Summary: Worries over the health and speed of the recovering economy remained this week, and the big mega-caps weren't enough to keep the indexes moving higher. Investors weren't sure what to do with a mixed bag of economic data, causing volatility in bonds and equities.
Notes
The structure is the following:
If you have been following my daily updates, you can skip down to "View on the Week." If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes, and market leaders each day.
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Monday, July 12, 2021
Facts: +0.21%, Volume higher, Closing range: 69%, Body: 12%
Good: Higher high, higher low, body and closing range in upper half of candle
Bad: Red body, low advance/decline ratio
Highs/Lows: Higher high, higher low
Candle: Thin red body in upper half of the candle, long lower wick from morning dip
Advanced/Decline: 0.8, more declining stocks than advancing stocks
Indexes: SPX (+0.35%), DJI (+0.36%), RUT (+0.08%), VIX (-0.06%)
Sectors: Financials (XLF +0.98%) and Real Estate (XLRE +0.87%) at the top. Energy (XLE -0.15%) and Consumer Staples (XPL -0.16%) were the bottom.
Expectation: Sideways or Higher
New all-time highs across three of the major indexes is not a bad way to start the week. The 10-year Treasury note auction passed without many surprises, giving the indexes a boost in the afternoon.
The Nasdaq closed with a +0.21% advance on slightly higher volume. The candle shows a bit of indecision as markets dipped in the morning but then recovered and made gains in the afternoon after the auction. The 12% Red body in the upper half of the candle is above a long lower wick. The closing range is 69%. There were more declining stocks than advancing stocks.
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Tuesday, July 13, 2021
Facts: -0.38%, Volume higher, Closing range: 12%, Body: 26%
Good: Higher high, outside day that keeps index in uptrend, support at ~14,675
Bad: Long upper wick from afternoon selling, red body at bottom of candle
Highs/Lows: Higher high, lower low
Candle: Outside day, long upper wick signals a bearish reversal day
Advanced/Decline: 0.21, five decline stocks for every advancing stock
Indexes: SPX (-0.35%), DJI (-0.31%), RUT (-1.88%), VIX (+5.88%)
Sectors: Technology (XLK +0.41%) and Consumer Staples (XLP -0.03%) at the top. Consumer Discretionary (XLY -1.20%) and Real Estate (XLRE -1.30%) were the bottom.
Expectation: Lower
Higher than expected inflation data wasn't enough to keep the indexes from making new highs, but the rally couldn't last, and markets closed lower on Tuesday. A weaker than expected 30y bond auction sent yields higher and spooked investors in the afternoon. Big tech held onto gains, helping the Technology sector end the day in the positive.
The Nasdaq closed the day with a -0.38% loss on higher volume. The candle has a long upper wick that represents the morning rally which turned into an afternoon sell-off. The 26% red body sits at the bottom of the candle, creating a 12% closing range above a short lower wick. The outside day with a bearish reversal confirms the underlying weakness where five stocks declined for every advancing stock.
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Wednesday, July 14, 2021
Facts: -0.22%, Volume lower, Closing range: 8%, Body: 86%
Good: Nothing
Bad: Thick red body, closing range, lower high
Highs/Lows: Lower high, lower low
Candle: Mostly red body surrounded by tiny wicks
Advanced/Decline: 0.28, more than three decline stocks for every advancing stock
Indexes: SPX (+0.12%), DJI (+0.13%), RUT (-1.63%), VIX (-4.62%)
Sectors: Consumer Staples (XLP +0.89%) and Real Estate (XLRE +0.88%) at the top. Financials (XLF -0.46%) and Energy (XLE -2.98%) were the bottom.
Expectation: Lower
Apple gets an upgrade, and big tech rises again as the rest of the market fades around it. Producer Price Index data was higher than expected. Still, Jerome Powell continued to focus on inflation being transitory and the need for further economic support until the jobs market fully recovers.
Despite the advances in big tech, the Nasdaq closed -0.22% lower. Showing the lopsided gains in the market, the QQQ ETF (weighted by cap size) was up +0.18%, while the QQQE ETF (equal-weighted) was down -0.12%. The Nasdaq candle is almost all red body (86%), with tiny upper and lower wicks. The closing range is 8%. There were more than three declining stocks for every advancing stock.
