Summary: Rising jobless claims surprised the market this morning, sending cyclical sectors lower and causing a reversal in small caps after several days of gains. Investors rotated back into growth stocks and big tech, which are more resilient to the swings in the economy.
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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Thursday, July 22, 2021
Facts: +0.36%, Volume lower, Closing range: 87%, Body: 42%
Good: High closing range with higher high and higher low
Bad: Low volume, low A/D ratio
Highs/Lows: Higher high, higher low
Candle: Longer lower wick, a medium size green body in upper half
Advanced/Decline: 0.32, three declining stocks for every advancing stock
Indexes: SPX (+0.20%), DJI (+0.07%), RUT (-1.55%), VIX (-1.23%)
Sectors: Technology (XLK +0.74%) and Health (XLV +0.74%) at the top. Financials (XLF -1.09%) and Energy (XLE -1.12%) were bottom.
Expectation: Sideways or Lower
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Market Overview
Rising jobless claims surprised the market this morning, sending cyclical sectors lower and causing a reversal in small caps after several days of gains. Investors rotated back into growth stocks and big tech, which are more resilient to the swings in the economy.
The Nasdaq finished the day with a +0.36% on lower volume than the previous day. The day ended with an 87% closing range for the index. A 45% body sits in the upper half of the candle, above a long lower wick formed in the morning as investors absorbed the economic news.
The Russell 2000 (RUT) declined -1.55%, losing most of the gains from the previous day. The S&P 500 (SPX) gained +0.20%, while the Dow Jones Industrial Average (DJI) gained only +0.07%.
The VIX volatility index declined -1.23%.
Technology (XLK +0.74%) led the sector list, helped along by big tech. Health (XLV +0.74%) had a nearly equivalent gain to also land at the top. Financials (XLF -1.09%) and Energy (XLE -1.12%) were at the bottom of the list.
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Economic Indicators
Both Continuing Jobless Claims and Initial Jobless Claims came in higher than expected. The numbers are still higher than pre-pandemic levels, so an unexpected uptrend is alarming to analysts. Existing Home Sales data came in lower than expected.
The US Dollar (DXY) advanced +0.06% for the day.
The US 30y, 10y, and 2y Treasury Yields all declined slightly today.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices both advanced today.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) prices advanced.
Timber (Wood) advanced.
Copper (COPPER1!) advanced, and Aluminum (ALI1!) advanced.
Bitcoin (BTCUSD) advanced +0,35%. Ethereum (ETHUSD) advanced +0.90%. (Time of writing)
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Investor Sentiment
The put/call ratio rose to 0.714. 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 back into Fear (instead of Extreme Fear), heading toward Neutral.
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Market Leaders
The four largest mega-caps all gained for the day. Microsoft (MSFT) led the group with a +1.68% advance and a new all-time high, thanks to a price target upgrade from Citi. Amazon (AMZN) climbed by +1.47%. Apple (AAPL) gained +0.96%. Alphabet (GOOGL) rose +0.68%. All four are trading above key moving average lines.
Danaher Corporation (DHR), Salesforce.com (CRM), Thermo Fisher Scientific (TMO), and Adobe (ADBE) were the top mega-cap gainers for the day. Bank of America (BAC), JP Morgan (JPM), Exxon Mobil (XOM), and Taiwan Semiconductor (TSM) were at the bottom of the list.
Despite the focus on growth stocks today, the daily update list is about half gainers and half losers. The top of the list includes CloudFlare (NET), Crowdstrike (CRWD), Snowflake (SNOW), and Etsy (ETSY). At the bottom of the list are Chinese stocks FUTU Holding (FUTU), Ehang Holding (EH), and UP Fintech (TIGR), all with losses greater than 7%.
SNAP (SNAP) is up over 16% in after-hours trading after an earnings beat and doubling revenue from a year earlier. Twitter (TWTR) was up nearly 5%, showing better than expected growth in its earnings release.
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Looking ahead
The Manufacturing and Services purchasing manager indexes released on Friday will be another indicator of economic activity and the speed of the recovery.
Friday's earning reports include Honeywell (HON), American Express (AXP), and Schlumberger (SLB).
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Trends, Support, and Resistance
The Nasdaq is making a slow but steady climb back to all-time highs.
The five-day trend line points to a +0.29% gain for Friday.
The one-day trend line ends with a +0.14% gain.
The trend line from the 7/13 high points to a -1.39% decline.
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Wrap-up
The unexpected economic data that arrived this morning took some steam out of the broader rally while rotating investment back into big tech and a focused list of growth stocks. Give the lower volume and the low advance/decline ratio, the gains today were rather weak. Therefore, the expectation for tomorrow will be sideways or lower.
