Trend lines drawn from the 2/16 ATH (15d), 3/2 (5d) and today 3/8 (1d).
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Monday, March 8, 2021
Facts: -2.41%, Volume lower, Closing range: 2%, Body: 73%
Good: Held above 12,600 as market closed
Bad: Could not hold short rally in morning, selling the rest of afternoon
Highs/Lows: Higher high, higher low
Candle: Short upper wick over a thick red body, no lower wick
Advance/Decline: More than one declining stock for every advancing stock
Indexes: SPX (-0.54%), DJI (+0.97%), RUT (+0.49%), VIX (+3.28%)
Sectors: Utilities (XLU +1.41%) and Materials (XLB +1.34%) were the top sectors. Communications (XLC -1.34%) and Technology (XLK -2.42%) were bottom.
Expectation: Lower
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Market Overview
The rotation continues. It's not often that a rotation is so clearly seen, with the Dow Jones ending the day up nearly 1% and the Nasdaq ending the day down 2.41%. Nine sectors outperformed the broader S&P 500 index, while the other two sectors lost enough to bring down the index for a loss by the end of the day.
The Nasdaq closed the day with a -2.41% loss on lower volume. The closing range of 2% followed an afternoon of selling that formed the 73% red body underneath a small upper wick from the short morning rally. There were more declining stocks than advancing stocks.
The Dow Jones Industrial average (DJI) gained +0.97% for the day. The Russell 2000 (RUT) advanced +0.49%. The S&P 500 declined -0.54%.
The VIX volatility index rose +3.28%.
Utilities (XLU +1.41%) and Materials (XLB +1.34%) were the top sectors for the day, with 8 out of the 11 SPDR sectors advancing for the day. Communications (XLC -1.34%) and Technology (XLK -2.42%) were the bottom, weighted down by losses from large mega-caps that dominate the two sectors.
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Economic Indicators
The US Dollar (DXY) continues to advance with a +0.45% gain today. It has now regained a support area from the second half of 2020.
Yields on the US 30y and 10y treasury bonds rose for the day. The 2y yield spiked above 1.5 again with a 16% increase to 0.169.
High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) prices both dropped.
Silver (SILVER) and Gold (GOLD) both declined for the day. Crude Oil (CRUDEOIL1!) pulled a bit back from its recent advance. Timber (WOOD) advanced. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined.
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Investor Sentiment
The put/call ratio dropped to 0.633. 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 moved toward the greed side.
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Market Leaders
All four big mega-caps declined for the day. Alphabet (GOOGL) and Apple (AAPL) had the biggest losses with -4.27% and -4.17% declines. Microsoft (MSFT) declined -1.82%. Amazon (AMZN) declined for -1.62%. All four are trading below their 21d EMA and 50d MA. They continue to weigh down the indexes and their respective sectors as they have an overweight impact due to their size.
Several mega-caps did very well for the day. Walt Disney (DIS) gained +6.27% for the day. Roche Holding (RHHBF) gained 5%. Oracle (ORCL) and Cisco Systems (CSCO) proved not all is bad for mega-cap tech stocks with gains of around 3% each. Mastercard (MA) and Visa (V) also appeared at the top of the mega-cap list. PayPal (PYPL), Taiwan Semiconductor (TSM), Tesla (TSLA), and Nvidia (NVDA) occupied the bottom of the list with over 5% losses each.
Growth stocks tracked by the daily update were mostly down for the day. Dr Horton (DHI), Draft Kings (DKNG), Ehang Holdings (EH) and Penn National Gaming (PENN) all had gains for the day. FUTU Holdings (FUTU), UP Fintech (TIGR) both were hit with greater than 10% declines. Digital Turbine (APPS) declined a huge 16.32% and is nearly 40% below its all-time high set less than a week ago.
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Looking ahead
The EIA Short-Term energy outlook will be released before market opens on Tuesday. After market close, the API Weekly Crude Oil stock numbers will be released. The house is expected to vote on the stimulus bill on Tuesday.
MongoDb (MDB) and Open Lending (LPRO) will report earnings tomorrow.
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Trends, Support and Resistance
The trend line from the 2/16 ATH is pointing to a +0.60% gain for tomorrow that would be a nice bounce the 12,600 area.
The one-day trend line is pointing to a -1.63% which would test the 12,400 low from Friday. The five-day trend line points to a -2.19% loss, breaking thru the 12,400 mark.
We've been keeping an eye on a head and shoulders pattern. This pattern represents an attempt to move back to new highs that was rejected at a previous resistance point. Typically the height of the head is measured to determine the potential move downward that will occur as the price breaks below the neck line, which occurred last week.
I've also been cautioning that the drop would not happen in a straight line. Expect some back-and-forth as the index looks for a bottom. The target low from the pattern is 6.3% below Monday's close. Of course, the index could move lower than that point.
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Wrap-up
Although the expectation set for today was sideways or higher based on Friday's candle, I also noted the weak volume in the rebound on Friday that gave me concern about holding the gains into Monday. Today's sell-off was also at low volume, so it did not really set a decisive direction for the index. Nonetheless, buyers of Nasdaq mega-cap stocks were missing even as the index dipped to a lower close.
Given the thick red bodied candle, the expectation for tomorrow is lower. The passing of the stimulus may provide some support to some segments of stocks but it may also stoke more fears of inflation and rising interest rates that have pulled down big tech and growth stocks.