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Thursday, July 15, 2021
Facts: -0.70%, Volume higher, Closing range: 46%, Body: 47%
Good: Bounce off support at 21d EMA
Bad: Another LH/LL on slightly higher volume
Highs/Lows: Lower high, lower low
Candle: Thick red body in upper half of candle, long lower wick
Advanced/Decline: 0.5, two declining stocks for every advancing stock
Indexes: SPX (-0.33%), DJI (+0.15%), RUT (-0.55%), VIX (+4.17%)
Sectors: Utilities (XLU +1.13%) and Consumer Staples (XLP +0.41%) at the top. Technology (XLK -0.82%) and Energy (XLE -1.40%) were bottom
Expectation: Sideways or Lower
Is the big tech trade finished? Or is this just a pause before another leg up? Economic data in the morning caused volatility at the market open, which eventually went to the bears. The selling continued until the afternoon when the buyers came back into the market.
The Nasdaq closed the day with a -0.70% loss on slightly higher volume. The candle has a thick red body in the upper half and a long lower wick in the lower half. The closing range is 46%, and the body covers 47% of the candle. There were two declining stocks for every advancing stock.
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Friday, July 16, 2021
Facts: -0.80%, Volume lower, Closing range: 7%, Body: 81%
Good: Nothing
Bad: Close below 21d EMA, mostly red body, low closing range
Highs/Lows: Lower high, lower low
Candle: Almost entirely red body, upper wick longer than lower wick
Advanced/Decline: 0.32, three declining stocks for every advancing stock
Indexes: SPX (-0.75%), DJI (-0.86%), RUT (-1.24%), VIX (+8.47%)
Sectors: Utilities (XLU +1.01%) and Health (XLV +0.27%) at the top. Materials (XLB -1.51%) and Energy (XLE -2.83%) were bottom.
Expectation: Lower
The market gave us a painful Friday to end a painful week. Utilities were again the top sector as investors took defensive positions brought on by worries over the pandemic and a slowing economic recovery.
The Nasdaq closed with a -0.8% loss. Volume was lower, but the candle was distinctly bearish with a large 81% red body and a dismal 7% closing range. The upper wick, created by an early morning rally, is slightly longer than the lower wick. The index got some support at 14,500 but quickly reversed, moving below the 21-day exponential moving average. There were three declining stocks for every advancing stock.
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View on the Week
Worries over the health and speed of the recovering economy remained this week, and the big mega-caps weren't enough to keep the indexes moving higher. Investors weren't sure what to do with a mixed bag of economic data, causing volatility in bonds and equities.
All seemed ok after an uneventful 10-year Treasury note auction on Monday. That was the only news of the day. After the auction, the Nasdaq rallied into close and continued the rally into the following day. That's when the trouble started.
Tuesday kicked off with higher than expected Consumer Price Index data. Equities continued to rally, but the inflation worries hit the 30-year bond auction. The low demand for the bond sent yields higher. Only big tech companies held onto gains by the end of the day.
The big tech rally got another boost on Wednesday when JP Morgan analysts upgraded the price target for Apple after news that the company is boosting iPhone production by as much as 20%. The rally extended to other tech mega-caps and set up a situation where a pullback for the big tech stocks was due.
On Thursday, Federal Reserve Banks in New York and Philadelphia released their Manufacturing Data. The New York numbers were at all-time highs while the Philadelphia numbers were lower than expected. Although the Philadelphia numbers were below expectations, they are still high on a historical basis. The numbers supported the narrative that the economic recovery is slowing, sending Treasury Yields back down to where they started the week. And yet, the US Dollar strengthened.
The economic worries, volatility in bonds, and extended prices in big tech all combined to sink the indexes lower on Friday, closing a painful week for growth investors.
The Nasdaq declined -1.87% for the week. Volume was higher than the previous week. Despite the decline, the index did manage a higher high and a higher low for the week. The closing range of 4% is the lowest in over a year, representing the selling into the close that occurred on Friday.
Small Caps suffered the most this week, with the Russell 2000 (RUT) dropping -5.12%. The S&P 500 (SPX) declined -0.97% for the week. The Dow Jones Industrial Average (DJI) lost -0.52%.
