Weekly Market Vibes

Market Seeks Catalyst as Momentum Slows.

A flurry of mixed earnings and economic data this week ended with the major averages flat as investors continued to digest the new data for clues on the outlook for U.S. interest rates and the economy. The outperformance of money center banks was offset by disappointing earnings reports from regional banks that had record outflows in the wake of last month's turmoil. Another round of hawkish Fed comments and rising yields erased earlier gains on Tuesday and ended the session flat with Fed President Bostic suggesting that the Federal Reserve could pause after a May hike. With the 10-Year Treasury rising to 3.6% and the two-year climbing to 4.27%, mortgage rates were pushed higher as economic data showed a drop in mortgage applications and buyer demand at multi-year lows on Wednesday. Stocks closed lower on Thursday amid disappointing results from Tesla (TSLA) and AT&T (T), mixed earnings data from various sectors, and softer-than-expected housing and jobs data. Friday saw another subdued session as blue-chip component, Proctor & Gamble (PG) and HCA Healthcare (HCA) reported solid results and future guidance, but the major indexes remained rangebound as no major catalyst presented itself throughout the week. The DJIA and the S&P 500 traded in a narrow range throughout the week and remained above both its 50 and 100-day moving averages. The NASDAQ was also moving sideways as it continued to trade above its 50-day MA. Bonds were also flat as the benchmark 10-year note close around 3.51%, while the 2-year yield settled at 4.10% while the US Dollar (UUP) managed to eke out a small gain for the week.

For the period, the DJIA lost 77.51 points (-0.2%) and settled at 33808.96. The S&P 500 was lower by 4.12 points (-0.1%) and closed at 4133.52. The NASDAQ eased 51.01 points (-0.4%) finishing at 12072.46, while the small cap Russell 2000 managed to post a gain of 10.36 points (+0.6%) finishing at 1791.51.

The technical condition of the market remains mixed as most of the major averages finished the period lower. The majority of the technical indicators for the different indexes are in neutral territory. MACD, a short-term trend gauge, is bullish while Momentum, as measured by the 14-day RSI, is improving. The DJIA was able to hold above support at its 100-day MA this week and above the descending trend line off the January-October decline. The S&P 500 managed to hold support around 4130 this week and remains above both its 100 and 50-day MA. The NASDAQ remains above its 21-day MA as it continues to trade in a range between 12000 and 12200 which has been in place since the start of the month. However, negative divergence could be seen with Philadelphia Semiconductor Index breaking below its 50-day moving average.

Investors may also want to keep an eye on the VIX. The volatility index continues to fall throughout the week as it settled around the 16 handle. The technical indicators for the secondary indexes, including the DJ Transportation Index and Russell 2000 are in neutral ground and momentum has slowed, which is in line with the major averages. The small cap Russell 2000 continues to stall below its 200-day MA, while the DJ Transportation Index which struggled at its 100-day MA, it beginning to test resistance at its 50-day MA. These indexes will need to bust through those resistance areas before the broader market is likely to take another leg higher.

Underlying breadth was mostly negative with the NYSE and NASDAQ Advance/Decline lines, leading indicators of market direction, moving lower. New 52-week highs on the NYSE outnumbered the new lows for a fourth consecutive week. New lows continue to outnumber the highs on the NASDAQ with the new highs last reversing the numbers in early February. Investor Sentiment is neutral. Retail investors saw an uptick in the bulls from 27.2% to 26.1%, with most remain in the Neutral camp according to the American Association of Individual Investors (AAII). The National Association of Active Investment Managers (NAAIM) Exposure Index increased their equities to 78.3% from 58.7% the prior week.  

The markets momentum is measured by comparing the strength or weakness of several broad market indexes to the DJIA. Readings of -4 and lower are regarded as bearish since it is an indication that a majority of the broader based market indexes are weaker than the DJIA on a percentage basis. Conversely, readings of +4 or higher are regarded as bullish.  

The Momentum Index is Positive at +6, unchanged from the previous week. Breadth was mixed at the NYSE as the Advance/Decline line lost 2728 units while the number of new 52-week highs out did the new lows on all five sessions. Breadth was mixed at the NASDAQ as the A/D line added 4765 units while the number of new lows beat the new highs on each day. Finally, the percentage of stocks above their 50-day moving average decreased to 45.5% vs. 48.1% the previous week, while those above their 200-day moving average also pulled back to 50.3% vs. 53.9%. Readings above 70.0% denote an overbought condition, while below 20% is bullish.

Measuring the markets Bullish or Bearish sentiment is important when attempting to determine the markets future direction. Market Edge tracks nine technical indicators that measure excessive speculative or sentiment conditions prevalent in the market.

The Sentiment Index is Neutral at +2, unchanged from the previous week. The Dividend Yield Spread (-2.48 vs. -2.04) and the AAII Bull-Bear Ratio (0.8 vs. 0.8) are Bullish. NYSE short interest was up +2.2% and 2.8 days of average volume for the period ending 3/15/23 vs. being up +2.4% and 2.5 days average volume to cover at the end of February. Short interest at the NASDAQ was up +2.6% and 2.3 days of average volume mid-March vs. a +1.1% increase and 2.5 days average volume to cover on 2/28/23. The Percentage of Bullish Investment Advisors (50.7% vs. 48.7%), the Percentage of Bearish Investment Advisors (24.0% vs. 24.3%), the Bullish-Bearish Investment Advisors Ratio (2.1 vs. 2.0), the Fear and Greed Index (67.4 vs. 60.8), the Total Put/Call Ratio (1.03 vs. 1.04), the NAAIM Exposure Index (78.3 vs. 58.7) and the VIX, a measurement of fear in the market, (18.40 vs. 17.07) are Neutral. VIX readings under 13.00 are regarded as bearish while those above 30.0 are bullish.

U.S equity funds, including ETF activity, had outflows of $856 million for the reporting period ending 4/19/23 compared to outflows of $53 million the previous week.

What's Hot (37) What's Not (54). Of the 91 Industry Groups that we track, 37 are rated as either Strong or Improving while 54 are regarded as Weak or Deteriorating. The previous week's totals were 31-60. The following are the strongest and weakest groups for the period ending 4/20/23. Strongest: Precious Metals, Advertising, Household Products (Non-Durable) and Pharmaceuticals. Weakest: Banks-Eastern, Internet-Financial, Banks-Western and Banks-Central.  

The top performing ETF categories for the week ending 4/20/23 were Specialty Financial (+2.90%). Specialty Real Estate (+1.35%), Commodity-Agriculture (+1.07%) and Sector-Industrial (+0.66%). The weakest categories were Commodity-Energy (-4.86%), Sector-Telecom (-3.58%) Sector-Energy (-3.34%) and Sector-Internet (-2.45%).

By David L. Blake, CMT

Next week's Economic Calendar:

Monday - Chicago Fed National Activity Index and Dallas Fed Manufacturing Survey

Tuesday - Case-Schiller Home Price Index, Consumer Confidence, New Home Sales and Richmond Fed Manufacturing Index

Wednesday -Mortgage Apps, Durable Goods Orders and EIA Petroleum Status Report

Thursday - Jobless Claims, GDP and Pending Home Sales Index

Friday - Personal Income and Outlays, Employment Cost Index, Chicago PMI and Consumer Sentiment

‍

‍