Jim’s Notes – Tech leads markets lower

Moving the Market – April 23rd

The markets finished the week on a negative note closing out a down week for stocks. The SP500 was down 3% and the NASDAQ was down 5.5%. The breadth of the downside move in the last four days shows the current sentiment is negative. Earnings were mixed as well not helping the situation. Interest rates moved above 4.6% as uncertainty around the Fed remains an issue. NFLX guidance disappointed pushing the stock down 9%. NVDA fell 10% following SMCI not announcing preliminary results for Q3 and falling 23%. Thus the SOXX was down 4%. Volatility picked up all week remaining above 18 and showing a clear shift in momentum the last few days. Looking towards next week the term oversold has been used by the media already, but the reality is the move lower has come predominately from the mega-cap stocks and technology. There were seven sectors in the green on Friday along with small caps closing in positive territory. Can we see a turnaround for the indexes? Never say never. With the Iran/Israel conflict dying down to a battle of words, there is hope among the talking heads for now. One final note for the week was Congress at the last minute was able to pass a bill spending $95 billion on providing security assistance to Ukraine, Israel, and Taiwan. More spending and borrowing by a government already in debt to the point of financial destruction. The security assistance portion of the bill allows massive data collection to virtually every business that captures customer communication and web interaction on their servers… 4th Amendment anyone? Has anyone in Congress read the Constitution? Senate passes bill renewing FISA… All said we continue to spend taxpayer’s money plus more and take away the rights of citizens of the United States all in the name of “protecting” our allies. More insanity. We now turn to next week and focus on where the opportunities lie.

The NASDAQ and SP500 closed the week in negative territory with the DIA flat for the week. The broad indexes moved to the next level of support near term. The S&P 500 index 4952, NASDAQ 15,158, and DIA 377. Friday fared better with seven sectors closing in the green. The technology sector led the downside falling more than 2%. The NASDAQ closed down 2%, DIA was up 0.5%, and the SP500 was down 0.8%. The major indexes closed mixed with volatility moving to 18. The SOXX was down 4%. Small Caps (Russell 2000) were up 0.1%. The ten-year treasury yield was 4.61% down 3 bps for the day. Crude Oil (USO) was up 0.1%. (UGA) was up 0.2%. Natural gas (UNG) was up 0.7%. The dollar was flat. We are focused on managing the risk in the current environment and letting it unfold.

Monday 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 15,630 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 other positions with our stops in place. Patience and risk management are key. Look for opportunities if the charts set up a 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.

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

Headlines Worthy of Note:

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.

NFLX earnings were solid with solid growth. Then why did the stock fall after hours? Simply put, they decided they wanted to be judged on earnings and revenue growth versus how many subscribers they gained or lost. Worth watching how the stock responds in trading on Friday. Article on the change. Tanked 9% on Friday.

Bitcoin completes its ‘halving’ move on Saturday. The speculation is the coin will rise in price as it has in the past. Watching how that works out on Monday… when the masses believe one thing the markets are notorious for doing the opposite.

Quote of the Day: “I don’t believe in the afterlife, but I am bringing a change of underwear” — Woody Allen

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