EB Daily Market Report - Tuesday, April 26, 2022

Tom Bowley - April 26, 2022

Executive Market Summary

Futures were weak overnight, despite the strong finish on Monday
The NASDAQ has been the weakest index, dropping more than 3% earlier in the session
The Volatility Index ($VIX, +14.73%) is quite problematic, suggesting that impulsive bouts of selling are likely
Energy (XLE, +1.22%), after a harsh performance yesterday, is the only sector higher today
Meanwhile, yesterday's leaders - consumer discretionary (XLY, -3.87%), technology (XLK, -2.48%), and communication services (XLC, -1.91%) - are today's laggards
Automobiles ($DJUSAU, -9.45%) are very weak as Tesla (TSLA, -10.58%) loses 105 bucks
Semiconductors ($DJUSSC, -2.97%) and software ($DJUSSW, -2.60%) are the big losers in technology
Cryptocurrencies are selling off hard, with etherium ($ETHUSD) down just over 5%
Crude oil ($WTIC, +2.90%) is up $3 to $101 per barrel, lifting the energy space

Market Outlook

After the close today, we're going to get the latest quarterly reports from both Microsoft (MSFT) and Alphabet (GOOGL). These two reports will be BIG, not just because they're very large market cap companies that will impact our major indices significantly, but also because they are "leaders" in two very beaten-down industry groups, software ($DJUSSW) and internet ($DJUSNS). If the leaders disappoint, then it will not bode well for the balance of these industry groups. Here are the two absolute price charts, with relative strength reflected in the panels below each price chart:

MSFT:

GOOGL:

The blue directional lines show both of these stocks outperforming their industry peers. However, the red directional lines show how poorly their industry groups are trading vs. the benchmark S&P 500.

The S&P 500's ability to weather the storm as well as it has in 2022 has come down to the outstanding performance of many of its highest-weighted stocks - like MSFT and GOOGL. Can these two leaders beat estimates and provide solid guidance? And if so, will it even matter? TSLA reported great numbers and the stock responded with a big initial move higher. But TSLA has now lost 200 bucks in just over 3 days.

Tonight is the start of a major push into earnings season. Which way the market moves after these leaders report will ultimately help to determine whether we find a tradable bottom now or sometime later this year.

Sector/Industry Focus

Automobiles ($DJUSAU) is having a horrific day and is threatening a major breakdown beneath its 50-day SMA:

The weakness is directly attributable to the selling in TSLA shares today. The market appears to be digesting TSLA's acquisition of Twitter (TWTR) and doesn't like it - at least not in the short-term.

ChartLists/Strategies

Yesterday looked like a major reversal in the stock market. Today, it looks like another leg lower. When the VIX reaches the 30s, the market's unpredictability soars. From one day to the next, you don't know whether you should be long or short. The trend is lower, so if I traded, I'd mostly consider short positions. However, capitulation (heavy volume selling and a reversal) can occur at any time. I'd try to be out of all short positions when volume increases significantly AND buying accelerates in the afternoon.

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 26:

MSFT, GOOGL, V, PEP, NVS, UPS, TXN, RTX, GE, MDLZ, CB, CNI, MMM, EW, WM, SHW, UBS, AMC, COF, ADM, ECL, CNC, ROP, VLO, CMG, MSCI, EQR, PCAR, GLW, DHI, CSGP, ESS, NTRS, TECK, ENPH, MKL, UDR, AGR, TER, TRU, ENTG, IEX, AVY, RHI, FFIV, JNPR, ARCC, WBD, EXAS, HUBB, IVZ, TX, MANH, RRC, WH, ST, CHE, BYD, QS, GPK, MKSI, MTDR, TENB, SKX, PII, BPOP, TNET, JBLU, NSP, SSTK, NAVI, TRMK, EDU, USNA

Wednesday, April 27:

FB, TMUS, QCOM, AMGN, AMT, GSK, BA, PYPL, NOW, ADP, CME, CP, EQIX, GD, FISV, BSX, NSC, F, HUM, KHC, ORLY, IQV, APH, AFL, TEL, AVB, CVE, STM, HES, DFS, ODFL, AWK, ALGN, LVS, INVH, ETR, MAA, DRE, URI, TDY, RJF, GRMN, SPOT, UMC, TECK, GIB, MOH, CS, HOLX, TS, STX, ACGL, CHKP, BG, ROL, WAB, TYL, EQT, BMRN, RE, CHRW, PINS, MAS, PTC, GGG, AZPN, AR, QGEN, FICO, NLY, HTZ, TDOC, OC, WSC, MAT, RGEN, CACI, PPC, OSK, ASGN, HOG, AUY, LPL, HELE, IART, SLAB, HP, SLM, MEOH, MMSI, R, ALSN, MXL, SHOO, TMHC, AGI, FIX, MC, COUR, MTH, FORM, GPI, UPWK, PLXS, CAKE, EAT, UCTT, EXTR, NBR, HEES, NEO, LC, OII, CLB, PI

Economic Reports

March durable goods: +0.8% (actual) vs. +1.0% (estimate)

March durable goods ex-transports: +1.1% (actual) vs. +0.5% (estimate)

February Case-Shiller home price index: +2.4% (actual) vs. +1.5% (estimate)

February FHFA house price index: +2.1% (actual) vs. +1.6% (estimate)

April consumer confidence: 107.3 (actual) vs. 106.8 (estimate)

March new home sales: 763,000 (actual) vs. 772,000 (estimate)

Happy trading!

Tom