Summary: The focus was all on inflation this week. The updated consumer price index numbers were due on Wednesday, and investors entered the week expected the worst. On top of inflation, an oil pipeline closure on the east coast meant even more upward price pressure for consumers. Monday started the week with a terrible-looking marubozu candle which has no upper or lower wick. Prices went straight down from open to close. Utilities was the leading sector as investors took defensive positions. Five stocks declined for every advancing stock.
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, May 10, 2021
Facts: -2.55%, Volume higher, Closing range: 0%, Body: 100%
Good: Nothing
Bad: All red body, selling from open to close with a failed rally of the 50d MA
Highs/Lows: Lower high, lower low
Candle: Marubozu red, no upper or lower wick
Advance/Decline: Two declining stocks for every advancing stock
Indexes: SPX (+0.74%), DJI (+0.66%), RUT (+1.35%), VIX (-9.24%)
Sectors: Utilities (XLU +1.01%) and Consumer Staples (XLP +0.76%) were top. Communications (XLC -1.92%) and Technology (XLK -2.52%).
Expectation: Lower
Inflation looms over big tech and growth stocks like an approaching hurricane, keeping investors wondering when and how big it will hit. Last week's jobs data supported the government's case that there is still support needed for economic recovery and that inflation is transitionary. But a shutdown oil pipeline over the weekend has investors worried. And the future updates on consumer and producer price index data are causing them to take a cautious stance.
The result was a big hit to big tech and growth stocks as the Nasdaq closed with a -2.55% decline on higher volume. The ominous marubozu candle has no upper and lower wick. It is 100% red body with a 0% closing range.
This high of the day was the open, and the low of the day was the close. There was a brief rally as the index hit the 50d moving average, but it was short-lived and failed to send the index below the key support line. Five stocks declined for every advancing stock.
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Tuesday, May 11, 2021
Facts: -0.09%, Volume lower, Closing range: 89%, Body: 87%
Good: Solid green body as bulls take over after gap down
Bad: Lower high, lower low, lower close
Highs/Lows: Lower high, lower low
Candle: Thick green body with short upper wick and high closing range
Advance/Decline: Two declining stocks for every advancing stock
Indexes: SPX (-0.87%), DJI (-1.36%), RUT (-0.26%), VIX (+11.09%)
Sectors: Materials (XLB +0.33%) and Communications (XLC -0.29%) were top. Financials (XLF -1.77%) and Energy (XLE -2.57%) were bottom.
Expectation: Sideways or Lower
A gap down must have shocked the bulls into action as the major indices crawled their way back up from morning lows. The results show a rotation happened underneath a market sell-off. Growth stocks benefited from the rotation, while the broader market had more than two declining stocks for every advancing stock.
The Nasdaq closed down -0.09% on lower volume. Despite a thick green-bodied candle, the lower high, lower low, and lower close continue a downtrend that's in its ninth day. The body covers 87% of the candle with a closing range of 89% under a thin upper wick. Two stocks declined for every advancing stock.
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Wednesday, May 12, 2021
Facts: -2.67%, Volume lower, Closing range: 10%, Body: 64%
Good: Nothing
Bad: Lower high, lower low, lower close, all day selling
Highs/Lows: Lower high, lower low
Candle: Longer upper wick over a tick red body, tiny lower wick
Advance/Decline: Five declining stocks for every advancing stock
Indexes: SPX (-2.14%), DJI (-1.99%), RUT (-3.26%), VIX (+26.33%)
Sectors: Energy (XLE +0.48%) and Health (XLV -0.94%) were top. Technology (XLK -2.81%) and Consumer Discretionary (XLY -3.39%) were bottom.
Expectation: Sideways or Lower
Consumer price index data was higher than expected, which is excellent for the US dollar, but sent investors into a selling frenzy as they reacted to higher inflation and the possibility of higher interest rates. It's a conflicting mix of being glad the economy is recovering and trying to price in the impact to valuations and potential reactions by the Fed to an overheated economy.
The Nasdaq closed down -2.67% on the fourth day in a row of lower highs, lower lows, and lower closes. The closing range of 10% comes underneath a 64% red body, and a long upper wick formed in a quick but short-lived rebound at open. The selling pressure existed throughout the day as five stocks declined for every advancing stock.
