“The VIX is trading at the lowest levels since the S&P 500 hit its standing all-time high in the early days of 2022,” Tom Essaye, founder of Sevens Report Research, said. “It will be hard to believe the market is poised to casually cruise towards new record highs from here,” he added. “I.e., the bottom of the bear market is not in.” Click here to read the full article.
What’s in Today’s Technical Report:
S&P 500 futures are little changed to start the week this morning. Last week’s pullback paused at a longer standing, multi-week uptrend line leaving the broader equity at a tipping point. How the market trades today will very likely decide if the S&P will continue to bleed lower or break last week’s downtrend and retest the recent highs.
The Nasdaq has been a notable outperformer this year but there are cracks emerging in the rally and we outline key levels to watch this week within the Report.
Among the sectors, we view five sectors as trending higher, four as market neutral, and two as trending lower.
In the currency and bond markets, both the dollar and multiple benchmark Treasury Notes have pulled back to critical price support zones and whether those levels hold or not will have a varying impact on all asset classes.
Commodities as an asset class have been fluctuating in a tight range in 2023 with gold outperforming and oil underperforming, but there are signs that oil is poised to take the lead in the complex and gold may be losing upside momentum.
Finally, the VIX is still deeply under pressure which is confusing many investors but we dive into the specific reasons for the movement in the index and what to look for in the weeks and months ahead as we continue to navigate this historically difficult market backdrop amid very uncertain macroeconomic dynamics.
What’s in Today’s Report:
Futures are sightly lower following a quiet weekend of news as markets look ahead to key earnings reports and economic data this week.
Economically, the only notable report was German IFO Business Expectations, which slightly beat estimates.
Debt ceiling headlines will increase this week as Republicans try to pass a debt ceiling bill, and if it fails to pass that will increase debt ceiling anxiety in the markets.
Today there is only one economic report, Chicago Fed National Activity Index (E: -0.02), and barring a major surprise that shouldn’t move markets.
Focus then will be on earnings, and especially the First Republic results after the close (estimates are $0.72/share). Markets will want to see stability from what’s viewed as one of the most vulnerable regional banks. Other notable earnings today also include KO ($0.65) and WHR ($2.44) which will give us insight into consumer spending.
Special Technical Market Update Delivered Today
The special technical report will be delivered via email later this morning.
Due to increased demand for more detailed technical insights from our subscribers, we have prepared a separate, special market update that provides detailed analysis of the current technical state of this market, including:
As the economy (and possibly markets) approach a tipping point and the Fed readies for the likely final rate hike, we can expect more volatility and conflicting fundamental economic data. Having high quality, plain-English technical analysis can help us better navigate this market.
Tyler Richey, Sevens Report CMT, has been the lead analyst on this special report, and we are all excited to deliver this value-add research to subscribers today.
What’s in Today’s Report:
Futures are slightly lower despite solid economic data overnight, as markets await this morning flash PMIs.
EU and UK flash composite PMIs were better than expected at 54.4. vs. (E) 54.0 for the Euro Zone and 53.9 vs. (E) 52.4 for the UK, and both numbers are pushing back on the global recession narrative.
Today the focus will be on the April Flash Composite PMI (E: 50.7) and after yesterday’s soft Philly data, markets will absolutely want to see solid numbers. If that happens, we should expect a rebound from yesterday’s declines.
We also get another Fed speaker, Cook at 4:35 p.m. ET and some additional earnings: PG ($1.32), HCA ($3.99), SLB ($0.61), FCX ($0.46), RF ($0.65), SAP ($1.25).
Sevens Report Research Founder Tom Essaye agrees with the Fed pause narrative fueling stocks but thinks there are also other elements in play. “Market pros expect stocks to drop,” Essaye says. “That means the ‘pain trade’ is higher in the short term, as under allocated advisors and investors begrudgingly chase stocks.” Click here to read the full article.
“If earnings news is not encouraging today, and yields continue to move higher over the course of the session, the selling pressure on equities is likely to continue and liable to accelerate,” wrote Tom Essaye, founder of the Sevens Report. Click here to read the full article.
As such, the pain trade has been higher for all of 2023 and that’s helping support stocks despite decidedly mixed fundamentals (and mixed is being generous),” Tom Essaye, founder of Sevens Report Research wrote. Click here to read the full article.
The stock market’s resilience so far in 2023 is an example of a well-worn but sometimes useful market concept known as the “pain trade.” Tom Essaye, founder of Sevens Report Research, defined it succinctly in a Tuesday note: “The goal of the market is to extract the most amount of pain from the greatest number of people.” Click here to read the full article.
Looking ahead, economic data will be in focus as a “strong economic recovery in China and the avoidance of hard landings in Europe and the U.S. are both priced into the market with WTI trading with an $80 handle,” said analysts at Sevens Report Research in Tuesday’s newsletter. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately weaker following a disappointing night of earnings.
TSLA, NOK, FFIV and TSMC all missed earnings and provided cautious commentary or guidance, and that’s increasing concerns about an economic slowdown.
Today there are numerous potential catalysts including important economic reports, lots of Fed speak and more earnings reports.
Starting with the data, the key report today is Philly Fed (E: -19.4) and markets will want to see if it confirms the rebound we saw in Empire (if it does, expect some stock weakness as Fed expectations become slightly more hawkish). We also get Jobless Claims (E: 242K) and any move closer to 300k will be welcomed as it signals a slightly more normal labor market.
Turning to the Fed, there are multiple speakers today including Waller (12:00 p.m. ET), Mester (12:20 p.m. ET), Logan (3:00 p.m. ET) and Bostic (5:00 p.m. ET) and it will be notable to see if they all push back on the rate cut expectations in the markets.
Finally, on earnings, results lately have been underwhelming so these reports are becoming more important. Earnings we’re watching today include: T ($0.58), TSM ($1.21), AXP ($2.63), UNP ($2.57), PPG ($1.55), CSX ($0.43), STX ($0.18).