Daily Summary – April 30, 2021 - April Goes Out with A Whimper
Daily Summary – April 30, 2021 - April Goes Out with A Whimper
US equity indices ended the week (and month) on a down note with SPX, NDX, Naz, and RUT all down at least seven tenths (RUT down a little more than the others, -1.26%) giving them all down weeks, although all very mildly (SPX actually only finished down 4 points). All had solid April's though led by the SPX's gain of almost 5%.
The weekly losses were despite large speculators apparently adding quite a bit of exposure.
Pretty even in terms of growth versus value but definitely a bias to large caps as noted.
And this week's mild losses were despite a huge week of earnings that not only saw historically high beats but also one in five companies raising guidance.
Which have Credit Suisse and BoA upping earnings targets (CS to $200 in 2021 WITH a 25% corporate tax rate).
But at some point earnings needed to catch up to stock prices (it was a very positive month after all) so a week like this (earnings up stocks flat or down) helps that.
In fact, it has been two weeks of flat action as the SPX was only 7 points lower on 4/16. But I guess we probably shouldn't have been surprised by the relative weakness in the second half of the month based on this chart I noted.
I'll have some information about May seasonality at some point before the open Monday.
Major Market Technicals
RUT tested its 21-EMA which held. Naz got a bearish MACD sell longs crossover today on the daily chart. Underlying technicals on all the indexes continue to look weak.
Quick check of the monthly charts shows them all in great shape although all overbought.
SPX Sector Flag
Big deterioration in the SPX sector flag with only three green sectors (down from nine yesterday) and none over 1%, while seven sectors were down at least three tenths and three were down at least 1% led by energy's 2.7% drop.
SPX Sector Technicals
I said yesterday that energy was set to run if it wanted to, and it most decidedly did not want to today, pulling back and closing at the lows and just below the 50-DMA. It did though stay above the 20-DMA and did finish up for the week, and technicals remain favorable, so
Tech also fell below an MA, it's 20-DMA, and if I had to guess based on the chart, I'd say a test of the 50-DMA comes before too long.
On the monthly charts, all of the sectors look solid as the one holdout, utes, got a "cover shorts" MACD crossover this month to join the others in a bullish technical configuration. All are overbought other than utes, staples, and energy.
Subsectors
All key subsectors were red with semi's getting the worst of it down almost 3% but homebuilders, retail, and XBI (bios) were down over 1%. This brought the semi's down to the 50-DMA level which did hold.
On the monthly charts all of these have bullish MACD's although some are rolling over, and all but the bios are very overbought on RSI (semi's are an 84).
Breadth
Breadth was mixed. You'd expect negative breadth but NYSE was really negative with only 27% of volume positive and 31% of issues. Naz was better at 43 and 30. That 43% positive volume on Naz actually ok given it was down nearly one percent. Normally would harp on this more but it was month end after a strong month for stocks so probably a bit of rebalancing going on.
Commodities/Currencies/Bonds
Bonds - Despite all the hot price data from around the globe reported this morning bond yields were basically unchanged.
Dollar - Interestingly despite the muted action in bonds, dollar was strong, pushing right through the 100-DMA and hitting the 21-EMA. Will be interesting to see where it goes from here.
Crude - A day after pushing to a 2-month high pulled back below yesterday's lows, so looks like it's not going to be running away to the upside quite yet but remains above solid support.
And despite WTI in the 60's, so far drillers have followed through on promises to keep drilling in check with oil rigs staying stable again this week.
Nat Gas - Continues to hover just under the $3 mark with a green day (starting to form a bull flag).
Gold - Continues to hold support but isn't even testing resistance anymore as it slowly loses momentum with a flat day. MACD just about at sell longs configuration.
Copper - Pulled back for a second day after hitting 10-year highs yesterday.
VIX - Got a little life today in to the 18's.
Data
Did report on personal income and spending (link below).