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Thursday, May 13, 2021
Facts: +0.72%, Volume lower, Closing range: 49%, Body: 11%
Good: Higher close, support at 13,000
Bad: Negative red body, indecisive after swings up and down intraday on lower volume
Highs/Lows: Lower high, higher low
Candle: Spinning top, inside day with a thin red body and long upper and lower wicks
Advance/Decline: More declining stocks than advancing stocks
Indexes: SPX (+1.22%), DJI (+1.29%), RUT (+1.68%), VIX (-16.17%)
Sectors: Utilities (+1.93%) and Industrial (XLI +1.87%) were top. Consumer Discretionary (XLY +0.71%) and Energy (XLE -1.22%) were bottom.
Expectation: Sideways or Lower
Buy the dip? That seems to be what drove prices higher today on optimism after a positive jobs report. But caution is still in the market with Utilities as the leading sector, growth stocks essentially not participating, and an advance/decline ratio still below 1.0.
The Nasdaq closed higher but on lower volume, advancing +0.72% for the day. The indecisive candle has a thin red body nearly in the middle of the long upper and lower wicks. The closing range is 49%, with a narrow 11% red body. There were more declining stocks than advancing stocks.
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Friday, May 14, 2021
Facts: +2.32%, Volume lower, Closing range: 86%, Body: 80%
Good: Higher high, higher low, buying all day until just before close
Bad: Lower volume
Highs/Lows: Higher high, higher low
Candle: Thick green body under a small upper wick. Tiny lower wick.
Advanced/Decline: More than three advancing stocks for every declining stock
Indexes: SPX (+1.49%), DJI (+1.06%), RUT (+2.47%), VIX (-18.68%)
Sectors: Energy (XLE +3.10%) and Technology (XLK +2.20%) were top. Utilities (XLU +0.49%) and Consumer Staples (XLP +0.44%) were bottom.
Expectation: Sideways or Higher
A lighter volume but positive day followed lower than expected economic indicators, including Retail Sales and Consumer Sentiment. Perhaps the economic recovery is pausing as consumers react to the increases in prices. A little water on the fire could be good news to investors who are afraid things are overheating.
The Nasdaq closed with a +2.32% advance on lower volume. The thick green body over a tiny lower wick represents the buying throughout the day. A short upper wick came in the last hour of trading as investors took profits heading into the weekend. There were more than three advancing stocks for every declining stock.
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The Meaning of Life (View on the Week)
The focus was all on inflation this week. The updated consumer price index numbers were due on Wednesday, and investors entered the week expected the worst. On top of inflation, an oil pipeline closure on the east coast meant even more upward price pressure for consumers. Monday started the week with a terrible-looking marubozu candle which has no upper or lower wick. Prices went straight down from open to close. Utilities was the leading sector as investors took defensive positions. Five stocks declined for every advancing stock.
Tuesday opened with a gap down and then a seemingly bullish day as the index climbed back to the previous day's close. What most likely happened was many shorts taking profits. Just as a gap up is usually following by profit-taking on long positions, a gap down will often cause shorts to buy back stocks to cover their positions and take profits. The exceptional performance of highly shorted growth stocks on Tuesday is evidence of the profit-taking.
Wednesday was inflation day. The consumer price index grew higher than expected, and it sent investors into a frenzy, causing the index to dip once more. For the second day this week, five stocks declined for every advancing stock.
As expected, the producer price index also came in higher than analyst expectations. But it seemed not as much of a surprise, and the index found a support level at 13,000, tested it mid-day, and then closed near the open. The inside day showed an indecisive market with reactions to better employment numbers, mixed with nervousness around the inflation impact. Utilities led the sector list again.
Then on Friday, an interesting thing happened. Economic data was worse than expected. Retail sales data for April went down instead of up, and Consumer Sentiment for May was lower than expected. But it seemed investors loved the news. It could be that inflation truly is temporary, as the Fed has been saying. Or at least it supported the idea that there is still more time needed before declaring a win for the economic recovery.
The Nasdaq declined -2.34% for the week. The closing range of 62% shows the recovery on Thursday and Friday, bringing the index back into the upper half of the trading range. The candle is nearly identical to the previous week's candle, which had a similar sell-off in the first half of the week with some support in the latter part of the week.
All four major indices we track declined for the week. The Dow Jones Industrial Average (DJI) fell -1.14%. The S&P 500 (SPX) lost -1.39%. The Russell 2000 (RUT) dropped -2.07% but was down over 6% in the middle of the week.
