Market Brief - April 23, 2023

The next 3 weeks will be all about earnings, as 87% of the S&P 500 will report by May 5th. 

This week, over 600 public companies are due to report, including major index components Coca Cola, McDonalds, Visa, Microsoft, Alphabet, UPS, Meta, Amazon, Chevron and ExxonMobil. 

While the Nasdaq is trading near its highs for the year, price and volume for the S&P 500 and Russell 2000 are stagnating. While seasonality favors upside in April and May, collapsing volume indicates we are due for a correction. 

This week’s earnings announcements will offer clues as to whether we continue this bull run or retest the lows of 2022. 

Russell 2000 - Breakout Stagnating

The small cap index has been stuck in a sideways consolidation pattern since the June 2022 lows. The breakout of the long term downtrend on January 10th indicated the possible start of a new bull run. The index has since found support at the trend line on March 23, but the bounce over the last 4 weeks has been met with very low volume, indicating a lack of conviction. While the index has a positive seasonal bias through May, this is not what we would typically see at the start of a new uptrend. 

QQQ - Leading the Market Higher

The Nasdaq is the only major index trading near its high for the year, up more than 15% YTD (vs. 7.7% for the S&P 500 and 1.7% for the Russell 2000). Several major tech companies will report earnings next week, including Microsoft, Amazon, Alphabet, and Meta Platforms, which will determine if this rally has more steam.

SPY - Consolidating

The S&P 500 has been in a consolidation pattern for nearly 8 months. The index is approaching resistance on low volume and appears to be setting up for a correction. We need to see a breakout above $420 on strong volume for this rally to continue.

Given the divergence in price action between the Nasdaq and the rest of the market, caution is warranted.