Jim’s Notes – Technology leads the downside

Moving the Market – April 17th

The markets started higher again on Wednesday but closed lower. The breadth of the downside move in the last two days shows the current sentiment is negative. Earnings were mixed as well not helping the situation. Interest rates moved lower helping bonds but not stocks. Some sectors look poised to bounce. Some look ready to move lower. Crude fell on inventory data showing more build-up than expected. Technology, specifically software and semiconductors, is problematic as it continues to show downside pressure. Large and mega-cap stocks showed weakness on Wednesday as AAPL and TSLA struggled. Commodities showed some profit taking with GLD and USO lower. Small, midcaps, and transports moved below support showing another leg lower. All said Wednesday was a pivotal day but wasn’t with a bounce it was more sectors breaking the support levels. Relative to the bounce possibilities, it is always possible, but the sellers are in control, and as we stated last week hedge fund’s short interest is high. Manage your risk and let the opportunities present themselves.

The indexes were lower on the day with all three major indexes in negative territory. The broad indexes moved to the next level of support near term. The S&P 500 index 4952, NASDAQ 15,680, and DIA 377. Breadth belonged to the downside Wednesday with seven sector closing lower. The NASDAQ closed down 1.15%, DIA was down 0.14%, and the SP500 was down 0.58%. The major indexes closed mixed with volatility moving above 18. The SOXX was down 3%. Small Caps (Russell 2000) were down 1%. The ten-year treasury yield was 4.58% down 7 bps for the day. Crude Oil (USO) was down 3%. (UGA) was down 3.1%. Natural gas (UNG) was down 0.7%. The dollar was down 0.3%. We are focused on managing the risk in the current environment and letting it unfold.

Thursday Outlook: Markets remain volatile and driven by data and speculation. The facts in the reports show continued economic weakness despite what the headline numbers say or how the White House tries to spin it. Investors tried to shake off the selling but failed to find an ample supply of buyers. Technically the S&P 500 is below the 50-day MA testing the next level of support. The NASDAQ broke below the 15,847 level of support. The goal is to watch and see how this unfolds short term. We have added short positions on the leaders to the downside and we continue to hold our positions in the outliers like commodities. Patience and risk management are key. Another pivotal day for sectors and indexes.

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 and has joined the selling. Four sectors have outperformed the index showing weakness overall. XLV and IYZ have led the move lower.

Headlines Worthy of Note:

TSLA dropped 5.6% on news of a cut in 10% of global workforce. We continue to see job cuts across the board but the jobs report and jobless claims show positive results… doesn’t add up.

Crude Oil hits $85.67 a barrel… Israel and Iran continue to banter back and forth over war. This would be the worst possible outcome for the current situation in the Middle East. Some analysts believe oil would spike to $100 a barrel immediately if or when it happens. Crude settled the day at $85.67 down slightly on the day.

Apple is closer to producing an AI-compatible computer chip, designed to bring the Mac back. The new M4 chip is expected to run AI from a Mac versus the cloud. The stock has climbed 5/1$ on the announcement. The day after breaking support at the $168.50 level, AAPL closed lower on volatile trading Monday.

Metal prices are higher and heading higher based on the current speculation from analysts. Precious metals gold and silver continued higher for the week as the charts continued their verticle moves. The understanding is that debt levels are reaching a tipping point with the US creating $1 trillion in new debt every 100 days. Interest on the debt is now $1.1 trillion per year. BAC analysts state by the end of the year it will top $1.6 trillion… more than the annual social security budget.

Treasury Bonds – The treasury bond market interest rates moving above 4.6% on the 10-year bond we saw a big adjustment downward in prices. Below is a chart show the yields 1-3-year (SHY), 7-10-year (IEF), and 20+year (TLT) as compared to the respective yield for the bonds 5, 10, and 30 year periods. The chart starts at the last low for the 10-year bond as a benchmark. On the right you can see the yield on the 10-year has risen 10.8% and the price has declined 5.4% in value. The 30-year is down 12.6% in value. Thus why we have recommended being short bonds. TMV for this same period is up 35.8%.

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

Quote of the Day: “A pessimist is someone who had to listen to too many optimists.” — Don Marquis.

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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