'The 7 Familes' Score BIG and 'The Magical Mystery Tour' Takes Center Stage

The S&P closed at 2706.39 – So today’s circuit breakers are:
 
Level 1.  189.44 pts (7%) or 2516.95
Level 2.  351.83 pts (13% total) or 2354.56
Level 3.  541.28 pts (20% total) or 2165.11
 

 
Stocks rallied hard on Tuesday….as the story continues……Investors and traders are ignoring all the noise – the geopolitical BS and instead focusing on earnings.  - The Dow added 213 pts, the S&P added 28 pts, while the Nasdaq tacked on 124 pts.   Volume was ok…not great but more active than it was on Monday. 
 
The financials – represented by the XLF ended the day flat….GS – got clobbered – investors and traders sold the daylights out of it – sending it down $4 or 1.6% after they also reported ‘blow out’ numbers.   Yes, they beat on the top line and yes they killed it in sales and trading (like the rest of ‘7 families’*) – earning $2.3 bil this qtr alone vs the $1.8 bil that was expected….and that makes some sense.  Look – volatility spiked and that is good for trading revenues, but when you have them (and I mean all of them) calling clients and suggesting that if they (the clients) don’t send their order flow to them -  via the suite of automated algorythims provided to them on their desktop then that client just might drop off the ‘preferred client list’.  (just fyi – Clients hate to be dropped off ANY preferred list).
 
(*7 Families include: JPM, GS, MS, UBS, DBK, BAC, C,)
 
Oh – like THAT doesn’t happen?  Come on – who are you kidding…. it’s the best kept secret on the street… (wink, wink) …. a little arm bending never hurt anybody – or does it?   Now before you start screaming - Slow down there big boy…..GS (along with the other 6 families)  wants to be the mkt, they want customers to have to come to them – so if they capture the bulk of the order flow – they can internalize it, trade against it, spit out what they don’t want and move on….Look – they made $2.3 bil in sales and trading revenues – 27% more than they expected – or 27% more than they told the analysts they were gonna make…..Do you really think that is all just ‘commissions paid’?  Dude?  Really? Whatever!  So, you can say good for them, but I would say it’s bad for the public mkts – BUT that is a whole other conversation.
 
So why did GS get punished yesterday?   First – they are not buying back any stock in this next qtr…..(thumbs down by investors) and there was NO mention of any increase in advisory fees…in fact – GS who is always good at patting themselves on the back as they announce their number 1 position – was oddly quiet this time around……and so the assumption is that those ‘fees’ are not going to be what they have been  - at least for the next qtr…and so – some money came off the table – as traders whipped it around and large asset managers ‘peeled a little bit off the core position’ and rang the register.   
 
Now GS was not the only S&P (or Dow) company to report earnings yesterday…we heard from UNH, JNJ, IBM, PLD, CSX, UAL, and guess what?  They all beat their estimates as well….and so investors/traders continue to celebrate the good news…. Toss in the fact that global tensions have calmed down and word that (not yet) Secretary of State Mikey Pomp made a ‘clandestine’ trip to see Chubby (Kim Jung on) in the North (Korea) over Easter weekend – to pave the way for the
 
Donny/Chubby ‘Magical Mystery Tour’ – (that reference taken from the 1967 Beatles road show) - where Chubby will be singing about ‘Sgt. Pepper’s Lonely-Hearts Club Band’ and Donny will follow up with “All You Need is Love’….    
 
And so the mkts soared - In the end - investors/traders tested the final frontier – the resistance level that I pointed out yesterday – the intermediate term resistance at 2699....at 10:08 am he  kissed her, then she pushed back, causing him to re-group and regain his confidence to kiss her (again) – and this time she let him carry her off….and the algo’s went wild….they buyside algo’s ramping it up as technically – the mkt broke ‘out’ and this caused the sellside algo’s to retreat – knowing that the ‘boys’ were on their way…and the rest is history…as the mkt surged…..It’s not any more complicated than that….Boy meets girl (or boy meets boy or girl meets girl) and BOOM – it’s off to the races….simple….
 
OK – so a quick look at the O’Neil methodology reveals the continuing cycle…Utilities – XLU – and Staples – XLP - are now moving from the Underperforming & Improving quadrant into the Outperforming & Improving quadrant…and a look at the chart confirms this as well…. Notice the nice base they are both building as they begin to move higher, Financials – XLF – continue to consolidate.  Basic Materials – XLB – which has been in the Underperforming & Weakening quadrant is attempting to move into the Underperforming & Improving quadrant and you can also see that in the chart. After have a tough time in the March/April period – the group has now bounced off the lows and is challenging resistance at $59.96 – If we pierce this then we can expect a push higher.  And Energy – XLE – is now moving directly into the Underperforming & Improving quadrant – and that makes perfect sense as we have seen oil prices and production increase in an improving global economy. 
 
