Here’s a snippet from today’s report:

Equities in China had a good session with the Shanghai Composite rising over 2%, and on a closing basis, this was the highest close since March 2018.  Interestingly enough, though, there have been five days since the start of April where the Shanghai Composite traded higher on an intraday basis, so it’s not quite a breakout from its recent consolidation phase.

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Here’s a snippet from today’s report:

Happy Tax Day!  If you have been busy this morning writing out checks to Uncle Sam or grumbling that your refund isn’t as high as you thought it would be, don’t worry about missing a whole lot in the market as things have been pretty quiet so far.  The only economic indicator of note today is Empire Manufacturing, and the pace of earnings doesn’t start to pick up until tomorrow.

Whether it was a kitchen sink quarter or not, last Friday’s earnings report from Wells Fargo (WFC) wasn’t received well by the street.  After falling more than 2.5% on Friday, analysts had an entire weekend to think about and go over the results, and based on this morning’s research news, they didn’t like what they saw.  As shown in the analyst upgrades and downgrades section of our Morning Lineup, Wells Fargo was downgraded this morning by no less than four different firms.  Not exactly a ringing endorsement, but one could also make the argument that sentiment towards the stock has become skewed to the negative side.

Here’s a snippet from today’s report:

The week is looking to close off on a strong note as US equity futures have been surging in the pre-market with S&P 500 futures indicated to open up by 0.70%.  The drivers of this morning’s gains are a cocktail of strong loan growth data out of China, a positive start to earnings season with a big beat from JP Morgan (JPM) and no major misses from the Wells Fargo (WFC) or PNC, and then lastly a big merger in the Energy sector where Chevron (CVX) has agreed to acquire Anadarko Petroleum (APC) for $33 billion in cash and stock.  Also, Disney (DIS) is trading up over 6% on its new streaming service which is expected to be unprofitable for years to come! There’s a little bit of everything for the bulls to chew on this morning.

With regards to the Energy sector, there has been some head scratching this year over the fact that the Energy sector wasn’t up more given the surge in oil prices.  Today’s deal between CVX and APC would seem to validate that view.  Looking at a chart of how crude oil and the Energy sector have traded over the last five years shows that the two have tended to track each other pretty closely.

If you look closely at the chart above, you can barely make out crude oil’s recent surge while the Energy sector’s rally has been more restrained.  As a result of that disparity, the ratio between the price of the Energy sector to the price of WTI crude oil has fallen to 7.8, which is right near the low end of the range from the last five years and nearly two full points less than the average of 9.7.  Granted, it’s a crude comparison (pun intended) and only one piece of a bigger puzzle, but based on where oil prices are trading, the Energy sector looks cheap.

Here’s a snippet from today’s report:

Newsflow is on the quiet side this morning.  Futures, though, are trading higher on the heels of positive price action in Europe.  On the economic front, PPI and Jobless Claims will be released at 8:30.

The S&P 500 may be trading in a steady uptrend with higher highs and higher lows all year, but the small-cap Russell 2000 just can’t make up its mind.  For the last two months now, small caps have been stuck in a range as Banks and Biotechs, the two largest industries in the index, have been a drag.

The 200-day moving average is generally considered a dividing line between whether an index or stock is in a long-term uptrend or downtrend. In the Russell’s case, it has been oscillating above and below that level for some time now.  With yesterday’s close back above the 200-DMA, that now makes it seven times that the index has crossed above or below its 200-DMA on a closing basis in the last 50 trading days. That’s the most number of crosses in that short of a span in more than four years! In order for this trend to break one of those two “Big Bs” in the index (Banks and Biotechs) is going to have to make a move.

Here’s a snippet from today’s report:

As noted in our B.I.G. Tips report yesterday, while it starts off slowly, earnings season kicks off this week as the big banks start to report earnings on Friday and early next week.  In this report, we provide a breakdown of how analyst sentiment is stacking up heading into the reporting period and how that bodes for equities.  If you haven’t seen it yet, make sure you do!

Given the equity market’s strong performance during the last earnings season, it’s going to be hard to get a repeat performance.  That doesn’t mean returns can’t be positive, but if you are expecting anything resembling the last earnings season, you’re being way too greedy.  The table below shows the performance of the S&P 500 and each sector during the Q4 earnings season (1/11—2/22) and how that performance ranked versus prior quarters. With a gain of 7.57%, the S&P 500’s performance was the best earnings season showing since the Q2 2009 reporting period.  Industrials and Technology were the same with a gain of 10.9%.  Other sectors with notable performance relative to recent history included Consumer Staples (best since Q3 2013) and Consumer Discretionary (best since Q4 2014).

Here’s a snippet from today’s report:

This morning is about as quiet as it gets in terms of domestic news for equity markets.  One thing to note — while the cap-weighted S&P 500 remains about 1.2% below its all-time closing high of 2,930.75 (reached on 9/20/18), the S&P 500 Total Return index (which includes dividends) is now just 10 basis points away from a new all-time high.  The US equity market has effectively re-gained all of its Q4 losses at this point; now it just needs to clear one final resistance hurdle.