Summary: It was a week of slow but sure advances, with every day reaching a higher high than the previous day. Only one day saw a decline in the closing price, and that was only -0.09%. Volume was high entering the week and then wained later in the week while the advance/decline line remained above 1.0 on average through the week. Crazy meme stocks aside, the week wasn't exhilarating, but it's a good week of building support for higher prices.
Notes
The structure is the following:
If you have been following my daily updates, you can skip down to "The Meaning of Life." If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes, and market leaders each day.
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Monday, June 7, 2021
Facts: +0.49%, Volume higher, Closing range: 93%, Body: 76%
Good: Positive move on higher volume, good breadth.
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Small upper and lower wick surrounding a thick green body
Advanced/Decline: 1.47, Three advancing stocks for every two declining stocks
Indexes: SPX (-0.08%), DJI (-0.36%), RUT (+1.43%), VIX (+0.00%)
Sectors: Real Estate (XLRE +0.94%) and Communications (XLC +0.52%) were top. Industrials (XLI -0.69%) and Materials (XLB -1.22%) were bottom.
Expectation: Sideways or Higher
Growth investors seemed cautious in the first half of the session but turned bullish by the close. The caution showed up in the leading sectors after the market opened. As the morning ended, the action began rotating back toward growth.
The Nasdaq gained +0.49%, on higher volume. A short lower and upper wick surrounding a 76% green body represents the steady climb throughout the day. The closing range of 93% came after the index made a late afternoon intraday high, dipped, and quickly recovered. There were three advancing stocks for every two declining stocks.
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Tuesday, June 8, 2021
Facts: +0.31%, Volume higher, Closing range: 62%, Body: 14%
Good: Positive move on higher volume, higher high, higher low
Bad: Red body, indecisive candle, expected resistance at 14,000
Highs/Lows: Higher high, higher low
Candle: Thin red body in upper half of candle, longer lower wick
Advanced/Decline: 1.16, More advancing stocks than declining stocks
Indexes: SPX (+0.02%), DJI (-0.09%), RUT (+1.06%), VIX (+3.83%)
Sectors: Energy (XLE +0.86%) and Consumer Discretionary (XLY +0.81%) were top. Consumer Staples (XLP -0.84%) and Utilities (XLU -0.85%) were bottom.
Expectation: Sideways or Lower
The growth trade is continuing to build steam as investors await more inflation data later this week. The cautious start yesterday morning abated, and investors slowly rotated back into some growth and cyclical sectors today. Meme stocks continued crazy moves.
The Nasdaq closed with a +0.31% gain on higher volume. A long lower wick formed in the morning selling after a gap-up open that tested 14,000 resistance. Despite the morning selling, the index recovered to close just below where it opened, creating a thin 14% red body in the upper half of the candle. There were more advancing stocks than declining stocks.
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Wednesday, June 9, 2021
Facts: -0.09%, Volume lower, Closing range: 5%, Body: 71%
Good: Higher high, higher low, low above Monday's high
Bad: Could not stay above 14,000
Highs/Lows: Higher high, higher low
Candle: Mostly red body, no lower wick, short upper wick
Advanced/Decline: 0.86, More declining stocks than advancing stocks
Indexes: SPX (-0.18%), DJI (-0.44%), RUT (-0.71%), VIX (+4.92%)
Sectors: Health (XLV +0.97%) and Utilities (XLU +0.89%) were top. Financials (XLF -0.94%) and Industrials (XLI -1.02%) were bottom.
Expectation: Sideways or Lower
The major indices bounced around today while investors await inflation data released by the Labor Department tomorrow. A dip in Treasury yields helped boost some large mega-caps and growth stocks, but stocks in the Nasdaq did not share the gains broadly.
The Nasdaq closed with a -0.09% decline after briefly rising above 14,000 for the first time since early May. Volume was lower than the previous day. The candle is mostly red body with a closing range of 5%. The upper wick formed just after the open. The index approached 14,000 again in the early afternoon but reversed after the 10y note auction. There were more declining stocks than advancing stocks.
