Summary: The gains were broad across segments and sectors today, pivoting the indexes to the upside after a few days of declines. The only thing that was missing is higher volume that would indicate more institutional support in the gains. We'll take what we got for now and then keep a close eye in the days to come.
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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Wednesday, April 21, 2021
Facts: +1.19%, Volume lower, Closing range: 100%, Body: 84%
Good: Test of 21d EMA in morning then buying throughout the day, rally into close
Bad: Lower volume
Highs/Lows: Higher high, higher low
Candle: Long green body with no upper wick, small lower wick
Advance/Decline: Five advancing stocks for every two declining stocks
Indexes: SPX (+0.93%), DJI (+0.93%), RUT (+2.35%), VIX (-6.32%)
Sectors: Materials (XLB +1.82%) and Financials (XLF +1.39%) were the top sectors. Communications (XLC +0.17%) and Utilities (-0.84%) were bottom.
Expectation: Higher
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Market Overview
The gains were broad across segments and sectors today, pivoting the indexes to the upside after a few days of declines. The only thing that was missing is higher volume that would indicate more institutional support in the gains. We'll take what we got for now and then keep a close eye in the days to come.
The Nasdaq finally had the advance/decline ratio above 1.0 after eight sessions in a row of more decliners than advancers. Along with great support from mega-caps, the index closed with a +1.19% gain and a closing range of 100%. The 84% green body is above a small lower wick formed from a dip at open. Otherwise, the bulls led the index higher through the whole day. There were over 5 advancing stocks for every 2 declining stocks.
In a signal of rotation back into small-caps, the Russell 2000 (RUT) outperformed the other major indexes after underperforming for several sessions. But the rotation did not suck the wind out of the other segments, allowing gains to be broadly shared. The S&P 500 (SPX) and Dow Jones Industrial average (DJI) both had gains of +0.93%.
The VIX volatility index declined -6.32% after two days of big advances.
Cyclical sectors topped to the sector list for the day, but did not leave behind growth sectors. Materials (XLB +1.82%) and Financials (XLF +1.39%) were the top sectors. Utilities (-0.84%) was the only sector to decline, reversing the defensive trades of the previous two days.
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Economic Indicators
The US Dollar (DXY) declined -0.10% and may be in the early part of a base at the current level.
The US 30y treasury bond and the US 10y note yields remained about even. The 2y treasury note yields rose slightly.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices advanced.
Commodities were mostly bullish for the day. Silver (SILVER) and Gold (GOLD) advanced. Crude Oil (CRUDEOIL1!) declined on higher than expected crude oil supply numbers. Timber (WOOD) declines but is still near extraordinary highs. Copper (COPPER1!) and Aluminum (ALI1!) both advanced.
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Investor Sentiment
The put/call dropped to 0.548. 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 leaning toward the green side, but not near extreme.
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Market Leaders
The four biggest mega-caps certainly helped with the gains today. Microsoft (MSFT) and Amazon (AMZN) gained +0.90% and +0.82%. Apple (AAPL) gained +0.29%. Alphabet (GOOGL) declined -0.03% but found support late in the session after a morning decline.
ASML Holding (ASML) and Roche Holding (RHHBF) topped the mega-cap list with +6.25% and +4.64%. I don't usually include Roche in the daily update as its traded in OTC, but the earnings surprises of these two giants influenced European markets and likewise influenced sentiment in the US major indexes. Tesla (TSLA) and Nike (NKE) round out the top four mega-caps. There were more winners than losers in the mega-caps. Netflix (NFLX) dropped -7.40% after disappointing investors with subscriber growth. Oracle (ORCL) declined -3.26% because of a lost cloud deal with the Israel government.
There wasn't much to complain about among growth stocks either. Lemonade (LMND) was the top winner with a +10.83% gain. Moderna (MRNA), GrowGeneration (GRWG), DraftKings (DKNG) also topped the list with over 5% gains. At the bottom of the list were communications stocks Facebook (FB) and SNAP (SNAP) with -0.39% and -0.32% declines. FUTU Holdings (FUTU) continued to decline, losing -2.64%, after announcing a secondary offer two days ago. Peloton is struggling with the fallout from reports and investigations of treadmill injuries and one death, declined -6.17% today.
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Looking ahead
Thursday will bring an update to Initial Jobless Claims and Existing Home sales.
Earnings updates will include Intel (INTC), AT&T (T), Snap (SNAP), and DR Horton (DHI).
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Trends, Support and Resistance
The index found support at the 13,700 area again today, before rallying the rest of the day and closing just below 14,000.
If today's trend continues, the one-day trend line points to a +0.90% gain for tomorrow. The trend line from the 3/5 low points to a +0.31% gain.
The five-day trend line points to a -1.53% decline for tomorrow.
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Wrap-up
We've been watching the advance/decline ratio over that past week and a half, looking for a day where the advancing stocks outnumbered the declining stocks. Now that we have the signal, the attention turns to volume. Volume declined over the last three sessions, including a large decline today as the index pivoted upward.
