Daily Summary – April 28, 2021 - Another Day of Drift
Daily Summary – April 28, 2021 - Another Day of Drift
US equity indices vacillated around unchanged levels for a second day with small caps again finishing a bit green and SPX again a bit red, but NDX and Naz were down a little more so than yesterday at -0.42 and -0.28%, which was a bit surprising given the very solid earnings delivered from Alphabet and Microsoft. While the former was up, the latter, as well as a host of other tech companies from AMD to TXN were down leading that sector to the bottom of the board as we'll see in a moment.
Style box similar to yesterday with no real solid pattern other than value doing a little better in general than anywhere else.
After the bell we got Apple earnings. Surprise, they crushed expectations. And remember that $50B buyback from Alphabet? Apple says "hold my beer" adding $90B to its buyback. That's some real cash.
So the stock is ripping right? I guess if up 2% is ripping. Oh, yeah, and FB beat too. It'll probably be down tomorrow (just kidding it's up more than Apple somehow).
Major Market Technicals
I'll repeat yesterday - Given the basically flat sessions no real changes on technicals.
SPX Sector Flag
Some improvement in SPX sector flag with five green sectors (up from three yesterday) although outside of energy, which all the sudden was rediscovered after being left for dead for weeks (more on that below) none of the other green sectors would have cracked yesterday's top three. Of the five red sectors only one was down more than a third of a percent though (that was tech, dragged down by the weight of high expectations).
SPX Sector Technicals
While discr and tech have stayed close to highs, underneath they've weakened with a MACD daily sell longs crossover and RSI divergences. Doesn't mean anything bad is about to happen, just that they're losing momentum. Health care also starting to display some of the traits utes did before they started to really pull back, with RSI over to under 70.
Positively, fins made new ATH and got buy MACD signal, but biggest thing to note today is energy, which after a fairly steady 6 week downtrend has found new life pushing over downtrend lines, its 20 and 50-DMA's, and, importantly finally getting that MACD crossover and RSI divergence I've been waiting for. They're circled. This sector is all ready and primed to test the March highs if it wants to.
Subsectors
In key subsectors, bios were mixed again (XBI green, IBB red), semi's were weak falling back under the 20-DMA (dragged down by TXN, AMD, etc.), homebuilders and transp were also red (but less so) while retail was green.
Breadth
After an off day, breadth back to outperforming with 62 and 61% of volume positive on NYSE and Naz and issues at 56 and 53% respectively. That's very solid volume for mostly red days other than a mild gain for the RUT. So now we've had a week with mostly outperforming breadth. If you want to know why we haven't followed my "roadmap" of a 5-7% pullback that's why.
Commodities/Currencies/Bonds
Bonds - Bonds ended up finishing flat. Obviously the biggest thing for bonds today was the Fed statement and press conference. Two big things I mentioned this morning to watch for were any mention of inflation being a concern or that they were even "thinking about" removing accommodation. Nothing was expected on either, and Powell stuck to the script like he knew the algos were listening (which of course they were).
As there was SOME chance of either happening though when that got priced out pretty quickly yields dropped as you can see (it should be noted though that this was only a drop of 3 basis points).
Also came across this interesting tweet from Mark Dow.
Finally, Tom Graff, who is one of the best on this stuff, has me rethinking things. As I wrote about at length yesterday, I have been trying to think through the Fed's position where they have to gently ease the markets into "we're thinking about thinking about tapering", knowing how easy it will be for the market to just jump straight to pricing it all in. So I've thought they've got to signal WAY ahead of time that they're even thinking about it. But Tom makes a great point. Been there, done that, in 2013. Very similar in that they tried to signal months and months ahead of time that tapering could be coming at some undetermined point in the future. And for their cautiousness they were rewarded with rates shooting up 80 basis points in no time. So, Tom's conclusion is that they won't signal it's coming until they're sure it's coming, which could be a ways off. I think I buy that idea.
Dollar - Think a similar reaction today in the dollar. Had to have some people pricing in a Fed mistake that would push rates up and the dollar should follow. Since it didn't happen, dollar sold off, now at lowest level since February.
Crude - Green and tested last week's highs but didn't break through. But it's definitely starting to look like that head and shoulders top I wrote about a week or so ago IS a bust which is bullish. A break of last week's highs I think seals it.
In oil news,
Wrote on the EIA weekly report today.
https://sethiassociates.blogspot.com/2021/04/eia-summary-of-weekly-petroleum-data_28.html
While at first glance a headline build seems bearish when a draw was expected, it was taken as bullish given the details.
As trips per day continue to edge up in the US.
As well as UK.
Nat Gas - Another solid day pushing right up to the $3 level. It's now gotten very overbought so I can see it failing here and pulling back to support before mounting another run.
Gold - Continues to trade in range of last week.
Copper - Reversed early losses to push to new 10-year highs. Oh so close to ATH.
VIX - Mildly red remaining in the 17's.
Iron ore - Ok, NOW I'm doing iron ore.
Data
Other than EIA mentioned above nothing else written up today.
Mentioned this morning that I might have a little more on advanced indicators. Here are the tables on trade and inventories. Biggest thing I noted on trade is outside of food (which is interesting in that it wasn't up much) every category up at least 7%, and on imports every category (including food) up at least 5.7%. Very strong bounce back in trade from February's shipping and weather related weakness. Good to see. On inventories, huge drawdown in motor vehicles and parts as the chip shortage is depleting new product. Explains why prices, particularly for used cars, have skyrocketed.
Next 24
Tonight we'll get Biden's address which will be closely watched, but it sounds like most everything to be discussed has been pre-released. In any event, we know the issue will be in how these get passed, so I don't expect a lot of market reaction.
In terms of data, some various int'l including some employment and sentiment from Europe followed by the advance estimate for Q1 GDP, weekly jobless claims, and March pending home sales in the US.
On earnings, AMZN is the gorilla de jure but we also get MA, CMCSA, MRK, TMO, MCD, RDS, BMY, CAT, TOT, and AMT in the "over 100B" club, and there are another 15 companies that are between $50B-100B and over 100 $10B+ companies reporting. So, yeah, a big day.
Overall
So, my expectation for a similar reaction to earnings as last earnings season (general market lethargy) has been accurate, but the big difference in terms of a pullback is buyers have shown up this time around to keep the markets supported. So, it's more than possible that instead of pullback we just get chop for a couple/few weeks. Too early to tell, but for now I'm at least still not seeing the setup for any sustained rallies.
Misc
Some other random stuff from today.
Expected bond volatility well above that for stocks. Hadn't noticed that. Great point.
As breakevens continue to push to 7 year highs.
But interestingly that doesn't have investors piling into TIPS. Quite the opposite.
Moody's reports vaccines are raising European confidence.
As Biden Administration appears to be caving on early promises to leave non-nuclear Iranian sanctions alone until those areas were addressed.
And despite variants, etc., vaccines continue to provide amazing protection against Covid.
As real world data continues to confirm the initial study findings.
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
Comments
Post a Comment