This morning – global mkts are all celebrating….as the mood continues to improve – tensions fade and the earnings season does not disappoint………. In Europe - the EU HICP (Harmonized Index of Consumer Prices) their version of our CPI was in line with expectations.  The UK CPI number missed the expectations but the FTSE is not concerned….  FTSE + 0.78%   CAC 40 +0.26%, DAX flat, EUROSTOXX +0.24%, SPAIN +0.03% and ITALY + 0.04%.
 
US futs are UP again…currently +7 pts.  MS just came out with their earnings and guess what?  They killed it.  Reporting $1.45 vs the $1.25 expectation…. and look at this!  Sales and Trading ROCKED IT…. they earned $2.5 bil vs. the expected $2.1 bil.  BINGO!  (see above).  And today Jimmy Gordon (CEO) is also sayin’ ‘Cha Ching…It’s gonna be a good year for me too!” 
 
Look for earnings today from ABT, USB, MTG, AXP, KMI, CCI AA to name a few….
 
  
Eco data today – NONE
 
So, the SPX is now above all resistance points….and if you draw a trendline – the S&P should not hit any resistance until it gets to 2740 ish…..and if we keep getting all of these better than expected numbers with strong guidance then getting there should be a cake walk… Support is now 2700 on the index…..The key today will be can they take the Dow up and thru its last resistance at 24,811 – my sense is yes and that should happen early on today if the mkt holds onto these early gains. 
 
Oil is up 91 cts at $67.43 up at the 2018 highs…. The trendline suggests that this is about it for now…US crude inventories fell slightly from last week, but let’s see what the API has to say today.  If they report lower inventories then we could see a challenge to the trendline.
 
Gold is UP $2 $1,351.  Just stuck in the $1336/$1356 range.  
 
2 Fed speakers…. NY’s Billy Dudley at 8:15 and 3:15 pm and Fed Vice Chair of Supervision will speak at 4:15 pm…. Non-event. 

Veal Scallopine Bathed in White Wine w/Porcini's 

You will need:  3/4 oz of dried porcini, 1/b of fresh mushrooms, 1/2 stick butter, dried sage leaves (finely chopped), 6 veal scaloppine, 3/4 cup white wine, chopped Italian parsley, s&p, 1/2 cup heavy cream.
 
Soak the dried porcini in 1 cup of warm water for about 1/2 hr.  Once soaked - remove with a slotted spoon - next line a strainer with paper towel and strain the soaking water into a bowl and set aside.  Rinse the porcini in cold water to remove any grit then large chop - set aside.  
 
Next rinse the fresh mushrooms then cut into thin slices - set aside.
 
Add the butter and the sage into a sauté pan and turn heat to med high. Add a touch of olive oil to prevent the butter from burning.  Next add the veal scaloppine so as not to crowd the pan.  Brown well on one side - then flip and brown the other side...you should probably cook for about 4/6 mins total.... they should be pink on the inside....
 
Add the wine and let it boil - after 30 secs or so...remove the veal and place on a plate.  continue to steam the wine - scraping the bottom of the pan until all the wine is evaporated.  Now add back the mushroom water. And the porcinis to the pan.... stirring - allowing all the liquid to evaporate.... Now add the fresh mushrooms and the chopped parsley.  Season with s&p - turn heat to low and cover pan.... the fresh mushrooms will make their own juice - keep cooking - stirring every once and a while - remove cover until the juice evaporates.  Now add back a splash of white wine and the heavy cream and stir until it becomes a little thicker - 3 or 4 mins.  Now - season the veal with s&p and add back to the pan - leaving long enough just to reheat.  Turn them once or twice to assure even heating.
 
Present on a warmed plate and serve this dish with steamed asparagus - seasoned with s&p and a dab of butter.  Prepare a salad of arugula, Boston bib and maybe some fresh spinach.  Add red onions, cucumbers and sliced tomatoes.  Season with s&p, oregano, a squirt of fresh lemon juice, red wine vinegar and Olive oil.    I like a nice Merlot with this meal as it is a medium bodied red.
 

  
Buon Appetito.