Ideally we will see everything come together in the next session. A move higher, with broadly shared gains, on higher volume. The expectation is set for Higher. If the index moves lower, that will be a signal the last few weeks rally is losing support.
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=-
Wednesday, April 21, 2021
Facts: +1.19%, Volume lower, Closing range: 100%, Body: 84%
Good: Test of 21d EMA in morning then buying throughout the day, rally into close
Bad: Lower volume
Highs/Lows: Higher high, higher low
Candle: Long green body with no upper wick, small lower wick
Advance/Decline: Five advancing stocks for every two declining stocks
Indexes: SPX (+0.93%), DJI (+0.93%), RUT (+2.35%), VIX (-6.32%)
Sectors: Materials (XLB +1.82%) and Financials (XLF +1.39%) were the top sectors. Communications (XLC +0.17%) and Utilities (-0.84%) were bottom.
Expectation: Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The gains were broad across segments and sectors today, pivoting the indexes to the upside after a few days of declines. The only thing that was missing is higher volume that would indicate more institutional support in the gains. We'll take what we got for now and then keep a close eye in the days to come.
The Nasdaq finally had the advance/decline ratio above 1.0 after eight sessions in a row of more decliners than advancers. Along with great support from mega-caps, the index closed with a +1.19% gain and a closing range of 100%. The 84% green body is above a small lower wick formed from a dip at open. Otherwise, the bulls led the index higher through the whole day. There were over 5 advancing stocks for every 2 declining stocks.
In a signal of rotation back into small-caps, the Russell 2000 (RUT) outperformed the other major indexes after underperforming for several sessions. But the rotation did not suck the wind out of the other segments, allowing gains to be broadly shared. The S&P 500 (SPX) and Dow Jones Industrial average (DJI) both had gains of +0.93%.
The VIX volatility index declined -6.32% after two days of big advances.
Cyclical sectors topped to the sector list for the day, but did not leave behind growth sectors. Materials (XLB +1.82%) and Financials (XLF +1.39%) were the top sectors. Utilities (-0.84%) was the only sector to decline, reversing the defensive trades of the previous two days.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.10% and may be in the early part of a base at the current level.
The US 30y treasury bond and the US 10y note yields remained about even. The 2y treasury note yields rose slightly.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices advanced.
Commodities were mostly bullish for the day. Silver (SILVER) and Gold (GOLD) advanced. Crude Oil (CRUDEOIL1!) declined on higher than expected crude oil supply numbers. Timber (WOOD) declines but is still near extraordinary highs. Copper (COPPER1!) and Aluminum (ALI1!) both advanced.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call dropped to 0.548. 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 leaning toward the green side, but not near extreme.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
The four biggest mega-caps certainly helped with the gains today. Microsoft (MSFT) and Amazon (AMZN) gained +0.90% and +0.82%. Apple (AAPL) gained +0.29%. Alphabet (GOOGL) declined -0.03% but found support late in the session after a morning decline.
ASML Holding (ASML) and Roche Holding (RHHBF) topped the mega-cap list with +6.25% and +4.64%. I don't usually include Roche in the daily update as its traded in OTC, but the earnings surprises of these two giants influenced European markets and likewise influenced sentiment in the US major indexes. Tesla (TSLA) and Nike (NKE) round out the top four mega-caps. There were more winners than losers in the mega-caps. Netflix (NFLX) dropped -7.40% after disappointing investors with subscriber growth. Oracle (ORCL) declined -3.26% because of a lost cloud deal with the Israel government.
There wasn't much to complain about among growth stocks either. Lemonade (LMND) was the top winner with a +10.83% gain. Moderna (MRNA), GrowGeneration (GRWG), DraftKings (DKNG) also topped the list with over 5% gains. At the bottom of the list were communications stocks Facebook (FB) and SNAP (SNAP) with -0.39% and -0.32% declines. FUTU Holdings (FUTU) continued to decline, losing -2.64%, after announcing a secondary offer two days ago. Peloton is struggling with the fallout from reports and investigations of treadmill injuries and one death, declined -6.17% today.
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Looking ahead
Thursday will bring an update to Initial Jobless Claims and Existing Home sales.
Earnings updates will include Intel (INTC), AT&T (T), Snap (SNAP), and DR Horton (DHI).
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The index found support at the 13,700 area again today, before rallying the rest of the day and closing just below 14,000.
If today's trend continues, the one-day trend line points to a +0.90% gain for tomorrow. The trend line from the 3/5 low points to a +0.31% gain.
The five-day trend line points to a -1.53% decline for tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
We've been watching the advance/decline ratio over that past week and a half, looking for a day where the advancing stocks outnumbered the declining stocks. Now that we have the signal, the attention turns to volume. Volume declined over the last three sessions, including a large decline today as the index pivoted upward.
Ideally we will see everything come together in the next session. A move higher, with broadly shared gains, on higher volume. The expectation is set for Higher. If the index moves lower, that will be a signal the last few weeks rally is losing support.
Stay healthy and trade safe!