One might also expect investors to be nervous heading into the weekend, considering the unknowns around the pandemic and economic recovery.
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=-
Thursday, July 22, 2021
Facts: +0.36%, Volume lower, Closing range: 87%, Body: 42%
Good: High closing range with higher high and higher low
Bad: Low volume, low A/D ratio
Highs/Lows: Higher high, higher low
Candle: Longer lower wick, a medium size green body in upper half
Advanced/Decline: 0.32, three declining stocks for every advancing stock
Indexes: SPX (+0.20%), DJI (+0.07%), RUT (-1.55%), VIX (-1.23%)
Sectors: Technology (XLK +0.74%) and Health (XLV +0.74%) at the top. Financials (XLF -1.09%) and Energy (XLE -1.12%) were bottom.
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Rising jobless claims surprised the market this morning, sending cyclical sectors lower and causing a reversal in small caps after several days of gains. Investors rotated back into growth stocks and big tech, which are more resilient to the swings in the economy.
The Nasdaq finished the day with a +0.36% on lower volume than the previous day. The day ended with an 87% closing range for the index. A 45% body sits in the upper half of the candle, above a long lower wick formed in the morning as investors absorbed the economic news.
The Russell 2000 (RUT) declined -1.55%, losing most of the gains from the previous day. The S&P 500 (SPX) gained +0.20%, while the Dow Jones Industrial Average (DJI) gained only +0.07%.
The VIX volatility index declined -1.23%.
Technology (XLK +0.74%) led the sector list, helped along by big tech. Health (XLV +0.74%) had a nearly equivalent gain to also land at the top. Financials (XLF -1.09%) and Energy (XLE -1.12%) were at the bottom of the list.
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Economic Indicators
Both Continuing Jobless Claims and Initial Jobless Claims came in higher than expected. The numbers are still higher than pre-pandemic levels, so an unexpected uptrend is alarming to analysts. Existing Home Sales data came in lower than expected.
The US Dollar (DXY) advanced +0.06% for the day.
The US 30y, 10y, and 2y Treasury Yields all declined slightly today.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices both advanced today.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) prices advanced.
Timber (Wood) advanced.
Copper (COPPER1!) advanced, and Aluminum (ALI1!) advanced.
Bitcoin (BTCUSD) advanced +0,35%. Ethereum (ETHUSD) advanced +0.90%. (Time of writing)
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Investor Sentiment
The put/call ratio rose to 0.714. 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 back into Fear (instead of Extreme Fear), heading toward Neutral.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
The four largest mega-caps all gained for the day. Microsoft (MSFT) led the group with a +1.68% advance and a new all-time high, thanks to a price target upgrade from Citi. Amazon (AMZN) climbed by +1.47%. Apple (AAPL) gained +0.96%. Alphabet (GOOGL) rose +0.68%. All four are trading above key moving average lines.
Danaher Corporation (DHR), Salesforce.com (CRM), Thermo Fisher Scientific (TMO), and Adobe (ADBE) were the top mega-cap gainers for the day. Bank of America (BAC), JP Morgan (JPM), Exxon Mobil (XOM), and Taiwan Semiconductor (TSM) were at the bottom of the list.
Despite the focus on growth stocks today, the daily update list is about half gainers and half losers. The top of the list includes CloudFlare (NET), Crowdstrike (CRWD), Snowflake (SNOW), and Etsy (ETSY). At the bottom of the list are Chinese stocks FUTU Holding (FUTU), Ehang Holding (EH), and UP Fintech (TIGR), all with losses greater than 7%.
SNAP (SNAP) is up over 16% in after-hours trading after an earnings beat and doubling revenue from a year earlier. Twitter (TWTR) was up nearly 5%, showing better than expected growth in its earnings release.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
The Manufacturing and Services purchasing manager indexes released on Friday will be another indicator of economic activity and the speed of the recovery.
Friday's earning reports include Honeywell (HON), American Express (AXP), and Schlumberger (SLB).
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq is making a slow but steady climb back to all-time highs.
The five-day trend line points to a +0.29% gain for Friday.
The one-day trend line ends with a +0.14% gain.
The trend line from the 7/13 high points to a -1.39% decline.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The unexpected economic data that arrived this morning took some steam out of the broader rally while rotating investment back into big tech and a focused list of growth stocks. Give the lower volume and the low advance/decline ratio, the gains today were rather weak. Therefore, the expectation for tomorrow will be sideways or lower.
One might also expect investors to be nervous heading into the weekend, considering the unknowns around the pandemic and economic recovery.
Stay healthy and trade safe!
