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. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future.
I do occasionally have some errors or typos and will correct them in my blog or in 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:
If you have been following my daily updates, you can skip down to the “The Meaning of Life”. 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, March 22, 2021
Facts: +1.23%, Volume lower, Closing range: 60% (w/gap), Body: 56%
Good: Zero lower wick, strong morning rally to above the 50d MA
Bad: Could not stay above 50d MA, losing support late in the session
Highs/Lows: Higher high, higher low
Candle: No lower wick, green body under a long upper wick.
Advance/Decline: Two declining stocks for every advancing stock
Indexes: SPX (+0.70%), DJI (+0.32%), RUT (-0.91%), VIX (-9.88%)
Sectors: Technology (XLK +1.75%) and Communication Services (XLC +0.66%) were top sectors. Financials (XLF -1.72%) and Energy (XLE -2.00%) were bottom
Expectation: Sideways or Higher
Technology stocks showed up big for the first day of the week. The sector outperformed for the day, carrying most of the major indexes to close with positive gains for the day. The advances were not broadly shared, with two declining stocks for every advancing stock.
The Nasdaq closed with a +1.23% gain on significantly lower volume. The candle has no lower wick as the opening price level was never revisited after the morning rally. The 56% body sits under a long upper wick that formed during a sell-off just before close. The closing range of 60% includes a gap up at open and is positive, but does represent the weakness at close.
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Tuesday, March 23, 2021
Facts: +1.12%, Volume higher, Closing range: 12%, Body: -76%
Good: Nothing
Bad: Back below the 21d EMA with a thick red candle
Highs/Lows: Lower high, lower low
Candle: Mostly red body with tiny upper and lower wicks
Advance/Decline: Ten declining stocks for every advancing stock
Indexes: SPX (-0.76%), DJI (-0.94%), RUT (-3.58%), VIX (+7.54%)
Sectors: Utilities (XLU +1.52%) and Consumer Staples (+0.41%) were top. Industrials (XLI -1.75%) and Materials (XLB -2.08%) were bottom.
Expectation: Lower
The character of the market continues to swing in opposite directions. Expectation was for Sideways or Higher for today, and we got lower. If we were keeping score, you'd notice the expectations I'm setting on a daily basis are broken very consistently over the past few weeks. But it's a good time to remind the reader that the expectations are not predictions, but they are to set and expectation, get our attention when the expectation is broken, and learn what might have changed in the market. Here we go.
The Nasdaq closed with a -1.12% decline on higher volume. The candle has small upper and lower wicks, but is mostly red body. The closing range of 12% shows the day very much went to the bears. Few bulls came in to buy back the low prices. The selling was broad, across most sectors, segments and impacted all major indexes. There were 10 declining stocks for every advancing stock.
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Wednesday, March 24, 2021
Facts: -2.01%, Volume higher, Closing range: 0%, Body: 99%
Good: Nothing, even more nothing than yesterday
Bad: No wicks, all red body, close below 13,000 support
Highs/Lows: Lower high, lower low
Candle: Marubozu Black candle, no visible upper or lower wick, all red body
Advance/Decline: Five declining stocks for every advancing stock
Indexes: SPX (-0.55%), DJI (-0.01%), RUT (-2.35%), VIX (+4.43%)
Sectors: Energy (XLE +2.51%) and Industrials (XLI +0.73%) were top. Consumer Discretionary (XLY -1.48%) and Communications (XLC -2.52%) were bottom.
Expectation: Lower
In the endless rotations, the four cyclical sectors moved from the bottom to the top of the sector list in another session of selling for big tech, consumer discretionary and growth stocks.
The Nasdaq closed down -2.01% on higher volume. The 0% closing range comes after an all-day bearish move that formed a 99% red body candle. The tiny upper wick is barely visible and there is no lower wick. There were five declining stocks for every advancing stock.
