More intraday volatility for the markets as they sell early and close flat again on the day. The indices continued the trend from last week going nowhere. We remain at a point of indecision even with the busiest week of earnings ahead. Doji candles were left on SPY, QQQ, SOXX, and IWM for the third day. Dallas Fed Survey dropped to -23.4 versus -11 expected versus -15.7 previous… not exactly a vote of confidence looking forward. Investors remain unwilling to jump into the markets… interesting thing is that the sellers are unwilling to push stocks lower. Disney announced more layoffs and stated the economy was good… interesting. As discussed in the weekend update banks have resumed outflows. Commercial real estate saw Brookfield default on $160 million of office buildings… that may be just the beginning. First Republic stated that deposits dropped 40% but have stabilized… they borrowed $100 billion from Fed facilities… stock fell 33% after hours. Banks remain under pressure and this news isn’t going to help things. The volume remained below average on Monday as investors remain in a wait-and-see mode. The breadth is minimal relative to the current move from the March lows. Overall volume has been below average for the last 26 trading days despite the overall move higher. That takes us back to the bottom reversal in March. Energy was the leader on Monday. Semiconductors are breaking support and not giving any leadership needed to the broader markets. There is still plenty of indecision in place as you would expect in a news-driven market. None of the news is painting a positive outlook… thus, we proceed with caution watching for clarity. The belief would be at some point the markets/investors will have to accept the bad news for what it is… reality. But then again, we are an optimistic society when it comes to stocks.
Earnings are the storyline for the week with plenty of the mega caps reporting. The market is awaiting the next catalyst and with earnings, the FOMC meeting, and banks losing liquidity again, there will be plenty provided. The S&P 500 index closed up 0.1% as intraday volatility remained. The NASDAQ was down 0.3% trading in a narrow range. Small Caps (Russell 2000) were down 0.1% still trading sideways. The ten-year treasury yield closed at 3.51% down 5 bps on the day. Crude (USO) was up 1.5%… the second day of gains for the commodity. Gasoline (UGA) was up 1.4%. Natural gas (UNG) was up 2.7% trying to resume the bounce. The dollar was down 0.3% and struggling globally. We are focused on managing the risk and watching how this all unfolds.
NEWS: FRC dropped 30% after-hours. Deposits fell 40% to $104.5 billion in the first quarter.
ONE Chart to Watch: QQQ – 1) It is in a three-week sideways range. 2) Short-term trend is UP… starting from the January low and testing. 3) $320 resistance and level to clear for upside trade opportunity. (TQQQ) 4) $312.78 support and level to hold… if it breaks it creates a downside trading opportunity. (SQQQ)
Additional Charts to Watch: AI short side break lower. INMD cup & handle.
SPY, QQQ, IWM, SOXX. The continued lateral movement is a concern relative to breaking higher. The patterns are set to continue higher but breadth and volume say no. Watching for a decision from investors.
Previous Charts of Interest – Still in Play: LSCC (testing uptrend). Added uptrend in play. AAPL (reversal confirmed). Added to the position. AMZN (bottom reversal) Added. PG – trading range break as part of the consumer staples money rotation. Earnings gapped higher. Added. MCD breakout. Added. WMT ‘V’ bottom breakout. Added. WES reversal. Added. SRS Added. SRS (buy the dip). Added. SOXS. Added. TSLS. Added. UCO.
Stops Hit: None.
Quote of the Day: “The best proof of love is trust.” – Joyce Brothers
The S&P 500 index closed up 3 points to 4137 the index was up 0.1% with below-average volume on the day. The index stayed above 4086 holding the upside move. 4169 next level of resistance which we have been unable to break above. The up-trendline was broken last week… watching how that unfolds. Six of the eleven sectors closed higher on the day with energy as the leader up 1.1%. The worst performer of the day was technology down 0.4%. The VIX index closed at 16.9 as anxiety ticked up on the day. Plenty to watch moving forward. February highs are the current target if the upside continues.
Sector Rotation and the S&P 500 Index:
XLB – Basic Materials hit resistance at $81.75 and tested lower holding at the 50 day MA. Some rotation is in play short term. The sector was down 0.2% for the week.
XLU – Utilities Flag pattern hitting resistance at the 200-day MA. The sector was up 1% for the week. Entry $68.
IYZ – Telecom gapped down to $21.63 support watching and short signal if it breaks support. The sector was down 3.7% for the week.
XLP – Consumer Staples upside trend continues as money rotates to the “safe” haven of defensive stocks. The sector was up 1.8% for the week.
XLI – Industrials bounced back to the previous highs. The sector was up 0.8% for the week.
XLV – Healthcare Made a move through two resistance points. $136.30 next resistance to get through. Topping pattern on the chart. Biotech (IBB) equally moved higher. Entry $127.57. The sector was down 0.2% for the week. Testing. Moved back to the previous highs.
XLE – Energy rolling top with resistance at the $86.85 level. The sector was down 2.6% for the week. Crude moving lower impacting stocks short term. Solid day as crude moves higher again.
XLK – Technology The sector cleared the $144.10 resistance and testing. The sector was down 0.6% for the week. Need some leadership from the sector. SOXX traded below the 50 day MA.
XLF – Financials breaks above resistance at the $32.36 level on better-than-expected earnings. Showing short-term leadership. The sector was up 1% for the week. Banks will be the key short-term as they continue to struggle with regional banks reporting weaker earnings. Watching banks with deposit worries back in the headlines.
XLY – Consumer Discretionary $147.11 resistance in play again. Retail sales didn’t help as they fell into negative territory. The sector was up 0.3% for the week.
IYR – REITs stalled from the bounce and moved sideways over the last three weeks. Need to clear $85 currently. The sector was up 1.6% for the week. The negative influence of interest rates and reports of vacancies in commercial rents are rising. Letting this unfold. SRS entry $17.75. FCR is the largest holder of commercial real estate loans.