US Personal Income Mar: 21.1% (est 20.2%; prevR -7.0%; prev -7.1%); US Personal Spending Mar: 4.2% (est 4.1%; prev -1.0%) - details and analysis
https://sethiassociates.blogspot.com/2021/04/us-personal-income-mar-211-est-202.html
The index gained 5.7 points, boosted
by an influx of new business.
Among the main five indicators, Order Backlogs posted
the largest increase, while Supplier Deliveries saw the
biggest decline.
Demand improved markedly in April with New Orders
rising by 9.9 points to a near-7-year high. Production
ticked up 0.9 points to the highest level since January
2018. Anecdotal evidence suggested an anticipated
increase in business activity, partly because firms are
overbuying due to raw material shortages.
Order Backlogs soared, up 16.2 points in April, hitting
the highest level since December 1973. Firms are
experiencing difficulties in getting certain components
and raw materials.
Inventories fell 8.7 points in April, dipping below the 50-
mark for the first time since December 2020.
Employment edged higher in April by 1.7 points,
marking the highest level since August 2018 and the
second successive reading in expansion territory.
Supplier Deliveries eased 3.5 points in April, following a
sharp increase in March. Nevertheless, the index
remains elevated and firms continued to experience
slow delivery times due to logistical constraints.
Prices paid at the factory gate skyrocketed a further
11.1 points in April, surging to a 41-year high. Raw
material shortages and transportation problems
continue to weigh on companies cost burden.
This month’s special question asked, “Do you plan to
expand your workforce over the next three months?”
The majority, at 54.8%, plans to expand their work
force, either with permanent (16.7%) or temporary
(14.3%) workers, or both (23.8%). Against that, 45.2%
have no plans to expand their staff levels.
Also got final read of UofM sentiment which improved a bit as expectations, which has been lagging, moved a bit higher. Good to see.
US Univ. Of Michigan Sentiment Apr F: 88.3 (est 87.5; prev 86.5)
- Current Conditions: 97.2 (est 97.6; prev 97.2)
- Expectations: 82.7 (est 81.0; prev 79.7)
- 1-Year Inflation: 3.4% (prev 3.7%)
- 5-10 Year Inflation: 2.7% (prev 2.7%)
Peter Bookvar parses some details.
Next Week
The annual Berkshire confab is this weekend but to make things a little easier on Charlie Munger, it's being held in Los Angeles (and again virtually).
Normal data week next week, although we do end with a bang with the jobless reports on Friday.
On earnings, while on average not as large, we get a lot more reports next week with nearly 1500 companies reporting. Largest on Monday (and only $100B+) is EL.
Overall
So as y'all know I was looking for something like last earnings session with a pullback this week. Here's that chart again (arrows are start of last two earnings seasons).
So far we haven't pulled back, but we haven't gone up either, just sort of meandering. So I was sort of right. I would normally think maybe it'd come next week, but as detailed yesterday we've started to see some froth come out (in that regard put/call today was almost over 1), although it's far from panicky. But it's the start of a month, and it's hard to completely ignore the great earnings we're seeing. So I'll keep my sort of "neutral" call for next week.
Misc
Some other random stuff from today.
I've mentioned that one of the tricky things rest of the year is when and how the Fed introduces tapering discussion. I've gone back and forth on whether they start way early (to try to tiptoe in) or way late (recognizing 2013 when markets jumped the gun). One way to tiptoe would be to have the discussion sort of "seep up" from less influential to more influential members. Kaplan is sort of the former, although influential enough that what he says is listened to. Maybe this is the start of the tiptoe?
As I've noted before, the problem with EV's is the lack of infrastructure. And if we don't have it in the US anyone who thinks EV's are going to be all over the place anytime soon in rural China, India, etc., let alone Indonesia, etc., needs to think again.
USTR says China not complying with Phase 1 on IP protections.
Not just schools that will be requiring vaccinations.
And, one of my weekly favorites.
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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