Daily Summary – April 29, 2021 - Large Caps Back In Front

 Daily Summary – April 29, 2021 - Large Caps Back In Front

US equity indices hit their highs of the day at the open and steadily retreated until just after noon when they they staged a "v" recovery (at least the large caps) to push back to end near the highs.  Haven't had a day like this in a while for the SPX.


RUT was more like a checkmark only getting back about half of its starting point as small growth was a notable laggard.


The result was the SPX leading (first day in a while) up almost seven tenths, NDX up about half percent, Naz little under quarter percent, and RUT finished red down almost four tenths. 

And a style box that again leaned left and also to the top with large growth leading and large core (where Apple is housed) just behind.  Large growth lagging is notable following the amazing earnings we've had last two days from MSFT, GOOG, and FB.



And AMZN keeps the large growth earnings beats going absolutely crushing EPS estimates.


Coming into this morning companies were keeping up their historically high beat rates but continue to be rewarded less than history would suggest they should.  Broken record on this, but IMO it's because it's been priced in as shown by the huge gap between earnings growth and stock prices.  This action narrows that gap, which is a good thing.


But FWIW small caps have fared better than large following earnings beats.


Major Market Technicals

Nothing really new on the technicals.  SPX set another ATH and NDX and Naz intra-day, while RUT continues to test (but stay above) that 2280 level.

SPX Sector Flag

More improvement in SPX sector flag with nine green sectors (up from five yesterday and three day before) and while only one over 1% yesterday, had five over nine tenths led by comm's due to FB's 7% day.  Health care only red sector after a number of revenue and earnings misses (MRK, BMY etc.).  



SPX Sector Technicals

I had mentioned health care was looking weak yesterday and that continued today although it did bounce off its 20-DMA area.  I'm not super optimistic that holds.  Utes did hold their 20-DMA though bouncing right off it. Staples and tech did the same off of 21-EMA.

New ATH's in RE, industrials, fins, comms, and materials.  Great to see.

Subsectors

In key subsectors, bios weak, and retail a little red, but semi's, homebuilders and transp bounced back with solid green days.  New ATH for latter two.

Breadth

Breadth flipped back to disappointing today, especially Naz where just 36% of volume was positive and 44% of issues.  Really poor for a green day on the Naz.  NYSE a little better at 49 and 50% but that's still pretty poor with a strong day on the SPX even if the RUT was a bit red.  Hopefully this bounced back again. 

Commodities/Currencies/Bonds

Bonds - After pushing up in the morning bond yields pulled back and finished little changed.

Dollar - Similarly to bonds, basically no change here.

Crude - After testing yesterday, pushed right through April highs today, so that has me looking for a retest of the 52-week highs around $68 (WTI).  Really surprised by the resilience in the face of a slew of negative headlines.

In that regard, EIA sees jet fuel demand creeping up.



Nat Gas - Mentioned this morning that I thought nat gas might need to correct its overbought condition before pushing through $3, and a bearish storage report was just the excuse for a pullback.  I think it probably has more to go.  

Gold - Continues to hold support but isn't even testing resistance anymore as it slowly loses momentum.  No such issues for palladium which hit a record high.

Gold council out yesterday with report on 1Q gold flows.


Copper - Pulled back a touch after hitting a fresh 10-year high in the morning.

VIX - Mildly red remaining in the 17's.

Data

Did reports on GDP and pending home sales.  Didn't get to jobless claims quite yet.

https://sethiassociates.blogspot.com/2021/04/q1-gdp-initial-estimate-64-annualized.html
https://sethiassociates.blogspot.com/2021/04/us-pending-home-sales-mm-mar-19-est-44.html

On GDP, we're almost all the way back.



Next 24

A lot of data next 24 hours.  From Asia we'll get IP and retail sales from S Korea, a slew of reports from Japan, PMI's from China, a variety of data from Europe, mostly price indices but also some preliminary GDP data, followed by March personal income and spending and PCE, and April final Univ. of Michigan sentiment and Chicago PMI in the US.

On earnings, we're through the "Big 5" but do get XOM, CVX, ABBV, AZN, CHTR in the "over 100B" club.  

Overall

So, the markets continue to bust my prediction for some index weakness (which is fine by me) but today's breadth keeps me cautious.  Also sentiment remains mixed but overall still pretty frothy.  We saw a reading of 2.1 on the equity call/put ratio yesterday and NAAIM is back over 100 (meaning average is leveraged long).

But II bulls backed off by 4 points (although still just under 60), and AAII by 10 points (!)



Also, bets on big downside are surging as noted by Heisenberg Report.  This makes me less bearish.  I think.


And volatility remains very muted which is good for stocks.

So, where do we go?  I don't know.  I thought I did but now I'm just not sure.  If I had to pick I still think we're in store for weakness but I'm much less convinced then I was a week ago.



Misc

Some other random stuff from today. 

Now that all the plans are out, the pushback begins.





As the parsing of potential winners and losers begins (although is energy not even a sector anymore?).



Despite equity market strength, retirement funds have steadily pared their exposure (also makes me more bullish).



While ING likes the "core" of Europe.



As FDA looks to ban menthol.




And China continues to tighten the reigns on tech firms.



While Astra can't get their data together (really?).  



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

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