Break out the bubbly. The bubbly? At least that's what some of the most recent action across the equity space is starting to look like.
On Easter Monday, coming off of a three-day holiday weekend, and including the very first equity market reactions to last Friday's data for month of March on job creation, the marketplace, at least at the surface, showed an across-the-board rally. Which is my point. I think.
No, my usual checks are not yet reading as technically overbought -- well, the Dow Transports are, and both the Dow Industrials and S&P 500 are this >< close, but the Nasdaq Composite, which at least of late appears the most bubbly also appears to have some room according to its relative strength reading, which despite three days of sheer froth, remains below 60. An RSI reading of 70 is for many, considered the lower bound of what many referred to as being technically "overbought."
On Monday, the small-to mid-caps lagged the broader market, with the S&P 400 up 0.65%, and those non-identical (fraternal) twins, the S&P 600 and Russell 2000, gaining 0.43% and 0.49%, respectively. Getting toward the large-cap indices, the tech-heavy Nasdaq Composite scored a nice increase of 1.67%, while the even tech-heavier Nasdaq 100 (no financials) packed on 2.02%. The S&P 500, as well as the already mentioned Dow Transports may not have led on Monday, but both did move in a northerly direction and both set record-high closes.
Using sector select SPDR ETFs as proxies, Consumer Discretionaries ( (XLY) ) led the way, as the automobile industry led the sector. This came in response to news Friday that Tesla (TSLA) had crushed estimates for first-quarter deliveries, as well as news this past Thursday that total U.S. auto sales for the month of March had easily surpassed projections. In addition, Wells Fargo had some nice things to say about General Motors (GM) and that firm's electric future prior to that early bell on Monday morning.
Bad Breadth?
Well, not bad... just not great. Beyond the autos, it was all about growth over value, without actually selling value. Internet stocks led Communication Services ( (XLC) ) to a strong second place for the day, after the U.S. Supreme Court ruled in favor of Alphabet ( (GOOGL) ) over Oracle ( (ORCL) ) involving a $9 billion copyright case. The Technology sector ( (XLK) ) finished in third place for the day, but still gained more than 2%. Energy ( (XLE) ) was the day's only loser (-2.4%), and lost big.
Now, let's look at a couple of less than enthralling developments.
Winners beat losers by a rough 5 to 3 at the NYSE, and maybe 4 to 3 at the Nasdaq Market Site. Advancing volume also posted victories over declining volume at both exchanges, but not quite so decisively. That tally came to 4-3 Downtown and less than 5-4 or so up in Midtown. Aggregate trading volume declined for names listed at both exchanges on Monday from a holiday Thursday, which really, in my opinion, shows more a lack of distribution than any enthusiasm in accumulation.
Metrics used to gauge fear showed disagreement as the CBOE Volatility Index (VIX) actually gained ground throughout the afternoon, but the CBOE Option Total Put/Call Ratio dropped to its lowest level in almost six weeks.
What does this all mean? Hard to say exactly, but let's piece this together. We have a broad rally, but on unimpressive breadth and lackluster trading volume. We have metrics used to measure fear that show some concern, but nobody is really spending money on protection. Oh, and we have this, you're going to love this...
This is the same for both the Nasdaq Composite and the Nasdaq 100. A gap over a three-day weekend might not be so surprising, but these two indices now have posted upward-facing gaps in between three consecutive sessions. Folks, I may be wrong, sometimes I am admittedly, as it sure looks like I went to an elevated level of cash a few days early (which is another example of how experience has taught us to always move incrementally), but I find this action most likely to be less than sustainable, without provoking an algorithmic counter. In other words, don't just be nimble, but tread softly. Socks stuffed with leaves worn outside of your boots. At least that way, if you do leave tracks, they'll be indiscernible. Not only will they not figure out who you are, they may not even figure out which way you're moving. Also muffles noise.
You Don't Say
We noticed ViacomCBS (VIAC) moving lower throughout the session. We even added to our long. Then rumors hit Wall Street that sent the shares even lower after the closing bell. While Bloomberg News was reporting that Credit Suisse (CS) was shaking up its management team while reducing its dividend and halting the investment bank's share repurchase program in the wake of the Archegos Capital ($4.7 billion?) embarrassment, rumors circulated that CS was also shopping a 34 million share block of ViacomCBS, a 14 million share block of Vipshop Holdings (VIPS) , and an 11 million share block of Farfetch Limited (FTCH) .