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Thursday, June 10, 2021
Facts: +0.78%, Volume lower, Closing range: 91%, Body: 68%
Good: High closing range, close above 14,000
Bad: Lower volume
Highs/Lows: Higher high, lower low
Candle: Outside day, mostly green body with a longer lower wick
Advanced/Decline: 0.66, Three declining stocks for every two advancing stocks
Indexes: SPX (+0.47%), DJI (+0.06%), RUT (-0.68%), VIX (-10.0%)
Sectors: Health (XLV +1.71%) and Real Estate (XLRE +1.02%) were top. Materials (XLB -0.60%) and Financials (XLF -1.17%) were bottom.
Expectation: Sideways or Higher
Consumer price data was higher than expected, but not that high. After an initial premarket reaction, the major indices moved higher on the day while yields continued their drop and volatility moved out of the market.
The Nasdaq advanced +0.78% on lower volume and closed above 14,000. The candle is mostly green body with a short lower wick and even shorter upper wick. The high closing range of 91% and body of 68% is bullish, but there were three declining stocks for every two advancing stocks and volume overall was lower.
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Friday, June 11, 2021
Facts: +0.35%, Volume lower, Closing range: 100%, Body: 61%
Good: 100% closing range with good advance/decline ratio
Bad: Lower volume
Highs/Lows: Higher high, lower low
Candle: Short lower wick under green body, no upper wick
Advanced/Decline: 1.2, More advancing stocks than declining stocks
Indexes: SPX (+0.19%), DJI (+0.04%), RUT (+1.06%), VIX (-2.79%)
Sectors: Financials (XLF +0.64%) and Technology (XLK +0.60%) were top. Real Estate (XLRE -0.63%) and Health (XLV -0.71%) were bottom.
Expectation: Higher
The gains in equities were small but steady through this week. On Friday, the market rallied into close and headed into the weekend with a confidence boost.
The Nasdaq closed with a +0.35%, capping a week of gains that saw every day reach higher than the previous day. Volume was lower and faded in the last three days. Today's candle ended with a 100% closing range, thanks to a rally in the final 30 minutes of the session. The small lower wick is under a 61% green body. There were more advancing stocks than declining stocks.
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View on the Week
It was a week of slow but sure advances, with every day reaching a higher high than the previous day. Only one day saw a decline in the closing price, and that was only -0.09%. Volume was high entering the week and then wained later in the week while the advance/decline line remained above 1.0 on average through the week. Crazy meme stocks aside, the week wasn't exhilarating, but it's a good week of building support for higher prices.
Compare these past three weeks to the weeks from March 25 to April 16. Those weeks led to a new all-time high, but the support was not there, and the index quickly retreated. It's interesting to go back to the weekly updates from that period and compare the underlying support in the market. The chart shows several gap-up opens as the index rallied, but the gains were driven mainly by a few big mega-caps, and the advance/decline ratio remained below 1.0 during the same period.
Consumer demand was rising while a fire breaks out in a Japan chipmaker facility and a ship blocks the Suez canal, disrupting supply chains across industries. Biden released his infrastructure plans, sending commodity prices even higher. The coming inflation alarm should have been so easy to see, but investors were still moving money back into big tech and growth stocks. Finally, on Friday, 4/30, inflation data surprises investors sending the index lower and eventually back down to 13,000. It also didn't help that Janet Yellen hinted toward higher interest rates, and hackers attacked an oil pipeline on the east coast of the US.
The past three weeks, including this week, we have seen gains in the index while investors face the reality of inflation and growing confidence in the Fed's promises not to change monetary policy. However, while they were building positions back into growth stocks, there is also an indication of caution. We aren't clear of all the worries yet. Everyone will be looking closely at comments in the Fed meeting minutes and statements made this coming week. But for now, it seems we have much more stable growth in prices and a path toward higher highs.
The Nasdaq closed with a +1.85% gain for the week. Volume was lower than the previous week. The closing range of 100% is thanks to a rally in the last 30 minutes of trading on Friday. There is a barely visible lower wick, while the weekly candle is mostly green, representing the consistent gains through the week.
