Trend lines drawn from the 10/12 pivot day (17d), 10/28 (5d), and today 11/3 (1d).
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Tuesday, November 3, 2020
Stand straight, walk proud
‘Cause we shall be free
Facts: +1.85% higher, Volume higher, Closing range: 74%, Red Body: 58%
Good: Bulls led the day, and held near the day’s highs
Bad: Couldn’t break through 11,300 area
Highs/Lows: Higher low, higher high
Candle: Thick green body with a slightly longer upper wick
Advance/Decline: 3.78, Almost 4 advancers for every decliner
Sectors: Industrials (XLI +2.95%), Financials (XLF +2.22%), Consumer Discretionary (XLY +2.20%) were at top. Energy (XLE -0.57%) was the only losing sector.
Expectation: Sideways or Higher
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Market Overview
It is finally Election Day! And the day brought the pleasant surprise of a positive expectation breaker for the Nasdaq. Yesterday’s trend lines and the indecisive candle pointed to losses for today, but it is good to be wrong sometimes. I set my expectations for the next day, but always be prepared for a break from those expectations, especially during these uncertain times. The Nasdaq gained +1.85% today, climbing to just under the September resistance area of 11,300. Volume was slightly higher than the previous day. The index closed at a 74% closing range after developing a 58% green body. There were nearly four advancers for every declining stock. That is all good signal in the market.
There is still some work for the Nasdaq to show strength, focusing on getting past the high of 10/29 at 11287.63, showing a breakout from Wednesday’s severe drop. Right now, it is still trading within the range of the previous four days.
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Indexes and Sectors
The S&P 500 (SPX +1.78%), Dow Jones Industrial (DJI +2.06%) and Russell 2000 (RUT +2.91%) also had significant gains today. The Russell 2000 gains show the continued investment in small cap stocks. These indexes all broke above the trading range of the past four days, which is a good sign of strength. Industrials (XLI +2.95%) led the sectors for the day, followed closely by Financials (XLF +2.22%) and Consumer Discretionary (XLY +2.20%). All of these sectors would benefit from a stimulus, especially under a Biden presidency. Energy (XLE -0.57%) was the losing sector of the day, and the only sector to finish with losses. The Energy sector is not expected to benefit from a Biden presidency. If you look at the market to predict the election outcome, this is consistent to what it’s been pricing in recently. Keep in mind the old saying "to buy the rumor and sell the news."
The VIX volatility index decreased -4.26% continuing it’s decent from last week’s high, but is still well above the 200d moving average.
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Bonds
Treasury Bond spreads increased for the day. The 30Y-10Y spread is starting to form a downward trend but is still well off the pivot low in late July. Not a concern right now but will continue to watch.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
With few exceptions, mega-caps had a great day. The big four, Apple (AAPL +1.54%), Microsoft (MSFT +2.03%), Google (GOOG +1.49%) and Amazon (AMZN +1.46%) all had good gains today. Only Google is trading above it is key 21d EMA and 50d MA line. Expect the other three to have some resistance at these lines if they continue to approach them over the next few days. Also, looking at the relative candle, you can see only Microsoft (MSFT) started higher and moved higher than the overall index. It would be better if they were all moving up in a bullish way, giving the market more energy to rise from a bottom. Among other growth stocks, there were mostly positive gains. A few exceptions include Solar Edge (SEDG -22.92%) which disappointed on earnings and PayPal (PYPL -4.23%) which provided lower guidance for the coming fourth quarter. Wayfair (W +7.23%) had a great day after smashing expectations on earnings announced before the market open.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
It is hard to even look past tonight, as much will depend on the outcome of the election and the candidate’s reaction to the outcome. Tomorrow will bring updates on Employment data before market open and Crude Oil Inventories data at 10:30a. Several companies will be reporting earnings tomorrow including Hilton (HLT +3.01%) and Expedia (EXPE +4.31%) which will give visibility on how business and leisure travel are doing. Qualcomm (QCOM +1.19%), Baidu (BIDU +0.04%), Zynga (ZNGA +2.59%) and Paycom (PAYC +2.37%) are among some of the other important earnings announcements for tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
A continuation of today’s trend line would lead to a +0.53% increase for tomorrow and land the index just below the September resistance area of 11,300. With some additional energy, it could break through that area, but expect that it will pause there before further gains.
Looking at the other trend lines, the trend from the 10/12 pivot day would point to a -2.19% loss tomorrow. That is lower then the 5-day trend which has been flattening since last Wednesday and Friday big losses.
Putting more distance in between the index and the July support area is a good thing. Breaking through this support area would be dangerous as there is not much trading activity in the second half of the year in between that line and the June support area of 10,000. I kept in view the future possibility of reaching the June support area, a -9.20% loss from today’s close.
