S&P 500 Futures

Mixed Breakout

A mixed breakout has been underway this past week. Although the S&P 500 and DOW are making new highs the Russell 2000 and NASDAQ have lagged. When all four synch-up then there is the potential for an impulsive advance. A pullback may be how they re-align but volatility is making new lows which means large one-day moves are much less probable.

The chart of the VIX Index has been falling since the March 4th high (stocks bottomed one day later). This indicator is now at one-year lows which reflect a market that is trending higher and with little intra-day price movement. Some might say this indicates complacency but the chart patterns are leaning towards a trending market.

The chart of the S&P 500 below, shows a continuation rally from the 3/25 low. I have a fibonacci extension that shows a resistance level at 4143 which is not far away. A decent shot at testing this level early next week.

Earnings begin in earnest next week with the banks. Will the outlook from corporate America bring on volatility due to supply chain issues? Or will the recent breakouts be validated if earnings guidance is better than expected? It will probably be a sector by sector affair as the recovery is uneven right now but that will likely change in the coming months.

Chart of the Week!

Economic & Central Banking Snippets 

  • The March ISM services index rose to 63.7 from 55.3 – above estimates of 59 and the highest since 1997. All 18 industries surveyed saw growth in March so the economy is getting back on track. ISM summed up the release by saying “….the lifting of COVID related restrictions has released pent-up demand for many of their respective companies’ services. Production capacity constraints, material shortages, weather and challenges in logistics and human resources continue to cause supply chain disruption.”
  • The Labor Department on Tuesday released data that showed 7.4mm job openings at the end of February. That was up from 7.1 million in January and the most since January 2019.
  • The March PPI (Producer Price Index) rose 1% m/o/m which was twice the estimated amount. Versus last year, producer prices rose 4.2% and by 3.1% ex food and energy. Responsibility for the price increases come from the rising cost of product procurement, sharply higher prices for shipping and multi year highs in commodities.
  • The U.S. trade deficit climbed to a new record in February. American companies sent fewer goods overseas amid supply-chain disruptions and continued pandemic-related business restrictions. As the global economy continues to recover from the pandemic’s impact, U.S. exporters have reported congestion at ports, container shortages and steep increases in shipping rates

Macro Snippets

  • Boeing is alerting 16 of its customers who purchased the 737 MAX Jet of potential production issues related to the electrical power systems. The issue is unrelated to the failures that led to the two fatal crashes of the 737 MAX in 2018 and 2019. (Investopedia)
  • General Motors will halt production at several North American factories because of worsening computer chip shortage. Auto makers since late last year have been grappling with a shortage of semiconductor chips, which go into software modules used to control everything from brakes to dashboard touch screens. (WSJ)
  • ONE BILLION DOLLARS! Is the amount in compensation that the Suez Canal Authority has said it would demand from the owners of the Ever Given, the ship that blocked the waterway. The sum covers the cost of extraction, the loss of transit fees during the 400-plus-ship traffic jam and other expenses related to the blockage. Egyptian authorities said they won’t release the ship until compensation is paid. (WSJ)
  • Plant-based meat maker Beyond Meat has opened its first end-to-end manufacturing facility in Jiaxing, China. The new facility will significantly increase the speed and scale of production and distribution. “We are committed to investing in China as a region for long-term growth,” said CEO Ethan Brown.

That is all for now and thank you for being a subscriber!

Paul J. McCarthy III


Paul J. McCarthy, III

President – Kisco Capital

Paul McCarthy

Mr. McCarthy is the President and founder of Kisco Capital.