EB Daily Market Report - Thursday, April 1, 2021

ChartList Update and Market Closed on Friday

The April Seasonality report was sent out earlier this morning. We've updated our website to include the latest ChartList. You can view it or download it to your StockCharts.com account at your convenience.

The U.S. bond and stock markets will be closed on Friday, April 2nd, in observance of Good Friday. Enjoy your three-day weekend!

Executive Market Summary

• Futures were strong across-the-board to open up April, but the NASDAQ is showing leadership
• Growth stocks (IWF) are clearing important resistance - see Sector/Industry Focus section below
• The 10-year treasury yield ($TNX) is down 7 basis points; I've been discussing the negative divergence there, which is likely having an impact
• The U.S. Dollar (UUP) is down today, helping to lift commodities, especially gold ($GOLD, +0.77%) and crude oil ($WTIC, +1.10%)
• Aggressive sectors are leading this strong move into April as technology (XLK, +1.59%) and communication services (XLC, +1.36%) lead
• Defensive sectors lag, led by consumer staples (XLP, -0.17%)
• Travel & tourism ($DJUSTT, +2.51%), a group that loves April historically, is off to a great start in April 2021

Market Outlook

There's plenty of good news to go around as we open up April and 2021's second quarter. First, the S&P 500 has pierced 4000 for the first time in its history. In our MarketVision 2020 conference that was held in early-January 2020, I predicted the S&P 500 moving through 4000 last year. Of course, the pandemic hit in late-February and 4000 was out of the picture after a drop on the S&P 500 to 2191 on March 23, 2020. But a little over a year later, here we are.

Next up is the NASDAQ. Yesterday, I showed a down channel of the NASDAQ on an hourly chart. Well, the NASDAQ has taken Step 1 to repair its ship as you can see from this reprinted chart from yesterday:

Of course, nothing is ever as good as it appears. The NASDAQ had a strong open, but rotation was been eating into its relative strength since that open when we compare it to the S&P 500:

Maybe I'm just a bit gunshy after the March we've just had, but I'd really like to see this ratio move up throughout the day, not just during the opening 30 minutes. I want to see money rotating all day long. I'm not complaining about the NASDAQ finally seeing leadership. I guess I'd just like to "have my cake and eat it too."

Sector/Industry Focus

Growth stocks (IWF) are on the move today, breaking above key short-term resistance along the way. So long as we continue to see bullish developments on the chart, it would go a long way to helping restore solid relative performance within our portfolios. Here's a quick glance at the IWF, with the breakout above our key moving averages quite apparent:

We're seeing the initial stages of technical strength returning. A breakout out of a bullish inverse head & shoulders continuation pattern is quite encouraging, as is the PPO crossing centerline resistance. I've included a green arrow at the rising 20-day EMA. If we do see weakness ahead in the near-term, we want to hold this moving average. That would suggest we're beginning to trend higher. Loss of that moving average would put us right back where we've been throughout much of March. Earnings season is approaching, we're in a secular bull market, and growth stocks tend to lead advances. Based on all of that, I'm approaching this market currently as if the tide has shifted back towards growth stocks.

ChartLists/Strategies

I ran a scan of our two Strong Earnings ChartLists, searching for stocks with unusually high volume. The hope here is to find stocks making breakouts with confirming volume. I filtered stocks that have already traded at least 75% of their average daily volume over the past 90 days. 19 stocks were returned as follows:

AMAT, ASML, BNS, DOX, ENTG, FNKO, OPCH, RAIL, SIVB, STL, TCBI, TLS, TMDX, UCTT, VIPS, VIVO, WDC, WSC, X

Here are two interesting charts that I found among those listed above:

ENTG:

Barring a huge reversal this afternoon and failed breakout attempt, ENTG looks poised to perform well from here. It's not only breaking out on an absolute basis, but it's also breaking out relative to its semiconductor peers ($DJUSSC). If it does fail on today's close, I'd be a buyer if it were to then pull back to its rising 20-day EMA.

WSC:

Industrials have been hot, so it's always noteworthy to see a stock breaking out in a strong group. Failure to confirm today's intraday breakout on the close, however, would come with a bit of caution as WSC's AD line has been dropping of late. Given the heavy volume today, it'll drop a lot more if we see a reversal and a close near the low. But I always respect a heavy volume breakout, so continuing strength this afternoon would be bullish, regardless of the recent weakness in the AD line.

Earnings Reports

Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.

Thursday, April 1:

KMX, CCL

Friday, April 2:

None

Economic Reports

Initial jobless claims: 719,000 (actual) vs. 680,000 (estimate)

March PMI manufacturing: 59.1 (actual) vs. 59.0 (estimate)

March ISM manufacturing: 64.7 (actual) vs. 61.5 (estimate)

February construction spending: -0.8% (actual) vs. -0.8% (estimate)

Happy trading!

Tom