/ April 25
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Friday:
Michigan Consumer Sentiment Final (50.8 exp.) -
Friday:
AbbVie
Phillips 66
Colgate-Palmolive
Daily Briefing
*The stock market rallied for the third consecutive session; the Dow Jones Industrial Average jumped nearly 500 points, the S&P 500 registered a +2.0% gain, and the Nasdaq Composite gained +2.7%;
*With yesterday’s move, the S&P 500 is 10.1% above its low close in April 8 (4,982.77); short-covering and a fear of missing out on further gains contributed to the upside moves, boosted by strength in the mega cap and chipmakers spaces;
*SPY has managed to break out bullishly above the 20-DMA and the technical channel lower trendline; the full retracement to the 50-DMA (and slightly above, to $565) appears now to be just a matter of time, since bulls and FOMO chasers are now in the driver’s seat; it becomes critical for the benchmark ETF to hold intermediate support at $542 in order to build on these gains; notably, SPY is not nearly overbought at current levels (56/100) so further gains are probable from this perspective;
*The MACD signal has now jumped to an elevated level, which tends to be associated with temporary market tops rather than buying opportunities;
*We are now finally seeing more institutional buying in Dark Pools; the average buying index for yesterday, as far as the most important S&P 500 companies are concerned, is now sitting at 46%, just over the 45% mark which separates a “neutral” reading from a bearish one;
*The most notable development in this regard is not the average reading itself, but the kind of companies that were bought yesterday; up till now, dark pools investors have been in risk-averse mode, preferring to hide in consumer staples names like PG, JNJ and WMT;
*Now, most defensives have taken a back seat in the favor of risky plays - AVGO, MSFT, TSLA and NVDA are in the top half of the table and no longer sporting bearish volumes;
*Trends are more easy to spot when plotting the 1D, 2W and 1M average volumes side by side; while “a single warm day doesn't make spring”, it is nonetheless an important indicator we’ve been looking for under the surface of the market;
*As far as Gamma Exposure (GEX) goes, most key stocks are trading in a positive GEX regime, which should be supporting lower volatility; with the VIX trading at 26, there’s still plenty of room for volatility to drop;
*For major sector ETFs, average total GEX has now flipped positive (from the negative value recorded yesterday); SPY and QQQ are both trading in positive GEX territory, though it’s worth noting that most of the gamma exposure comes from short term options; in the medium term (70 days), GEX remains negative for most sector ETFs, including SPY and QQQ;
*Earnings news has been a mixed bag; Chipotle Mexican Grill (CMG, +1.6%), Southwest Airlines (LUV, +3.7%), IBM (IBM, -6.6%), and Merck (MRK, +1.4%) issued some cautious-sounding guidance;
*The PHLX Semiconductor Index (SOXX) surged +5.6% and the Vanguard Mega Cap Growth ETF (MGK) rose +3.1%; it wasn't just mega caps and chipmakers, though; many stocks benefitted from broad buying interest that was further supported by dropping market rates and positive economic data;
*Relating to market breadth, there was a very large jump in stocks trading above their 20-DMAs (755 to be precise); this is especially relevant in contrast to April 9, when SPY was also trading near $548, and there were only 209 such stocks;
*Such sudden spikes were also visible in 2023, as the market reached its eventual bottom in October;
*The 10-yr yield settled eight basis points lower at 4.31%; the 2-yr yield settled seven basis points lower at 3.79%; treasury yields were already lower before the market received another solid weekly initial claims number (222,000) and ahead of the $44 billion 7-yr note sale, which met soft demand;
*TLT surged +1.05%, corroborating the positive GEX and Dark Pools data that we’ve seen recently;