Continue to be prepared for unexpected moves over the next few days as the election unknowns are resolved and the market starts to absorb the news.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Tuesday, November 3, 2020
Stand straight, walk proud
‘Cause we shall be free
Facts: +1.85% higher, Volume higher, Closing range: 74%, Red Body: 58%
Good: Bulls led the day, and held near the day’s highs
Bad: Couldn’t break through 11,300 area
Highs/Lows: Higher low, higher high
Candle: Thick green body with a slightly longer upper wick
Advance/Decline: 3.78, Almost 4 advancers for every decliner
Sectors: Industrials (XLI +2.95%), Financials (XLF +2.22%), Consumer Discretionary (XLY +2.20%) were at top. Energy (XLE -0.57%) was the only losing sector.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
It is finally Election Day! And the day brought the pleasant surprise of a positive expectation breaker for the Nasdaq. Yesterday’s trend lines and the indecisive candle pointed to losses for today, but it is good to be wrong sometimes. I set my expectations for the next day, but always be prepared for a break from those expectations, especially during these uncertain times. The Nasdaq gained +1.85% today, climbing to just under the September resistance area of 11,300. Volume was slightly higher than the previous day. The index closed at a 74% closing range after developing a 58% green body. There were nearly four advancers for every declining stock. That is all good signal in the market.
There is still some work for the Nasdaq to show strength, focusing on getting past the high of 10/29 at 11287.63, showing a breakout from Wednesday’s severe drop. Right now, it is still trading within the range of the previous four days.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The S&P 500 (SPX +1.78%), Dow Jones Industrial (DJI +2.06%) and Russell 2000 (RUT +2.91%) also had significant gains today. The Russell 2000 gains show the continued investment in small cap stocks. These indexes all broke above the trading range of the past four days, which is a good sign of strength. Industrials (XLI +2.95%) led the sectors for the day, followed closely by Financials (XLF +2.22%) and Consumer Discretionary (XLY +2.20%). All of these sectors would benefit from a stimulus, especially under a Biden presidency. Energy (XLE -0.57%) was the losing sector of the day, and the only sector to finish with losses. The Energy sector is not expected to benefit from a Biden presidency. If you look at the market to predict the election outcome, this is consistent to what it’s been pricing in recently. Keep in mind the old saying "to buy the rumor and sell the news."
The VIX volatility index decreased -4.26% continuing it’s decent from last week’s high, but is still well above the 200d moving average.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Bonds
Treasury Bond spreads increased for the day. The 30Y-10Y spread is starting to form a downward trend but is still well off the pivot low in late July. Not a concern right now but will continue to watch.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
With few exceptions, mega-caps had a great day. The big four, Apple (AAPL +1.54%), Microsoft (MSFT +2.03%), Google (GOOG +1.49%) and Amazon (AMZN +1.46%) all had good gains today. Only Google is trading above it is key 21d EMA and 50d MA line. Expect the other three to have some resistance at these lines if they continue to approach them over the next few days. Also, looking at the relative candle, you can see only Microsoft (MSFT) started higher and moved higher than the overall index. It would be better if they were all moving up in a bullish way, giving the market more energy to rise from a bottom. Among other growth stocks, there were mostly positive gains. A few exceptions include Solar Edge (SEDG -22.92%) which disappointed on earnings and PayPal (PYPL -4.23%) which provided lower guidance for the coming fourth quarter. Wayfair (W +7.23%) had a great day after smashing expectations on earnings announced before the market open.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
It is hard to even look past tonight, as much will depend on the outcome of the election and the candidate’s reaction to the outcome. Tomorrow will bring updates on Employment data before market open and Crude Oil Inventories data at 10:30a. Several companies will be reporting earnings tomorrow including Hilton (HLT +3.01%) and Expedia (EXPE +4.31%) which will give visibility on how business and leisure travel are doing. Qualcomm (QCOM +1.19%), Baidu (BIDU +0.04%), Zynga (ZNGA +2.59%) and Paycom (PAYC +2.37%) are among some of the other important earnings announcements for tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
A continuation of today’s trend line would lead to a +0.53% increase for tomorrow and land the index just below the September resistance area of 11,300. With some additional energy, it could break through that area, but expect that it will pause there before further gains.
Looking at the other trend lines, the trend from the 10/12 pivot day would point to a -2.19% loss tomorrow. That is lower then the 5-day trend which has been flattening since last Wednesday and Friday big losses.
Putting more distance in between the index and the July support area is a good thing. Breaking through this support area would be dangerous as there is not much trading activity in the second half of the year in between that line and the June support area of 10,000. I kept in view the future possibility of reaching the June support area, a -9.20% loss from today’s close.
Continue to be prepared for unexpected moves over the next few days as the election unknowns are resolved and the market starts to absorb the news.
