Despite Friday’s down day, some of the larger banks reported earnings and seemed to say to the market, “what Banking crisis?”  JPMorgan (JPM) rose over 7% in a day and finished near the top of its trading range for the day.

The S&P 500 (SPY) had its fourth winning week in the last five. I’m still looking for it to challenge 420 before a pullback.  If it breaks 420, look for the 2022 April high as the next target.

Everyone keeps talking about and warning about a recession, but tech stocks are on the rise, shrugging off the potential for additional rate hikes.  In several issues of this newsletter this year, I’ve discussed how some tech companies have already come off their bottoms and rallied nearly 100%, and the Nasdaq-100 (QQQ) is already in bull market territory – rallying 20% off of its October lows.

So, the question is – can we feel safe buying the dips?  For example, Microsoft (MSFT) fell 1.3% on Friday.

There’s a lot to like about Microsoft – it’s expanding its gaming division, it’s getting more publicly involved with artificial intelligence through its partnership with OpenAI, the makers of ChatGPT, and its enterprise collaboration services like Teams continues to take market share away from its competitors.

But I’d argue that Friday’s 1.3% dip is not the pullback I’m waiting for. The chart above shows a series of higher highs and higher lows, but we’re still at the top of the channel and I’d wait for a bigger pullback, especially since the S&P 500 also looks like it could be coming into resistance.

While there are many calling for new market lows “once the recession hits”, and to “get out now”, you have to look at what the market is giving you and adjust your position size based on risk tolerance.

I’m not going to sit on the sidelines, waiting for a recession to pass when there are companies and ETFs out there with this type of performance over the last six months.

I’m buying the dips until the pattern changes. For example, the QQQs are holding above the 50-day moving average. I’d look for a bounce off that as support, and leg into a position, protecting the account in case the pattern changes with the next Fed rate hike in May.

Of course, this entire narrative can change with some tech earnings reporting this week.

It’s Monday, so that means it’s time to review the reports that have the biggest potential to move the market this week.

We have a number of Fed members giving speeches throughout the week, so that can always cause blips of market movement. Here are the major reports being released this week.

Tuesday – Housing Starts and Permits – 8:30 am EST – Housing starts in February jumped to 1.450 million annualized rate from January’s 1.321 million. The market is expecting to see a retreat in March’s numbers, going back down to 1.40 million. Numbers like these are what some use to show a recession is still coming.

Thursday – Jobless Claims – 8:30 am EST – The market is expecting to see jobless claims rise from 239k last week to around 245k this week. That would put the 4-week moving average of jobless claims at 240k. The Fed will continue to monitor jobless claims, but higher unemployment is needed to combat inflation.

Thursday – Philadelphia Fed Manufacturing Index – 8:30 am EST – While the index has been in contraction for the last seven reports, the report this week should see the index improve. The last report showed a deep contraction reading at -23.2. The market is expecting to see a reading of -19.5 this time around. Anything less than 0 is still a contraction in manufacturing.

Thursday – Existing Home Sales – 10:00 am EST – Similar to housing starts, the market is expecting to see the numbers come down from February’s 4.58 million to a reading of 4.485 million for March.

Thursday – Leading Indicators – 10:00 am EST – While I don’t typically follow this, the index is a composite of 10 forward-looking components, like building permits and unemployment claims, and attempts to predict economic conditions six months out. The reading is expecting to fall -0.4% from the previous month. While it’s near 0, it’s still showing that the ‘leading indicators’ are showing weakness for the next six months.

Friday – PMI Composite Flash – 9:45 am EST – Manufacturing is supposed to show continued contraction with a sub-50 reading of 49.1. The index has been less than 50 for 5 months. The Services Index, however, is expected to show an expansion reading of 51.50.

Ok, that’s enough for today. Remember, earnings season started and we have some major tech releases this week. Make sure you’re checking for earnings announcements before placing trades!

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