The VIX volatility index spiked +73.34% during the week but ended the week with just a +12.7% gain.
It was a mix of defensive and cyclical stocks that led the sector list this week. Only three sectors ended the week with gains, while the high growth sectors took the most significant declines.
Consumer Staples ( XLP ) topped the list, with Utilities ( XLU ) in fourth place. Both are defensive sectors for investors. Real Estate ( XLRE ) was lower in the list but still outperformed the sectors.
Financials ( XLF ) and Materials ( XLB ) joined Consumer Staples as the only sectors to end the week with gains.
Technology ( XLK ) and Consumer Discretionary ( XLY ) were at the bottom of the list. Both contain high growth companies that are likely to be impacted by inflation and potential increases in interest rates. They started to recovery on Thursday and Friday after the US Dollar and Treasury interest rates dropped.
The US Treasury 30y, 10y, and 2y yields all rose for the week. The spreads widened a bit between long and short-term yields.
Both the High Yield Corporate Bond (HYG) prices and Investment Grade Bond (LQD) prices declined sharply in the middle of the week but recovered to end the week with a small loss.
The US Dollar (DXY) rose +0.67% on Wednesday but then retreated, ending the week with a +0.08% advance.
Silver (SILVER) declined -0.10% while Gold (GOLD) advanced +0.60%.
Crude Oil (CRUDEOIL1!) advanced +0.48%.
The material commodities pulled back from record highs.
Timber (WOOD) declined -2.81%.
Copper (COPPER1!) declined -1.71%.
Aluminum (ALI1!) declined -3.11%.
Investors seemed to rotate back and forth between growth and value this week.
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The Big Four Mega-caps
The big four mega-caps continued to slide this week but outperformed the Nasdaq overall. Microsoft (MSFT) dipped below the 10w MA but closed above the line, losing only -1.71% for the week. Amazon (AMZN) lost -2.09%, closing below its 10w MA line. Apple (AAPL) dipped below its 10w and 40w MA but ended above both, closing the week with a -2.12% loss. Alphabet (GOOGL) was the only of the four to underperform the index, declining -3.13%. However, Alphabet stayed above the 10w moving average line.
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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. The results were mixed this week. Carnival Cruise Lines (CCL) gained +1.64% but remained below its 10w MA line after a weekly lower high and lower low. Delta Airlines (DAL) had a similar pattern but advanced only +0.43%. Marriot (MAR) declined -2.32%. Exxon Mobile (XOM) led energy stocks lower for the week, closing with a -2.66% weekly loss.
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Cryptocurrency
I'll start 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, which is tracking five cryptocurrencies, including these four (Ripple is the fifth). Nothing to note at the moment other than Bitcoin is bouncing between 60,000 and support at around 49,000. Ethereum is pulling back slightly from a 70% rally over the past two weeks.
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Investor Sentiment
The put/call ratio (PCCE) rose this week to its highest daily level since November. It recovered by the end of the week to end at 0.658. 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 on the fear side but not yet approaching extreme fear.
The NAAIM money manager exposure index is at 46.86 after moving above 100 two weeks ago.
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The Week Ahead
Monday
The week will open with Manufacturing data on Monday morning. Several FOMC members will speak after the market opens.
Tencent Music (TME), Niu Tech (NIU), Desktop Metal (DM), Fisker (FSR), Riot Blockchain (RIOT) will report earnings on Monday.
Tuesday
Building Permits and Housing Starts data will release on Tuesday. API Weekly Crude Oil Stock data will update after market close.
Earnings releases will include Walmart (WMT), Home Depot (HD), Sea (SE), Baidu (BIDU), Trip.com (TCOM), and Macy's (M).
Wednesday
Crude Oil Inventories get an update on Wednesday. In the afternoon, FOMC member Bostic speaks, and the FOMC Meeting Minutes will be released. Investors will look closely for wording that shows concern over inflation and any hints toward monetary policy changes.
Cisco (CSCO), Lowe's (LOW), JD.com (JD), Target (TGT), TJX (TJX), Synopsys (SNPS), Vipshop (VIPS), and FUTU Holdings (FUTU) report earnings.
Thursday
Initial Jobless Claims and the Philadelphia Fed Manufacturing Index data will be released Thursday.
Earnings Reports include Tencent (TCEHY), Applied Materials (AMAT), Ross Stores (ROST), and Deckers Outdoor (DECK).