The Russell 2000 (RUT) gained +2.16% for the week as it moves above a base, forming since March. The S&P 500 (SPX) closed the week at a record high, gaining +0.42% for the week. The Dow Jones Industrial Average (DJI) declined -0.80% this week.
The VIX volatility moved -4.59% lower, closing the week at pre-pandemic levels.
It was a mix of defensive sectors and growth stocks at the top of the sector list this week, while the cyclical sectors took a step back.
Real Estate ( XLRE ) led the sector list, continuing to gain on a solid housing market, higher rents, as well as a defense against potential inflation.
Health Care ( XLV ) also rallied this week, ending the week in second place on the sector list. Eli Lilly ( LLY ) helped boost the sector with news that the FDA may approve a new Alzheimer's therapy. The stock and the sector faded late in the week on the controversy over statements made by the company.
Technology ( XLK ) and Consumer Discretionary ( XLY ) were third and fourth on the list, with steady increases throughout the week as investors became more confident in the growth trade.
The cyclical stocks fell this past week. Financials ( XLF ) suffered from lower treasury yields, potentially impacting interest rates that drive revenue for the sector. Industrials ( XLI ) and Materials ( XLB ) declined as more of congress pushes back on Biden's infrastructure spending proposals.
The US Treasury 30y, 10y, and 2y yields declined for another week, and the spread between long and short-term yields tightened significantly.
The High Yield Corporate Bond (HYG) and Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) advanced +0.42% for the week.
Silver (SILVER) declined -0.35%, and Gold (GOLD) declined -0.70%.
Crude Oil (CRUDEOIL1!) advanced +2.58%, continuing to move toward highs in 2018.
Timber (WOOD) continues its decline, losing -2.04% this week. This is the fifth week of declines.
Copper (COPPER1!) advanced +0.76%.
Aluminum (ALI1!) advanced +0.42%.
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Big Four Mega-caps
The big four mega-caps look promising this week. Amazon (AMZN) and Microsoft (MSFT) moved above their 10-week moving average lines, with Amazon gaining +4.39% and Microsoft gaining +2.83%. Amazon's gain comes after several weeks of support at the 40-week moving average line. Microsoft's gain was after several weeks of resistance at the 10-week line. Apple (AAPL) gained +1.16% but still closed below the 10-week moving average. Alphabet (GOOGL) continues to show the most strength among the four with a +1.53% gain this week and remaining above the 10-week moving average since early in April.
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The Four Recovery Stocks
I picked four recovery stocks to track against the indexes and other indicators in this weekly report. Exxon Mobil (XOM) rose +1.17% this week while oil prices continuing to rise. Carnival Cruise Lines (CCL) declined -2.00%. Delta (DAL) and Marriott (MAR) gained +1.13% and +1.00% as both form a base just below the 10w moving average line.
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Cryptocurrency
I started tracking four major cryptocurrencies on the week in review. The four are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The latter two are not the largest by market cap but seem to be well-known and are part of the CIX capital.com index, tracking five cryptocurrencies, including these four (Ripple is the fifth).
Bitcoin (BTCUSD) has been riding support at the 40-week moving average line, gaining +8.98 this week. Ethereum (ETHUSD) declined +7.04%, meeting resistance at the 10-week moving average line. Litecoin (LTCUSD) declined -3.04% but also has support at the 40-week moving average. Bitcoin Cash (BTHUSD) declined -6.42%. Despite the declines from Ethereum and Bitcoin Cash, their average relative strength remains higher than the CIX.
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Investor Sentiment
The put/call ratio (PCCE) moved lower, ending the week at 0.558. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment and could mean an overbought market.
The CNN Fear & Greed Index is just to the greed side of neutral.
The NAAIM money manager exposure index declined slightly to 79.65.
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The Week Ahead
Monday
There is not much economic news scheduled for Monday.
There are no relevant earnings reports for the daily update on Monday.
Tuesday
Producer Price Index data is scheduled for release on Tuesday. We will also get an update on Retail sales data. Both sets of data come before the market open. API Weekly Crude Oil Stock data will be released after the market close.