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Thursday, March 25, 2021
Facts: +0.19%, Volume lower, Closing range: 85%, Body: +60%
Good: Closed near to intraday highs
Bad: Lower low hit in the morning, resistance at 13,000 near close
Highs/Lows: Lower high, lower low
Candle: Mostly green body with a slightly longer lower wick from morning dip
Advance/Decline: Three advancing stocks for every two declining stocks
Indexes: SPX (+0.52%), DJI (+0.62%), RUT (+2.29%), VIX (-6.56%)
Sectors: Financials (XLF +1.68%) and Industrials (XLI +1.60%) were top. Technology (XLK -0.06%) and Communications (XLC -0.49%) were bottom.
Expectation: Lower
Economic news seemed to weigh on the market after open, but investors shook off the weight later in the day to find gains across the major indexes. A short pullback to absorb the reaction from a weak 7y note auction was overcome to close near market intraday highs.
The Nasdaq closed with a +0.19% gain. The candle gave us a lower high and lower low, but overall is bullish look despite a morning dip and afternoon pullback. The closing range is 85% and a thick green body covering 60% of the candle. The lower volume, and lower high mean the trend is still downward.
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Friday, March 26, 2021
Facts: +1.24%, Volume higher, Closing range: 96%, Body: +53%
Good: Rally in afternoon to close near intraday high
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Thick green body with a long lower wick, very small upper wick
Advance/Decline: More than one advancing stock for every declining stock
Indexes: SPX (+1.66%), DJI (+1.39%), RUT (+1.76%), VIX (-4.80%)
Sectors: Technology (XLK +2.54%) and Materials (XLB +2.48%) were top. Utilities (XLU +0.33%) and Communications (XLC -1.09%) were bottom.
Expectation: Higher
A late afternoon rally in the market closed the week with a positive day for all the major indexes. It's not clear what caused the sudden late afternoon rally. It could just be expiring options activity, or it could be investors outlook of the economy improving. Morning economic data was mixed, but the personal income numbers and consumer sentiment showed the possibility of an upcoming rise in spending. Data from UK and Germany was also positive on their economies.
The Nasdaq closed the day with a +1.24% gain on higher volume. The closing range of 96% with a 53% green body over a long lower wick was enough to get a higher high on top of a higher low. The higher high and higher low with more volume than the previous day is a great indicator of strength. There were more advancing stocks than declining stocks.
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The Meaning of Life (View on the Week)
The week started with supply chain issues as a semiconductor plant in Japan was on fire. The week also ended with supply chain issues as a container ship remained stuck in the Suez Canal, blocking a major shipping route. The blockage caused oil prices to spike and more pressure on an already stressed supply chain.
Technology opened the week with huge gains from major leaders. But the gains were limited to big tech and all were on lower volume with no real breakouts. In the broader Nasdaq, there were two losers for every winner. On the surface, the chart looked ok, but the longer upper wick should have been another warning sign.
The bears were back on Tuesday and the selling was broad. New lockdowns across Europe and data issues with vaccine trials complicated the pandemic recovery and investors reacted. Utilities and Consumer Staples were at the top of the sector list while the cyclical sectors moved to the bottom. Pandemic stocks got a new life with Netflix, Peloton and Zoom topping the charts again. Global investors fled the US dollar and US treasuries as a safe haven, but equities suffered with 10 declining stocks for every advancing stock on the Nasdaq.
Wednesday brought another rotation. Cyclical sectors moved from the bottom of the sector list to the top of the sector list. Energy started to climb while a container ship blocking the Suez Canal, threatening oil and supply chain shortages. The US Dollar continued to rise. There were still five declining stocks for every advancing stock.
The Nasdaq crossed below a key level of 12,985.05 and looked very bearish with a Marubozu Black candle (no upper or lower wick, just red body). For Thursday, the index needed to hold above 12,783.40 which was the bottom line of the channel from the March 2020 bottom.
The index did hold, but not before testing that channel line. The Thursday candle is bullish. However, the lower high and lower low meant the downtrend continues. On the positive side, there were more advancing stocks than declining stocks. The US dollar gained again and the impact of a stronger dollar started to show up in the mega-caps list. Companies at the top of the gains list were ones that could benefit from a stronger dollar. Companies at the bottom of the list would have some negative impact by a strong dollar.
