EB Daily Market Report - Quick Update - Tuesday, May 7, 2024
Don't Go Away In May
We are having our "Don't Go Away In May" event today at 4:30pm ET. Room Instructions were sent out earlier. If you cannot make the event live, a recording will be made available later tonight or tomorrow for you to review at your convenience.
Market Update
Remember, technical analysis is not about being right or wrong. Many market pundits eschew technical analysis, because they simply point out its failures. They're getting it all wrong. Technical analysis, used properly, should help us manage risk. That's all.
I mention this, because I believe recent market action and signals are suggesting the worst of this downturn is over. I say this with a bit of hesitation as I know the May 6-May 25 period can be challenging at times. But seeing the Volatility Index ($VIX) drop from 19.50 to 13.29 in just over 2 weeks tells me that market makers are pricing short-term S&P options as though the worst in volatility spikes is behind us. The history of the stock market and the VIX also tells us that we want to be long whenever the VIX is below 17. The 17-20 range is BE CAREFUL range, while a climb above VIX 20 says GET OUT, even if only temporarily.
Our major indices are mixed with small and mid caps leading the charge - up more than 0.50%. Meanwhile, the Dow Jones, S&P 500, and NASDAQ are all close to the breakeven line today. 8 of 11 sectors are higher, with consumer discretionary (XLY, -0.71%) the primary laggard. The other two sectors down on the session are communication services (XLC, -0.10%) and technology (XLK, -0.08%). This helps to explain why the NASDAQ is the worst-performing of our major indices, though it's not down much.
Tesla (TSLA, -3.84%) and automobiles ($DJUSAU, -3.34%) is the primary drag on the XLY today. Mortgage finance ($DJUSMF, +1.73%) continues its upward path, leading financials (XLF, +0.23%) higher. Containers & packaging ($DJUSCP, +1.42%) is breaking out to its highest level since August 2022, propping up the materials sector (XLB, +1.03%), today's leader.
Commodities are mixed on the session, while the 10-year treasury yield ($TNX) drops another 4 basis points to 4.44%, now nearly 30 basis points below the recent high on the TNX above 3.70%.
The Walt Disney Co. (DIS, -9.68%) is the biggest loser in the Dow Jones by far and the 2nd worst performer in the S&P 500, trailing only BLDR's decline of 17.6%. DIS easily surpassed Wall Street consensus estimate, $1.21 vs $1.12, but traders are more focused on the company's inability to meet revenue estimate, even though the miss was slight.
Happy trading!
Tom