The VIX volatility advanced +14.04% for the week.
The sectors ended the week in a very character than they started the week. None of the leading sectors early in the week were leading by the end of the week.
Financials ( XLF ) started the week in first as investors anticipated earnings reports from big banks that began on Tuesday. By Friday, the sector slipped to the middle of the list, ending the week with a -1.61% decline.
Technology ( XLK ) and Communication Services ( XLC ) took over the top spots for Tuesday and most of Wednesday. They also reversed downward and ended the week with losses.
The only sectors to end the week with gains were Utilities ( XLU ), Consumer Staples ( XLP ), and Real Estate ( XLRE ). The defensive sectors gained ground at the end of the week as worries over the economy grew among investors.
Energy ( XLE ) was at the bottom of the list, dropping -7.89% this week. OPEC+ continues to have disagreements, destabilizing the sector along with the price of oil. Add the fears of a slowing recovery, and investors are exiting positions in the sector that performed well in the first half of 2021.
Treasury yields on the 30y bond and 10y note slid further this week. Although the 10y note auction passed without surprises, the 30y bond auction was weaker than expected, causing yields to rise midweek. However, the levels returned to where they started the week, and the slide continues. The 2y yields rose slightly for the week as the yield curve continues to flatten. The signal to read here is that investors see more risk in shorter-term debt, requiring more reward (yield). The outlook for the short term is growing more negative.
High Yield Corporate Bond (HYG) prices declined but remained near pre-pandemic highs. Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) advanced +0.66% for the week.
Silver (SILVER) declined -1.70%, and Gold (GOLD) advanced +0.16%.
Crude Oil (CRUDEOIL1!) declined -3.20%.
Timber (WOOD) advanced -4.30%.
Copper (COPPER1!) declined +-0.12%.
Aluminum (ALI1!) declined -0.61%.
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Big Four Mega-caps
Three of the four largest mega-caps advanced for the week. Alphabet (GOOGL) had the biggest gain with a +1.16% advance. Microsoft (MSFT) gained +1.01%. Apple (AAPL) rose +0.88%. All three pulled back from intra-week highs on Thursday and Friday. Amazon (AMZN) dropped -3.92% for the week. All four are trading above key moving averages.
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The Four Recovery Stocks
I picked four recovery stocks to track against the indexes and other indicators in this weekly report. The situation was not good for the four recovery stocks. Carnival Cruise Lines (CCL) took the biggest hit with a -13.77% decline, dropping below the 40w moving average. Delta Airlines (DAL) declined -6.66%, despite beating all analyst expectations on the top line, bottom line, and key metrics. Marriott (MAR) fell -5.21%. Exxon Mobil (XOM) dropped -6.39%, pulling the Energy sector lower.
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Cryptocurrency
I started tracking four major cryptocurrencies on the week in review. The four are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The latter two are not the largest by market cap but seem to be well-known and are part of the CIX capital.com index, tracking five cryptocurrencies, including these four (Ripple is the fifth).
The declines continue in the four cryptocurrencies. Bitcoin (BTCUSD) lose another -7.44%. Ethereum (ETHUSD) dropped -10.98%. Litecoin (LTCUSD) declined -10.70%. Bitcoin Cash (BCHUSD) fell -11.76%.
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Investor Sentiment
The put/call ratio (PCCE) ended the week at 0.859. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment and could mean an overbought market.
The CNN Fear & Greed Index moved into the Extreme Fear level. The indicator is at 23, which is the lowest since the 2020 pandemic crash.
The NAAIM Money Manager exposure index rose to 93.27 this week.
The survey occurs on Wednesdays, so the number does not include any selling on Thursday and Friday. However, it's still interesting that the index rose after the previous week where the market was already weakening.
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The Week Ahead
The week will start slow, but earnings reports will pick up as Financials kick off the earnings season.
Monday
There is not much economic news scheduled for Monday.
IBM will release earnings on Monday, which may be an early indicator of what's to come from other tech giants this earnings season.
Tuesday
Building Permits and Housing Starts data will be available on Tuesday morning before the market opens. API Weekly Crude Oil Stock gets released after the market closes.
