Summary: 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.
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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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
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Market Overview
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.
The Russell 2000 (RUT) was again the worst major index for the day, declining -1.24%. Investors have been exiting small-cap stocks and rotating back into big tech and growth stocks. The Dow Jones Industrial Average (DJI) fell -0.86%. The S&P 500 (SPX) dropped -0.75%.
The defensive sectors were at the top of the sector list for another day and topped the weekly list. Utilities (XLU +1.01%) and Health (XLV +0.27%) were the best performing sectors. Materials (XLB -1.51%) and Energy (XLE -2.83%) were the worst-performing.
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Economic Indicators
Retail Sales data came in higher than expected. However, Consumer Expectations and Sentiment surprised analysts with lower numbers than expected. Analysts expected higher sentiment because the US is emerging from the pandemic and getting back to a somewhat normal life. The lower number adds some worry that the recovery is slowing among concerns over inflation and new virus variants.
The US Dollar (DXY) rose +0.16% for the day.
The US 30y Treasury Yield rose slightly, while the 10y and 2y Yields declined.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) declined sharply.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) also declined sharply.
Copper (COPPER1!) advanced, and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) declined -1.45%. Ethereum (ETHUSD) declined -2.05%.
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Investor Sentiment
The put/call ratio rose to 0.859, showing investors getting more bearish. 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. Below that level is overly bullish.
The CNN Fear & Greed index moved into extreme fear. The extreme fear indicator is driven by demand for bonds (lower yields), higher put/call ratio, and weakening stock prices. Interestingly, the Junk Bond component still shows Greed.
The NAAIM Money Manager exposure index rose to 93.27 this week.
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Market Leaders
All big four mega-caps declined again today. Amazon (AMZN) declined the most this week, adding a -1.59% drop this week and closing just above its 21d EMA. Apple (AAPL) fell -1.41%. Microsoft (MSFT) and Alphabet (GOOGL) had smaller losses, declining -0.10% and -0.03%, respectively.
The top mega-caps for today are Oracle (ORCL), Danaher (DHR), Novo Nordisk (NVO), and Thermo Fischer (TMO). Danaher and Novo Nordisk are new to the list, topping the $200 billion market cap with gains this week as the Health sector picks up momentum. At the bottom of the list are Nvidia (NVDA), Exxon Mobil (XOM), Walt Disney (DIS), and ASML Holding (ASML).
The daily update growth stock list continued a tough week with more losers than gainers. Sumo Digital (SUMO), DocuSign (DOCU), Fastly (FSLY), and Zoom (ZM) were at the top of the list. The
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Looking ahead
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.
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Trends, Support, and Resistance
The Nasdaq closed below the 21d exponential moving average line today.
I removed the trend line from the 5/12 low and added a new trend line from the 7/13 high.
The five-day trend line points to a -0.07% decline for Monday.
The trend-line from the 7/13 high ends with a -0.58% loss.
The one-day trend line points to a -0.76% loss.
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Wrap-up
Gains over the past week have been focused mainly on big tech, while the rest of the market showed weakness. Investors are worried that the economic recovery is slowing, and that will hurt smaller companies the most. Big tech could only carry the indexes to a certain point and was due for a pullback. We'll have to wait for next week to see if there is a further correction or if the outlook will improve and support comes back into equities.
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=-
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
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Market Overview
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.
The Russell 2000 (RUT) was again the worst major index for the day, declining -1.24%. Investors have been exiting small-cap stocks and rotating back into big tech and growth stocks. The Dow Jones Industrial Average (DJI) fell -0.86%. The S&P 500 (SPX) dropped -0.75%.
The defensive sectors were at the top of the sector list for another day and topped the weekly list. Utilities (XLU +1.01%) and Health (XLV +0.27%) were the best performing sectors. Materials (XLB -1.51%) and Energy (XLE -2.83%) were the worst-performing.
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Economic Indicators
Retail Sales data came in higher than expected. However, Consumer Expectations and Sentiment surprised analysts with lower numbers than expected. Analysts expected higher sentiment because the US is emerging from the pandemic and getting back to a somewhat normal life. The lower number adds some worry that the recovery is slowing among concerns over inflation and new virus variants.
The US Dollar (DXY) rose +0.16% for the day.
The US 30y Treasury Yield rose slightly, while the 10y and 2y Yields declined.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) declined sharply.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) also declined sharply.
Copper (COPPER1!) advanced, and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) declined -1.45%. Ethereum (ETHUSD) declined -2.05%.
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Investor Sentiment
The put/call ratio rose to 0.859, showing investors getting more bearish. 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. Below that level is overly bullish.
The CNN Fear & Greed index moved into extreme fear. The extreme fear indicator is driven by demand for bonds (lower yields), higher put/call ratio, and weakening stock prices. Interestingly, the Junk Bond component still shows Greed.
The NAAIM Money Manager exposure index rose to 93.27 this week.
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Market Leaders
All big four mega-caps declined again today. Amazon (AMZN) declined the most this week, adding a -1.59% drop this week and closing just above its 21d EMA. Apple (AAPL) fell -1.41%. Microsoft (MSFT) and Alphabet (GOOGL) had smaller losses, declining -0.10% and -0.03%, respectively.
The top mega-caps for today are Oracle (ORCL), Danaher (DHR), Novo Nordisk (NVO), and Thermo Fischer (TMO). Danaher and Novo Nordisk are new to the list, topping the $200 billion market cap with gains this week as the Health sector picks up momentum. At the bottom of the list are Nvidia (NVDA), Exxon Mobil (XOM), Walt Disney (DIS), and ASML Holding (ASML).
The daily update growth stock list continued a tough week with more losers than gainers. Sumo Digital (SUMO), DocuSign (DOCU), Fastly (FSLY), and Zoom (ZM) were at the top of the list. The
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Looking ahead
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.
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Trends, Support, and Resistance
The Nasdaq closed below the 21d exponential moving average line today.
I removed the trend line from the 5/12 low and added a new trend line from the 7/13 high.
The five-day trend line points to a -0.07% decline for Monday.
The trend-line from the 7/13 high ends with a -0.58% loss.
The one-day trend line points to a -0.76% loss.
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Wrap-up
Gains over the past week have been focused mainly on big tech, while the rest of the market showed weakness. Investors are worried that the economic recovery is slowing, and that will hurt smaller companies the most. Big tech could only carry the indexes to a certain point and was due for a pullback. We'll have to wait for next week to see if there is a further correction or if the outlook will improve and support comes back into equities.
Stay healthy and trade safe!