I spent a number of my career's "glory years" at Credit Suisse. The golden years of investment banking during the go-go days of the internet bubble. It does not surprise me in the least that Credit Suisse was beaten to the exits by literally every other investment bank with a problem last week. Remember First Boston? Yes, you do. Pre Credit Suisse. Pre that absurd merge with Donaldson, Lufkin & Jenrette that doubled payroll, but brought in literally no new customers? We literally took no prisoners. That was Wall Street when Wall Street was Wall Street. Pure aggression. All the time. Fun as heck. Probably the business experience of a lifetime. But you knew they were in over their skis.
Literally, the first thing I did on my way out that door, now many years ago, was liquidate my equity position in that name. As soon as permissible. One of my best trades. Ever.
What You Need To Know
A lot of this is probably not in your best interest. The International Monetary Fund (IMF), and the World Bank are holding their simultaneous virtual meetings this week to discuss debt relief, SDR (Special Drawing Rights) allocation, which you will recall that I warned you about, and revised forecasts for global economic growth just as the French Finance Minister reduced that country's GDP expectations for 2021 to 5% from 6%.
You all are probably well aware of the proposal (that will not be formal until June) to have the IMF allocate $650 billion worth of SDRs to member nations in accordance to quota size. The idea, at least at the nominal level, is to aid the poorest of nations as they work their way through the pandemic. The Treasury Secretary and even the President appear to be onboard with the idea, although the largest burden will be borne by U.S. taxpayers. Just an FYI, SDRs are reserve assets that can be converted into any reserve currency, and I have identified SDRs, in particular, an eventually digitized version of the SDR, as the single greatest threat to not just the U.S. dollar's place as the planet's reserve currency of choice, but also for the cryptocurrency enthusiasts out there, the greatest threat to the potential future of bitcoin among other crypto choices. The globalists have not targeted you yet, but if they see potential advantage, they surely will.
I have no problem with helping the poorest countries. The problem here is that the description is a charade, Only a roughly $20 billion of the $650 billion in SDRs will actually head for "frontier" economies, which along with their emerging-market counterparts (which could account for another $200 billion, not counting China) probably already owe much of this money to China, to the U.S. and to the largest economies in the EU.
This may be more about finding a way for much of the planet to be able to service their debt than it really would be about aiding those at the bottom of the wealth curve. For my concept has been, since this idea first came up, to allocate this distribution inverse to quota. You want to help the poor, right? So do I. That is how. Otherwise, this is all smoke and mirrors. American taxpayers have always been among the planet's most generous creatures. If you're going to take from them, at least tell them what's going on.
In Other Developments...
Treasury Secretary Janet Yellen called on the community of nations to join the U.S. in setting up a "global minimum tax." This was in response to (what I wrote to you about on Monday morning) the threat of what increasing U.S. corporate tax rates to the least competitive levels found anywhere in the OECD, while piling on taxes on international profits, will do to both U.S. multinational corporations in terms of earnings, not to mention the obvious negative impact on labor markets.
I agree with Yellen that a global minimum tax would keep the U.S. artificially competitive in the face of a planned about-face in terms of domestic business climate. I just don't know why any nation seeing overt opportunity in a U.S. policy blunder would agree to make themselves less likely to benefit from welcoming businesses moving about or opening new businesses under some kind of reorganization. Perhaps this IMF distribution, if forced, could be used as leverage? Are we that smart? We can only hope. I know. They don't know how to defend us. Or that is not their goal.
Big Tech
Investors need to be fully cognizant that Intel (INTC) will hold their Ice Lake server chip reveal today (Tuesday, April 6), while Applied Materials (AMAT) , fresh off of a price target increase from Stifel, will hold the its "Investor Day." Expect much to be made of the new "Actionable Insight Accelerator" platform that launched on Monday (yesterday).
Tomorrow (Wednesday), shareholders will vote on the planned Advanced Micro Devices (AMD) acquisition of Xilinx XLNX. These stocks are all going to be volatile over these next couple of days.
Economics (All Times Eastern)
08:55 - Redbook (Weekly): Last 9.8% y/y.
10:00 - JOLTs Job Openings (Feb): Last 6.917M.
16:30 - API Oil Inventories (Weekly): Last +3.91M.
The Fed (All Times Eastern)
No Public Appearances Scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (PAYX) (0.92)
After the Close: (PACW) (0.91)
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