A Busy Week on Tap After Monday
Jobs, Fed, and earnings.
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Our View — The Week Ahead
Strong earnings reports from Microsoft and Alphabet on Thursday helped push the S&P 500 to its biggest weekly gain since early November following its first 5% pullback of the year. The S&P 500 is up 7% in 2024 and roughly 24% since late October.
Going into this week, there are a few major focuses.
First, Tuesday is the last trading day of April and we get earnings from Amazon, AMD, and Super Micro Computer — the latter two are chip and AI stocks. Second, the FOMC rate decision and Fed Chair Powell press conference are on Wednesday. Then Apple reports earnings on Thursday, while the jobs report is on Friday.
According to JPMorgan strategists led by Mislav Matejka, they wrote in a Sunday note to clients that major firms are “likely” to top average analyst profit estimates in quarterly reports, but rather than indicating strong bottom-line growth, it’s a matter of “aggressively” lower expectations as earnings for S&P 500 companies actually are projected to come in lower compared to a year ago. In order for stocks to rally past their all-time highs, there “really needs” to be some significant profit upgrades rather than just topping the modest estimates. The JPMorgan group added that the “key driver” of the S&P’s 15% rally over the last three months — significantly lower bond yields — is “likely over for the time being,” meaning there needs to be a tangible upward trend in earnings to justify the stock index’s lofty level.
Sometimes I call it better than I trade it and other times trade it better than I call it. Either way, this is not a game for the faint of heart.
After the close on Wednesday, I had a long discussion with PitBull about trading the ES and NQ. He said I have it right with the hit-and-run trading that I do. He went on to say that other than his 30 dot signals, all the strategies he used to make millions with do not work anymore. He also said he has always been a gold bug and he enjoys trading the crypto ETFs.
On the call, I asked him to do his stocks list and sure enough it was in my email 4 hours later. Every stock on the last exploded higher on Thursday and Friday. This is one experience that has always worked and I can honestly say if I had traded his stock picks over the last 30 years I would have made 100X.
I’m sorry, I can not give his active list away but when you get a good look at this your eyes will pop out. This is the list I asked him to make in March of 2020:
Our Lean
Last week some earnings beats saw no rewards, while misses got punished. What it looked like to me is big name stocks like NVDA had fallen too much, too fast, and when the market started to short-cover, it pushed up a lot of the market-leading stocks with it.
About 25% of all S&P companies will report earnings this week and another 33% of firms will report next week. Because there are no major economic reports or Fed speak today, it’s my guess we will see higher prices. Buy the 15 to 25 point pullback.
MrTopStep Levels:
MiM and Daily Recap
ES Recap
The ES traded up to 5150.25 on Globex after the PCE report increased 2.7% from a year earlier, above February’s 2.5% rise but well below the 40-year high of 7% in June 2022, according to the Commerce Department’s personal consumption expenditures index. The ES opened FRY-day’s regular session at 5111.00.
After the open, the ES traded 5117.75, sold off down to 5104.50 at 3:35, rallied up to 5122.25, pulled back to 5113.75, and then made 5 higher highs up to 5138.25 at 10:15. After the high, the ES pulled back to 5125.00, rallied up to 5143.00 at 11:05 and then traded down to the VWAP at 5124.75 at 11:15. From there, it rallied up to 5137.75 at 11:50, pulled back to 5129.25 at 12:05 and it was that low that slowly pushed the ES up to 5146.50 at 1:35.
The ES pulled back to 5138.50, rallied up to a lower high at 5145.50 and then rallied up to 5142.50 at 3:05 and up to 5144.00 at 3:30. The ES sold off down to 5132.00 at 3:44 and traded up to 5137.75 at 3:49 and traded 5136.50 as the 3:50 cash imbalance showed $1.24 billion to sell and sold off down to the VWAP at 5130.75 at 3:58 and traded 5130.25 on the 4:00 cash close. After 4:00, the ES traded 5128.75 and then flatlined at the VWAP and settled at 5131.75.
In the end, it was a week filled with surprises — some good and some not. In terms of the ES and NQ’s overall tone, NVDA was up 6.2% on the day and gained 15.1% on the week. In terms of the ES’s overall trade, volume was steady but not large: 304k ES traded on Globex and 1.094 million traded on the day session for a total of 1.398 million contracts traded.
Technical Edge
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NYSE Breadth: 68% Upside Volume
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Nasdaq Breadth: 66% Upside Volume
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Advance/Decline: 66% Advance
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VIX: ~15.25
Additional Content —
I found some of this interesting over the weekend and thought to pass it on.
“There’s also a risk that other big companies might follow DTC’s lead and make similar rules. This could further impact crypto markets and make it harder for firms to use crypto as collateral. So while not all crypto investors use DTC, this change could still have some ripple effects. It’s important to keep an eye on how the market reacts and whether other institutions follow suit. The DTC rule change is a significant development for the crypto market. As always, it’s crucial to stay informed and make investment decisions based on your own research and risk tolerance.”
The next piece is from Goldman Sachs: The US labor market is automating and becoming more flexible
It does an excellent job running through the current employment situation in the US, including this excerpt:
“The US labor market is being shaped by three intersecting trends: two of them long-term and the third cyclical. Generative artificial intelligence is poised to automate nearly a quarter of jobs across all industries. The effects of AI will be felt on a workforce that is already “fractionalized,” in which part-time roles supplement or replace full-time ones.
Those two megatrends feed into a slowing job market. Goldman Sachs Research expects US unemployment to rise over the next 12 months. In combination, these three forces will profoundly change how US companies recruit and retain talent in the near future.”
Economic Calendar
For a more complete Economic Calendar see: https://mrtopstep.com/economic-calendar/
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!
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