Friday opened with a mix of economic news and the continued stress of the Suez Canal blockage. The rally in the final hour saved the day to close the index higher. The reason for the rally was unclear, but may have been from positive economic news in Europe or it could have been market maker activity to cover for expiring options. The volume was higher, but still not as high as average volume since the beginning of the year. To put more confidence in a rally, I'd like to see consistent buying throughout the day with higher than average volume.
The Nasdaq declined -0.58% for the week on lower volume. The closing range of 53% is better than the previous week, but we have a lower high and a lower low.
The Nasdaq gave us a lower high and a lower low this week. A symmetrical triangle is forming which is usually followed by a move in the direction of the previous trend.
I focus on the Nasdaq because it holds many of the growth stocks that I tend to have in my portfolio. But I always keep an eye on the other major indexes in this report. The S&P 500 (SPX) had an all-time high close for the week and advanced +1.57%. The Dow Jones Industrial average (DJI) closed with a +1.36% gain.
Small caps and the Russell 2000 (RUT) struggled for a second week. It dipped more than 8% at one point but climbed back to close with a 62% closing range and end the week with a -2.89% loss.
The VIX volatility index closed the week at its lowest since March of 2020, declining -9.98% for the week.
There were several changes of winners and losers during a week that ended with the S&P 500 at a record close.
Technology ( XLK ) led for the first two days of the week. It held the lead on Tuesday, but was sold off heavily on Wednesday and Thursday, but then ended the week with a huge gain on Friday, putting it in third place.
Utilities ( XLU ) topped the list on Tuesday as investors became defensive. Utilities didn't take the top weekly spot on until Thursday when investors became more cautious again.
Consumer Staples ( XLP ) remained steady throughout the volatile week and ended the week at the top.
After last week's rout, Energy ( XLE ) seemed to find a bottom on Tuesday. After a big gain on Wednesday, the sector opened back near the bottom on Thursday, but quickly recovered . By the end of Friday, it was able to end the week with a gain.
Communication Services ( XLC ) and Consumer Discretionary ( XLY ) were the only two sectors to decline for the week. Communication Services ended the week at the bottom with more than a 4% decline. Although Technology sector fared well, there is still evidence of rotation from growth to value.
Longer term treasury yields pulled back from recent gains. The US 30y bond and US 10y note yields both dropped relative to the 2y note. There was a brief scare with a disappointing 7y note auction on Thursday, but bonds did not sell off heavily like after the previous lackluster auctions.
The yield curve still remains steep but has stopped steepening for the past few weeks.
High Yields Corporate Bonds (HYG) and Investment Grade (LQD) corporate bond prices both advanced for the week. The spread between corporate bonds and short term treasury bonds tightened.
The US Dollar (DXY) advanced +0.89% and is now having some impact on multinationals valuations.
Silver (SILVER) and Gold (GOLD) both declined for the week.
Crude Oil Futures (CRUDEOIL1!) remained about even for the week, despite a choppy up and down week.
Timber (WOOD) advanced. Copper (COPPER1!) declined while Aluminum (ALI1!) advanced. The continuing growth in aluminum prices is a signal of the high demand created by the recovering economy and manufacturing companies trying to keep up with expected demand.
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The Big Four Mega-caps
Apple (AAPL) and Microsoft (MSFT) were able to end the week with gains while Amazon (AMZN) and Alphabet (GOOGL) declined for the week. Microsoft and Alphabet closed above their 10w moving average lines. Apple is below the 10w but above the 40w moving average. Amazon remains below both moving average lines. Relative to the Nasdaq, Microsoft and Alphabet have been outperforming while Apple and Amazon have been underperforming.
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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. Exxon Mobil was the only one to end the week with gains as oil prices are expected to rise with the continued blockage of the Suez Canal. The others sold off sharply early in the week as the pandemic seemed to pop back into investors' worries. They all recovered later in the week, but not enough to end the week with gains. All of the four recovery stocks are trading above both key moving average lines.
