Baby come back, yeah, any kind of fool could see

There was something in everything about you

Baby come back; you can blame it all on me

I was wrong, and I just can't live without you, no

-Composers John Crowley / Peter Beckett

Although the signs were there, I was pleasantly surprised at just how much the market rallied yesterday.  However, I did point out there was pent-up demand, and it’s clear smart money had begun to nibble, but that was a flash mob scene. Many people still remember how good it feels when the market is moving higher, screaming, “Baby Come Back.”

• S&P 500: +1.61%
• NASDAQ: +2.15%
• DJIA: +1.45%
• RUT: +2.04%
• WTI: -5.11%

 

Heat Map

Market breadth for the S&P was unbelievably powerful as 88 out of 503 names finished the session higher.

I found the action in Real Estate (XLRE) most compelling from a sector point of view – those names should have been up less as money rotated back into growth.

On that note, has growth finally stopped fainting every time a Fed official says “boo” and the ten-year bond yield ticks higher? If so, that’s a buy signal.

Still, there were more new lows than highs and light volume left something to be desired, but it was a solid session.

Market Breadth	NYSE	NASDAQ
Advancers	2,269	3,343
Decliners	1,059	1,337
New Highs	99	89
New Lows	285	306
Up Volume	2.88 billion	3.50 billion
Down Volume	1.21 billion	1.01 billion

Key Sectors & Charts

I know this is counterintuitive, but maybe the consumer isn’t dead, and maybe with the help of credit, they will keep spending. All banks show consumers are using more credit and debit - perhaps to preserve cash. Right now, household debt service payments as a percentage of disposable personal income are near a record low. So, there’s room to run up your credit cards, although I’m not advocating that.

The Consumer Discretionary (XLY) chart is compelling, closing above the 50 and 200-day moving averages and filling a big gap along the way. After that, it could be some backing and filling – the big test comes at 190, then it’s off to the races.

Technology (XLK) is in the shadows right here and has a couple of large gaps to fill on the near-term horizon. That probably means even if there is a move higher, it will be a seesaw kind of move that might actually mask big gains. Real traction happens above 165, which would need a mega-lift by great results and guidance from mega-caps.

The XLK sector sees a lot of resistance.

Bond Yield Just Won’t Quit

You do not have to be a technician to see if the bond yield rally is extended. It’s plain nuts!  Check out the Moving Average Convergence/Divergence (MACD) indicator. Wowzah!  It has to pull back soon, although I am not sure it gets back under 2.50%.

Portfolio Approach

We added a new position in Financials yesterday in our Hotline Model Portfolio, and we are adding to Technology this morning.

Today’s Session

While Netflix (NFLX) gets all the attention, the market has actually gathered itself and turned higher ahead of the opening bell.   The company lost subscribers for the first time and see two million exiting this quarter.

I have to say the situation with Netflix is an extreme embarrassment for Wall Street and some of the loudest and cockiest analysis and television commentators.   You are going to be wrong a lot in this business. Peter Lynch says six out of ten wins is a high percentage.

I obviously understand that, but what’s amazing to me is the hubris and arrogance and the constant berating of others, especially retail investors, by some of the reddest faces this morning.

There have been at least nine downgrades, including JP Morgan, which had a buy on NFLX since 2013.

I’m watching the ten-year bond, where the yield has gone parabolic.  Lots of hunches it’s gone too far, and Bank of America says to buy now as they see the yield heading back to 2.25%.  Also many see TLT as a screaming buy as well.

If they are right about these yields coming back to earth, that will be fantastic news for mega growth names.

Comments

I have never been a fan of companies like JP when they put out their "Neutral to Buy, Hold, Sell to Hold ect..." Whatever their matrix is, messes things up just like when fed "talks". Look under the hood, kick the tires, check car fact reports, get diagnostics done. Doing ones due diligence is proper way to go. William E Blanken Jr on 4/20/2022 11:43:25 AM

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