Earnings reports for Tuesday include Oracle (ORCL), H&R Block (HRB), and La-Z-Boy (LZB).
Wednesday
Build Permits and Housing Starts data will be released in the morning on Wednesday. Crude Oil Inventories get an update after the market opens. The most important events for the day will come in the afternoon. The Fed will release Meeting Minutes and a Fed Interest Rate Decision at 2:00 pm. The Fed Economic Projections will follow that. Investors will watch these updates from the Fed very closely, and the reactions could be oversized in either direction.
There are no significant earnings releases for this daily update on Wednesday.
Thursday
Initial Jobless Claims data is expected to continue to improve on Thursday. The Philadelphia Fed Manufacturing Index will also be released before the market opens.
Adobe (ADBE), Kroger (KR), and Jabil (JBL) release earnings on Thursday. The Jabil report will be before the market opens.
Friday
There is not much significant economic news scheduled for Friday.
There are no relevant earnings reports for the daily update.
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The Bullish Side
This week's bullish and bearish outlook both focus on the Fed comments for Wednesday. Will the Fed have a strong stance toward continuing monetary policy to support the economy further back to health? There are several reasons why they will continue.
Jerome Powell has made it clear that they would not change economic support until employment fully recovers. Although employment data is getting better, as indicated by the nonfarm jobs report two weeks ago and the lower initial jobless claims, the labor market is still not fully recovered to pre-pandemic levels.
The fears of a monetary policy change have mainly come from rising inflation. Investors have had to balance high inflation data with the level of trust they have in the Fed's statements that inflation is transitionary. There is plenty to indicate that it is transitionary. Much of the price increase pressures have been due to supply chain issues among rising consumer demand, which should ease in the next quarter.
Biden's infrastructure plans are meeting resistance among Republicans and even some Democrats. The negotiations will result in a smaller plan and less pressure on commodity prices, helping to ease inflation worries.
Employment and inflation will be two significant factors in the Fed's comments on Wednesday. There will be others, including the broader health of the global economy and the progress of the pandemic recovery in Europe and Asia. Altogether, one can expect the Fed to continue monetary policy without any hint of tapering just yet.
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The Bearish Side
Or the Fed might start "talking about talking about" tapering. The mere hint of discussion about when the tapering should start will send investors into a tantrum even if a year away.
Even worse is if the Fed starts to signal to worry about inflation being less transitionary than previously thought. That will have investors reconsidering the net present value of future growth in their portfolios and perhaps move into instruments better protected from inflation.
Whatever the Fed says on Wednesday, we can expect investors to be very sensitive and reactions to be significant.
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Key Nasdaq Levels to Watch
The Nasdaq closed above the 14,000 resistance area this week. The 21d EMA crossed back above the 50d MA, a good confirmation of the upward trend. The index is also staying close to the middle of a regression trend channel from the 5/12 low.
On the positive side, the levels are:
On the downside, there are a few key levels:
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Wrap-up
It seems we have something significant to watch every week recently. A few weeks ago, it was inflation. Then it was employment data. This past week, investors focused on consumer sentiment and prices. This coming week, all the focus will be on the Fed on Wednesday.
Wednesday's Fed comments could support the index to move back into new all-time highs, or it could be another pivot to the downside and retests of major support areas. There's no way to predict what will happen. The important thing is to know the event is coming and have a plan for your portfolio. Maybe you plan to hold through any news. Perhaps you plan to take some profits. Or set stops at a place that you are comfortable with the risk level. Either way, have a good week.
Good luck, stay healthy, and trade safe!
Notes
- The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week.
- I occasionally have some errors or typos and will correct them in my blog or the comments on TradingView. I do not have an editor and do this in my free time.
- If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
- A recap of the daily updates that I do here on TradingView.
- View on the past week
- What's coming in the next week
- The Bullish View, The Bearish View
- Key index levels to watch out for
- Wrap-up
If you have been following my daily updates, you can skip down to "The Meaning of Life." If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes, and market leaders each day.