Friday
On Friday morning, the Purchasing Manager Index data for Services and Manufacturing will be released just aftermarket open. The data shows an expected increase/decrease in activity to meet customer demand in the two sectors. Existing Home Sales will also be released after the market opens.
Deere & Company (DE), Foot Locker (FL), and Buckle (BKE) are on the shortlist of earnings reports for Friday.
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The Bullish Side
Now that investors have a complete picture of inflation for the month, they can focus on other data points. They can focus on which sectors are performing well and which stocks have had good earnings results and show additional growth this year.
The lower-than-expected retail sales and consumer sentiment data on Friday poured a little water on the fire burning around inflation. That will provide some relief for investors overly worried about the impact of inflation and the prospect for higher interest rates.
As the dollar came back down in value after spiking on Wednesday, big tech and growth stocks found support and healthy gains. As the value trade deflates on lower retail and consumer sentiment data, growth stocks could benefit, boosting the Nasdaq. The could accelerate if investors decide now is the time to buy these stocks at a reduced price.
The Fed is still on our side.
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The Bearish Side
The index lost several key support levels this past week and has much to prove before investor confidence returns. The put/call ratio remains higher than in recent months, showing investors are nervous about what's to come. That nervousness could mean we have not hit the bottom of this pull-back yet.
The increases in the index this past week came on lower volume. That could be because the gains were mainly coming from shorts covering positions vs. an actual bullish rally. If so, the support could be weak, and another leg lower may be in store.
The Fed can flip sides at any time.
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Key Nasdaq Levels to Watch
The Nasdaq dropped below the 50d MA and found support at the 13,000 level. That 13,000 level is a crucial area to watch.
On the positive side, the levels are:
On the downside, there are a few key levels:
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Wrap-up
The inflation storm hit this week, and it was a rough ride for growth investors. Thankfully, we found some support on Thursday and Friday and hope that the bulls are coming back in to buy stocks at a discount. The big question is whether all the news on an overheating economy is baked in now and the market will start to make another leg up. Or will the economic data continue to shake investors out of equities?
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.
- The Meaning of Life, a 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, May 10, 2021
Facts: -2.55%, Volume higher, Closing range: 0%, Body: 100%
Good: Nothing
Bad: All red body, selling from open to close with a failed rally of the 50d MA
Highs/Lows: Lower high, lower low
Candle: Marubozu red, no upper or lower wick
Advance/Decline: Two declining stocks for every advancing stock
Indexes: SPX (+0.74%), DJI (+0.66%), RUT (+1.35%), VIX (-9.24%)
Sectors: Utilities (XLU +1.01%) and Consumer Staples (XLP +0.76%) were top. Communications (XLC -1.92%) and Technology (XLK -2.52%).
Expectation: Lower
Inflation looms over big tech and growth stocks like an approaching hurricane, keeping investors wondering when and how big it will hit. Last week's jobs data supported the government's case that there is still support needed for economic recovery and that inflation is transitionary. But a shutdown oil pipeline over the weekend has investors worried. And the future updates on consumer and producer price index data are causing them to take a cautious stance.
The result was a big hit to big tech and growth stocks as the Nasdaq closed with a -2.55% decline on higher volume. The ominous marubozu candle has no upper and lower wick. It is 100% red body with a 0% closing range.
This high of the day was the open, and the low of the day was the close. There was a brief rally as the index hit the 50d moving average, but it was short-lived and failed to send the index below the key support line. Five stocks declined for every advancing stock.
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Tuesday, May 11, 2021
Facts: -0.09%, Volume lower, Closing range: 89%, Body: 87%
Good: Solid green body as bulls take over after gap down
Bad: Lower high, lower low, lower close
Highs/Lows: Lower high, lower low
Candle: Thick green body with short upper wick and high closing range
Advance/Decline: Two declining stocks for every advancing stock
Indexes: SPX (-0.87%), DJI (-1.36%), RUT (-0.26%), VIX (+11.09%)
Sectors: Materials (XLB +0.33%) and Communications (XLC -0.29%) were top. Financials (XLF -1.77%) and Energy (XLE -2.57%) were bottom.
Expectation: Sideways or Lower
A gap down must have shocked the bulls into action as the major indices crawled their way back up from morning lows. The results show a rotation happened underneath a market sell-off. Growth stocks benefited from the rotation, while the broader market had more than two declining stocks for every advancing stock.