Netflix (NFLX), Philip Morris (PM), Chipotle (CMG), KeyCorp (KEY), Haliburton (HAL), and United Airlines (UAL) will report earnings on Tuesday.
Wednesday
Crude Oil Inventories are the primary economic data for Wednesday, although some may be interested in Mortgage data released before the market opens.
Johnson & Johnson (JNJ), ASML Holding (ASML), Coca-Cola (KO), Verizon (VZ), and Fidelity Financial (FNF) are some of the interesting reports for Wednesday. Analysts will listen closely to Coca-Cola statements around supply chain costs and whether they are transferring increased costs along to consumers.
Thursday
The weekly Initial Jobless Claims become available on Thursday before the market opens. After the market opens, Investors will get Existing Home Sales data for June.
Intel (INTC), Abbott Labs (ABT), AT&T (T), Snap (SNAP), ABB (ABB), Twitter (TWTR), DR Horton (DHI), Southwest Airlines (LUV), Dominos Pizza (DPZ), and American Airlines (AAL) release earnings on Thursday.
Friday
The Manufacturing and Services purchasing manager indexes released on Friday will be another indicator of economic activity and the speed of the recovery.
Friday's earning reports include Honeywell (HON), American Express (AXP), and Schlumberger (SLB).
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The Bullish Side
There may be a slowdown in the speed of growth compared to the first half of the year, but the economy is still expanding at a historically high rate. The US Dollar is strengthening. Investors continue to support high prices (low yields) in both investment grade and junk corporate bonds, showing confidence in US businesses to be successful in the near term.
That confidence is coming from the ability for businesses to secure low interest rates for debt to fund growth, while consumers are continuing to drive demand via increased activity (Retail Sales is higher than expected). Inflation remains high, but consumers are still purchasing, using a record amount of savings to fund new purchases.
The Fed's Jerome Powell reaffirmed again this week that they believe inflation is transitory, but they are more than willing to step in to control inflation. Although an interest rate hike would cause some pause, the bigger evil for growth stocks is out-of-control inflation. The slightly more hawkish Fed can help growth investors remain confident in the market.
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The Bearish Side
At all-time highs, the market was due for a pullback. Despite gains among big tech, the last two weeks have shown a broader weakness in equities. Much of that is from fears of a slowing economic recovery, driving volatility in the bond market, and spilling over into equities.
Although Retail sales were higher than expected, Consumer sentiment and expectations data were low. Analysts expected the consumer numbers to be higher since we are emerging from the long pandemic. However, it seems consumers are worried about new variants and also stressed by higher prices for goods.
The question is, will there be a further correction, or is the minor pullback this week enough to get support and move higher. The CNN Fear & Greed index moved into the Extreme Fear range, based primarily on the weakness in stock prices and high demand for long-term bonds. That means big investors see a worsening situation on the horizon and possibly a move lower for the indexes.
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Key Nasdaq Levels to Watch
The Nasdaq set another all-time high this week before pulling back again and closing below the 21d exponential moving average. The index closed with a higher low but with a dismal closing range, sliding into the end of the week.
On the positive side, the levels are:
On the downside, there are a few key levels:
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Wrap-up
It was a tough week, especially for growth investors. Economic signals are all over the place, causing reactions among investors. Ultimately, volatility will have investors exiting riskier positions and moving to safe-havens. We saw that through the increased demand for long-term bonds and the rise of defensive sectors to the top of the sector list the past two weeks.
As it stands, the Nasdaq is still in an uptrend. It looks worrisome, but we have to wait and see what happens in the coming week. A further decline could mean a 5-6% correction before the uptrend resumes. Or the index could turn back toward new all-time highs sooner if new data indicate a more robust economic recovery.
Good luck, stay healthy, and trade safe!
Notes
- The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week.
- I occasionally have some errors or typos and will correct them in my blog or the comments on TradingView. I do not have an editor and do this in my free time.
- If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
- A recap of the daily updates that I do here on TradingView.
- View on the past week
- What's coming in the next week
- The Bullish View, The Bearish View
- Key index levels to watch out for
- Wrap-up
If you have been following my daily updates, you can skip down to "View on the Week." If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes, and market leaders each day.