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Monday, June 7, 2021
Facts: +0.49%, Volume higher, Closing range: 93%, Body: 76%
Good: Positive move on higher volume, good breadth.
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Small upper and lower wick surrounding a thick green body
Advanced/Decline: 1.47, Three advancing stocks for every two declining stocks
Indexes: SPX (-0.08%), DJI (-0.36%), RUT (+1.43%), VIX (+0.00%)
Sectors: Real Estate (XLRE +0.94%) and Communications (XLC +0.52%) were top. Industrials (XLI -0.69%) and Materials (XLB -1.22%) were bottom.
Expectation: Sideways or Higher
Growth investors seemed cautious in the first half of the session but turned bullish by the close. The caution showed up in the leading sectors after the market opened. As the morning ended, the action began rotating back toward growth.
The Nasdaq gained +0.49%, on higher volume. A short lower and upper wick surrounding a 76% green body represents the steady climb throughout the day. The closing range of 93% came after the index made a late afternoon intraday high, dipped, and quickly recovered. There were three advancing stocks for every two declining stocks.
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Tuesday, June 8, 2021
Facts: +0.31%, Volume higher, Closing range: 62%, Body: 14%
Good: Positive move on higher volume, higher high, higher low
Bad: Red body, indecisive candle, expected resistance at 14,000
Highs/Lows: Higher high, higher low
Candle: Thin red body in upper half of candle, longer lower wick
Advanced/Decline: 1.16, More advancing stocks than declining stocks
Indexes: SPX (+0.02%), DJI (-0.09%), RUT (+1.06%), VIX (+3.83%)
Sectors: Energy (XLE +0.86%) and Consumer Discretionary (XLY +0.81%) were top. Consumer Staples (XLP -0.84%) and Utilities (XLU -0.85%) were bottom.
Expectation: Sideways or Lower
The growth trade is continuing to build steam as investors await more inflation data later this week. The cautious start yesterday morning abated, and investors slowly rotated back into some growth and cyclical sectors today. Meme stocks continued crazy moves.
The Nasdaq closed with a +0.31% gain on higher volume. A long lower wick formed in the morning selling after a gap-up open that tested 14,000 resistance. Despite the morning selling, the index recovered to close just below where it opened, creating a thin 14% red body in the upper half of the candle. There were more advancing stocks than declining stocks.
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Wednesday, June 9, 2021
Facts: -0.09%, Volume lower, Closing range: 5%, Body: 71%
Good: Higher high, higher low, low above Monday's high
Bad: Could not stay above 14,000
Highs/Lows: Higher high, higher low
Candle: Mostly red body, no lower wick, short upper wick
Advanced/Decline: 0.86, More declining stocks than advancing stocks
Indexes: SPX (-0.18%), DJI (-0.44%), RUT (-0.71%), VIX (+4.92%)
Sectors: Health (XLV +0.97%) and Utilities (XLU +0.89%) were top. Financials (XLF -0.94%) and Industrials (XLI -1.02%) were bottom.
Expectation: Sideways or Lower
The major indices bounced around today while investors await inflation data released by the Labor Department tomorrow. A dip in Treasury yields helped boost some large mega-caps and growth stocks, but stocks in the Nasdaq did not share the gains broadly.
The Nasdaq closed with a -0.09% decline after briefly rising above 14,000 for the first time since early May. Volume was lower than the previous day. The candle is mostly red body with a closing range of 5%. The upper wick formed just after the open. The index approached 14,000 again in the early afternoon but reversed after the 10y note auction. There were more declining stocks than advancing stocks.
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Thursday, June 10, 2021
Facts: +0.78%, Volume lower, Closing range: 91%, Body: 68%
Good: High closing range, close above 14,000
Bad: Lower volume
Highs/Lows: Higher high, lower low
Candle: Outside day, mostly green body with a longer lower wick
Advanced/Decline: 0.66, Three declining stocks for every two advancing stocks
Indexes: SPX (+0.47%), DJI (+0.06%), RUT (-0.68%), VIX (-10.0%)
Sectors: Health (XLV +1.71%) and Real Estate (XLRE +1.02%) were top. Materials (XLB -0.60%) and Financials (XLF -1.17%) were bottom.
