I have to say it was yet another impressive session that was utterly lackluster. But at the same time, as I pointed out on the Afternoon Note yesterday, the fact sellers didn’t pull the trigger on weakness is very telling. After that sloppy bond offering, traders had an excuse to bolt but stayed. These folks loaded up on the ‘dip’ – in other words, smart money. I wasn’t thrilled with market breadth, however.

Mega-cap stocks keep powering higher, mitigating more decliners than advancers, but volume speaks volumes.

Market Breadth	NYSE	NASDAQ
Advancers	1,643	2,297
Decliners	1,705	2,467
New Highs	75	67
New Lows	139	162
Up Volume	2.26 billion	3.22 billion
Down Volume	2.10 billion	1.90 billion

Rotation

Energy (XLE) was hit by headlines that the Shanghai Stock Exchange was shutting down. But I also suspect West Texas Intermediate (WTI) is looking to pull back a little more, although the oil patch has become a fan favorite. 

Democrats are coming after oil companies like it’s 2008 again, when they were 16% of the S&P 500 market capitalization (market cap) and true behemoths. Sure, they make convenient political scapegoats but are less than 4% of the S&P 500 these days. That suggests an upside potential, but sans geopolitical premiums. I doubt these stocks will ever reach their potential because of the Environmental, Social, Governance (ESG) restrictions.

The New Safe Havens

Investors have been flocking back to Utilities (XLU) as the sector is up more than 8% this month. I think beyond the traditional role of safe havens where investors can get steady cash flow and high dividends, there is rightly a suspicion the administration will find ways to funnel big money to the sector in the name of fighting climate change.

Then there’s Apple (AAPL), which shines brightly in our eyes as investors. It is the ultimate cash machine and makes both value and growth investors comfortable. The stock is now 7.1% of the S&P 500 – no company has ever had that kind of influence over the stock market.

Inversion

Inversion sounds like a great name for a horror movie, sort of like “The Invasion of the Body Snatchers.” Yesterday, we saw it with the 30-and five-year yield spread. These inversions point to a recession down the road, sooner rather than later.

Speaking of out-of-body experiences – the gaming of Fed hikes is off the chain. 

On the Eve of Breaking Out

The S&P 500  through 4,600 on a closing basis will change the investor sentiment big time. It has been a heck of a move, so there is a chance it needs to be tested – perhaps pulling back to the 200-day moving average and holding it there.

Perhaps, this bad boy might just take another leg higher before looking back.

Portfolio Approach

We are adding a new position in Real Estate in our Hotline Model Portfolio this morning.

Today’s Session

News is breaking that Ukraine and Russia are close to reaching a ceasefire, hopefully. Reports that Russia will “reduce military activity” near Kyiv while a meeting between Presidents Zelensky and Putin is set up.   The markets are higher on hope of peace. 

WTI crude is down 5% to $100.50 per barrel down from $108 earlier.  The dollar is trading down against the euro on the news. Treasury yields have backed off the highs with the 10-year at 2.45% and the 2-year at 2.36%. 

Comments

Long term viewer of FBN and love Charles’s clear, concise description of the market Thank you Jay Flynn on 3/29/2022 10:07:04 AM

Hum, interest rate at 3 % by this time next year! CDs will be looking, not bad at all! Love all the great info Charles! Lorin on 3/29/2022 10:49:22 AM

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