The Nasdaq closed down -0.09% on lower volume. Despite a thick green-bodied candle, the lower high, lower low, and lower close continue a downtrend that's in its ninth day. The body covers 87% of the candle with a closing range of 89% under a thin upper wick. Two stocks declined for every advancing stock.
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Wednesday, May 12, 2021
Facts: -2.67%, Volume lower, Closing range: 10%, Body: 64%
Good: Nothing
Bad: Lower high, lower low, lower close, all day selling
Highs/Lows: Lower high, lower low
Candle: Longer upper wick over a tick red body, tiny lower wick
Advance/Decline: Five declining stocks for every advancing stock
Indexes: SPX (-2.14%), DJI (-1.99%), RUT (-3.26%), VIX (+26.33%)
Sectors: Energy (XLE +0.48%) and Health (XLV -0.94%) were top. Technology (XLK -2.81%) and Consumer Discretionary (XLY -3.39%) were bottom.
Expectation: Sideways or Lower
Consumer price index data was higher than expected, which is excellent for the US dollar, but sent investors into a selling frenzy as they reacted to higher inflation and the possibility of higher interest rates. It's a conflicting mix of being glad the economy is recovering and trying to price in the impact to valuations and potential reactions by the Fed to an overheated economy.
The Nasdaq closed down -2.67% on the fourth day in a row of lower highs, lower lows, and lower closes. The closing range of 10% comes underneath a 64% red body, and a long upper wick formed in a quick but short-lived rebound at open. The selling pressure existed throughout the day as five stocks declined for every advancing stock.
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Thursday, May 13, 2021
Facts: +0.72%, Volume lower, Closing range: 49%, Body: 11%
Good: Higher close, support at 13,000
Bad: Negative red body, indecisive after swings up and down intraday on lower volume
Highs/Lows: Lower high, higher low
Candle: Spinning top, inside day with a thin red body and long upper and lower wicks
Advance/Decline: More declining stocks than advancing stocks
Indexes: SPX (+1.22%), DJI (+1.29%), RUT (+1.68%), VIX (-16.17%)
Sectors: Utilities (+1.93%) and Industrial (XLI +1.87%) were top. Consumer Discretionary (XLY +0.71%) and Energy (XLE -1.22%) were bottom.
Expectation: Sideways or Lower
Buy the dip? That seems to be what drove prices higher today on optimism after a positive jobs report. But caution is still in the market with Utilities as the leading sector, growth stocks essentially not participating, and an advance/decline ratio still below 1.0.
The Nasdaq closed higher but on lower volume, advancing +0.72% for the day. The indecisive candle has a thin red body nearly in the middle of the long upper and lower wicks. The closing range is 49%, with a narrow 11% red body. There were more declining stocks than advancing stocks.
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Friday, May 14, 2021
Facts: +2.32%, Volume lower, Closing range: 86%, Body: 80%
Good: Higher high, higher low, buying all day until just before close
Bad: Lower volume
Highs/Lows: Higher high, higher low
Candle: Thick green body under a small upper wick. Tiny lower wick.
Advanced/Decline: More than three advancing stocks for every declining stock
Indexes: SPX (+1.49%), DJI (+1.06%), RUT (+2.47%), VIX (-18.68%)
Sectors: Energy (XLE +3.10%) and Technology (XLK +2.20%) were top. Utilities (XLU +0.49%) and Consumer Staples (XLP +0.44%) were bottom.
Expectation: Sideways or Higher
A lighter volume but positive day followed lower than expected economic indicators, including Retail Sales and Consumer Sentiment. Perhaps the economic recovery is pausing as consumers react to the increases in prices. A little water on the fire could be good news to investors who are afraid things are overheating.
The Nasdaq closed with a +2.32% advance on lower volume. The thick green body over a tiny lower wick represents the buying throughout the day. A short upper wick came in the last hour of trading as investors took profits heading into the weekend. There were more than three advancing stocks for every declining stock.
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The Meaning of Life (View on the Week)
The focus was all on inflation this week. The updated consumer price index numbers were due on Wednesday, and investors entered the week expected the worst. On top of inflation, an oil pipeline closure on the east coast meant even more upward price pressure for consumers. Monday started the week with a terrible-looking marubozu candle which has no upper or lower wick. Prices went straight down from open to close. Utilities was the leading sector as investors took defensive positions. Five stocks declined for every advancing stock.