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Monday, July 12, 2021
Facts: +0.21%, Volume higher, Closing range: 69%, Body: 12%
Good: Higher high, higher low, body and closing range in upper half of candle
Bad: Red body, low advance/decline ratio
Highs/Lows: Higher high, higher low
Candle: Thin red body in upper half of the candle, long lower wick from morning dip
Advanced/Decline: 0.8, more declining stocks than advancing stocks
Indexes: SPX (+0.35%), DJI (+0.36%), RUT (+0.08%), VIX (-0.06%)
Sectors: Financials (XLF +0.98%) and Real Estate (XLRE +0.87%) at the top. Energy (XLE -0.15%) and Consumer Staples (XPL -0.16%) were the bottom.
Expectation: Sideways or Higher
New all-time highs across three of the major indexes is not a bad way to start the week. The 10-year Treasury note auction passed without many surprises, giving the indexes a boost in the afternoon.
The Nasdaq closed with a +0.21% advance on slightly higher volume. The candle shows a bit of indecision as markets dipped in the morning but then recovered and made gains in the afternoon after the auction. The 12% Red body in the upper half of the candle is above a long lower wick. The closing range is 69%. There were more declining stocks than advancing stocks.
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Tuesday, July 13, 2021
Facts: -0.38%, Volume higher, Closing range: 12%, Body: 26%
Good: Higher high, outside day that keeps index in uptrend, support at ~14,675
Bad: Long upper wick from afternoon selling, red body at bottom of candle
Highs/Lows: Higher high, lower low
Candle: Outside day, long upper wick signals a bearish reversal day
Advanced/Decline: 0.21, five decline stocks for every advancing stock
Indexes: SPX (-0.35%), DJI (-0.31%), RUT (-1.88%), VIX (+5.88%)
Sectors: Technology (XLK +0.41%) and Consumer Staples (XLP -0.03%) at the top. Consumer Discretionary (XLY -1.20%) and Real Estate (XLRE -1.30%) were the bottom.
Expectation: Lower
Higher than expected inflation data wasn't enough to keep the indexes from making new highs, but the rally couldn't last, and markets closed lower on Tuesday. A weaker than expected 30y bond auction sent yields higher and spooked investors in the afternoon. Big tech held onto gains, helping the Technology sector end the day in the positive.
The Nasdaq closed the day with a -0.38% loss on higher volume. The candle has a long upper wick that represents the morning rally which turned into an afternoon sell-off. The 26% red body sits at the bottom of the candle, creating a 12% closing range above a short lower wick. The outside day with a bearish reversal confirms the underlying weakness where five stocks declined for every advancing stock.
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Wednesday, July 14, 2021
Facts: -0.22%, Volume lower, Closing range: 8%, Body: 86%
Good: Nothing
Bad: Thick red body, closing range, lower high
Highs/Lows: Lower high, lower low
Candle: Mostly red body surrounded by tiny wicks
Advanced/Decline: 0.28, more than three decline stocks for every advancing stock
Indexes: SPX (+0.12%), DJI (+0.13%), RUT (-1.63%), VIX (-4.62%)
Sectors: Consumer Staples (XLP +0.89%) and Real Estate (XLRE +0.88%) at the top. Financials (XLF -0.46%) and Energy (XLE -2.98%) were the bottom.
Expectation: Lower
Apple gets an upgrade, and big tech rises again as the rest of the market fades around it. Producer Price Index data was higher than expected. Still, Jerome Powell continued to focus on inflation being transitory and the need for further economic support until the jobs market fully recovers.
Despite the advances in big tech, the Nasdaq closed -0.22% lower. Showing the lopsided gains in the market, the QQQ ETF (weighted by cap size) was up +0.18%, while the QQQE ETF (equal-weighted) was down -0.12%. The Nasdaq candle is almost all red body (86%), with tiny upper and lower wicks. The closing range is 8%. There were more than three declining stocks for every advancing stock.
