bit red but all within two tenths of the flatline.  

Reversing yesterday, value outperformed today with small value the leading style.  

This was despite more solid earnings.  Coming into today, as with last quarter, companies are smashing expectations.

And it looks like two of the biggest have kept it going. 

And also a big beat from heavyweight V (but big miss from AMGN and SBUX mixed).

Major Market Technicals

Given the basically flat sessions no real changes on technicals.

SPX Sector Flag

SPX sector flag continues to deterioriate with only three green sectors (although all three were up around at least nine tenths) and all cyclicals which is nice.  Only one sector down more than 1% which is utes which was down for 5th day in a row and has pulled all the way back to its 20-DMA. 

SPX Sector Technicals

Mentioned utes above.  All kinds of technical issues there from MACD crossovers to RSI and money flow divergences.

On the other side tech hit an intra-day ATH and financials a closing ATH.  

Subsectors

In key subsectors, bios were mixed, transp (on back of big days from UPS and FedEx) and homebuilders strong pushing to ATHs, retail also green, while semi's were red.

Breadth

Breadth not great, particularly Naz where only 45% of volume was positive and 43% of issues.  While Naz was slightly red, I was hoping for better given the recent 80% readings.  NYSE a little better at 51% volume and 48% issues.  About what you'd expect with slightly red SPX and slightly green RUT.

Commodities/Currencies/Bonds

Bonds - Bonds saw a little bit of movement following the 7-year auction, with the 10-year moving up 5 basis points to just below its 20-DMA.  I think a break of that leads to a test of the 1.7% area.  As a reminder, the 7-year auction back in January set off the 70 basis point move in a couple of months that brought us to current levels.  Today's was better coming in right about at the when issued with better bid/cover and more direct accepted (although slightly less indirect (foreign) buying).  

Dollar - Held support again today finishing flat.

Crude - Green but remaining below last week's highs.

OPEC+ JMMC met today with no recommendations, and now it turns out they're cancelling the policy meeting that was set for tomorrow and just sticking with the previously agreed on supply increase for May.

API also out today which showed a large crude build but draws in gasoline and distillate.  We get EIA tomorrow.

Nat Gas - Another solid day closing at an almost 2-month high.

Gold - Continues to trade in range of last week.

Copper - Green continuing to push to new 10-yr highs.

VIX - Mildly red remaining in the 17's.

Mentioned Soy this morning.  Corn also up huge this week on drought in large producer Brazil.

Data

No write ups today.  I did a huge write up on the consumer confidence numbers, Richmond Fed report as well as regional reports, and some other stuff that was lost.  I am so angry as it was good stuff. In a nutshell though what was most notable is that Consumer Confidence present situation is doing great while the expectations remains stuck in the mud.  In fact, consumers expect the job situation to be worse in 6 months.  Incomes are supposed to be up a touch.  I guess maybe they're hearing all the "peak" talk.  

From the report: “Consumer confidence has rebounded sharply over the last two months and is now at its highest level since February 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions improved significantly in April, suggesting the economic recovery strengthened further in early Q2. Consumers’ optimism about the short-term outlook held steady this month. Consumers were more upbeat about their income prospects, perhaps due to the improving job market and the recent round of stimulus checks. Short-term inflation expectations held steady in April, but remain elevated. Vacation intentions posted a healthy increase, likely boosted by the accelerating vaccine rollout and further loosening of pandemic restrictions.

Richmond Fed manufacturing report pulled back a bit from March but a solid reading, mostly it seems due to supply chain issues.  Here was language from the report:

Fifth District manufacturing activity improved in April, according to the most recent survey from the Richmond Fed. The composite index held steady at 17, indicating continued growth, as all three component indexes—shipments, new orders, and employment—remained positive. Survey responses indicated supply constraints, with the backlog of orders and vendor lead time indexes registering historic highs. Meanwhile, inventories shrank as the indexes for inventories of finished goods and raw materials reached their lowest values on record. Manufacturers were optimistic that conditions would continue to improve in the coming months

Also, I missed the Dallas Fed manufacturing survey yesterday (basically Texas).  As with Richmond Fed, it pulled back from March levels as shipments fell, but backlogs were very robust, and in both surveys wages and employment increased which is good.

Texas factory activity expanded at solid clip in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 14 points to 34.0, a reading still well above average and indicative of robust output growth. Other measures of manufacturing activity also pointed to strong growth this month, with demand, labor, price and wage indexes reaching all-time highs.

Expectations regarding future manufacturing activity pushed further positive in April. The future production index moved up to 47.2, and the future general business activity index inched up to 36.6. Most other measures of future manufacturing activity also rose, and all remained solidly in positive territory.

Advisor Perspectives does a nice chart which brings together all of the Fed surveys.  Here's the most recent.

Next 24

Big item on the agenda for tomorrow outside of company earnings is the Fed statement and press conference.  Nothing is expected other than a repeat of the last couple of months.  At some point the Fed is going to need to start to signal that they're thinking about thinking about starting to taper purchases (yes, it's gotten that far that they have to actually signal they're going to think about removing accommodation).  It's a tricky place to be because they now need to signal well in advance of moving, but they know that as soon as they signal that the market will just price it in (i.e., stocks and bonds will fall).  They don't really want that, but they also can't wait forever (at least I don't think they plan to).   I don't think they start that process tomorrow, but if they do, it will surely have an impact on the markets. 

Not much overnight, and tomorrow lighter day outside of the Fed in the US with just mortgage apps, trade balance, inventories, and EIA.

On earnings, two gorillas are AAPL and FB.  Also get QCOM, BA, SHOP, SONY, SNY, NOW, GSK in the "over 100B" club.

Overall

Risky behavior continues to percolate.

Which always makes me nervous.  So for now I am sticking with my roadmap chart of last earnings season (the second arrow on the chart below).

Misc

Some other random stuff from today. 

Some late breaking headlines on Biden's plans.  "Fully pay for His $4T in Spending".  Hmm.

Richard Bernstein Advisors sees huge deleveraging coming.

As people pile into the non-cap weighted train.

As TSLA discovers risks of selling into China.  Doesn't seem like a good sign when Chinese state media is putting out negative stories on your brand.

JPCOA meetings continue in Vienna.

And today's Mid-East activity.

And perks of vaccinations.  We need more of this...

to avoid this.

To see more content, including summaries of some of today's economic reports and my morning and nightly updates go to https://sethiassociates.blogspot.com