Weekly Trader's Outlook

If you read last week's blog you might recall that my forecast for this week was "Breakout," which I defined as a greater than 2% move in the S&P 500 (either higher or lower) on a week-over-week basis. At the time of this writing the S&P 500 is down roughly 0.5% on the week, so my forecast turned out to be wrong. The SPX traded within a 200+ point range this week (~5,220-5,459), but that's relatively muted volatility compared to last week. Following last Wednesday's 90-day pause on tariffs, markets are still on standby for an official trade deal to be announced. Yesterday President Trump said that "big progress" is being made in negotiations with Japan, he is meeting with Italy Prime Minister Meloni at the time of this writing, but still no deals. In my view the longer that it takes the U.S. to land a deal, the worse it is for the economy and the stock market. From a bullish perspective, stocks may get a relief rally once a deal is announced (which could happen at any time), and perhaps once the first deal is announced it will make it easier for other countries to follow suit. However, there is still a high level of uncertainty regarding what the economic impact from the resulting shifts in trade policy. Stocks are also fully valued at a forward P/E of roughly 20, so my sense is that volatility will persist until we get more clarity around the state of the global economy. Fortunately, Q1 earnings have been relatively healthy (58/500 S&P companies have reported, 6.17% revenue growth, 6.35% EPS growth thus far), the labor market appears to be relatively healthy and while soft data has rolled over, it has yet to manifest in the hard data. Also fortunate for markets is this week's pullback in Treasury yields which was likely induced by encouraging comments from Boston Federal Reserve President Susan Collins last Friday.

At the time of this writing (2:30 p.m. ET), all the major indices are near the highs of the session (DJI - 284, SPX + 44, COMP + 77, RUT + 21), which appears to be driven by constructive comments from President Trump around trade and investor anticipation that a trade deal will be announced soon. There are no guarantees of course, and we don't know what the terms of any deals will be, but it seems to me that any deal will at least initially trigger some buying/short covering. If a trade deal is announced and stocks respond positively, it will be interesting to see if the SPX and NDX have enough bullish momentum to get above key resistance at 5,550 & 19,000 respectively. Like the past couple weeks, I find it difficult to make a directional call due to so many unknowns. Therefore, I'll just say that my forecast next week is "bullish" if a deal is announced and "bearish" if not. What could challenge this forecast? If a deal is announced but the terms are interpreted as bearish (meaning harmful to growth/earnings) by the markets. I understand my forecast may be a bit of a "cop-out," but in this environment it feels like everything hinges on clarity around global trade and the potential impact to risk assets.

Other Potential Market-Moving Catalysts:

Economic:

- Monday (4/21): Leading Indicators

- Tuesday (4/22): no reports

- Wednesday (4/23): EIA Crude Oil Inventories, MBA Mortgage Applications Index, New Home Sales

- Thursday (4/24): Continuing Claims, Durable Goods Orders, EIA Natural Gas Inventories, Existing Home Sales, Initial Jobless Claims

- Friday (4/25): University of Michigan Consumer Sentiment

Earnings:

- Monday (4/21): Comerica Inc. (CMA), W.R. Berkley Corp. (WRB), Western Alliance Bancorp (WAL), Zions Bancorporation (ZION), BOK Financial Corp. (BOKF)

- Tuesday (4/22): GE Aerospace (GE), Verizon Communications Inc. (VZ), RTX Corp. (RTX), Danaher Corp. (DHR), Lockheed Martin Corp. (LMT), Elevance Health Inc. (ELV), 3M Co. (MMM), Tesla Inc. (TSLA), SAP SE (SAP), Intuitive Surgical Inc. (ISRG)

- Wednesday (4/23): AT&T Inc. (T), Thermo-Scientific Corp. (TMO), Boeing Co. (BA), CME Group Inc. (CME), International Business Machines Corp. (IBM), ServiceNow Inc. (NOW), Texas Instruments Inc. (TXN), La Research Corp. (LRCX), Chipotle Mexican Grill Inc. (CMG), Newmont Corporation (NEM)

- Thursday (4/24): Procter & Gamble Co. (PG), Merck & Co. Inc. (MRK), PepsiCo. Inc. (PEP), Union Pacific Corp. (UNP), Alphabet Inc. (GOOG), T-Mobile UX Inc. (TMUS), Gilead Sciences Inc. (GILD), Intel Corp. (INTC)

- Friday (4/25): AbbVie Inc. (ABBV), HCA Healthcare Inc. (HCA), AON PLC (AON), Colgate-Palmolive Co. (CL), Charter Communications Inc. (CHTR), Schlumberger NV (SLB), Phillips 66 (PSX), Centene Corp. (CNC)

It was relatively light week for economic data. From a bullish perspective, monthly retail sales jumped the most since January 2023 and the weekly Initial Claims continued its string of sub-230K readings, so the job market appears to be holding up well for now. However, the strong retail sales may have been due to a "pull forward" of demand by consumers to avoid the potential impact of tariffs. Here's the breakdown from this week's reports:

Retail Sales: Headline month-over-month (MoM) increased 1.4%, up from +0.2% in the prior month and above the +1.2% expected. This brings the year-over-year gain to +4.6%. Retail sales ex-autos increased 0.5%, better than the 0.3% expected.

