Get your motor runnin'
Head out on the highway
Looking for adventure
In whatever come our way
- "Born To Be Wild" Mars Bonfire (Steppenwolf) 1968
Looking For Adventure?
If there ever was a time that called for active portfolio management. Just wow.
While the broadest U.S. large-cap equity index, the S&P 500, gave up just two points for a decline of 0.06%, the far more narrow, blue-chip-laden Dow Jones Industrial Average ran 249 points (+0.71%), led by IBM's ( IBM) 7.1% post-earnings surge that apparently had more impact than Walt Disney's ( DIS) state-level legislative issues in Florida, as DIS took a 5.6% tumble.
On the other end of the spectrum, the Nasdaq Composite and Nasdaq 100 were down 1.22% and 1.49% respectively, as Netflix ( NFLX) opened low and kept going lower, closing the regular session down a "mere" 35.1%. FYI, I did take an entry-level short position in IBM on Wednesday at $139.23. I could have made more than a buck at one point. I was hoping for a little more than that. I am willing to add up to $141. I do not plan to carry this position for very long.
About the Nasdaq Composite. Wednesday was its eighth consecutive day closing below and a seventh consecutive day not even making contact with any of my three key moving averages.
For the swing crowd, the Nasdaq Composite's 21-day exponential moving average (EMA) has moved to within ten points of its 50-day simple moving average (SMA).
Now, let's take a look at the S&P 500. Readers will quickly see that Wednesday's almost "unchanged" performance allowed the index to hold that 21-day SMA as well as its 50-day SMA:
Traders will note that the S&P 500 closed but 37 points short of its own 200-day SMA. Such an oddity. While Wednesday counts as a rather negative showing, based on the red candlestick and higher trading volume, equity index futures are moving higher overnight. Retaking that 200-day line will change at least to a minor degree... portfolio manager sentiment, which I will get to in a moment.
Before I get there, though, how many of you read Helene Meisler's Top Stocks newsletter last night? That first paragraph was something we all kind of knew and kind of felt, but seeing it in print really drove the point home. Chop-fest, medium to longish-term chop-fest. In Helene's words:
"The chop-fest continues. In fact, I looked it up. On Feb. 15, the S&P closed at 4475. On March 18, it closed at 4463, and, today, it closed at 4459. We have done a lot of up and down in that time, but when we step back, it does look like a giant chop."
-- Helene Meisler, Top Stocks April 20, 2022
Internals
I would be remiss if I did not point out that the Dow Transports (+1.69%), S&P MidCap 400 (+0.76%), S&P SmallCap 600 (+0.71%) and Russell 2000 (+0.37%) all rallied to varying degrees on Wednesday. Yes, I know that performance for the Transports was skewed to the upside thanks to the run in Avis Budget Group ( CAR) , which was up 11.9%, but there may be a little something to this. All four of these indexes, which are generally economically over-sensitive, as well as dollar valuation and interest-rate sensitive, have retaken their individual 21-day EMAs and 50-day SMAs this week, while the Dow Transports have even retaken their own 200-day SMA scoring the trifecta and in the case of that particular index, capturing all three on the same day.
Does it matter more that eight of the 11 S&P sector-select SPDR ETFs shaded green on Wednesday, or does it matter more that the four leading sectors for the session were the four sectors considered to be defensive in nature? With growth at the bottom of the daily performance tables, all of the cyclical sectors were jammed in the middle. A big algorithmic "I don't know?" Then again, four of those five cyclical sectors closed green. Interesting.
At the New York Stock Exchange, winners beat losers by almost two to one, while the split was more like 50/50 at the Nasdaq. Advancing volume took a 59.1% share of composite NYSE-listed trading, but just a 40% share of composite Nasdaq-listed trade. Aggregate trading volume increased on Wednesday from Tuesday for both NYSE and Nasdaq-domiciled names, as well as for Nasdaq Composite constituents. However, aggregate trading volume decreased on Wednesday from Tuesday for S&P 500 constituents.
More chop? More indecision? More algorithmic "wake me up when the FOMC does something not priced in?" Casual observers might not realize that real sea monsters live under the placid surface of the deep green oceans before us.