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Thursday, July 15, 2021
Facts: -0.70%, Volume higher, Closing range: 46%, Body: 47%
Good: Bounce off support at 21d EMA
Bad: Another LH/LL on slightly higher volume
Highs/Lows: Lower high, lower low
Candle: Thick red body in upper half of candle, long lower wick
Advanced/Decline: 0.5, two declining stocks for every advancing stock
Indexes: SPX (-0.33%), DJI (+0.15%), RUT (-0.55%), VIX (+4.17%)
Sectors: Utilities (XLU +1.13%) and Consumer Staples (XLP +0.41%) at the top. Technology (XLK -0.82%) and Energy (XLE -1.40%) were bottom
Expectation: Sideways or Lower
Is the big tech trade finished? Or is this just a pause before another leg up? Economic data in the morning caused volatility at the market open, which eventually went to the bears. The selling continued until the afternoon when the buyers came back into the market.
The Nasdaq closed the day with a -0.70% loss on slightly higher volume. The candle has a thick red body in the upper half and a long lower wick in the lower half. The closing range is 46%, and the body covers 47% of the candle. There were two declining stocks for every advancing stock.
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Friday, July 16, 2021
Facts: -0.80%, Volume lower, Closing range: 7%, Body: 81%
Good: Nothing
Bad: Close below 21d EMA, mostly red body, low closing range
Highs/Lows: Lower high, lower low
Candle: Almost entirely red body, upper wick longer than lower wick
Advanced/Decline: 0.32, three declining stocks for every advancing stock
Indexes: SPX (-0.75%), DJI (-0.86%), RUT (-1.24%), VIX (+8.47%)
Sectors: Utilities (XLU +1.01%) and Health (XLV +0.27%) at the top. Materials (XLB -1.51%) and Energy (XLE -2.83%) were bottom.
Expectation: Lower
The market gave us a painful Friday to end a painful week. Utilities were again the top sector as investors took defensive positions brought on by worries over the pandemic and a slowing economic recovery.
The Nasdaq closed with a -0.8% loss. Volume was lower, but the candle was distinctly bearish with a large 81% red body and a dismal 7% closing range. The upper wick, created by an early morning rally, is slightly longer than the lower wick. The index got some support at 14,500 but quickly reversed, moving below the 21-day exponential moving average. There were three declining stocks for every advancing stock.
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View on the Week
Worries over the health and speed of the recovering economy remained this week, and the big mega-caps weren't enough to keep the indexes moving higher. Investors weren't sure what to do with a mixed bag of economic data, causing volatility in bonds and equities.
All seemed ok after an uneventful 10-year Treasury note auction on Monday. That was the only news of the day. After the auction, the Nasdaq rallied into close and continued the rally into the following day. That's when the trouble started.
Tuesday kicked off with higher than expected Consumer Price Index data. Equities continued to rally, but the inflation worries hit the 30-year bond auction. The low demand for the bond sent yields higher. Only big tech companies held onto gains by the end of the day.
The big tech rally got another boost on Wednesday when JP Morgan analysts upgraded the price target for Apple after news that the company is boosting iPhone production by as much as 20%. The rally extended to other tech mega-caps and set up a situation where a pullback for the big tech stocks was due.
On Thursday, Federal Reserve Banks in New York and Philadelphia released their Manufacturing Data. The New York numbers were at all-time highs while the Philadelphia numbers were lower than expected. Although the Philadelphia numbers were below expectations, they are still high on a historical basis. The numbers supported the narrative that the economic recovery is slowing, sending Treasury Yields back down to where they started the week. And yet, the US Dollar strengthened.
The economic worries, volatility in bonds, and extended prices in big tech all combined to sink the indexes lower on Friday, closing a painful week for growth investors.
The Nasdaq declined -1.87% for the week. Volume was higher than the previous week. Despite the decline, the index did manage a higher high and a higher low for the week. The closing range of 4% is the lowest in over a year, representing the selling into the close that occurred on Friday.
Small Caps suffered the most this week, with the Russell 2000 (RUT) dropping -5.12%. The S&P 500 (SPX) declined -0.97% for the week. The Dow Jones Industrial Average (DJI) lost -0.52%.
The VIX volatility advanced +14.04% for the week.
The sectors ended the week in a very character than they started the week. None of the leading sectors early in the week were leading by the end of the week.
Financials ( XLF ) started the week in first as investors anticipated earnings reports from big banks that began on Tuesday. By Friday, the sector slipped to the middle of the list, ending the week with a -1.61% decline.