Expectation: Sideways or Higher
Consumer price data was higher than expected, but not that high. After an initial premarket reaction, the major indices moved higher on the day while yields continued their drop and volatility moved out of the market.
The Nasdaq advanced +0.78% on lower volume and closed above 14,000. The candle is mostly green body with a short lower wick and even shorter upper wick. The high closing range of 91% and body of 68% is bullish, but there were three declining stocks for every two advancing stocks and volume overall was lower.
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Friday, June 11, 2021
Facts: +0.35%, Volume lower, Closing range: 100%, Body: 61%
Good: 100% closing range with good advance/decline ratio
Bad: Lower volume
Highs/Lows: Higher high, lower low
Candle: Short lower wick under green body, no upper wick
Advanced/Decline: 1.2, More advancing stocks than declining stocks
Indexes: SPX (+0.19%), DJI (+0.04%), RUT (+1.06%), VIX (-2.79%)
Sectors: Financials (XLF +0.64%) and Technology (XLK +0.60%) were top. Real Estate (XLRE -0.63%) and Health (XLV -0.71%) were bottom.
Expectation: Higher
The gains in equities were small but steady through this week. On Friday, the market rallied into close and headed into the weekend with a confidence boost.
The Nasdaq closed with a +0.35%, capping a week of gains that saw every day reach higher than the previous day. Volume was lower and faded in the last three days. Today's candle ended with a 100% closing range, thanks to a rally in the final 30 minutes of the session. The small lower wick is under a 61% green body. There were more advancing stocks than declining stocks.
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View on the Week
It was a week of slow but sure advances, with every day reaching a higher high than the previous day. Only one day saw a decline in the closing price, and that was only -0.09%. Volume was high entering the week and then wained later in the week while the advance/decline line remained above 1.0 on average through the week. Crazy meme stocks aside, the week wasn't exhilarating, but it's a good week of building support for higher prices.
Compare these past three weeks to the weeks from March 25 to April 16. Those weeks led to a new all-time high, but the support was not there, and the index quickly retreated. It's interesting to go back to the weekly updates from that period and compare the underlying support in the market. The chart shows several gap-up opens as the index rallied, but the gains were driven mainly by a few big mega-caps, and the advance/decline ratio remained below 1.0 during the same period.
Consumer demand was rising while a fire breaks out in a Japan chipmaker facility and a ship blocks the Suez canal, disrupting supply chains across industries. Biden released his infrastructure plans, sending commodity prices even higher. The coming inflation alarm should have been so easy to see, but investors were still moving money back into big tech and growth stocks. Finally, on Friday, 4/30, inflation data surprises investors sending the index lower and eventually back down to 13,000. It also didn't help that Janet Yellen hinted toward higher interest rates, and hackers attacked an oil pipeline on the east coast of the US.
The past three weeks, including this week, we have seen gains in the index while investors face the reality of inflation and growing confidence in the Fed's promises not to change monetary policy. However, while they were building positions back into growth stocks, there is also an indication of caution. We aren't clear of all the worries yet. Everyone will be looking closely at comments in the Fed meeting minutes and statements made this coming week. But for now, it seems we have much more stable growth in prices and a path toward higher highs.
The Nasdaq closed with a +1.85% gain for the week. Volume was lower than the previous week. The closing range of 100% is thanks to a rally in the last 30 minutes of trading on Friday. There is a barely visible lower wick, while the weekly candle is mostly green, representing the consistent gains through the week.
The Russell 2000 (RUT) gained +2.16% for the week as it moves above a base, forming since March. The S&P 500 (SPX) closed the week at a record high, gaining +0.42% for the week. The Dow Jones Industrial Average (DJI) declined -0.80% this week.
The VIX volatility moved -4.59% lower, closing the week at pre-pandemic levels.
