Summary: Small-caps soared today as the Russell 2000 nearly set a record close. Tesla helped carry the Nasdaq higher while the four largest mega-caps declined for the day.
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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Monday, November 1, 2021
Facts: +0.63%, Volume lower, Closing Range: 98%, Body: 43% Green
Good: Closing range of 98%, high advance/decline ratio
Bad: Lowering volume
Highs/Lows: Higher high, Higher low
Candle: Long lower wick under small green body at top of candle
Advance/Decline: 2.23, more than two advancing stocks for every declining stock
Indexes: SPX (+0.18%), DJI (+0.26%), RUT (+2.65%), VIX (+0.92%)
Sector List: Consumer Discretionary (XLY +1.83%) and Energy (XLE +1.72%) at the top. Health (XLV -0.12%) and Technology (XLK -0.15%) at the bottom.
Expectation: Sideways or Lower
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Market Overview
Small-caps soared today as the Russell 2000 nearly set a record close. Tesla helped carry the Nasdaq higher while the four largest mega-caps declined for the day.
The Nasdaq closed with a +0.63% gain. Volume was slightly lower than the previous day but remained higher than average. The candle has a long lower wick formed in the morning just after the market opened. However, the index climbed from there, dipped in the afternoon, but continued to rise into the market close. The closing range of 98%, higher high, and higher low are all bullish and there were more than two advancing stocks for every declining stock.
The Russell 2000 (RUT) gained +2.65% for the day, closing just below its record close in March. Since then, the small-cap index has been range-bound, so this week will be a big test to see if small-caps can break out. The S&P 500 (SPX) gained +0.18%, while the Dow Jones Industrial Average (DJI) climbed +0.26%. The VIX Volatility Index rose +0.92%.
Tesla helped carry Consumer Discretionary (XLY +1.83%) to the top of the sector list. Energy (XLE +1.72%) was the second-best sector for the day, overtaken by Consumer Discretionary in the final few minutes of trading. Only two sectors declined for the day, Health (XLV -0.12%) and Technology (XLK -0.15%).
Manufacturing data for October released in the morning showed higher employment and better-than-expected activity among purchasing managers. The ISM Manufacturing Purchasing Manager Index came in at 60.8 against the forecast of 60.5. Overall the data shows supply-chain is still a concern but not quite as bad as analysts thought.
The US Dollar Index (DXY) declined -0.27% for the day. US 30y and 10y Treasury Yields rose while the 2y Treasury Yield declined. High Yield (HYG) Corporate Bond prices fell sharply. Investment Grade (LQD) Corporate prices also fell.
The put/call ratio (PCCE) dropped to 0.541. The CNN Fear & Greed index moved into Extreme Greed.
The four largest mega-caps all declined for the day. Alphabet (GOOGL) had the most significant decline, falling -3.07% for the day. After bouncing on Friday's dip, Amazon (AMZN) closed lower today, dropping -1.61%. Apple (AAPL) dipped to its 21d EMA and 50d MA before getting support and closing only -0.56% for the day. Microsoft (MSFT) has the healthiest-looking chart, declining only -0.68% today after several days of gains.
Tesla (TSLA) was the top mega-cap for the day, seemingly carrying the whole market higher. The company gained +8.49%, continuing to rise on the large Hertz purchase and the positive outlook for the EV industry. Alphabet was the worst-performing mega-cap for the day, followed by Eli Lilly (LLY), which declined -2.14%.
Chinese Fintech companies topped the Daily Update Growth List. UP Fintech (TIGR) and FUTU Holding (FUTU) continue to trade with high volatility, advancing +12.52% and +8.97% today. It wasn't a great day for all growth stocks. MongoDB (MDB) and CrowdStrike (CRWD) were at the bottom of the growth list with declines of -4.4%.
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Looking ahead
Tuesday is a quiet day for economic news as investors await the outcome of a two-day Fed meeting this week. News from the meeting will come on Wednesday.
Pfizer (PFE), T-Mobile (TMUS), Amgen (AMGN), Estee Lauder (EL), Prudential Financial (PRU), Rockwell Automation (ROK), Paycom (PAYC), Zillow (Z), SolarEdge (SEDG), LYFT (LYFT), and Fidelity (FNF) are a few of the earnings reports for Tuesday that will give clues on how companies and specific segments are progressing.
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Trends, Support, and Resistance
The Nasdaq set a new all-time high and record close today. After three days of gains, the trend lines are pointing at a lateral move for Tuesday.
All three trend lines (from the 10/4 low, the one-day, and the five-day) point to a +0.07% gain for Tuesday.
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Wrap-up
November 1, 2020, marked the start of an amazing run for small-caps and the Russell 2000. The index gained 50% between November 1, 2020, and its latest all-time high on March 15, 2021. Based on today's advance, it looks like the small-cap index wants to go on another run.
There are reasons that the index could run again. Small-caps have historically responded better to Fed monetary policy changes. They may initially dip just like any other segments, but the following one to two years tend to be great years for the Russell 2000.
Investors are awaiting the Fed's official decision over bond purchase tapering. Over the next two days, there will likely be some hedging and profit-taking among stocks that have benefited from the loose monetary policy. That includes large multinationals and tech growth stocks, which could hold back the Nasdaq. Once initial reaction to news clears, it's reasonable to believe the Nasdaq can continue its bullish rally.