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Investor Sentiment
The put/call ratio (PCCE) ended the week at 0.753. 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 is near to the neutral territory.
The NAAIM exposure index moved down to 57.52. Money managers were reducing positions in the market as of Wednesday when the survey is taken.
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The Week Ahead
Next week will only have four days of trading. Markets will be closed for Good Friday.
A few short term bill auctions are scheduled for Monday. Otherwise there is not much economic news for the start of the week. Investors will be watching for an update to the situation with the Suez Canal.
On Tuesday, the CB Consumer Confidence numbers will be released just after market open. The API Weekly Crude Oil Stock will be updated after market close.
There will be a few key updates on Wednesday morning. First employment data for March will be updated. Purchasing Managers Index data will indicate how much purchasing activity is happening in order to meet manufacturing demands. Pending Home Sales and Crude Oil Inventories will be released after market open.
On Thursday, an OPEC meeting is scheduled which will impact outlook for oil supply/demand. Initial Jobless Claims data will be released. Additional Manufacturing data for March will indicate how the sector is recovering.
The markets will be closed on Good Friday, but there will still be some economic data released. Hourly Earnings, Nonfarm Payrolls and the Unemployment Rate will all show how strong the labor market is recovering.
There are no daily update earnings reports for Monday.
Lululemon (LULU), Chewy (CHWY), Carnival Corp (CCL), and HyreCar (HYRE) will report earnings on Tuesday.
Walgreens (WBA) and Riot Blockchain (RIOT) report on Wednesday.
CarMax (KMX) reports on Thursday.
No earnings reports for Good Friday.
Be sure to check your portfolio for upcoming earnings reports.
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The Bullish Side
Looking broadly across the market, the S&P 500 closed at an all-time high. The Dow Jones Industrial average is near all-time highs. Despite the performance for the Nasdaq, broadly the markets are performing well. Investors continue to rotate into value stocks, away from growth stocks, but that was a necessary rebalancing. Soon the rebalance will be over and stocks can broadly advance together.
Global investors are seeing safety and value in the US Dollar again, which helps to strengthen the bond market as well. That should keep yields and the yield curve under control at least for a while. The Fed will continue to buy up bonds to control the yield curve while not worrying up inflation.
Rising consumer sentiment means record savings and new stimulus checks could be poured into the economy soon.
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The Bearish Side
The supply chain is strained from two big events this week and the higher spending expected in coming months could put more upward pressure on prices. Inflation could scare investors and cause more negative reactions in the bond and equity markets.
The rising US Dollar is a signal of strength in the economy, but also could have impacts on multinationals that will cause further rotation and volatility. Add that rotation on top of the continuing rotation from growth stocks to value stocks.
There is some discussion in the news of large margin calls linked to Archegos happening last week that may continue into next week. If so, there could be more downward pressure on the indexes.
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Key Nasdaq Levels to Watch
The Nasdaq stayed in a channel drawn from the March 2020 bottom and is forming a symmetrical triangle that should breakout this week or next. It could breakout to the upside or downside.
On the positive side, the level we still want to reach is 13,620.71, but there's a few levels to pass before that happens:
I do occasionally have some errors or typos and will correct them in my blog or in 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.
- The Meaning of Life, a 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 the “The Meaning of Life”. 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, March 22, 2021
Facts: +1.23%, Volume lower, Closing range: 60% (w/gap), Body: 56%
Good: Zero lower wick, strong morning rally to above the 50d MA
Bad: Could not stay above 50d MA, losing support late in the session
Highs/Lows: Higher high, higher low
Candle: No lower wick, green body under a long upper wick.
Advance/Decline: Two declining stocks for every advancing stock
Indexes: SPX (+0.70%), DJI (+0.32%), RUT (-0.91%), VIX (-9.88%)
Sectors: Technology (XLK +1.75%) and Communication Services (XLC +0.66%) were top sectors. Financials (XLF -1.72%) and Energy (XLE -2.00%) were bottom
Expectation: Sideways or Higher
Technology stocks showed up big for the first day of the week. The sector outperformed for the day, carrying most of the major indexes to close with positive gains for the day. The advances were not broadly shared, with two declining stocks for every advancing stock.