It was a mix of defensive sectors and growth stocks at the top of the sector list this week, while the cyclical sectors took a step back.
Real Estate ( XLRE ) led the sector list, continuing to gain on a solid housing market, higher rents, as well as a defense against potential inflation.
Health Care ( XLV ) also rallied this week, ending the week in second place on the sector list. Eli Lilly ( LLY ) helped boost the sector with news that the FDA may approve a new Alzheimer's therapy. The stock and the sector faded late in the week on the controversy over statements made by the company.
Technology ( XLK ) and Consumer Discretionary ( XLY ) were third and fourth on the list, with steady increases throughout the week as investors became more confident in the growth trade.
The cyclical stocks fell this past week. Financials ( XLF ) suffered from lower treasury yields, potentially impacting interest rates that drive revenue for the sector. Industrials ( XLI ) and Materials ( XLB ) declined as more of congress pushes back on Biden's infrastructure spending proposals.
The US Treasury 30y, 10y, and 2y yields declined for another week, and the spread between long and short-term yields tightened significantly.
The High Yield Corporate Bond (HYG) and Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) advanced +0.42% for the week.
Silver (SILVER) declined -0.35%, and Gold (GOLD) declined -0.70%.
Crude Oil (CRUDEOIL1!) advanced +2.58%, continuing to move toward highs in 2018.
Timber (WOOD) continues its decline, losing -2.04% this week. This is the fifth week of declines.
Copper (COPPER1!) advanced +0.76%.
Aluminum (ALI1!) advanced +0.42%.
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Big Four Mega-caps
The big four mega-caps look promising this week. Amazon (AMZN) and Microsoft (MSFT) moved above their 10-week moving average lines, with Amazon gaining +4.39% and Microsoft gaining +2.83%. Amazon's gain comes after several weeks of support at the 40-week moving average line. Microsoft's gain was after several weeks of resistance at the 10-week line. Apple (AAPL) gained +1.16% but still closed below the 10-week moving average. Alphabet (GOOGL) continues to show the most strength among the four with a +1.53% gain this week and remaining above the 10-week moving average since early in April.
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The Four Recovery Stocks
I picked four recovery stocks to track against the indexes and other indicators in this weekly report. Exxon Mobil (XOM) rose +1.17% this week while oil prices continuing to rise. Carnival Cruise Lines (CCL) declined -2.00%. Delta (DAL) and Marriott (MAR) gained +1.13% and +1.00% as both form a base just below the 10w moving average line.
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Cryptocurrency
I started tracking four major cryptocurrencies on the week in review. The four are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The latter two are not the largest by market cap but seem to be well-known and are part of the CIX capital.com index, tracking five cryptocurrencies, including these four (Ripple is the fifth).
Bitcoin (BTCUSD) has been riding support at the 40-week moving average line, gaining +8.98 this week. Ethereum (ETHUSD) declined +7.04%, meeting resistance at the 10-week moving average line. Litecoin (LTCUSD) declined -3.04% but also has support at the 40-week moving average. Bitcoin Cash (BTHUSD) declined -6.42%. Despite the declines from Ethereum and Bitcoin Cash, their average relative strength remains higher than the CIX.
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Investor Sentiment
The put/call ratio (PCCE) moved lower, ending the week at 0.558. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment and could mean an overbought market.
The CNN Fear & Greed Index is just to the greed side of neutral.
The NAAIM money manager exposure index declined slightly to 79.65.
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The Week Ahead
Monday
There is not much economic news scheduled for Monday.
There are no relevant earnings reports for the daily update on Monday.
Tuesday
Producer Price Index data is scheduled for release on Tuesday. We will also get an update on Retail sales data. Both sets of data come before the market open. API Weekly Crude Oil Stock data will be released after the market close.
Earnings reports for Tuesday include Oracle (ORCL), H&R Block (HRB), and La-Z-Boy (LZB).
Wednesday
Build Permits and Housing Starts data will be released in the morning on Wednesday. Crude Oil Inventories get an update after the market opens. The most important events for the day will come in the afternoon. The Fed will release Meeting Minutes and a Fed Interest Rate Decision at 2:00 pm. The Fed Economic Projections will follow that. Investors will watch these updates from the Fed very closely, and the reactions could be oversized in either direction.