For tomorrow, the expectation is Sideways or Lower.
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=-
Monday, November 1, 2021
Facts: +0.63%, Volume lower, Closing Range: 98%, Body: 43% Green
Good: Closing range of 98%, high advance/decline ratio
Bad: Lowering volume
Highs/Lows: Higher high, Higher low
Candle: Long lower wick under small green body at top of candle
Advance/Decline: 2.23, more than two advancing stocks for every declining stock
Indexes: SPX (+0.18%), DJI (+0.26%), RUT (+2.65%), VIX (+0.92%)
Sector List: Consumer Discretionary (XLY +1.83%) and Energy (XLE +1.72%) at the top. Health (XLV -0.12%) and Technology (XLK -0.15%) at the bottom.
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Small-caps soared today as the Russell 2000 nearly set a record close. Tesla helped carry the Nasdaq higher while the four largest mega-caps declined for the day.
The Nasdaq closed with a +0.63% gain. Volume was slightly lower than the previous day but remained higher than average. The candle has a long lower wick formed in the morning just after the market opened. However, the index climbed from there, dipped in the afternoon, but continued to rise into the market close. The closing range of 98%, higher high, and higher low are all bullish and there were more than two advancing stocks for every declining stock.
The Russell 2000 (RUT) gained +2.65% for the day, closing just below its record close in March. Since then, the small-cap index has been range-bound, so this week will be a big test to see if small-caps can break out. The S&P 500 (SPX) gained +0.18%, while the Dow Jones Industrial Average (DJI) climbed +0.26%. The VIX Volatility Index rose +0.92%.
Tesla helped carry Consumer Discretionary (XLY +1.83%) to the top of the sector list. Energy (XLE +1.72%) was the second-best sector for the day, overtaken by Consumer Discretionary in the final few minutes of trading. Only two sectors declined for the day, Health (XLV -0.12%) and Technology (XLK -0.15%).
Manufacturing data for October released in the morning showed higher employment and better-than-expected activity among purchasing managers. The ISM Manufacturing Purchasing Manager Index came in at 60.8 against the forecast of 60.5. Overall the data shows supply-chain is still a concern but not quite as bad as analysts thought.
The US Dollar Index (DXY) declined -0.27% for the day. US 30y and 10y Treasury Yields rose while the 2y Treasury Yield declined. High Yield (HYG) Corporate Bond prices fell sharply. Investment Grade (LQD) Corporate prices also fell.
The put/call ratio (PCCE) dropped to 0.541. The CNN Fear & Greed index moved into Extreme Greed.
The four largest mega-caps all declined for the day. Alphabet (GOOGL) had the most significant decline, falling -3.07% for the day. After bouncing on Friday's dip, Amazon (AMZN) closed lower today, dropping -1.61%. Apple (AAPL) dipped to its 21d EMA and 50d MA before getting support and closing only -0.56% for the day. Microsoft (MSFT) has the healthiest-looking chart, declining only -0.68% today after several days of gains.
Tesla (TSLA) was the top mega-cap for the day, seemingly carrying the whole market higher. The company gained +8.49%, continuing to rise on the large Hertz purchase and the positive outlook for the EV industry. Alphabet was the worst-performing mega-cap for the day, followed by Eli Lilly (LLY), which declined -2.14%.
Chinese Fintech companies topped the Daily Update Growth List. UP Fintech (TIGR) and FUTU Holding (FUTU) continue to trade with high volatility, advancing +12.52% and +8.97% today. It wasn't a great day for all growth stocks. MongoDB (MDB) and CrowdStrike (CRWD) were at the bottom of the growth list with declines of -4.4%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tuesday is a quiet day for economic news as investors await the outcome of a two-day Fed meeting this week. News from the meeting will come on Wednesday.
Pfizer (PFE), T-Mobile (TMUS), Amgen (AMGN), Estee Lauder (EL), Prudential Financial (PRU), Rockwell Automation (ROK), Paycom (PAYC), Zillow (Z), SolarEdge (SEDG), LYFT (LYFT), and Fidelity (FNF) are a few of the earnings reports for Tuesday that will give clues on how companies and specific segments are progressing.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq set a new all-time high and record close today. After three days of gains, the trend lines are pointing at a lateral move for Tuesday.
All three trend lines (from the 10/4 low, the one-day, and the five-day) point to a +0.07% gain for Tuesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
November 1, 2020, marked the start of an amazing run for small-caps and the Russell 2000. The index gained 50% between November 1, 2020, and its latest all-time high on March 15, 2021. Based on today's advance, it looks like the small-cap index wants to go on another run.
There are reasons that the index could run again. Small-caps have historically responded better to Fed monetary policy changes. They may initially dip just like any other segments, but the following one to two years tend to be great years for the Russell 2000.
Investors are awaiting the Fed's official decision over bond purchase tapering. Over the next two days, there will likely be some hedging and profit-taking among stocks that have benefited from the loose monetary policy. That includes large multinationals and tech growth stocks, which could hold back the Nasdaq. Once initial reaction to news clears, it's reasonable to believe the Nasdaq can continue its bullish rally.
For tomorrow, the expectation is Sideways or Lower.
Stay healthy and trade safe!