About Sentiment
Investors Intelligence posted their weekly "Bulls vs. Bears" survey of advisers and newsletter writers on Wednesday.
The Bulls had dropped to 32.1% of respondents, while the Bears moved up to 33.3%. This last happened in late February and the last time before that was back in March of 2020. The time before that was in very early January 2019.
Not that this is a law or anything, but historically, when the percentage of bears rises above the percentage of bulls for this survey, that often signals that a short-to medium-term bottom has either been or is being put in.
Quote of the Day
"There's a shift going on now of consumer spending moving back toward services and leisure. The hospitality and services side of the economy seems to be much more optimistic than the goods side."
-- Charles Gascon, Senior Economist, St. Louis Fed (drawn from Wednesday's Beige Book)
Russia News
1) The Credit Derivatives Committee judged that Russia's payment in rubles of two dollar bonds on April 4 was a "potential failure to pay" event for credit default swaps. Russia has until the grace period ends on May 4 to make these payments in U.S. dollars. The committee includes Goldman Sachs ( GS) , Barclays ( BCS) , and JPMorgan Chase ( JPM) .
2) Federal Reserve Chair Jerome Powell and U.S. Treasury Secretary Janet Yellen were both among a group of finance ministers and central bank governors that walked out of Wednesday's G-20 meeting as the Russian delegation began their address. Other notables walking out included Ukrainian Finance Minister Serhiy Marchenko, ECB President Christine Lagarde, BOE Governor Andrew Bailey, Dutch Finance Minister Sigrid Kaag, and EU Economy Commissioner Paolo Gentiloni. It was noted that French, German, Spanish, and Japanese officials did not leave the room.
3) Russian President Vladimir Putin has hailed the "liberation" of the Ukrainian port city of Mariupol despite the fact that Ukrainian forces still hold the Azovstal steel works facility while protecting an estimated 1K civilians, the fact that the entire city is all but destroyed and the fact that by Ukrainian estimates, more than 20K civilians have been killed in the city. Some liberation.
4) Russia's Defense Ministry reported having fired a Sarmat Intercontinental ballistic missile from the Plesetsk cosmodrome in northern Arkhangelsk (on the White Sea, less than 390 nautical miles from Finland). Putin was shown on Russian state television watching the launch, and said, "This unique weapon will strengthen the military potential of our armed forces, will reliably guarantee Russia's security against outside threats and force those, who in the heat of frenzied aggressive rhetoric try to threaten our country, to think again."
I don't think I need to state just how dangerous this situation is. Russia is on her heels, has been militarily humiliated before the world, and is in an economic mess all because of overly aggressive leadership, and now that leadership wants to rattle their nuclear sabres.
Apparently...
Bill Ackman's Pershing Square Capital Management has sold its Netflix ( NFLX) holdings less than three months after disclosing a long position of some 3.1M shares, making Pershing Square one of Netflix's top-20 shareholders.
Estimates are that Pershing Square may have lost a rough $435M on this "investment."
Overnight Trades
In response to the market's post-earnings reaction, I have been adding overnight to my Lam Research ( LRCX) long position carefully and have initiated a "short-term" short position (just a trade) in Tesla ( TSLA) . I will be flat TSLA at some point this morning, right or wrong.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 180K, Last 185K.
08:30 - Continuing Claims (Weekly): Last 1.475M.
08:30 - Philadelphia Fed Manufacturing Index (Apr): Expecting 20.5, Last 27.4.
10:00 - CB Leading Indicators Mar): Expecting 0.3% m/m, Last 0.3% m/m.
10:30 - Natural Gas Inventories (Weekly): Last +15B cf.
The Fed (All Times Eastern)
11:00 - Speaker: Federal Reserve Chair Jerome Powell.
12:30 - Speaker: St. Louis Fed Pres. James Bullard.
13:00 - Speaker: Federal Reserve Chair Jerome Powell.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: ( AAL) (-2.41), ( T) (0.78), ( DHR) (2.66), ( FCX) (0.88), ( NUE) (7.32), ( UNP) (2.57)
(NUE, UNP and DIS are holdings in the Action Alerts PLUS member club . Want to be alerted before AAP buys or sells these stocks? Learn more now. )
