Jim’s Notes – Weekend Outlook and Update

Moving the Market – April 13th

The markets ended the week in negative territory as Iran fears and bank earnings set the tone of trading. JP Morgan fell 6.4% as their forecast disappointed investors. Their guidance on net interest income was projected to be below current estimates. Evidently, inflation is hurting the outlook for profits… go figure. Maybe someone should inform the White House. KBE was down 1% on Friday as banks struggled. The energy sector was down 1.6% on rumors that an attack by Iran on Israel was imminent. The 10-year bond fell to 4.5% but the damage was done on Thursday as higher rates reflect the belief the Fed is out of the cutting business on rates for now. Gold spiked early to over $2400 per ounce but closed down 1.3% as the dollar closed higher. All eleven sectors of the S&P 500 index closed in negative territory. Transports broke below support again. Small caps fell below $199.45 support and is now 2.1% below the 50-day MA. The VIX climbed to 17.1 after peaking at 19.1 intraday. Anxiety levels are definitely rising as stocks struggle for clarity and direction. We will watch to see if the sellers maintain control next week.

The indexes were negative on Friday leaving the NASDAQ, SP500, and the Dow in negative territory for the week. The broad indexes failed to hold the Thursday gains and technically put them back at key support levels. The S&P 500 index settled at the 50-day MA… this will be of interest next week. No sectors closed in positive territory. The NASDAQ closed down 1.4%, DIA was down 1.2%, and the SP500 was down 1.4%. The major indexes closed lower with volatility moving above 17. The SOXX was down 3.2%. Small Caps (Russell 2000) were down 1.7%. The ten-year treasury yield was 4.50% down 7 bps for the day. Crude Oil (USO) was up 0.6%. (UGA) was up 0.3%. Natural gas (UNG) was up 0.2%. The dollar was up 0.8%. We are focused on managing the risk in the current environment and letting it unfold.

Monday Outlook: We look to a new week following one driven by data. 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 following the CPI data but the sellers returned on Friday. Technically the S&P 500 is at the 50-day MA testing the next level of support. The NASDAQ is at the 16,047 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 and crude oil.

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, but only three sectors have outperformed the index showing weakness overall. XLV and IYZ have led the move lower.

Headlines Worthy of Note:

Crude Oil hits $87.67 a barrel… Israel is preparing for an imminent attack from Iran. 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 $85.02 up 0.6% for 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 at $176.55 Friday.

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.

Dollar – Moved higher again as China released weak trade data showing imports and exports contracted sharply with both numbers well under expectations. The dollar closed up 0.8%.

Treasury Bonds – The treasury bond market had a rough week with interest rates moving above 4.5% 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: “Be thankful we’re not getting all the government we are paying for.” — Will Rogers.

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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