The Nasdaq closed with a +1.23% gain on significantly lower volume. The candle has no lower wick as the opening price level was never revisited after the morning rally. The 56% body sits under a long upper wick that formed during a sell-off just before close. The closing range of 60% includes a gap up at open and is positive, but does represent the weakness at close.
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Tuesday, March 23, 2021
Facts: +1.12%, Volume higher, Closing range: 12%, Body: -76%
Good: Nothing
Bad: Back below the 21d EMA with a thick red candle
Highs/Lows: Lower high, lower low
Candle: Mostly red body with tiny upper and lower wicks
Advance/Decline: Ten declining stocks for every advancing stock
Indexes: SPX (-0.76%), DJI (-0.94%), RUT (-3.58%), VIX (+7.54%)
Sectors: Utilities (XLU +1.52%) and Consumer Staples (+0.41%) were top. Industrials (XLI -1.75%) and Materials (XLB -2.08%) were bottom.
Expectation: Lower
The character of the market continues to swing in opposite directions. Expectation was for Sideways or Higher for today, and we got lower. If we were keeping score, you'd notice the expectations I'm setting on a daily basis are broken very consistently over the past few weeks. But it's a good time to remind the reader that the expectations are not predictions, but they are to set and expectation, get our attention when the expectation is broken, and learn what might have changed in the market. Here we go.
The Nasdaq closed with a -1.12% decline on higher volume. The candle has small upper and lower wicks, but is mostly red body. The closing range of 12% shows the day very much went to the bears. Few bulls came in to buy back the low prices. The selling was broad, across most sectors, segments and impacted all major indexes. There were 10 declining stocks for every advancing stock.
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Wednesday, March 24, 2021
Facts: -2.01%, Volume higher, Closing range: 0%, Body: 99%
Good: Nothing, even more nothing than yesterday
Bad: No wicks, all red body, close below 13,000 support
Highs/Lows: Lower high, lower low
Candle: Marubozu Black candle, no visible upper or lower wick, all red body
Advance/Decline: Five declining stocks for every advancing stock
Indexes: SPX (-0.55%), DJI (-0.01%), RUT (-2.35%), VIX (+4.43%)
Sectors: Energy (XLE +2.51%) and Industrials (XLI +0.73%) were top. Consumer Discretionary (XLY -1.48%) and Communications (XLC -2.52%) were bottom.
Expectation: Lower
In the endless rotations, the four cyclical sectors moved from the bottom to the top of the sector list in another session of selling for big tech, consumer discretionary and growth stocks.
The Nasdaq closed down -2.01% on higher volume. The 0% closing range comes after an all-day bearish move that formed a 99% red body candle. The tiny upper wick is barely visible and there is no lower wick. There were five declining stocks for every advancing stock.
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Thursday, March 25, 2021
Facts: +0.19%, Volume lower, Closing range: 85%, Body: +60%
Good: Closed near to intraday highs
Bad: Lower low hit in the morning, resistance at 13,000 near close
Highs/Lows: Lower high, lower low
Candle: Mostly green body with a slightly longer lower wick from morning dip
Advance/Decline: Three advancing stocks for every two declining stocks
Indexes: SPX (+0.52%), DJI (+0.62%), RUT (+2.29%), VIX (-6.56%)
Sectors: Financials (XLF +1.68%) and Industrials (XLI +1.60%) were top. Technology (XLK -0.06%) and Communications (XLC -0.49%) were bottom.
Expectation: Lower
Economic news seemed to weigh on the market after open, but investors shook off the weight later in the day to find gains across the major indexes. A short pullback to absorb the reaction from a weak 7y note auction was overcome to close near market intraday highs.
The Nasdaq closed with a +0.19% gain. The candle gave us a lower high and lower low, but overall is bullish look despite a morning dip and afternoon pullback. The closing range is 85% and a thick green body covering 60% of the candle. The lower volume, and lower high mean the trend is still downward.
