Trend lines drawn from the 3/5 low (12d), 3/16 (5d) and today 3/22 (1d).
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=- 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
-=x=-=x=-=x=-=x=-=x=-=x=-=x=- Market Overview
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.
The S&P 500 (SPX) and Dow Jones Industrial (DJI) closed with +0.70% and +0.32% gains, largely driven by big tech stocks. The Russell 2000 (RUT) started the day in the positive, but sold off in the morning as the Nasdaq was rallying. The RUT ended the day with a -0.91% gain.
The VIX volatility index declined -9.88%, back to its lowest level since February 2020.
Technology (XLK +1.75%) was the top performing sector of the day and the only sector to perform better than the broader S&P 500 index. Communication Services (XLC +0.66%) was the next best sector. Financials (XLF -1.72%) and Energy (XLE -2.00%) performed the worst for the day. Energy continues to underperform after having one of its worst weeks in recent memory last week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=- Economic Indicators
The US Dollar (DXY) declined -0.09%.
The US 30y bond and 10y and 2y treasury note yields all declined for the day, helping drive the gains for big tech and growth stocks.
High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) both advanced for the day.
Silver (SILVER) and Gold (GOLD) both declined for the day. Crude Oil (CRUDEOIL1!) gained for the day. Timber (WOOD) declined. Copper (COPPER1!) was about even while Aluminum (ALI1!) continues advancing to its highest point since 2019.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment
The put/call ratio is at 0.532. 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 near neutral.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=- Market Leaders
The four largest mega-caps all had gains for the day. Apple (AAPL) and Microsoft (MSFT) led the way with +2.83% and 2.45% gains. Amazon (AMZN) gained +1.17% and Alphabet (GOOGL) gained +0.18%. To put these gains into perspective though, consider a few things. All of them are on lower volume. Only Microsoft moved back above its 21d EMA line, while Apple attempted but found resistance. None of the gains were at a "breakout" level where the price moves past the high within a base.
Overall mega-caps did well with ASML Holding (ASML) topping the list with a 5.22% gain. Baidu (BIDU), Taiwan Semiconductor (TSM) and Intel (INTC) round out the top four mega-caps. At the bottom of the list were Bank of America (BAC) and JPMorgan Chase (JPM), leading the Financials sector lower. Also at the bottom of the list was Toyota Motor (TM) which could have a big impact from a fire at Japanese auto chip manufacturer Renesas.
Digital Turbine (APPS) led growth stocks with a big +10.31% gain. This gain was on higher volume and could be considered a breakout. Okta (OKTA), Chewy (CHWY) and Enphase Energy (ENPH) were other leading growth stocks. At the bottom of the growth stock list were three Chinese stocks. FUTU Holdings (FUTU), UP Fintech (TIGR) and Ehang Holdings (EH) all lost more than 6%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=- Looking ahead
On Tuesday, New Home Sales data will be released. Also, API Weekly Crude Oil stock will be revealed.
Fed chairman Jerome Powell will begin testimony before congress where he's expected to applaud the stimulus bill and economic support programs as having a positive impact, but that we are not out of the woods yet for long term economic recovery.
There will be a 2y treasury note auction tomorrow which will be watched closely.
Adobe (ADBE) will release earnings on Tuesday. It probably doesn't make much difference for the stock price, but GameStop (GME) will also announce earnings on Tuesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=- Trends, Support and Resistance
The index closed above the 21d EMA today, but was unable to hold support above the 50d MA.
The trend line from the 3/5 bottom points to a +1.47% gain for tomorrow, just under the 13,600 support area. The one-day trend line points to a +1.28% gain, and back above the 50d MA.
The five-day trend line points to a -1.39% loss, back below the 21d EMA.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up
It was a good to start the week with a gain for the Nasdaq. However, the gains were not broadly shared and were on less volume than has been average since the start of the year.
Investors are still watching yields closely on treasury notes and bonds, adjusting valuations on sectors such as Technology, Communications and Financials. As they yields continue to be volatile, expect these sectors to also be volatile.
Also watch for surprises from the testimony of Jerome Powell to congress. If pressed with questions, investors will be listening closely to his answers to understand the timing of future tapering of bond buying or interest rate hikes. So far, he has been firm and clear that nothing would change through 2023.
Hi and thanks for the analysis.
Regarding the Investor Sentiment:
"The put/call ratio is at 0.532. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish ) and below 1", why should we watch for a possible pullback in the market?
Thanks!
Madcaptains
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@hugopouchard, id love to better understand that one too
drewby4321
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@hugopouchard, Hi! There are many contrarian indicators that people look at as flags or warning signs. Many of them track the bullishness or bearishness of investors in the market. Investors generally are at their most bullish at the end of moves upward and most bearish at the end of moves downward.
When the put/call ratio is low, it means there are many more option calls than puts in the market. Investors are overly bullish, and you can also think of the market as overbought. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction. It was at 0.5 on 2/11 just two trading days before we hit the all-time high.
There are times it will go low and there is not much pullback. In fact ever since last March's bottom, and the fed has been propping up the market, this indicator has on average been very low compared to other periods of time.
The CNN Fear & Greed indicator is similar. Investors are usually at the most greedy level (also bullish) just before market dips.
The NAAIM exposure index measures how much money managers are invested in the market. How much margin are they using? If they are far into margin, it indicates very bullish sentiment, and potentially the market is overbought.
philbest313
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We are hoping for a revival in the EV minerals scene.
However this currently seems very rare, with some stocks doing ok on one day and then badly on the next day.
Whilst we all believe that EV minerals will soon be in short supply, this has clearly not happened yet, whilst the likes of Galaxy Resources sleeping at only AU$2.35, Piedmont Lithium at under AU$1.10.
However CCW:CA is possibly trying to follow AMY:CA into "recycling heaven", hopefully they will continue their rise to fame.
drewby4321
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@philbest313, Yep, many sectors are very volatile right now. Really hard to trade anything at this point.
Regarding the Investor Sentiment:
"The put/call ratio is at 0.532. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish ) and below 1", why should we watch for a possible pullback in the market?
Thanks!