Summary: A better-than-expected jobs report was enough to continue the trend in Technology and Communications stocks that started yesterday. Eyes remain on the Fed and inflation. Still, a drop in the US dollar and US treasury rates, in addition to lowering expectations from a few retailers, gave investors some relief that the economy was not overheating out of control.
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Thursday, May 20, 2021
Facts: +1.77%, Volume lower, Closing range: 89% (w/gap), Body: 86%
Good: No lower wick, thick green body with high closing range
Bad: Lower volume
Highs/Lows: Higher high, higher low
Candle: Gap up at open, mostly green body with a short upper wick
Advanced/Decline: Three advancing stocks for every two declining stocks
Indexes: SPX (+1.06%), DJI (+0.55%), RUT (+0.64%), VIX (-6.81%)
Sectors: Technology (XLK +1.91%) and Communications (XLC +1.71%) were top. Financials (XLF +0.05%) and Energy (XLE -0.15%) were bottom.
Expectation: Higher
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Market Overview
A better-than-expected jobs report was enough to continue the trend in Technology and Communications stocks that started yesterday. Eyes remain on the Fed and inflation. Still, a drop in the US dollar and US treasury rates, in addition to lowering expectations from a few retailers, gave investors some relief that the economy was not overheating out of control.
The Nasdaq closed the day with a +1.77% advance. Volume was lower, but the gap-up and higher high and higher low are both great signs. With the gap, the closing range was 89%. An 86% green body sits under a short upper wick formed late in the date. There is no visible lower wick. There were three advancing stocks for every two declining stocks.
The S&P 500 (SPX) gained +1.06%. The Dow Jones Industrial Average (DJI) advanced +0.55%. The Russell 2000 (RUT) gained +0.64%.
The VIX volatility index declined -6.81%.
Technology (XLK +1.91%) and Communications (XLC +1.71%) were the top sectors for the second day in a row. Only Energy (XLE -0.15%) declined for the day. Financials (XLF +0.05%) had a slight gain but was at the bottom of the sector list.
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Economic Indicators
The US Dollar (DXY) declined -0.47% for the day.
The US 30y, 10y, and 2y Treasury yields all declined, and the spread between the 10y and 2y tightened.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (WOOD) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) advanced +9.92%, recovering from yesterday's dip. Ethereum (ETHUSD) rose +14.48%.
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Investor Sentiment
The put/call ratio dropped to 0.633. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index is still in the fear zone.
The NAAIM money manager exposure index declined to 44.21
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Market Leaders
All four largest mega-caps gained for the day. Apple (AAPL) rose +2.10% to close just below its 21d EMA and 50d MA lines. Alphabet (GOOGL) gained +1.56% and moved back above the 21d EMA. Microsoft (MSFT) closed just below the 50d MA, with a +1.38% gain. Amazon(AMZN) moved above the 50d MA with a +0.49% advance.
Tesla (TSLA) topped the mega-cap list for the first time in weeks. Nvidia (NVDA), Netflix (NFLX), ASML Holding (ASML), and PayPal (PYPL) were also at the top of the list with greater than 2.5% gains. Only a handful of mega-caps lost for the day. Bank of America (BAC), Exxon Mobil (XOM), Verizon (VZ), and United Health (UNH) were the worst losers of the day, but all declined less than 0.25%.
Enphase (ENPH) and Solar Edge (SEDG), two solar energy stocks, are at the top of the daily update growth list for the second day in a row. Fiverr (FVRR) and SNAP (SNAP) are the third and fourth best of the day. Several growth stocks topped 5% gains. Only a few in the list had losses. Those include DoorDash (DASH), Chewy (CHWY), RH (RH), and Palantir (PLTR) at the bottom of the list.
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Looking ahead
On Friday morning, the Purchasing Manager Index data for Services and Manufacturing will be available after the market opens. The data shows an expected increase/decrease in activity to meet customer demand in the two sectors. Existing Home Sales will also be released after the market opens.
Deere & Company (DE), Foot Locker (FL), and Buckle (BKE) are on the shortlist of earnings reports for Friday.
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Trends, Support, and Resistance
The index closed above the 21d EMA line today. It had first hit resistance at the line, then found support as the index faded a bit into the close. Holding this key support line is critical to ending the week positively.
The one-day trend-line points to a +0.97% gain for tomorrow, taking the index above the 50d MA.
The five-day trend line leads to a -0.85% loss.
The trend-line from the 4/2 high shows a -3.14% decline on Friday.
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Wrap-up
I'll take it. A positive day for the Nasdaq, and growth stocks, and broad overall gains in the market is very welcome after a few days of disappointing losses. It's not yet time to jump back in the deep end. I would wait for a day with similar characteristics today, but higher volume showing institutions are accumulating.