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Friday, March 26, 2021
Facts: +1.24%, Volume higher, Closing range: 96%, Body: +53%
Good: Rally in afternoon to close near intraday high
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Thick green body with a long lower wick, very small upper wick
Advance/Decline: More than one advancing stock for every declining stock
Indexes: SPX (+1.66%), DJI (+1.39%), RUT (+1.76%), VIX (-4.80%)
Sectors: Technology (XLK +2.54%) and Materials (XLB +2.48%) were top. Utilities (XLU +0.33%) and Communications (XLC -1.09%) were bottom.
Expectation: Higher
A late afternoon rally in the market closed the week with a positive day for all the major indexes. It's not clear what caused the sudden late afternoon rally. It could just be expiring options activity, or it could be investors outlook of the economy improving. Morning economic data was mixed, but the personal income numbers and consumer sentiment showed the possibility of an upcoming rise in spending. Data from UK and Germany was also positive on their economies.
The Nasdaq closed the day with a +1.24% gain on higher volume. The closing range of 96% with a 53% green body over a long lower wick was enough to get a higher high on top of a higher low. The higher high and higher low with more volume than the previous day is a great indicator of strength. There were more advancing stocks than declining stocks.
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The Meaning of Life (View on the Week)
The week started with supply chain issues as a semiconductor plant in Japan was on fire. The week also ended with supply chain issues as a container ship remained stuck in the Suez Canal, blocking a major shipping route. The blockage caused oil prices to spike and more pressure on an already stressed supply chain.
Technology opened the week with huge gains from major leaders. But the gains were limited to big tech and all were on lower volume with no real breakouts. In the broader Nasdaq, there were two losers for every winner. On the surface, the chart looked ok, but the longer upper wick should have been another warning sign.
The bears were back on Tuesday and the selling was broad. New lockdowns across Europe and data issues with vaccine trials complicated the pandemic recovery and investors reacted. Utilities and Consumer Staples were at the top of the sector list while the cyclical sectors moved to the bottom. Pandemic stocks got a new life with Netflix, Peloton and Zoom topping the charts again. Global investors fled the US dollar and US treasuries as a safe haven, but equities suffered with 10 declining stocks for every advancing stock on the Nasdaq.
Wednesday brought another rotation. Cyclical sectors moved from the bottom of the sector list to the top of the sector list. Energy started to climb while a container ship blocking the Suez Canal, threatening oil and supply chain shortages. The US Dollar continued to rise. There were still five declining stocks for every advancing stock.
The Nasdaq crossed below a key level of 12,985.05 and looked very bearish with a Marubozu Black candle (no upper or lower wick, just red body). For Thursday, the index needed to hold above 12,783.40 which was the bottom line of the channel from the March 2020 bottom.
The index did hold, but not before testing that channel line. The Thursday candle is bullish. However, the lower high and lower low meant the downtrend continues. On the positive side, there were more advancing stocks than declining stocks. The US dollar gained again and the impact of a stronger dollar started to show up in the mega-caps list. Companies at the top of the gains list were ones that could benefit from a stronger dollar. Companies at the bottom of the list would have some negative impact by a strong dollar.
Friday opened with a mix of economic news and the continued stress of the Suez Canal blockage. The rally in the final hour saved the day to close the index higher. The reason for the rally was unclear, but may have been from positive economic news in Europe or it could have been market maker activity to cover for expiring options. The volume was higher, but still not as high as average volume since the beginning of the year. To put more confidence in a rally, I'd like to see consistent buying throughout the day with higher than average volume.
The Nasdaq declined -0.58% for the week on lower volume. The closing range of 53% is better than the previous week, but we have a lower high and a lower low.
The Nasdaq gave us a lower high and a lower low this week. A symmetrical triangle is forming which is usually followed by a move in the direction of the previous trend.
