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“Don’t hope. Hope is for people who aren’t prepared.” – Kareem Abdul-Jabbar

Morning stock market summary

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Futures are higher this morning as positive earnings results lift the mood of investors even as interest rates are higher.  Housing Starts and Building permits were just released, and both reports came in lower than expected. Housing Starts were a big miss coming in at 1.321 million compared to forecasts for 1.485.  Building Permits were also weaker at 1.458 million versus consensus forecasts for 1.510 million. These reports should have been friendly to rates, but so far there has been very little movement in the 10-year yield.  Besides these two reports, the only other items on the calendar are Industrial Production and Capacity Utilization at 9:15.  We’ll also be hearing from Fed Chair Powel at 1:15 Eastern.

After the last two trading days, and all of April for that matter, there are probably a lot of overexposed traders and investors hoping for an up day or two. We don’t know where the market will go from here in the short term, but at this point, the S&P 500 is only down 3.66% from its closing all-time high at the end of March.  That’s not even close to what most people would call a correction, let alone a pullback.  While the current decline is the first of that magnitude since late last year, since 1953 there have been 455 declines of 3% or more on a closing basis without a 3% rally in between. That works out to one about every two months. In other words, the fact that we hadn’t had a pullback of 3% in over five months was more unusual than the fact that the S&P 500 is now down over 3% from its high.  In fact, since 1953, there have only been ten other periods where the S&P 500 went longer than the just-ended streak without falling 3% from a local closing high.

Looking at the four major US indices across the market cap spectrum, the Russell 2000 is the only one not up YTD, although it was in the black just a week ago.  What’s also notable is that a week ago all four indices were above their 50-day moving averages (DMA) and two (MDY and SPY) were overbought.  As of yesterday’s close, all four indices are not below their 50-DMA, and two (QQQ and IWM) are oversold. Change tends to happen fast in the markets.

The fact that all four of the indices shown above closed below their 50-DMA yesterday was notable because it was the first time since November 2nd that all four of them closed below their 50-DMAs. Since 1990, that streak was on the extreme side, but it wasn’t unheard of as eleven streaks were longer and another six lasted longer than 100 trading days. The most recent ended in August of last year (106 trading days), and the longest was 262 trading days ending in January 1996.

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