Technology ( XLK ) and Communication Services ( XLC ) took over the top spots for Tuesday and most of Wednesday. They also reversed downward and ended the week with losses.
The only sectors to end the week with gains were Utilities ( XLU ), Consumer Staples ( XLP ), and Real Estate ( XLRE ). The defensive sectors gained ground at the end of the week as worries over the economy grew among investors.
Energy ( XLE ) was at the bottom of the list, dropping -7.89% this week. OPEC+ continues to have disagreements, destabilizing the sector along with the price of oil. Add the fears of a slowing recovery, and investors are exiting positions in the sector that performed well in the first half of 2021.
Treasury yields on the 30y bond and 10y note slid further this week. Although the 10y note auction passed without surprises, the 30y bond auction was weaker than expected, causing yields to rise midweek. However, the levels returned to where they started the week, and the slide continues. The 2y yields rose slightly for the week as the yield curve continues to flatten. The signal to read here is that investors see more risk in shorter-term debt, requiring more reward (yield). The outlook for the short term is growing more negative.
High Yield Corporate Bond (HYG) prices declined but remained near pre-pandemic highs. Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) advanced +0.66% for the week.
Silver (SILVER) declined -1.70%, and Gold (GOLD) advanced +0.16%.
Crude Oil (CRUDEOIL1!) declined -3.20%.
Timber (WOOD) advanced -4.30%.
Copper (COPPER1!) declined +-0.12%.
Aluminum (ALI1!) declined -0.61%.
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Big Four Mega-caps
Three of the four largest mega-caps advanced for the week. Alphabet (GOOGL) had the biggest gain with a +1.16% advance. Microsoft (MSFT) gained +1.01%. Apple (AAPL) rose +0.88%. All three pulled back from intra-week highs on Thursday and Friday. Amazon (AMZN) dropped -3.92% for the week. All four are trading above key moving averages.
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The Four Recovery Stocks
I picked four recovery stocks to track against the indexes and other indicators in this weekly report. The situation was not good for the four recovery stocks. Carnival Cruise Lines (CCL) took the biggest hit with a -13.77% decline, dropping below the 40w moving average. Delta Airlines (DAL) declined -6.66%, despite beating all analyst expectations on the top line, bottom line, and key metrics. Marriott (MAR) fell -5.21%. Exxon Mobil (XOM) dropped -6.39%, pulling the Energy sector lower.
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Cryptocurrency
I started tracking four major cryptocurrencies on the week in review. The four are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The latter two are not the largest by market cap but seem to be well-known and are part of the CIX capital.com index, tracking five cryptocurrencies, including these four (Ripple is the fifth).
The declines continue in the four cryptocurrencies. Bitcoin (BTCUSD) lose another -7.44%. Ethereum (ETHUSD) dropped -10.98%. Litecoin (LTCUSD) declined -10.70%. Bitcoin Cash (BCHUSD) fell -11.76%.
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Investor Sentiment
The put/call ratio (PCCE) ended the week at 0.859. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment and could mean an overbought market.
The CNN Fear & Greed Index moved into the Extreme Fear level. The indicator is at 23, which is the lowest since the 2020 pandemic crash.
The NAAIM Money Manager exposure index rose to 93.27 this week.
The survey occurs on Wednesdays, so the number does not include any selling on Thursday and Friday. However, it's still interesting that the index rose after the previous week where the market was already weakening.
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The Week Ahead
The week will start slow, but earnings reports will pick up as Financials kick off the earnings season.
Monday
There is not much economic news scheduled for Monday.
IBM will release earnings on Monday, which may be an early indicator of what's to come from other tech giants this earnings season.
Tuesday
Building Permits and Housing Starts data will be available on Tuesday morning before the market opens. API Weekly Crude Oil Stock gets released after the market closes.
Netflix (NFLX), Philip Morris (PM), Chipotle (CMG), KeyCorp (KEY), Haliburton (HAL), and United Airlines (UAL) will report earnings on Tuesday.
Wednesday
Crude Oil Inventories are the primary economic data for Wednesday, although some may be interested in Mortgage data released before the market opens.