I focus on the Nasdaq because it holds many of the growth stocks that I tend to have in my portfolio. But I always keep an eye on the other major indexes in this report. The S&P 500 (SPX) had an all-time high close for the week and advanced +1.57%. The Dow Jones Industrial average (DJI) closed with a +1.36% gain.
Small caps and the Russell 2000 (RUT) struggled for a second week. It dipped more than 8% at one point but climbed back to close with a 62% closing range and end the week with a -2.89% loss.
The VIX volatility index closed the week at its lowest since March of 2020, declining -9.98% for the week.
There were several changes of winners and losers during a week that ended with the S&P 500 at a record close.
Technology ( XLK ) led for the first two days of the week. It held the lead on Tuesday, but was sold off heavily on Wednesday and Thursday, but then ended the week with a huge gain on Friday, putting it in third place.
Utilities ( XLU ) topped the list on Tuesday as investors became defensive. Utilities didn't take the top weekly spot on until Thursday when investors became more cautious again.
Consumer Staples ( XLP ) remained steady throughout the volatile week and ended the week at the top.
After last week's rout, Energy ( XLE ) seemed to find a bottom on Tuesday. After a big gain on Wednesday, the sector opened back near the bottom on Thursday, but quickly recovered . By the end of Friday, it was able to end the week with a gain.
Communication Services ( XLC ) and Consumer Discretionary ( XLY ) were the only two sectors to decline for the week. Communication Services ended the week at the bottom with more than a 4% decline. Although Technology sector fared well, there is still evidence of rotation from growth to value.
Longer term treasury yields pulled back from recent gains. The US 30y bond and US 10y note yields both dropped relative to the 2y note. There was a brief scare with a disappointing 7y note auction on Thursday, but bonds did not sell off heavily like after the previous lackluster auctions.
The yield curve still remains steep but has stopped steepening for the past few weeks.
High Yields Corporate Bonds (HYG) and Investment Grade (LQD) corporate bond prices both advanced for the week. The spread between corporate bonds and short term treasury bonds tightened.
The US Dollar (DXY) advanced +0.89% and is now having some impact on multinationals valuations.
Silver (SILVER) and Gold (GOLD) both declined for the week.
Crude Oil Futures (CRUDEOIL1!) remained about even for the week, despite a choppy up and down week.
Timber (WOOD) advanced. Copper (COPPER1!) declined while Aluminum (ALI1!) advanced. The continuing growth in aluminum prices is a signal of the high demand created by the recovering economy and manufacturing companies trying to keep up with expected demand.
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The Big Four Mega-caps
Apple (AAPL) and Microsoft (MSFT) were able to end the week with gains while Amazon (AMZN) and Alphabet (GOOGL) declined for the week. Microsoft and Alphabet closed above their 10w moving average lines. Apple is below the 10w but above the 40w moving average. Amazon remains below both moving average lines. Relative to the Nasdaq, Microsoft and Alphabet have been outperforming while Apple and Amazon have been underperforming.
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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. Exxon Mobil was the only one to end the week with gains as oil prices are expected to rise with the continued blockage of the Suez Canal. The others sold off sharply early in the week as the pandemic seemed to pop back into investors' worries. They all recovered later in the week, but not enough to end the week with gains. All of the four recovery stocks are trading above both key moving average lines.
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Investor Sentiment
The put/call ratio (PCCE) ended the week at 0.753. 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 is near to the neutral territory.
The NAAIM exposure index moved down to 57.52. Money managers were reducing positions in the market as of Wednesday when the survey is taken.
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The Week Ahead
Next week will only have four days of trading. Markets will be closed for Good Friday.
A few short term bill auctions are scheduled for Monday. Otherwise there is not much economic news for the start of the week. Investors will be watching for an update to the situation with the Suez Canal.
On Tuesday, the CB Consumer Confidence numbers will be released just after market open. The API Weekly Crude Oil Stock will be updated after market close.
There will be a few key updates on Wednesday morning. First employment data for March will be updated. Purchasing Managers Index data will indicate how much purchasing activity is happening in order to meet manufacturing demands. Pending Home Sales and Crude Oil Inventories will be released after market open.
