Santoli: Market is indecisive as traders weigh good-enough earnings, Powell evoking Volcker

Published Thu, Apr 21 20221:02 PM EDT

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. More mixed action within an indecisive trading range — fairly well-supported by a technical cushion, seasonal tailwinds, cautious sentiment and good-enough earnings, working against stubborn downtrends in mega-cap growth and the shadow of a Federal Reserve in a hurry with a Chair who keeps evoking Paul Volcker's harsh resolve in fighting inflation. The early pop mostly gone, small-cap indexes are leaking lower, and the S & P 500 bashful are looking up at its still-rising 200-day moving average. Hard to have a very strong view on how this resolves, but I am willing to point out we've priced in a lot of the known challenges and, arguably, the mini recession panic is losing some of its energy. Tesla is now up 6% but barely above Tuesday's closing level on a very clean and sturdy quarterly report. There's no doubt the overhang of potential selling by Elon Musk to stockpile ammunition for a possible Twitter bid is a factor restraining the near-term upside, as are the facts that it ramped 35% off the mid-March low and has a trillion-dollar market value and trades at 65-times 2023 projected earnings. Another extreme low in AAII weekly bullish sentiment, with two straight sub-20% readings for the first time since 2016. We can discuss possible extenuating factors that make this a fluky number, but the historical evidence says it is a good contrarian bullish signal for stocks over coming months. My take on why so worried with the market in a mere routine correction: This crowd are asset allocators, and both stocks and bonds have been hit hard from the gate this year; inflation saps economic optimism; big tax bills on 2021 gains were due; there's a general societal malaise infusing all public opinion (consumer sentiment, political polls). And why this is more extreme than most sentiment/positioning gauges, other measures such as Investors Intelligence advisors survey and the BofA fund manager poll show comparable if less-severe anxiety. Take it all for what it's worth. There was a bit of macro reassurance from the Conference Board's Leading Economic Indicators today. New high, better than expected. Recessions in the past have started a minimum of seven months and an average of eleven months after LEI has peaked in prior cycles. Market breadth is on the weaker side, underperforming the big-cap indexes, as the rally found sellers above 4,500 on the S & P 500. About 2:1 down:up volume. The equal-weight S & P lagging slightly today but holding most of its outperformance, down less than 4% from peak while the XLG ETF (largest 50 stocks) is off more than 9%. VIX perking above 21, on alert for perhaps a bit of a give-back of the S & P's 1.75% week-to-date gain. Nothing too worrying, VIX futures are set up in a benign formation, showing no real stress building up at this point.

Traders on the floor of the NYSE, April 1, 2022.

Source: NYSE

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.