Tuesday opened with a gap down and then a seemingly bullish day as the index climbed back to the previous day's close. What most likely happened was many shorts taking profits. Just as a gap up is usually following by profit-taking on long positions, a gap down will often cause shorts to buy back stocks to cover their positions and take profits. The exceptional performance of highly shorted growth stocks on Tuesday is evidence of the profit-taking.
Wednesday was inflation day. The consumer price index grew higher than expected, and it sent investors into a frenzy, causing the index to dip once more. For the second day this week, five stocks declined for every advancing stock.
As expected, the producer price index also came in higher than analyst expectations. But it seemed not as much of a surprise, and the index found a support level at 13,000, tested it mid-day, and then closed near the open. The inside day showed an indecisive market with reactions to better employment numbers, mixed with nervousness around the inflation impact. Utilities led the sector list again.
Then on Friday, an interesting thing happened. Economic data was worse than expected. Retail sales data for April went down instead of up, and Consumer Sentiment for May was lower than expected. But it seemed investors loved the news. It could be that inflation truly is temporary, as the Fed has been saying. Or at least it supported the idea that there is still more time needed before declaring a win for the economic recovery.
The Nasdaq declined -2.34% for the week. The closing range of 62% shows the recovery on Thursday and Friday, bringing the index back into the upper half of the trading range. The candle is nearly identical to the previous week's candle, which had a similar sell-off in the first half of the week with some support in the latter part of the week.
All four major indices we track declined for the week. The Dow Jones Industrial Average (DJI) fell -1.14%. The S&P 500 (SPX) lost -1.39%. The Russell 2000 (RUT) dropped -2.07% but was down over 6% in the middle of the week.
The VIX volatility index spiked +73.34% during the week but ended the week with just a +12.7% gain.
It was a mix of defensive and cyclical stocks that led the sector list this week. Only three sectors ended the week with gains, while the high growth sectors took the most significant declines.
Consumer Staples ( XLP ) topped the list, with Utilities ( XLU ) in fourth place. Both are defensive sectors for investors. Real Estate ( XLRE ) was lower in the list but still outperformed the sectors.
Financials ( XLF ) and Materials ( XLB ) joined Consumer Staples as the only sectors to end the week with gains.
Technology ( XLK ) and Consumer Discretionary ( XLY ) were at the bottom of the list. Both contain high growth companies that are likely to be impacted by inflation and potential increases in interest rates. They started to recovery on Thursday and Friday after the US Dollar and Treasury interest rates dropped.
The US Treasury 30y, 10y, and 2y yields all rose for the week. The spreads widened a bit between long and short-term yields.
Both the High Yield Corporate Bond (HYG) prices and Investment Grade Bond (LQD) prices declined sharply in the middle of the week but recovered to end the week with a small loss.
The US Dollar (DXY) rose +0.67% on Wednesday but then retreated, ending the week with a +0.08% advance.
Silver (SILVER) declined -0.10% while Gold (GOLD) advanced +0.60%.
Crude Oil (CRUDEOIL1!) advanced +0.48%.
The material commodities pulled back from record highs.
Timber (WOOD) declined -2.81%.
Copper (COPPER1!) declined -1.71%.
Aluminum (ALI1!) declined -3.11%.
Investors seemed to rotate back and forth between growth and value this week.
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The Big Four Mega-caps
The big four mega-caps continued to slide this week but outperformed the Nasdaq overall. Microsoft (MSFT) dipped below the 10w MA but closed above the line, losing only -1.71% for the week. Amazon (AMZN) lost -2.09%, closing below its 10w MA line. Apple (AAPL) dipped below its 10w and 40w MA but ended above both, closing the week with a -2.12% loss. Alphabet (GOOGL) was the only of the four to underperform the index, declining -3.13%. However, Alphabet stayed above the 10w moving average line.
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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. The results were mixed this week. Carnival Cruise Lines (CCL) gained +1.64% but remained below its 10w MA line after a weekly lower high and lower low. Delta Airlines (DAL) had a similar pattern but advanced only +0.43%. Marriot (MAR) declined -2.32%. Exxon Mobile (XOM) led energy stocks lower for the week, closing with a -2.66% weekly loss.
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Cryptocurrency
I'll start 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, which is tracking five cryptocurrencies, including these four (Ripple is the fifth). Nothing to note at the moment other than Bitcoin is bouncing between 60,000 and support at around 49,000. Ethereum is pulling back slightly from a 70% rally over the past two weeks.
