EB Daily Market Report - Tuesday, April 5, 2022
Executive Market Summary
- Futures were lower overnight and our major indices gapped down at the opening bell
- The NASDAQ, after showing relative strength on Monday, is down significantly more than the other major indices today
- Growth stocks (IWF, -1.54%) are being treated much more harshly than value stocks (IWD, -0.27%), again the complete opposite of Monday
- The 10-year treasury yield ($TNX) has soared to 2.56%, up 15 basis points on the session, yet the surge has done very little for financials (XLF, -0.09%)
- Banks ($DJUSBK, -0.65%) are not seeing any benefit from the higher rates, which tells us that rates are not likely rising because of economic strength ahead
- Commodities are mostly lower, led by crude oil's ($WTIC, -1.63%) decline
- Consumer discretionary (XLY, -1.82%) is the primary laggard as tires ($DWCTIR, -4.25%) and auto parts ($DJUSAT, -4.02%) are weak
- Technology (XLK, -1.75%) isn't far behind as semiconductors ($DJUSSC, -3.96%) and renewable energy ($DWCREE, -3.40%) both struggle
- Moderna (MRNA, -6.23%) rolls over to a 3-week low as the 2nd worst performer on the S&P 500; MarketAxess Holdings (MKTX, -9.96%) is the worst performer
Market Outlook
The QQQ (ETF that tracks the NASDAQ 100) is obviously having a rough day, but we haven't seen a 20-day EMA test. So while it's easy to say, "here we go again" to the downside, the bullish argument remains intact as the QQQ trades above its 20-day EMA:
I could argue both the bullish and bearish sides. I think it will be important to watch to see if the recent high can be cleared after this period of selling/weakness ends. To the downside, the 20-day EMA will be the first important support area to hold. If that fails, then the February low does come back into play.
Sector/Industry Focus
Semiconductors ($DJUSSC, -3.96%) are threatening to close back below their 50-day SMA for the first time since mid-March. Perhaps worse technically is its failure to hold onto 20-week EMA support:
I've drawn what I believe constitute key support and resistance lines on this weekly chart. 7100-8750 is the wide range that I'd look for the DJUSSC to trade within until we see either a key breakout or breakdown.
ChartLists/Strategies
I looked at dozens of charts on our Strong Earnings ChartList (SECL) before finding one that I felt was trading at or very near a key price support level. Check it out:
UNP:
The thick red and green arrows mark two key points - the first was the breakout above key resistance near 253, then later was the low near 252. In my opinion, that suggests the 252-253 price area is critical short-term support. If we don't see a reversal here, the next critical support level would be in the 230-235 range. Let's see how this one closes today.
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.
Tuesday, April 5:
AYI, NG, LNN, ARRY, SGH
Wednesday, April 6:
RPM, LEVI, SMPL, TLRY, GBX, SCHN, SLP
Economic Reports
March PMI composite: 57.7 (actual) vs. 58.5 (estimate)
March ISM services: 58.3 (actual) vs. 58.5 (estimate)
Happy trading!
Tom