10:48 a.m. ET
The tone this morning is on the bullish side, but low conviction. There are some interesting developments in Small Caps as we near the kick-off of earnings season with the banks Friday, which are crucial to Small Caps near term.
SP-500 -0.1%, Dow +0.1% (Transports +0.6%), NASDAQ-100 -0.7%, Small Caps +0.35%
A couple of the averages are breaking out of recent bullish price consolidations, but the percentage moves out of the consolidations are small, lacking conviction.
SP-500 (15m) trading above a bull flag.
Dow (15m) trading above a bullish triangle
NASDAQ-100 (30m) is a bit more out of favor thus far n Q2, but has a loose bull flag consolidation.
Perhaps the most interesting and telling chart is that of Small Caps that have been dragged around by the nose by the banks. Small Caps have been putting in an inverse H&S base and price is moving up toward the neckline, suggesting the right shoulder is complete.
IWM (15m) – the timing here is very interesting as the banks that need to rally for small caps to breakout and rally from this base, start reporting earnings Friday.
Although here was little movement in the Most Shorted Index, there’s a resumption of some short covering from Thursday this morning.
SP-500 (2m) and MSI (white. However, the MSI is still just off some of the deepest levels since the 2020 COVID crash. I just read this morning that hedge funds are the most short the S&P that they’ve been in 12 years.
VIX (+0.35%) is pretty much flat much like the S&P. The Absolute Breadth Index is down to 25.
9 of 11 sectors are modestly higher led by cyclicals again, but moves are fairly modest with most sectors not up or down more than a half percent. The mega-caps (MGK -0.7%) lag the equal weight S&P (+0.4%) by 110 basis points. Amazon (AMZN -2.55%) and Microsoft (-2.35%) are major laggards in the mega-cap group.
Semis (SOX +0.1%) are outperforming the Tech sector (-0.9%). Regional Banks are unchanged, the KBW Bank Index is up +0.55%.
Advancers lead decliners by a better than 3-to-1 margin at the NYSE and a 2-to-1 margin at the NASDAQ. Despite lagging due to mega-caps, NASDAQ-100’s advance/decline line is improving this morning and starting to lead the index higher. NYSE’s A/D line is also outperforming the benchmark index.
Despite the low conviction tone of the morning so far, breadth oscillators are moving into overbought territory at 97 (scale 0 to 100).
The 2 and 10-year yield are little changed, up 1 bp each. The U.S. Dollar Index is down -0.5% after jumping yesterday due to Yen weakness.
HYG (0%) is hung up at technical resistance between its 200-day and 100-day sma’s.
Gold futures are up +0.7% to $2017.50, holding a test of $2,000 and gold’s breakout from a bullish ascending triangle from last week.
Bitcoin is up around +2%, adding to yesterday’s breakout from a bullish ascending triangle consolidation and trading above $30k.
BTC/USD (4H)
If you’re interested, I posted a series of four 1-minute YouTube Shorts videos on how central bank liquidity is one of the primary drivers of BTC’s price.
3C charts of the averages are generally constructive in the near term, consistent with the price consolidations the averages have been trading in since the start of April or Q2. I don’t see a lot of evidence for a strong breakout yet from 3C and I suspect that’s probably due to the CPI Wednesday, PPI Thursday and the kick off of earnings season Friday with the banks. It seems to me that the early part of Q2 for the equity market may very well depend on the banks, and Small Caps are setting up a base in anticipation of those earnings. My guess is that if the banks disappoint, we’ll see the mega-caps get more attention from investors in Q2.