Santoli’s Thursday market notes: Why the stock market is stalling, and what could jump-start it

Published Thu, Apr 22 20211:03 PM EDTUpdated Thu, Apr 22 20211:06 PM EDT

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Back to the benign rotational grind? Wednesday's bounce was a bit of a save, prevented the S & P from dropping out of the April breakout range (which starts a bit under 4150) as the groups that had already had steep pullbacks drew real-money buyers. Small-caps, regional banks, biotech, etc. Now it's about whether the market really refreshed itself or we're just noodling around in a range for a bit. The two-day wobble did very little to change the overall picture: sturdy uptrend + supportive credit + aggressive investor positioning + complacent sentiment. The generally unenthusiastic response to very good earnings, in aggregate, repeats a pattern from Q3 and Q4 – the market figured out estimates were far too low before the reports show up. And we're now in a zone where investors will start to worry about peak rate-of-change improvement and tougher comps looking ahead. Not to say the market itself is toppy, but it might take a bit more incremental good news per unit of potential stock-price upside. And we have some early signs of a quality shift, buying in healthcare, dividend stocks, staples, stable/mature growth as the binge on cyclical/value from November-March is digested. A second straight positive surprise on weekly unemployment claims brings a very modest uptick in Treasury yields, which slightly tilts the equity leadership toward small-caps/cyclicals for the day. Russell 2000 Mega-cap growth softer and the Nasdaq 100 still has a bit to prove here. Semi shortage, single-family-house shortage, lumber shortage, used-car shortage – the scarcity/price increase story suggest a high-pressure phase of the recovery, but also a high-frictional-cost period. So far companies are preserving margins in general but arguably this should mean more of a winner/loser split, more sector dispersion, etc. We'll see. The week's sentiment readings show investors still pretty upbeat and very involved in the market: retail AAII bull/bear split pretty stretched – bears near long-term floor around 20%. Market breadth is firm after Wednesday's heavy positive skew (87% of NYSE volume to the upside). Many studies show that persistent strong breadth can insulate the market from the contrarian negative implications of excessively optimistic sentiment/positioning. So this is worth watching. VIX sagging again, the rotational opposing currents keeping the S & P daily