EB Daily Market Report - Wednesday, April 27, 2022

Tom Bowley - April 27, 2022

Executive Market Summary

Futures were mixed overnight after a couple of tech giants reported quarterly results
Microsoft (MSFT, +6.54%) is very strong today after beating revenue and EPS expectations
Alphabet (GOOGL, -2.63%), meanwhile, came up short of EPS estimates and added another layer of weakness to an already weak internet group ($DJUSNS, -2.23%)
Communication services (XLC, -1.41%) is today's weakest sector, given the GOOGL earnings news
Software ($DJUSSW, +4.06%), however, is benefiting from MSFT and helping to lead technology (XLK, +2.59%) higher
The 10-year treasury yield ($TNX) is up 2 basis points to 2.79%, but financials (XLF, +0.48%) remain under pressure on a relative basis
The U.S. Dollar ($USD) has been on a tear higher during April, likely as a result of overall stock market weakness; the dollar is viewed as a safer alternative during market turmoil
The strong dollar is taking a toll on gold ($GOLD, -0.72%), which has struggled the past two months with the stronger dollar
Get ready for more fireworks as Meta Platforms (FB) and PayPal (PYPL) are among this afternoon's earnings

Market Outlook

One positive development for the longer-term is that we're definitely beginning to see more bearishness in options, which I believe is necessary for us to truly launch higher later this year. Yesterday's equity-only put call ratio ($CPCE) was .72 and the 3-day moving average hit its highest level since this post-pandemic rally began over two years ago:

I really want to see the 5-day moving average move up to the .80-.90 area (horizontal lines), so while the 3-day moving average rising is a positive first step, I'd like to see much more bearishness before we can begin to think about a bottom. But hey, this is a start and that's good news.

If you are completely in cash and have been that way for awhile, and are looking for a few levels to consider buying back in, I'd consider the current level to be the first. I do think we will move lower, but there are no guarantees, and buying back in in increments makes a lot of sense. If we're back at an all-time high in 2023, which I believe is likely, buying at depressed levels will work out well.

Sector/Industry Focus

Alphabet (GOOGL) was the latest big name in the internet space ($DJUSNS) to deliver bad news as it missed its earnings estimate after the bell on Tuesday. Later today, we'll get the latest from Meta Platforms (FB). Oh boy! (sarcasm intended). The weekly chart below shows a PPO that continues to weaken, so other than a short-term bounce, I'm just not seeing any kind of buying opportunity:

The black arrows do show oversold conditions, so perhaps after FB reports - either good or bad - we'll see the group see a few buyers show up. But I'm definitely not convinced a final bottom is in.

ChartLists/Strategies

I am remaining on the sideline as this volatility grips the market. We're up a little more than 1% as I write this, but there's no telling what might happen this afternoon. And after the bell today, Meta Platforms (FB) reports its quarterly results. Of all the FAANG stocks, FB is the worst heading into earnings - in my opinion. If they deliver a bomb, we could see big selling tomorrow. PayPal (PYPL) also reports its results this afternoon and it's another stock that has been downright awful in terms of both absolute and relative strength. FB and PYPL leading today's parade of earnings makes me feel a bit queasy.

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.

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

Thursday, April 28:

AAPL, AMZN, MA, LLY, MRK, TMO, CMCSA, INTC, MCD, LIN, SNY, TTE, CAT, MO, SYK, SO, GILD, NOC, KDP, AEP, KLAC, LHX, HSY, DXCM, DLR, XEL, TWTR, AJG, BAX, CARR, TEAM, RMD, BCS, TROW, NOK, PCG, LUV, WTW, DTE, WST, SGEN, CHD, GWW, LH, SIRI, HIG, VRSN, SWK, ARES, CINF, FTV, ALNY, TW, AVTR, PFG, IP, SSNC, CPT, IRM, WDC, BIO, KIM, LPLA, LNT, CE, TFX, ZEN, TXT, CG, LKQ, AEM, IPG, ABMD, ROKU, EMN, DPZ, CSL, RS, CUBE, GLPI, MPW, PHM, AOS, FBHS, NLSN, CFR, X, SWN, OLN, MHK, ERIE, TFII, FSLR, LECO, WU, FIVN, HUN, KBR, VIRT, OMF, BC, FCN, COLM, EXPO, TPX, SRCL, POWI, ENSG, CNX, KEX, MTSI, PRFT, BTU, TRUP, EVTC, VC, JKS, TEX, HUBG, CBZ, MD, EGO, EBS, CRS, CENX, OSTK, RLGY, SKYW, GVA, COHU, EB, MTLS

Economic Reports

March pending home sales: -1.2% (actual) vs. -1.1% (estimate)

Happy trading!

Tom