He did it again. Jay Powell stepped up to the podium and adjusted the microphone just like he did last year at Jackson Hole, Wyoming. He gave the Street the inevitable news because the Fed had boxed itself in, - but he broke the news and the new direction of the Fed policy in such a way that was ambiguous at best and even encouraging.

His answer to the first question during the Q&A period focused on an economy that is wearing its ‘big boy pants’ and could take a few hits to the gut. He actually said the economy could “flourish” with less accommodation. Later, when he exclaimed the economy is “very strong,” it sparked a reversal and stocks galloped into the closing bell.

Jerome Powell borrowed a line from President Biden on inflation – it wasn’t me. In rejecting culpability for runaway inflation in America, Biden’s claim: inflation is not caused by our framework. Instead, the chairman of the Federal Reserve said inflation was “sudden and unexpected.”

Great Session

• S&P 500: +2.24%
• NASDAQ Composite: +3.77%
• Russell 2000: +3.14%

Growth sectors enjoyed a very strong session as investors rotated out of 2022’s best sectors into the worst.

Consumer Discretionary (XLY) was the best sector, led by casinos with exposure to MACAU and midsized retailers where there could be a wave of consolidation and big fund acquisitions.

Financials (XLF) enjoyed a strong session, led mostly by regional banks.

Tech rallied behind Software-as-a-Service (SaaS) names – after the close, PagerDuty (PD) popped on earnings.

While there was a sea of green on the Heat Map, market breadth still had a glaring sore spot.

There are still far more lows than highs (220 difference on NASDAQ), but the trend is improving.

Market Breadth	NYSE	NASDAQ
Advancers	2,664	3,733
Decliners	698	977
New Highs	44	34
New Lows	174	254
Up Volume	5.32 billion	5.73 billion
Down Volume	990.26 million	716.52 million

 

NASDAQ Rising

Back-to-back sessions, where the NASDAQ Composite climbed off the canvas to rally into the close, has to grab your attention. And before you say you’ve seen this before, according to Sentiment Trader, this is only the fifth time in history the NASDAQ Composite tumbled to a 52-week low then surged at least 2.5% on back-to-back sessions.

Four of those times marked multi-year lows.

We saw a “Three Inside Up” formation using candlesticks, which is a reversal pattern.

I was also impressed with the volume, although I still need to see more on these reversal sessions. The NASDAQ closed right at the top of the channel. The Moving Average Convergence/Divergence (MACD) and the Williams R% are also constructive.

Perhaps Powell is Right because The Atlanta Fed hiked their first quarter Gross Domestic Product (GDP) to 1.2%, although the Personal Consumption Expenditures (PCE) also climbed to 4.4%.

 

That development is encouraging, and Renaissance Macro Research points out that when certain issues are considered, the news is really promising.

Dry Powder

In the March survey of global money managers who control close to a trillion dollars, they were overweight in cash and commodities. Both of those could swiftly change to stocks as the bond market looks done for the time being.

Portfolio Approach

There are not sector weighting changes this morning in our Hotline Model Portfolio.

Today’s Session

This morning, all the economic data releases came in better than expected, including housing starts +6.8% against consensus of +3.8%. 

But the market is looking for some kind of spark, which it can’t seem to find it just yet.

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