Jim’s Notes – Buyers follow through

Moving the Market – April 24th

The markets started the week on a positive note and followed through on Tuesday with a solid open-to-close move higher. PMI Manufacturing index gets the credit for the catalyst as it moved below 50 showing a contraction phase. That of course, is good news relative to the Fed and interest rates according to the talking heads. Thus, investors took the stance that bad news is good news and put money to work. The ECB Monday was talking about rate cuts in June helping the cause. The Fed on th other hand was talking about savings decline, delinquency spikes, and all the challenges it creates. Maybe hinting at some form of stimulus ahead. That aside stocks were higher again pushed through some resistance points and hitting others. There is plenty of work ahead if the upside is to resume technically. The Interest rates moved to 4.59% and remain elevated in front of the FOMC meeting next week. Semiconductors and software led the bounce helping the NASDAQ. Financials continued the upside move adding to the bounce from last week. Ten sectors closed in the green with only basic materials closing in negative territory. TSLA missed earnings but up 10% after hours on Tuesday… bad news is good news. The upside bounce is in play as we watch the data and earnings unfold over the next few days This raises the question of how much upside is there relative to the current environment of economics and earnings. As always we will see what unfolds and take what the market offers. Closed some short positions and looking where the opportunities lie. Money will always find a home we just have to follow it.

The NASDAQ and SP500 start the week higher thanks to a belief shift as discussed above. The broad indexes moved to the next level of support and bounced the last two days. Technology taking the lead on the bounce along with financials. The NASDAQ closed up 1.6%, DIA was up 0.6%, and the SP500 was up 1.2%. The major indexes closed higher with volatility moving to 15.6. The SOXX was up 2%. Small Caps (Russell 2000) were up 1.6%. The ten-year treasury yield was 4.59% down 3 bps for the day. Crude Oil (USO) was up 1.5%. (UGA) was up 1.2%. Natural gas (UNG) was up 2.6%. The dollar was down 0.4%. We are focused on managing the risk in the current environment and letting it unfold.

Wednesday Outlook: Markets bounced at support… a shift in sentiment is worthy of note. Talking heads were out with bad news is good news relative to the economic data. The Fed enters a quiet period prior to the FOMC meeting next week. Investors tried to shake off the selling with a solid day of buying. The goal is to watch and see how this unfolds short term. We will manage our positions with our stops in place. Patience and risk management are key. Look for opportunities with the bounce move at support.

Chart of Sectors: This chart starts at the previous high for the S&P 500 index on March 28th. Note that XLE has been the clear leader from that point. It joined the selling and is now moving higher along with XLU. Some of the defensive sectors have ticked up… XLP, XLF, IYZ. Leading the downside currently is XLK and XLY… those were the leaders on upside move from October. NOTE: Ten of the eleven sectors have bounced with XLB lagging.

Charts to Watch: See Notes on “Reality of the Markets”

Headlines Worthy of Note:

MarketWatch reported the Treasury is ready to implement a program to ‘make the bond market more resilient.’ The Treasury is planning what is called the first Treasury buybacks in 20 years. Why? Wait for it, ‘support liquidity in the Treasury market.’ Why would we need to do this? Simply put, nobody wants the US debt paper. We are essentially going down the same path as Japan. For further rationale on this move by the Treasury, the New York Fed will conduct the Treasury buyback operations. Imagine the Fed and the Treasury teaming up to monetize debt the Treasury issues. Again the question is why? Let’s turn our attention to the BUDGET that the Biden Administration released on Monday… their own figures on the low side would grow the debt to $54 trillion versus the $34 trillion currently over the next 10 years. That is $2 trillion per year for those who don’t want to do the math. Those are insane numbers from the crazy people running the country currently. Talk about the highway to HELL, we are currently on it going as fast as we can.

Earnings were mixed last week amid questions about the Fed rate cuts, geopolitical issues, and the government spending more money… $95 billion for Ukraine, Israel, and Taiwan. This week we face earnings from big tech companies and others… TSLA, META, IBM, QCOM, BA, MSFT, GOOG, INTC just to name a few… could set the tone for the markets short term.

Quote of the Day: “I saw a woman wearing a sweatshirt with Guess on it. I said, Thyroid problem?” — Arnold Schwarzenegger

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