Tomorrow is an options expiration day. Expect some changes in direction in the afternoon. Overall, I'll set my expectations for higher based on the past two days.
Stay healthy and trade safe!
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Thursday, May 20, 2021
Facts: +1.77%, Volume lower, Closing range: 89% (w/gap), Body: 86%
Good: No lower wick, thick green body with high closing range
Bad: Lower volume
Highs/Lows: Higher high, higher low
Candle: Gap up at open, mostly green body with a short upper wick
Advanced/Decline: Three advancing stocks for every two declining stocks
Indexes: SPX (+1.06%), DJI (+0.55%), RUT (+0.64%), VIX (-6.81%)
Sectors: Technology (XLK +1.91%) and Communications (XLC +1.71%) were top. Financials (XLF +0.05%) and Energy (XLE -0.15%) were bottom.
Expectation: Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
A better-than-expected jobs report was enough to continue the trend in Technology and Communications stocks that started yesterday. Eyes remain on the Fed and inflation. Still, a drop in the US dollar and US treasury rates, in addition to lowering expectations from a few retailers, gave investors some relief that the economy was not overheating out of control.
The Nasdaq closed the day with a +1.77% advance. Volume was lower, but the gap-up and higher high and higher low are both great signs. With the gap, the closing range was 89%. An 86% green body sits under a short upper wick formed late in the date. There is no visible lower wick. There were three advancing stocks for every two declining stocks.
The S&P 500 (SPX) gained +1.06%. The Dow Jones Industrial Average (DJI) advanced +0.55%. The Russell 2000 (RUT) gained +0.64%.
The VIX volatility index declined -6.81%.
Technology (XLK +1.91%) and Communications (XLC +1.71%) were the top sectors for the second day in a row. Only Energy (XLE -0.15%) declined for the day. Financials (XLF +0.05%) had a slight gain but was at the bottom of the sector list.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.47% for the day.
The US 30y, 10y, and 2y Treasury yields all declined, and the spread between the 10y and 2y tightened.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (WOOD) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) advanced +9.92%, recovering from yesterday's dip. Ethereum (ETHUSD) rose +14.48%.
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Investor Sentiment
The put/call ratio dropped to 0.633. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index is still in the fear zone.
The NAAIM money manager exposure index declined to 44.21
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All four largest mega-caps gained for the day. Apple (AAPL) rose +2.10% to close just below its 21d EMA and 50d MA lines. Alphabet (GOOGL) gained +1.56% and moved back above the 21d EMA. Microsoft (MSFT) closed just below the 50d MA, with a +1.38% gain. Amazon(AMZN) moved above the 50d MA with a +0.49% advance.
Tesla (TSLA) topped the mega-cap list for the first time in weeks. Nvidia (NVDA), Netflix (NFLX), ASML Holding (ASML), and PayPal (PYPL) were also at the top of the list with greater than 2.5% gains. Only a handful of mega-caps lost for the day. Bank of America (BAC), Exxon Mobil (XOM), Verizon (VZ), and United Health (UNH) were the worst losers of the day, but all declined less than 0.25%.
Enphase (ENPH) and Solar Edge (SEDG), two solar energy stocks, are at the top of the daily update growth list for the second day in a row. Fiverr (FVRR) and SNAP (SNAP) are the third and fourth best of the day. Several growth stocks topped 5% gains. Only a few in the list had losses. Those include DoorDash (DASH), Chewy (CHWY), RH (RH), and Palantir (PLTR) at the bottom of the list.
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Looking ahead
On Friday morning, the Purchasing Manager Index data for Services and Manufacturing will be available after the market opens. The data shows an expected increase/decrease in activity to meet customer demand in the two sectors. Existing Home Sales will also be released after the market opens.
Deere & Company (DE), Foot Locker (FL), and Buckle (BKE) are on the shortlist of earnings reports for Friday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The index closed above the 21d EMA line today. It had first hit resistance at the line, then found support as the index faded a bit into the close. Holding this key support line is critical to ending the week positively.
The one-day trend-line points to a +0.97% gain for tomorrow, taking the index above the 50d MA.
The five-day trend line leads to a -0.85% loss.
The trend-line from the 4/2 high shows a -3.14% decline on Friday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
I'll take it. A positive day for the Nasdaq, and growth stocks, and broad overall gains in the market is very welcome after a few days of disappointing losses. It's not yet time to jump back in the deep end. I would wait for a day with similar characteristics today, but higher volume showing institutions are accumulating.
Tomorrow is an options expiration day. Expect some changes in direction in the afternoon. Overall, I'll set my expectations for higher based on the past two days.
Stay healthy and trade safe!