Empire State Manufacturing: -8.1 vs. -12.0 expected.

Philadelphia Fed Index: -26.4 vs. +11.0 expected.

Mortgage Bankers Association (MBA) Mortgage Applications Index: decreased 8.5% from the prior week.

Business Inventories: 0.2% vs. 0.2% expected.

Export Prices: 0.0% vs. +0.5% prior.

Import Prices: -0.1% vs. +0.2% prior.

Initial Jobless Claims: Decreased to 215K from 224K in the prior week, and below the 221K expected. Continuing Claims increased 41K to 1.85M from last week.

The Atlanta Fed's GDPNow "nowcast" for Q1 GDP was revised up to -2.2% yesterday day from -2.4% on April 9th.

Last Friday there was a lot of concern about the concurrent sell-off in both Treasuries and the U.S. Dollar. However, that same day Boston Fed President said that the Fed stands ready to intervene if necessary and that seemed to provide support as yields came back down this week. Compared to last Friday, two-year Treasury yields are down nearly 20 basis points (3.773% vs. 3.975%), 10-year yields dropped ~18 basis points (4.315% vs. 4.493%) and 30-year yields are down ~8 basis points (4.806% vs. 4.887%).

Expectations around potential rate cuts from the Fed softened this week, assisted by cautious commentary from Fed Chair Powell yesterday. Per Bloomberg, expectations for a 25 basis point cut at the May Federal Open Market Committee (FOMC) meeting are currently 11% from 24% last week, with the June FOMC meeting currently showing a 63% chance of a cut. Note: There is no FOMC meeting in April.

While the S&P 500 (SPX) appears to be confined within a trading range that spans between last Monday's intraday low (4,835) and the March 13th low (~5,500), I thought I'd highlight a key support level for the equal-weight S&P 500 index (SPXEW). In the chart below you can see that the 200-week simple moving average (the gold line) held as support in both October of 2022, October of 2023 and once again earlier this month (the three green arrows below). Therefore, as long as this index can remain above this long-term moving average (~6,314 currently) the intermediate-term technical assessment is bullish, and a breach below this level would be considered bearish.

Intermediate-term technical translation: bullish provided the index remains above the 200-week SMA

The Nasdaq 100 index (NDX) remains in an intermediate-term downtrend that started back in mid-February. How do you break out of a downtrend? Stop making new lows. Therefore, last Monday's (April 7th) low of 16,542 is key near-term support with near-term resistance around the 19,000 level. I understand 16,542-19,000 is a wide near-term "trading range," but this speaks to the volatile environment that markets find themselves in. If the NDX can get back above the 19,000 this would be a bullish development, but until then my technical assessment is cautious.

Near-term technical translation: bearish

Last week Teucrium launched a 2x leveraged XRP ETF (XXRP – 40.47 to $29.93) representing the first XRP ETF in the United States. This fund aims to provide twice the daily return of XRP. The launch comes ahead of a May 22nd decision by the U.S. Securities and Exchange Commission (SEC) whether to approve Grayscale's spot XRP ETF. In addition to already approved Bitcoin and Ethereum spot & futures ETFs, a couple ETFs were recently launched on altcoin Solana (SOLZ, SOLT), though there is not yet a Solana spot ETF.

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP) and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). Stocks are down modestly this week, but market breadth improved, albeit from depressed levels. On a week-over-week basis, the SPX (white line) breadth moved up to 29.40% from 26.40%, the CCMP (blue line) ticked up to 18.94% from 16.50%, and the the RTY (red line) expanded to 16.42% versus 13.38%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (27 today): Agnico-Eagle Mines Ltd. (AEM - $1.83 to $120.71), Atmos Energy Corp. (ATO + $2.27 to $158.58), Eldorado Gold Corp. (EGO - $0.23 to $19.83), First Capital Inc. (FCAP + $0.31 to $40.55), Royal Gold Inc. (RGLD - $2.61 to $183.84), Thompson Reuters Inc. (TRI + $0.42 to $180.67)

This Week's Notable 52-week Lows (91 today): Acadia Healthcare Co. (ACHC + $0.35 to $24.19), Boot Barn Holdings (BOOT - $0.29 to $89.44), E.L.F. Beauty Inc. (ELF + $1.00 to $50.95), Footlocker Inc. (FL + $0.11 to $11.23), JB Hunt Transport Inc. (JBHT + $3.02 to $127.75), Matson Inc. (MATX + $0.59 to $98.51)