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Investor Sentiment
The put/call ratio (PCCE) rose this week to its highest daily level since November. It recovered by the end of the week to end at 0.658. 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 on the fear side but not yet approaching extreme fear.
The NAAIM money manager exposure index is at 46.86 after moving above 100 two weeks ago.
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The Week Ahead
Monday
The week will open with Manufacturing data on Monday morning. Several FOMC members will speak after the market opens.
Tencent Music (TME), Niu Tech (NIU), Desktop Metal (DM), Fisker (FSR), Riot Blockchain (RIOT) will report earnings on Monday.
Tuesday
Building Permits and Housing Starts data will release on Tuesday. API Weekly Crude Oil Stock data will update after market close.
Earnings releases will include Walmart (WMT), Home Depot (HD), Sea (SE), Baidu (BIDU), Trip.com (TCOM), and Macy's (M).
Wednesday
Crude Oil Inventories get an update on Wednesday. In the afternoon, FOMC member Bostic speaks, and the FOMC Meeting Minutes will be released. Investors will look closely for wording that shows concern over inflation and any hints toward monetary policy changes.
Cisco (CSCO), Lowe's (LOW), JD.com (JD), Target (TGT), TJX (TJX), Synopsys (SNPS), Vipshop (VIPS), and FUTU Holdings (FUTU) report earnings.
Thursday
Initial Jobless Claims and the Philadelphia Fed Manufacturing Index data will be released Thursday.
Earnings Reports include Tencent (TCEHY), Applied Materials (AMAT), Ross Stores (ROST), and Deckers Outdoor (DECK).
Friday
On Friday morning, the Purchasing Manager Index data for Services and Manufacturing will be released just aftermarket open. The data shows an expected increase/decrease in activity to meet customer demand in the two sectors. Existing Home Sales will also be released after the market opens.
Deere & Company (DE), Foot Locker (FL), and Buckle (BKE) are on the shortlist of earnings reports for Friday.
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The Bullish Side
Now that investors have a complete picture of inflation for the month, they can focus on other data points. They can focus on which sectors are performing well and which stocks have had good earnings results and show additional growth this year.
The lower-than-expected retail sales and consumer sentiment data on Friday poured a little water on the fire burning around inflation. That will provide some relief for investors overly worried about the impact of inflation and the prospect for higher interest rates.
As the dollar came back down in value after spiking on Wednesday, big tech and growth stocks found support and healthy gains. As the value trade deflates on lower retail and consumer sentiment data, growth stocks could benefit, boosting the Nasdaq. The could accelerate if investors decide now is the time to buy these stocks at a reduced price.
The Fed is still on our side.
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The Bearish Side
The index lost several key support levels this past week and has much to prove before investor confidence returns. The put/call ratio remains higher than in recent months, showing investors are nervous about what's to come. That nervousness could mean we have not hit the bottom of this pull-back yet.
The increases in the index this past week came on lower volume. That could be because the gains were mainly coming from shorts covering positions vs. an actual bullish rally. If so, the support could be weak, and another leg lower may be in store.
The Fed can flip sides at any time.
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Key Nasdaq Levels to Watch
The Nasdaq dropped below the 50d MA and found support at the 13,000 level. That 13,000 level is a crucial area to watch.
On the positive side, the levels are:
- The 10d MA moved below the 21d EMA and 50d MA, marking the sudden drop. It's currently at 13,487.41 and the first critical level to reach.
- The 50d MA is at 13,539.94.
- The 21d EMA is at 13,598.43.
- The high of this past week was 13,687.93.
- The rally attempt of the previous week went to 13,828.62. Get above this level to end the sequence of lower highs.
- 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 all-time high is at 14,211.57 is the all-time high.
On the downside, there are a few key levels:
- The low of this past week is 13,002.54.
- That low is just above the 13,000 support line.
- 12,786.81 is a low pivot point from the late March dip. Stay above this low to keep an upward trend since early March.
- 12,479.80 is the 200d MA.
- 12,397.05 is a low pivot point from the early March dip.
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Wrap-up
The inflation storm hit this week, and it was a rough ride for growth investors. Thankfully, we found some support on Thursday and Friday and hope that the bulls are coming back in to buy stocks at a discount. The big question is whether all the news on an overheating economy is baked in now and the market will start to make another leg up. Or will the economic data continue to shake investors out of equities?
Good luck, stay healthy, and trade safe!
