Market Summary

• The markets were fairly volatile last week with Wed trading up and Thursday back down. Inflation and future interest rate hikes continue to weigh on the markets. The 10-year yield continues to run higher and seems to be heading toward 3%.
• $SPX is still locked in a trading range between Tuesday’s lows (4380) and the earlyApril highs (4637), as denoted by the horizontal purple lines on the chart. Outside of that range, there is considerable support at 4100-4200 and resistance at 4700-4800 (horizontal red lines on the chart).
• Equity-only put-call ratios continue to remain solidly on buy signals, as these ratios are dropping steadily on their charts. The buy signals that originally took place in mid-March will continue to remain in place until the ratios roll over and begin to rise.
• The QQQ and the SPY were the worst performers due to rising yields. The IWM small cap index did manage to put in a 0.55% gain on the week. Semi-conductor index (SMH) got slammed and is at a support level.
• All three of the indexes still reside below their 200-day moving averages as that level remains potential resistance if and when it is tested. A non-bullish outlook still looks warranted.
• The CBOE Volatility Index (VIX) has drifted back down to its 200-day moving average. Is a rally off that moving average imminent, or will it reside around or below it as it did a couple of weeks ago? A VIX rally would most likely mean a further drop for stocks.
• The construct of volatility derivatives is solidly bullish in its outlook for stocks. The term structure of the $VIX futures slopes upward all the way out through October, so that is a positive for the stock market, as is the fact that those futures are trading at a premium to $VIX. In addition, the situation is helped by the fact that the CBOE Volatility Indices term structure slopes upward, also.
• In summary, there are mixed indicators in place, which is not unusual when $SPX is swinging back and forth in a (wide) trading range. Both bulls and bears have been frustrated by the lack of follow-through.
• It certainly appeared that the bears had a chance this week when $SPX closed below 4420, but as has so often been the case, no further decline occurred. The bulls experienced the same sense of futility when the breakout above 4600 a couple of weeks ago was not able to extend higher. So, we will continue to trade individual indicator signals as they occur, without being overly committed to either the bull or bear case right now

What’s happening this Week:
• Russia-Ukraine situation.
• Some housing sector stats Monday and Tuesday
• Quarterly earnings will accelerate for the next several weeks going forward with NFLX and TSLA a couple of the big-name stocks expected to release numbers this week. Remember to check for the expected earnings announcement before entering any trade. Surprises can cost you money. In addition, there are several economic reports due this week including several housing numbers that could give further insight to how inflation is affecting the economy. Hope you enjoyed the long weekend and have a safe, happy and prosperous week ahead!

Economic calendar

Apr 19: Housing Starts
Apr 20: Existing Home Sales
Apr 20: Beige Book
Apr 21: Jobless Claims
Apr 21: Economic Indicators

Sectors in Play
• Consumer staples for safety trade
• Energy (oil, nat gas, coal and uranium) still looks good as well as gold and silver.
• Materials, metals and mining had a good week (XME)
• Technology and consumer discretionary weakest sectors on inflation, rising rates and potential for an economic slowdown.

Earnings on deck for this week:
• Mon 4/18 – BAC, SCHW bmo – JBHT amc
• Tues 4/19 – HAL, JNJ bmo – NFLX, IBM amc
• Wed 4/20 – PG, ABT bmo – TSLA, UAL, CSX amc
• Thur 4/21 – AT&T, SNAP, AA
• Fri 4/22 – Verizon, SAP

Watchlist :
CAT – monster day on Friday…metals and mining sector strong.
SMH – at support and could bounce here but will be challenged if 10 year yield keeps rising.
TSLA – Reports Wed – watch $950 and $1100 for support and resistance levels.
USO – still looking strong – see XLE comment
XLE – looks ready to break higher again
XLV – the pullback here – still considering a potential for an entry at the 20 sma daily ($138 level).

AMD – With the stock dropping below some major support last week, it may be poised to drop lower. Potential bear put spreads will be modeled out with a bearish start to the week.
MARA – The stock is setting up a potential GKO, which means it may be moving even further to the downside. Straight puts will be considered.
GLD – The ETF may be on the move higher if inflation worries keep growing. Potential bull call spreads will be explored with a move over a pivot level at $185.

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