On Thursday, an OPEC meeting is scheduled which will impact outlook for oil supply/demand. Initial Jobless Claims data will be released. Additional Manufacturing data for March will indicate how the sector is recovering.
The markets will be closed on Good Friday, but there will still be some economic data released. Hourly Earnings, Nonfarm Payrolls and the Unemployment Rate will all show how strong the labor market is recovering.
There are no daily update earnings reports for Monday.
Lululemon (LULU), Chewy (CHWY), Carnival Corp (CCL), and HyreCar (HYRE) will report earnings on Tuesday.
Walgreens (WBA) and Riot Blockchain (RIOT) report on Wednesday.
CarMax (KMX) reports on Thursday.
No earnings reports for Good Friday.
Be sure to check your portfolio for upcoming earnings reports.
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The Bullish Side
Looking broadly across the market, the S&P 500 closed at an all-time high. The Dow Jones Industrial average is near all-time highs. Despite the performance for the Nasdaq, broadly the markets are performing well. Investors continue to rotate into value stocks, away from growth stocks, but that was a necessary rebalancing. Soon the rebalance will be over and stocks can broadly advance together.
Global investors are seeing safety and value in the US Dollar again, which helps to strengthen the bond market as well. That should keep yields and the yield curve under control at least for a while. The Fed will continue to buy up bonds to control the yield curve while not worrying up inflation.
Rising consumer sentiment means record savings and new stimulus checks could be poured into the economy soon.
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The Bearish Side
The supply chain is strained from two big events this week and the higher spending expected in coming months could put more upward pressure on prices. Inflation could scare investors and cause more negative reactions in the bond and equity markets.
The rising US Dollar is a signal of strength in the economy, but also could have impacts on multinationals that will cause further rotation and volatility. Add that rotation on top of the continuing rotation from growth stocks to value stocks.
There is some discussion in the news of large margin calls linked to Archegos happening last week that may continue into next week. If so, there could be more downward pressure on the indexes.
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Key Nasdaq Levels to Watch
The Nasdaq stayed in a channel drawn from the March 2020 bottom and is forming a symmetrical triangle that should breakout this week or next. It could breakout to the upside or downside.
On the positive side, the level we still want to reach is 13,620.71, but there's a few levels to pass before that happens:
- The 21d EMA is at 13,239.15. We need to get above that line and stay above it.
- The 50d MA is at 13,426.43. The 50d started to trend lower this week, and we need it to trend higher.
- After the 50d MA, this past weeks high of 13,455.64 is the next goal. We need a higher high for next week.
- The next line is 13,620.71 which is the high from two weeks ago. But it is also past the area of resistance that the index was rejected on 1/26, 3/2, and 3/16.
- 14,000 will be the next area of resistance.
- The all-time high is at 14,175.12. That might be a stretch to get there this week, but keep it in our sites.
On the downside, the index must stay above 12,985.05 which was a previous neck line on a head and shoulders:
- 13,000 has been an area of support on 1/29, 2/23, 3/3. The index broke below that support area this week, but was able to rise back above it before the end of the week.
- 12,985.05 is just below that support area and a key level that would mark bearishness. The index also breached that line this past week.
- The lower line of the channel from the March 2020 bottom is around 12,924 for next week.
- The low of this past week is 12,786.81. Stay above that price to give us a higher low for this week.
- The next support area is 12,500-12,550.
- 12,397.05 is the current bottom of the recent correction on the Nasdaq. Let's not make a new bottom.
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Wrap-up
It may not seem like it looking at growth stocks or small caps, but there was plenty of optimism in the market this past week. The optimism though was focused on the economic recovery and what sectors stocks will benefit the most over the coming months.
Global investors are recognizing the strength of the US economic recovery and buying up the US dollar.
As the balance of growth and value stocks starts to even out, we can expect some of that global investment to start to move into the 2020 winners again. Still there is no guarantee that what did well last year, will do well again this year. Find what is holding up well relative to their industry sectors and the indexes.
Good luck, stay healthy and trade safe!
