Jim’s Notes – April 4th

Moving the Market – Treasury Yields Ease Helping Stocks

The markets moved in a low-to-high action but failed to hold the move above the 10-day MA. The intraday activity was interesting with stocks opening lower, then heading higher in the first hour. After that, they drifted lower throughout the day with some selling in the last hour of trading. All said indices posted modest gains but the sellers were still active relative to selling into the early optimism. The comments from the Fed were still the company line relative to interest rates. Despite the Fed headlines yields on the 10-year bond moved from 4.42% early and closed at 4.35% helping ease some fear about higher rates. The ADP employment report was better than expected at 184k new jobs expected. The ISM Services fell to 51.4 from 52.9 in February. This indicates a softening in the services sector. Prices fell to 52.4 from 58.6 in February showing contrary data to the S&P reports earlier this week. It may give the Fed alternative data to continue with rate cuts later this year. Thus, the confusion overall for the trading day. Technically failure to hold above the 10-day MA showed a lack of power behind the buying. Intel fell 8.2% after losing $7 billion in its foundry business. Crude oil closed above $85 per barrel following the OPEC meeting leaving production levels unchanged. Gold and silver closed higher again. Hints of a banking liquidity issue are starting to hit the news. Commercial Real Estate (CRE) is the underlying challenge as defaults and late payments continue to rise. If the Fed offers liquidity to the banks that will ramp up inflation. As we see it, the Fed has painted itself in a corner, and either way it is going to cause financial stress for the markets. None of this is a positive looking forward. But, we follow the trends and take what the markets offer. Uncertainty is in play and we know the market doesn’t like uncertainty. Expect more volatility along with a test lower as we look forward.

The indexes traded low to higher with a fade in the last hour closing slightly higher on the day. Commodities were higher again. The leaders were energy, materials, and industrials. Money flow was higher. The RSI was higher as volume remained below average. Seven sectors closed in positive territory improving over Tuesday’s action. The NASDAQ closed up 0.2%, DIA was down 0.1%, and the SP500 was up 0.1%. The major indexes closed higher. The SOXX was up 0.2%. Small Caps (Russell 2000) were up 0.6%. The ten-year treasury yield was 4.35% down 1 bps for the day. Crude Oil (USO) was up 0.5%. (UGA) was up 0.1%. Natural gas (UNG) was down 0.1%. The dollar was down 0.4%. We are focused on managing the risk in the current environment and letting it unfold.

Thursday Outlook: The market remains undecided as seen in the action on Wednesday. The obsession with the Fed and interest rates continues to dominate the headlines. The data relative to inflation is the cause for the angst. The buyers tried to push higher but lacked overall conviction. The sellers continue to act on each move higher keeping the markets in a sideways action of late. Overnight futures are higher as we watch how the day unfolds… Crude is unchanged. Patience as this all unfolds. Proceed with caution and keep your stops in place. This is going to get interesting.

Headlines Worthy of Note:

Disney (DIS) claimed victory over investor activist Nelson Peltz for control of the board and direction of the company. Now comes the challenge of making things better for shareholders or the victory will be short-lived. The stock was down 3.1% for the day. The stock has moved higher since earnings improved in February. Tracking how the stock does over time.

Amazon (AMZN) is planning to spend $150 billion on data centers to lead the AI charge. The goal is to maintain its edge over Microsoft and Google in the cloud services market. Chips will come from NVDA and AMAT to run the data centers. VRT will help with infrastructure and networking. Thus, watching the players involved in this process will lead to companies generally benefitting financially similar to Apple’s supply chain.

Charts to Watch: See Notes on “Reality of the Markets” & “Jim’s Beliefs About the Market” pages…

Quote of the Day: “I’m the only man in the world who has a marriage license made out to whom it may concern.” — Mickey Rooney.

Note of Changes on Website: The ‘Weekend Update & Outlook’ will now reside on the “Reality of the Markets” page. It will be updated throughout the week as needed relative to market changes.

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