Stock Market Still Range Bound

Tuesday recap:

Equity markets put in a mixed performance Tuesday. The stock market is still range bound after failing to follow through with their broad based gains from Monday.

Investors, while not abjectly complacent, are a bit on the edge of their seat, conflicted over mediocre earnings reports that might be beating “tapped down” expectations.

This of course is complicated by the backdrop of a fractured oil market, the unresolved Greece/EU dilemma, seemingly “knee jerk” monetary policy decisions coming out of China, and uneven economic growth in the US.  It’s no wonder market averages have been trending sideways within a range for the better part of the last 6 months. This makes tape reading the stock market, all the more difficult.

By the end of the day, the major market averages; DJIA  -0.5% at 17,950, S&P 500 -0.15% at 2097, NASDAQ +0.4% at 5014 continue to be magnetized to big round numbers, while the Russell 2000 -0.1% at 1264 and NYSE composite +0.15% at 11,100,  have yet to see a surge of momentum yet, following fresh all time highs late last week.

DJIA Chart

range bound

There were of course winners and losers among key industry sectors.

Pockets of the Tech sector continue to outperform.  Semiconductor stocks continue to recover after a brutal end to 1Q.  The SOXX ETF +0.65% after testing its 200 day MA on March 26.   Cyber security names continue to charge higher, with good reason,  and the upper crust of Social Media names still have strong demand.

$SOX ETF Chart

sox

Transports, after showing moderate losses until mid afternoon,  staged a strong rally from 2:00 to 3:00 PM and closed above the 8800 near term resistance level we’ve been watching the last week. DJ Transports, +0.25% at 8815.  Watch closely if it can hold above that level.  The Transports were a very high beta sector the last 2 years, and if they pick up momentum, outsized moves are not uncommon.

Oil retreated from its highest price levels of 2015 and shares of oil stocks were weaker by 1% to 3%.  We saw multiple reports that Saudi Arabia has halted their bombing missions in Yemen.  Not sure of a cause-effect link from this development.  Stay tuned.

Utilities are a major concern.   Unlike the Transports, Utilities made no attempt to build on their +1% gains from Monday.  In fact, they gave it all back!!  DJUA -1% at 585.80.  Even more troublesome is the UTY ETF is looking right into the teeth of an ominous “Death Cross” where the 50 day MA is going down through the 200 day MA and by the end of next week will be below the 200 day and heading south.

The DJ Utility average has the exact same pattern with the “cross” to hit in maybe 2 weeks.  It’s hard to imagine any technical improvement in the Utility stocks for 3 to 6 months.

Today’s Earnings

The Day Ahead:  We have a heavy dose of high profile earnings reports for Investors to dissect between this morning and last night after the close.  YHOO, EBAY, FB and QCOM highlight the tech sector, while BA, MCD, KO and T are all major blue chip multinationals.

Globally, the Japan Nikkei closed above 20,000 last night for the first time in 15 years, but the rest of Asia is a bit weaker and Eurozone markets are down close to 0.5% at midday.  If we weaken throughout the day and another wave of buying comes into US Treasuries, 1.85% is a key resistance level on the 10 year treasury yield.

Tim Anderson Managing Director TJM Investments, LLC

tanderson@mndpartners.com tjanderson56@gmail.com

Twitter: @TJAnderson1

 

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