Despite significant fluctuations, the S&P 500 is on track to close the week essentially flat. At the same time, underlying fundamentals warn that further volatility is likely ahead, and consumers continue to raise warning flags.
MACROECONOMIC UPDATE
- Pending Home Sales of Existing Homes ticked up slightly in March, increasing 1.5%. Pending sales, however, remain near the lowest level in 25 years and -1.1% below the level of one year ago.
- The final reading for Consumer Sentiment in April was released this morning and showed a slight improvement from the preliminary reading of 47.6. However, the final reading of 49.8 still remains below any other time in history – even as the ceasefire with Iran was extended and the stock market has rallied. At the same time, inflation expectations for the year ahead remained elevated at 4.7% as inflation concerns become entrenched.
TECHNICAL UPDATE
- The bullish Selling Vacuum in InvesTech’s time-tested Negative Leadership Composite (NLC), stalled at 2.7 after its reemergence last week. Without a climb in the Selling Vacuum to at least +20, the strength of the current rally is doubtful. The NLC continues to be a critical guide as the stock market tug of war continues.
- The InvesTech Gorilla Index slipped lower this week even as the broader market was flat, and remains below its peak of last October. If weakness returns to these mega-cap giants, it will be a warning sign that the rally is fading and the rest of the market could follow.
INVESTECH MODEL FUND PORTFOLIO
There are no changes to the Model Fund Portfolio this week, which is comprised of 58% long positions, 5% in an inverse index ETF, 5% in an intermediate Treasury ETF, and 32% cash held in short-term Treasurys or a money market fund. This results in 53% net equity exposure.