With a shock oil production cut now under investors’ belts, attention is shifting to data, chiefly Good Friday’s jobs numbers, which could provide the next big catalyst for equities as earnings season looms once again.
JPMorgan, though, will not be steered from its bearish path. The bank kicked off the week by saying U.S. stocks were not worth the risk, and strategist Marko Kolanovic has now doubled down with a fresh warning:
“We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months,” he said late Monday. While his is hardly the only cautious voice on Wall Street, note Kolanovic was a bull for much of 2022, which ended up being a terrible year for stocks.
Read: 2023 has been rough so far. Use it as a wake-up call for your retirement planning.
Where stocks go from here is all down to a few key levels, says our call of the day, from money manager Grindstone Intelligence.
Austin Harrison, chief market strategist of the Kansas City-based outfit, says that for much of 2023, whether to buy stocks or sell them and find alternative investments has been a near impossible call, even after major indexes have bounced off October lows.
For that reason, technicals matter a lot right now, he says.
“The S&P 500
SPX,
is trying to get through the 4100-4200 level for the fifth time. This has been our line in the sand all year, and there’s no reason to change that approach now. It’s the 161.8% retracement from the 2020 decline, and it also marked a key low early last year, before the bear market really got going. It’s been resistance for 10 months,” he told clients in a note.
If the S&P 500 can rise above those February highs, Harrison said he’ll be much more convinced of a new bull market under way.
It’s a similar story for the Nasdaq Composite
COMP,
where they are focused on the 11800-12200 resistance level. “These aren’t just numbers we’re pulling out of a hat – 12000 is the 161.8% Fibonacci retracement from the entire COVID selloff. The market respects these Fib levels, so we do, too,” he said, referring to horizontal lines that chart watchers use to identify points of support and resistance.
Harrison said that the Fibonacci level for the Nasdaq also marks the point where “growth stocks peaked relative to value. In September 2020, growth stocks, which dominate the Nasdaq, ended a near 15-year run of outperformance relative to value,” he said.
While another strong week like last one’s will put those big indexes above Grindstone’s key levels, he is still wary of weak breadth — when the number of declining stocks are above those gaining.
The strategist points out that most stocks have lagged behind index returns this year by a sizable margin — the S&P 500 has outperformed the equal-weighted index by around 6% since mid-January. That may be nothing to get too alarmed about as it simply means biggest stocks — growthy ones — are rising faster than smaller ones, said Harrison.
One piece of good news lately — the Dow industrials
DJIA,
has made it back above 33,000, Harrison said.
But bottom line, the strategist is staying neutral on stocks until the S&P 500 is above 4,200 and the Nasdaq has “comfortably cleared” 12,220 — opening the door to “higher stock prices.”
“That doesn’t mean we need to be indiscriminately buying everything we see — we still want to be selective. But unless the situation in value deteriorates further, there just isn’t much technical evidence to support a bearish approach.”
Read: What ‘unprecedented’ volatility in the $24 trillion Treasury bond market looks like
The markets
Stock futures
ES00,
NQ00,
are edging higher, while Treasury yields
TMUBMUSD10Y,
TMUBMUSD02Y,
rise and the dollar
DXY,
falls. Oil prices
CL.1,
continue to rise, with U.S. crude
CL.1,
trading above $81 a barrel. The British pound
GBPUSD,
has busted past $1.25.
Read: Soaring oil prices: 6 things investors need to know about the surprise OPEC+ production cuts
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
The buzz
AMC
AMC,
stock is down 28% after the movie-theater operator said it has settled a shareholder lawsuit over a stock conversion. This will pave the way for AMC to convert its AMC Preferred Equity , or APE
APE,
units into shares of common stock, proceed with a 10-to-1 reverse stock split and raise capital. APE shares are up 20%.
Rocket launch provider Virgin Orbit
VORB,
has filed for chapter 11 bankruptcy protection and will seek a sale, after laying off most of its staff following a failed launch in January. The stock is down 23% in premarket.
Factory orders and job openings are due at 10 a.m., followed later by a speech from Cleveland Fed President Loretta Mester at 6 p.m.
A judge has barred recording equipment and devices at former President Donald Trump’s expected arraignment in New York later on Tuesday. Here’s a rundown of what will happen next.
Best of the web
LSU’s Angel Reese has more NIL sponsors than any other college basketball player, male or female
An 11th century church has become a symbol for a severe drought that’s affecting much of Spain.
The chart
“Beyond the banking crisis, what do you believe is the likely cause of the next market crisis?” That was the question posed by JPMorgan’s most recent client survey, and here’s the answer:
JPMorgan
The prospect of commercial real estate being the next shoe to drop has been the subject of much chatter since the banking fallout. One economist has warned of a “real mess,” to come but just short of financial disaster. And amid all the caution, there are still a handful of commercial REIT stocks that analysts love.
The tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
| Ticker | Security name |
|
TSLA, |
Tesla |
|
AMC, |
AMC Entertainment |
|
APE, |
AMC Entertainment Holdings preferred shares |
|
BBBY, |
Bed Bath & Beyond |
|
GME, |
GameStop |
|
AAPL, |
Apple |
|
MULN, |
Mullen Automotive |
|
NIO, |
NIO |
|
BABA, |
Alibaba |
|
FRC, |
First Republic Bank |
Random reads
When squirrels take over your kitchen.
Dungeons & Dragons: How to watch the film like a pro.
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This post was originally published on Market Watch