There are no significant earnings releases for this daily update on Wednesday.
Thursday
Initial Jobless Claims data is expected to continue to improve on Thursday. The Philadelphia Fed Manufacturing Index will also be released before the market opens.
Adobe (ADBE), Kroger (KR), and Jabil (JBL) release earnings on Thursday. The Jabil report will be before the market opens.
Friday
There is not much significant economic news scheduled for Friday.
There are no relevant earnings reports for the daily update.
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The Bullish Side
This week's bullish and bearish outlook both focus on the Fed comments for Wednesday. Will the Fed have a strong stance toward continuing monetary policy to support the economy further back to health? There are several reasons why they will continue.
Jerome Powell has made it clear that they would not change economic support until employment fully recovers. Although employment data is getting better, as indicated by the nonfarm jobs report two weeks ago and the lower initial jobless claims, the labor market is still not fully recovered to pre-pandemic levels.
The fears of a monetary policy change have mainly come from rising inflation. Investors have had to balance high inflation data with the level of trust they have in the Fed's statements that inflation is transitionary. There is plenty to indicate that it is transitionary. Much of the price increase pressures have been due to supply chain issues among rising consumer demand, which should ease in the next quarter.
Biden's infrastructure plans are meeting resistance among Republicans and even some Democrats. The negotiations will result in a smaller plan and less pressure on commodity prices, helping to ease inflation worries.
Employment and inflation will be two significant factors in the Fed's comments on Wednesday. There will be others, including the broader health of the global economy and the progress of the pandemic recovery in Europe and Asia. Altogether, one can expect the Fed to continue monetary policy without any hint of tapering just yet.
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The Bearish Side
Or the Fed might start "talking about talking about" tapering. The mere hint of discussion about when the tapering should start will send investors into a tantrum even if a year away.
Even worse is if the Fed starts to signal to worry about inflation being less transitionary than previously thought. That will have investors reconsidering the net present value of future growth in their portfolios and perhaps move into instruments better protected from inflation.
Whatever the Fed says on Wednesday, we can expect investors to be very sensitive and reactions to be significant.
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Key Nasdaq Levels to Watch
The Nasdaq closed above the 14,000 resistance area this week. The 21d EMA crossed back above the 50d MA, a good confirmation of the upward trend. The index is also staying close to the middle of a regression trend channel from the 5/12 low.
On the positive side, the levels are:
- The high of this past week was 14,069.42. Let's make a new weekly high.
- The all-time high is at 14,211.57.
- The mid-point of the regression trend from the 5/12 low points to 14,256 by the end of the week.
On the downside, there are a few key levels:
- 14,000 has been a key area of support/resistance. The index has only stayed above this level for a few days at a time since the beginning of 2021.
- The 10d MA is at 13,847.87.
- The low of this past week is 13,784.89.
- The 21d EMA is at 13,765.00, moving back above the 50d MA.
- The 50d MA is at 13,740.87.
- There is a pivot at 13,548.93. This is a "higher low" in the current uptrend.
- There is a support area at 13,000. 13,002.54 is a pivot from May. Below this level is a correction.
- 12,730.95 is the 200d MA. This could be a support point if the index falls below 13,000.
- 12,397.05 is a low pivot point from the early March dip.
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Wrap-up
It seems we have something significant to watch every week recently. A few weeks ago, it was inflation. Then it was employment data. This past week, investors focused on consumer sentiment and prices. This coming week, all the focus will be on the Fed on Wednesday.
Wednesday's Fed comments could support the index to move back into new all-time highs, or it could be another pivot to the downside and retests of major support areas. There's no way to predict what will happen. The important thing is to know the event is coming and have a plan for your portfolio. Maybe you plan to hold through any news. Perhaps you plan to take some profits. Or set stops at a place that you are comfortable with the risk level. Either way, have a good week.
Good luck, stay healthy, and trade safe!
