Daily Market Update for 4/20

Original Chart

Notes

Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.

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Wednesday, April 20, 2022

Facts: -1.22%, Volume higher, Closing Range: 11%, Body: 84% Red
Good: Higher high, higher low
Bad: Mostly red body, closing range, higher volume on decline
Highs/Lows: Higher high, Higher low
Candle: Mostly red body, barely visible wicks
Advance/Decline: 0.75, more declining than advancing stocks
Indexes:SPX (-0.06%), DJI (+0.71%), RUT (+0.37%), VIX (-4.91%)
Sector List: Real Estate ( XLRE +1.89%) and Consumer Staples ( XLP +1.50%) at the top. Consumer Discretionary ( XLY -1.29%) and Communications ( XLC -4.34%) at the bottom.

Market Overview

Yields on longer-term treasuries dropped sharply today as did the US Dollar index . Growth stocks led the Nasdaq lower while the Dow Jones Industrial Average closed higher.

The Nasdaq closed lower by -1.22% after starting the day in the green. The closing range of 11% and 84% red body show that selling dominated the day. There was higher volume on the decline and more declining stocks than advancing stocks.

The Dow Jones Industrial Average (DJI) was able to gain +0.71%. The Russell 2000 (RUT) gained by +0.37%. The S&P 500 (SPX) declined by -0.06%. The VIXVolatility Index continued lower, dropping by -4.91% today.

The three growth sectors declined while the other eight of the eleven S&P 500 sectors gained. Real Estate ( XLRE +1.89%) and Consumer Staples ( XLP +1.50%) were at the top of the sector list. Consumer Discretionary ( XLY -1.29%) and Communications ( XLC -4.34%) were at the bottom.

Existing Home Sales for March were lower than forecast. The strong building permits and new home sales data from yesterday caused Timber prices to continue to move higher. Crude Oil Inventories were much lower than forecast, showing higher demand. The Fed Beige Books released in the afternoon showed slow steady growth but headwinds for companies on inflation and worker shortages.

The US Dollar index DXY ) declined by -0.65%. The US 30y and 10y Treasury Yields declined sharply. The 2y yield declined as well, but not as much as longer-term notes. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices followed Treasury prices higher (yields lower, prices rise). Brent Oil remained at $106 a barrel.

The put/call ratio ( PCCE ) rose to 0.794. The CNN Fear & Greed Index remained Neutral.

Of the big six mega-caps, only Microsoft MSFT ) gained today, advancing +0.37%. Meta ( FB ) had the biggest decline, dropping by -7.77% as it followed the Communications sector lower.

Thermo Fisher ( TMO ) was the best mega-cap for the day, climbing by +2.96%. Meta was at the bottom of the list, followed by Disney (DIS) which lose -5.56%.

The Daily Update Growth List only had two winners today. Twitter TWTR ) escaped the drawdown in the communications sector and gained +1.21% today to top the list. Probably most know who’s at the bottom of the list. Netflix NFLX ) dropped by -35.12% today after losing subscribers for the first time in a decade.

Tesla TSLA ) impressed investors in its earnings release and was up over 5% in after-hours trading.

Looking ahead

Tomorrow will start with the weekly Initial Jobless Claims. Also before the market opens, we will get the Philadelphia Fed Manufacturing Index for April.

Jerome Powell is scheduled to speak tomorrow. These will be his last comments before the quiet period preceding the May 3-4 Fed meeting. We can expect him to firm up a 50 basis point interest rate hike for May.

Philip Morris (PM), Blackstone Group ( BX ), AT&T (T), ABB ABB ), Snap (SNAP), KeyCorp (KEY), and American Airlines (AAL) are some of the earnings reports for tomorrow.

Trends, Support, and Resistance

The Nasdaq set a higher high today before losing the opening rally and selling the rest of the day.

If the one-day and five-day trend lines continue, we can expect a -0.16% decline for Thursday.

The trend line from the 3/29 high leads to a -2.41% decline for Thursday.

Wrap-up

Netflix reported a 200,000 net loss in subscribers and projected another 2 million loss for the next quarter. That sent the stock price down by -35% and weighed down the Communications sector with bad sentiment which likely rippled through growth sectors as well.

Now we have a good report from Tesla which should help with investor sentiment. And it remains to be seen if Netflix’s decline in subscribers is isolated from the leader, or will other streaming services report declines also.

Tomorrow we should see Jerome Powell firm up expectations for the rate hike coming in May. That should provide some stability for markets, removing (or confirming) fears of a larger hike which were stoked by various Fed officials over the past week.

Stay healthy and trade safe!

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