Keep an eye out for stocks that are preforming well relative to the indexes and put them on your watch list.
Stay healthy and trade safe!
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 8, 2021
Facts: -2.41%, Volume lower, Closing range: 2%, Body: 73%
Good: Held above 12,600 as market closed
Bad: Could not hold short rally in morning, selling the rest of afternoon
Highs/Lows: Higher high, higher low
Candle: Short upper wick over a thick red body, no lower wick
Advance/Decline: More than one declining stock for every advancing stock
Indexes: SPX (-0.54%), DJI (+0.97%), RUT (+0.49%), VIX (+3.28%)
Sectors: Utilities (XLU +1.41%) and Materials (XLB +1.34%) were the top sectors. Communications (XLC -1.34%) and Technology (XLK -2.42%) were bottom.
Expectation: Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The rotation continues. It's not often that a rotation is so clearly seen, with the Dow Jones ending the day up nearly 1% and the Nasdaq ending the day down 2.41%. Nine sectors outperformed the broader S&P 500 index, while the other two sectors lost enough to bring down the index for a loss by the end of the day.
The Nasdaq closed the day with a -2.41% loss on lower volume. The closing range of 2% followed an afternoon of selling that formed the 73% red body underneath a small upper wick from the short morning rally. There were more declining stocks than advancing stocks.
The Dow Jones Industrial average (DJI) gained +0.97% for the day. The Russell 2000 (RUT) advanced +0.49%. The S&P 500 declined -0.54%.
The VIX volatility index rose +3.28%.
Utilities (XLU +1.41%) and Materials (XLB +1.34%) were the top sectors for the day, with 8 out of the 11 SPDR sectors advancing for the day. Communications (XLC -1.34%) and Technology (XLK -2.42%) were the bottom, weighted down by losses from large mega-caps that dominate the two sectors.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) continues to advance with a +0.45% gain today. It has now regained a support area from the second half of 2020.
Yields on the US 30y and 10y treasury bonds rose for the day. The 2y yield spiked above 1.5 again with a 16% increase to 0.169.
High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) prices both dropped.
Silver (SILVER) and Gold (GOLD) both declined for the day. Crude Oil (CRUDEOIL1!) pulled a bit back from its recent advance. Timber (WOOD) advanced. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio dropped to 0.633. 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 moved toward the greed side.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All four big mega-caps declined for the day. Alphabet (GOOGL) and Apple (AAPL) had the biggest losses with -4.27% and -4.17% declines. Microsoft (MSFT) declined -1.82%. Amazon (AMZN) declined for -1.62%. All four are trading below their 21d EMA and 50d MA. They continue to weigh down the indexes and their respective sectors as they have an overweight impact due to their size.
Several mega-caps did very well for the day. Walt Disney (DIS) gained +6.27% for the day. Roche Holding (RHHBF) gained 5%. Oracle (ORCL) and Cisco Systems (CSCO) proved not all is bad for mega-cap tech stocks with gains of around 3% each. Mastercard (MA) and Visa (V) also appeared at the top of the mega-cap list. PayPal (PYPL), Taiwan Semiconductor (TSM), Tesla (TSLA), and Nvidia (NVDA) occupied the bottom of the list with over 5% losses each.
Growth stocks tracked by the daily update were mostly down for the day. Dr Horton (DHI), Draft Kings (DKNG), Ehang Holdings (EH) and Penn National Gaming (PENN) all had gains for the day. FUTU Holdings (FUTU), UP Fintech (TIGR) both were hit with greater than 10% declines. Digital Turbine (APPS) declined a huge 16.32% and is nearly 40% below its all-time high set less than a week ago.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
The EIA Short-Term energy outlook will be released before market opens on Tuesday. After market close, the API Weekly Crude Oil stock numbers will be released. The house is expected to vote on the stimulus bill on Tuesday.
MongoDb (MDB) and Open Lending (LPRO) will report earnings tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The trend line from the 2/16 ATH is pointing to a +0.60% gain for tomorrow that would be a nice bounce the 12,600 area.
The one-day trend line is pointing to a -1.63% which would test the 12,400 low from Friday. The five-day trend line points to a -2.19% loss, breaking thru the 12,400 mark.
We've been keeping an eye on a head and shoulders pattern. This pattern represents an attempt to move back to new highs that was rejected at a previous resistance point. Typically the height of the head is measured to determine the potential move downward that will occur as the price breaks below the neck line, which occurred last week.
I've also been cautioning that the drop would not happen in a straight line. Expect some back-and-forth as the index looks for a bottom. The target low from the pattern is 6.3% below Monday's close. Of course, the index could move lower than that point.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Although the expectation set for today was sideways or higher based on Friday's candle, I also noted the weak volume in the rebound on Friday that gave me concern about holding the gains into Monday. Today's sell-off was also at low volume, so it did not really set a decisive direction for the index. Nonetheless, buyers of Nasdaq mega-cap stocks were missing even as the index dipped to a lower close.
Given the thick red bodied candle, the expectation for tomorrow is lower. The passing of the stimulus may provide some support to some segments of stocks but it may also stoke more fears of inflation and rising interest rates that have pulled down big tech and growth stocks.
Keep an eye out for stocks that are preforming well relative to the indexes and put them on your watch list.
Stay healthy and trade safe!
