Trend lines drawn from the 2/16 ATH (17d), 3/4 (5d) and today 3/10 (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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Thursday, March 11, 2021
Facts: +2.52%, Volume lower, Closing range: 81%, Body: 67%
Good: Another higher high and higher low, back above 21d EMA and 50d MA
Bad: Not much, resistance at 13,400
Highs/Lows: Higher high, higher low
Candle: Thick red body with small upper and lower wicks, low closing range
Advance/Decline: Almost three advancing stocks for every declining stock
Indexes: SPX (+1.04%), DJI (+0.58%), RUT (+2.31%), VIX (-2.88%)
Sectors: Technology (XLK +2.14%) and Communications (XLC +1.89%) were top. Utilities (XLU -0.26%) and Financials (XLF -0.29%) were bottom.
Expectation: Sideways or Higher
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Market Overview
The back and forth continues as the Nasdaq and technology stocks rise again. The sector list has flipped back and forth the last several days as investors rotate in and out of big tech and growth stocks. Today, the market rallied as jobs reports showed positive gains in the labor market and the stimulus is proceeding to Biden's signature. Technology was back on top while Financials moved to the bottom.
The Nasdaq closed with a +2.52% gain on lower volume. The 67% green body was formed in the morning as the index quickly rose to intraday highs around 13,400 and stayed there the rest of the day. The short upper wick is above an 81% closing range. There were almost three advancing stocks for every declining stock.
All four major indexes gained for the day with the Russell 2000 (RUT) advancing 2.31%, just behind the Nasdaq performance. The S&P 500 gained +1.04%. The Dow Jones Industrial gained +0.58%.
The VIX volatility index declined -2.88%.
The sector list flipped once again with Technology (XLK +2.14%) moving to the top, followed by Communications (XLC +1.89%) and Consumer Discretionary (XLY +1.53%). Financials (XLF -0.29%) moved to the bottom.
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Economic Indicators
The US Dollar (DXY) declined -0.44%.
Yields on the US 30y and 10y treasury bonds rose. The 2y bond yields dropped.
High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) both gained for another day.
Silver (SILVER) and Gold (GOLD) declined just slightly. Crude Oil (CRUDEOIL1!) gained. Timber (WOOD) continues to advance. Copper (COPPER1!) advanced while Aluminum (ALI1!) advanced.
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Investor Sentiment
The put/call ratio declined to 0.571 as investors get more bullish. 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 is moving back toward the greed level.
The NAAIM exposure index moved all the way down to 0.48. That's the lowest exposure since April of 2020 and brings up the question of what is driving prices higher if investment managers are reducing positions.
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Market Leaders
All four big mega-caps advanced for the day. Alphabet (GOOGL) had the biggest advance with a +3.16% gain. Microsoft (MSFT) advanced +2.03%. Both Alphabet and Microsoft are trading above their 21d EMA and 50d MA lines. Apple (AAPL) and Amazon (AMZN) had gains of +1.65% and +1.83% but remain under their 21d EMA and 50d MA lines.
Taiwan Semiconductor (TSM), New Oriental Ed (EDU), PayPal (PYPL) and Tesla (TSLA) were the top four mega-caps. AT&T (T) and Verizon (VZ) were at the bottom of the list despite Communications ending near the top of the sector list.
Almost all the growth stocks in the daily update list had gains. UP Fintech (TIGR), Ehang Holdings (EH) and Digital Turbine (APPS) topped the list with more than 14% gains. SUMO Logic declined 13.51% after beating earnings but offering soft sales guidance.
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Looking ahead
Friday's producer price index data will complement the consumer price data earlier in the week. In addition, the inflation expectation and consumer sentiment numbers released after the market opens will be watched closely.
Sharp (SHCAY) will report earnings on Friday before market open.
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Trends, Support and Resistance
The Nasdaq moved above the 21d EMA and 50d MA lines today and met resistance around 13,400.
The five-day and one-day trend lines both point to another gain tomorrow that will be a +1.29% advance.
The longer trend-line from the 2/16 ATH points to a -4.60% decline, moving the index back below the 13,000 area.
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Wrap-up
Having the index close above the 21d EMA and 50d MA is a great positive sign for the rally. Another advance on higher volume would solidify the rally in my opinion and I'd mark the bottom as 2/5 and update the trend-lines.
Still, I have a few concerns. The NAAIM exposure index moving to less than 50% while the market rallies is a mystery. What is driving prices higher if positions are being reduced by money managers. The answer could be the record amount of retail trading and the popularity of options trading.
Another indicator I've started to watch, but haven't been including here is the TRIN.NQ ARMS Trading Index. This index measures the Advance/Decline ratio against the Advancing Volume / Declining Volume ratio. A number of 1.00 indicates a balance of volume between advancing and declining stocks. A low number under 0.5 would mean there is a larger amount of volume going to advancing stocks and could indicate panic buying as investors buy the dip.