Summary: The index continues with intraday volatility and indecision. Economic data remains a driver along with earnings. 4169 next level to clear on the upside… 4086 level to hold on the downside. Volume was below average again… something we continue to watch. Plenty of things to worry about on the horizon… crude is a concern longer term… treasury bond yields bounce on Fed concerns… leadership… geopolitics… dollar… earnings… and plenty of data on the way. We will remain patient for now as data versus hope play out. Remember two things; first, the trend is your friend, and second, don’t fight the Fed.
(The notes above are posted at the end of each week based on activity from the previous week’s trading. The BOLD/ITALIC comments are the current-day changes worthy of note.)
KEY INDICATORS/SECTORS & LEADERS TO WATCH:
The NASDAQ index closed down 35.2 points to 12,037 as the index was down 0.29% for the day. The index held the move back above the 11,474 previous support with a three-week lateral move on the chart. Still technically in a position to move back to the August highs, but equally could test support. Technology is the key… SOXX and IGV mixed on the day.
NASDAQ 100 (QQQ) was down 0.21% with the mega caps struggling of late. The move held above $312.13 and letting it play out. The sector had a positive bias with 56 of the 100 stocks closing in positive territory for the day. Mega-caps are testing sideways. Third doji candle just above the 20-day EMA.
Semiconductors (SOXX) failed to hold the move above the $432.27 resistance. Not looking good on the charts with the test lower. The sector was down 1.5% for the week. Watching how it plays out next week. Closed below the 50-day MA… not looking very leadership-like.
Software (IGV) worked higher and now consolidating around the 10-day MA. The sector was down 0.1% for the week. Mega caps leading the sector.
Biotech (IBB) The sector moved higher hitting resistance at the $134 level. The sector was up 0.8% for the week. IBB entry $127.35. Stop $130.50.
Small-Cap Index (IWM) lagging overall as investors move away from growth to safety. Bottom trading range in play. The sector was up 0.6% for the week. Letting it unfold.
Transports (IYT) attempting to push higher as airlines are a drag overall on the sector. The sector was up 1.4% for the week. If the markets are to move higher overall they need transport to be positive.
The Dollar (UUP) The dollar remains volatile as more countries are willing to trade outside the dollar. held steady for the week… watching how it unfolds. The dollar was down 0.1% for the week.
Treasury Yield 10-Year Bond (TNX) The yield closed the week at 3.57 up from 3.52% last week. Mixed reactions all week to the news. TLT was down 0.6% for the week. TLT up 1%.
Crude oil (USO) Tough week for oil as news states China and US are consuming less on weaker economic data. The pressure will be on the upside longer term… watching how the short term unfolds and what opportunities are offered. USO was down 5.3% for the week. UCO entry $25.80. Stop $28.50 Hit Stop. Up on “improving” economic data in China.
Gold (GLD) The commodity is showing a rolling top. The metal was down 1.1% for the week. Entry $169.50. Stop $$184.50. Hit Stop. Solid gain, watching for the opportunity as it unfolds.
Put/Call ratio was 0.87 on Monday… boring like the market.
Questions to Ponder: Navigating Uncertainty
Stagflation – persistent inflation combined with stagnant consumer demand and relatively high unemployment. Do we have this situation currently in the US economy? If it doesn’t exist in a purely technically defined way, it is creating the same economic environment currently in the US, and the current administration is in denial. Thus, we will continue to feel the effects of this until we change course.
Money Supply – Falling at the fastest rate since 1930. M2 fell 2.2% in February and fell 2.4% in March… Contraction in supply should contract liquidity in the system and stifle inflation. Watch bank deposits they are still declining. See the above definition of stagflation… the pressure on the economy is building.
Semiconductors – China announced a national security review into US chipmaker – and one of three memory chip market leaders – Micron. MU fell on the news. This battle between the US and China over chips has been going on for some time… caught in the crossfire is South Korea and Tiawan.
Monday: Stocks were mixed on the day with intraday volatility still in play. Despite the intraday swings volatility remains at 16.9 and watching how it unfolds near term. There is still plenty ahead for investors to ponder relative to the economy, earnings, the Fed, and inflation. Earnings have been mixed, economic data has been mixed, thus, stocks have been mixed. The market breadth for the upside move still isn’t great. We see plenty of opportunities setting up both on the downside and the upside on the charts. Key is to let it unfold and take the opportunities as they are presented.
We are watching the trends in the leading sectors and the major indexes as they test key support levels. The SOXX is a key indicator for the markets and after peaking three weeks ago has been testing lower. The sector tested below key support levels and looking at how it plays out near term. Watch for the major index’s volume, direction, sentiment, and volatility levels to lead you to what takes place. There are plenty of moving parts, we have to understand that truth/reality eventually plays out in the markets. Until then we will continue to take what is offered and manage the risk that is.
Our longer-term view is still negative, but nothing goes straight down or up… there are always positive and negative swings in a longer-term trend. We have to remain focused on short-term trades until there is longer-term directional clarity. News is in the driver’s seat as we take positions that are technically moving and offering opportunities. The key remains, know where you are now, know what is happening now, and know what is on the horizon… act accordingly. The goal now is to manage the risk of positions, take what is offered… short or long, and then manage your money.
“Vision without action is a daydream… Action without vision is a nightmare.” Japanese proverb
The goal of these notes is to allow you, the investor, to learn how to see the market development as the progression through the sector develops based on news, speculation, and data. Data drives long-term results and develops trends… speculation and news are short-term drivers and offer higher risk trading opportunities. Through the use of both technical and fundamental data, we can have greater confidence in our trading strategies with a disciplined approach to investing and managing the risk of our money.