Johnson & Johnson (JNJ), ASML Holding (ASML), Coca-Cola (KO), Verizon (VZ), and Fidelity Financial (FNF) are some of the interesting reports for Wednesday. Analysts will listen closely to Coca-Cola statements around supply chain costs and whether they are transferring increased costs along to consumers.
Thursday
The weekly Initial Jobless Claims become available on Thursday before the market opens. After the market opens, Investors will get Existing Home Sales data for June.
Intel (INTC), Abbott Labs (ABT), AT&T (T), Snap (SNAP), ABB (ABB), Twitter (TWTR), DR Horton (DHI), Southwest Airlines (LUV), Dominos Pizza (DPZ), and American Airlines (AAL) release earnings on Thursday.
Friday
The Manufacturing and Services purchasing manager indexes released on Friday will be another indicator of economic activity and the speed of the recovery.
Friday's earning reports include Honeywell (HON), American Express (AXP), and Schlumberger (SLB).
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The Bullish Side
There may be a slowdown in the speed of growth compared to the first half of the year, but the economy is still expanding at a historically high rate. The US Dollar is strengthening. Investors continue to support high prices (low yields) in both investment grade and junk corporate bonds, showing confidence in US businesses to be successful in the near term.
That confidence is coming from the ability for businesses to secure low interest rates for debt to fund growth, while consumers are continuing to drive demand via increased activity (Retail Sales is higher than expected). Inflation remains high, but consumers are still purchasing, using a record amount of savings to fund new purchases.
The Fed's Jerome Powell reaffirmed again this week that they believe inflation is transitory, but they are more than willing to step in to control inflation. Although an interest rate hike would cause some pause, the bigger evil for growth stocks is out-of-control inflation. The slightly more hawkish Fed can help growth investors remain confident in the market.
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The Bearish Side
At all-time highs, the market was due for a pullback. Despite gains among big tech, the last two weeks have shown a broader weakness in equities. Much of that is from fears of a slowing economic recovery, driving volatility in the bond market, and spilling over into equities.
Although Retail sales were higher than expected, Consumer sentiment and expectations data were low. Analysts expected the consumer numbers to be higher since we are emerging from the long pandemic. However, it seems consumers are worried about new variants and also stressed by higher prices for goods.
The question is, will there be a further correction, or is the minor pullback this week enough to get support and move higher. The CNN Fear & Greed index moved into the Extreme Fear range, based primarily on the weakness in stock prices and high demand for long-term bonds. That means big investors see a worsening situation on the horizon and possibly a move lower for the indexes.
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Key Nasdaq Levels to Watch
The Nasdaq set another all-time high this week before pulling back again and closing below the 21d exponential moving average. The index closed with a higher low but with a dismal closing range, sliding into the end of the week.
On the positive side, the levels are:
- The 21d EMA is at 14449.77.
- 14,500 has been a support area in the past, get back above this area to move higher.
- The 10d MA is at 14,625.59.
- The high of this past week was a new all-time high at 14,803.68.
- The mid-point of the regression trend from the 5/12 low points to 14,989 by the end of the week.
- The round number 15,000 is likely to be a new area of resistance.
On the downside, there are a few key levels:
- The low of this past week is 14,413.32.
- The low of the previous week is 14,371.59. Keep making higher lows to keep the uptrend intact.
- The 50d MA is at 14,004.19.
- 14,000 has been a key area of support/resistance.
- There is a pivot at 13,548.93.
- There is a support area at 13,000. 13,002.54 is a pivot from May.
- 13,119.60 is the 200d MA.
- 12,397.05 is a low pivot point from the early March dip.
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Wrap-up
It was a tough week, especially for growth investors. Economic signals are all over the place, causing reactions among investors. Ultimately, volatility will have investors exiting riskier positions and moving to safe-havens. We saw that through the increased demand for long-term bonds and the rise of defensive sectors to the top of the sector list the past two weeks.
As it stands, the Nasdaq is still in an uptrend. It looks worrisome, but we have to wait and see what happens in the coming week. A further decline could mean a 5-6% correction before the uptrend resumes. Or the index could turn back toward new all-time highs sooner if new data indicate a more robust economic recovery.
Good luck, stay healthy, and trade safe!