Nonetheless, an advance past the 21d EMA tells me there's reason to look at opportunities for entry with controlled risk. I'd be selective about what stocks are setting up with proper bases vs which are rebounding and may turn back around in the coming week as rally buying fades.
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=-
Thursday, March 11, 2021
Facts: +2.52%, Volume lower, Closing range: 81%, Body: 67%
Good: Another higher high and higher low, back above 21d EMA and 50d MA
Bad: Not much, resistance at 13,400
Highs/Lows: Higher high, higher low
Candle: Thick red body with small upper and lower wicks, low closing range
Advance/Decline: Almost three advancing stocks for every declining stock
Indexes: SPX (+1.04%), DJI (+0.58%), RUT (+2.31%), VIX (-2.88%)
Sectors: Technology (XLK +2.14%) and Communications (XLC +1.89%) were top. Utilities (XLU -0.26%) and Financials (XLF -0.29%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The back and forth continues as the Nasdaq and technology stocks rise again. The sector list has flipped back and forth the last several days as investors rotate in and out of big tech and growth stocks. Today, the market rallied as jobs reports showed positive gains in the labor market and the stimulus is proceeding to Biden's signature. Technology was back on top while Financials moved to the bottom.
The Nasdaq closed with a +2.52% gain on lower volume. The 67% green body was formed in the morning as the index quickly rose to intraday highs around 13,400 and stayed there the rest of the day. The short upper wick is above an 81% closing range. There were almost three advancing stocks for every declining stock.
All four major indexes gained for the day with the Russell 2000 (RUT) advancing 2.31%, just behind the Nasdaq performance. The S&P 500 gained +1.04%. The Dow Jones Industrial gained +0.58%.
The VIX volatility index declined -2.88%.
The sector list flipped once again with Technology (XLK +2.14%) moving to the top, followed by Communications (XLC +1.89%) and Consumer Discretionary (XLY +1.53%). Financials (XLF -0.29%) moved to the bottom.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.44%.
Yields on the US 30y and 10y treasury bonds rose. The 2y bond yields dropped.
High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) both gained for another day.
Silver (SILVER) and Gold (GOLD) declined just slightly. Crude Oil (CRUDEOIL1!) gained. Timber (WOOD) continues to advance. Copper (COPPER1!) advanced while Aluminum (ALI1!) advanced.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio declined to 0.571 as investors get more bullish. 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 is moving back toward the greed level.
The NAAIM exposure index moved all the way down to 0.48. That's the lowest exposure since April of 2020 and brings up the question of what is driving prices higher if investment managers are reducing positions.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All four big mega-caps advanced for the day. Alphabet (GOOGL) had the biggest advance with a +3.16% gain. Microsoft (MSFT) advanced +2.03%. Both Alphabet and Microsoft are trading above their 21d EMA and 50d MA lines. Apple (AAPL) and Amazon (AMZN) had gains of +1.65% and +1.83% but remain under their 21d EMA and 50d MA lines.
Taiwan Semiconductor (TSM), New Oriental Ed (EDU), PayPal (PYPL) and Tesla (TSLA) were the top four mega-caps. AT&T (T) and Verizon (VZ) were at the bottom of the list despite Communications ending near the top of the sector list.
Almost all the growth stocks in the daily update list had gains. UP Fintech (TIGR), Ehang Holdings (EH) and Digital Turbine (APPS) topped the list with more than 14% gains. SUMO Logic declined 13.51% after beating earnings but offering soft sales guidance.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Friday's producer price index data will complement the consumer price data earlier in the week. In addition, the inflation expectation and consumer sentiment numbers released after the market opens will be watched closely.
Sharp (SHCAY) will report earnings on Friday before market open.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The Nasdaq moved above the 21d EMA and 50d MA lines today and met resistance around 13,400.
The five-day and one-day trend lines both point to another gain tomorrow that will be a +1.29% advance.
The longer trend-line from the 2/16 ATH points to a -4.60% decline, moving the index back below the 13,000 area.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Having the index close above the 21d EMA and 50d MA is a great positive sign for the rally. Another advance on higher volume would solidify the rally in my opinion and I'd mark the bottom as 2/5 and update the trend-lines.
Still, I have a few concerns. The NAAIM exposure index moving to less than 50% while the market rallies is a mystery. What is driving prices higher if positions are being reduced by money managers. The answer could be the record amount of retail trading and the popularity of options trading.
Another indicator I've started to watch, but haven't been including here is the TRIN.NQ ARMS Trading Index. This index measures the Advance/Decline ratio against the Advancing Volume / Declining Volume ratio. A number of 1.00 indicates a balance of volume between advancing and declining stocks. A low number under 0.5 would mean there is a larger amount of volume going to advancing stocks and could indicate panic buying as investors buy the dip.
Nonetheless, an advance past the 21d EMA tells me there's reason to look at opportunities for entry with controlled risk. I'd be selective about what stocks are setting up with proper bases vs which are rebounding and may turn back around in the coming week as rally buying fades.
Stay healthy and trade safe!
