Summary: Higher than expected inflation data wasn't enough to keep the indexes from making new highs, but the rally couldn't last, and markets closed lower on Tuesday. A weaker than expected 30y bond auction sent yields higher and spooked investors in the afternoon. Big tech held onto gains, helping the Technology sector end the day in the positive.
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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Tuesday, July 13, 2021
Facts: -0.38%, Volume higher, Closing range: 12%, Body: 26%
Good: Higher high, outside day that keeps index in uptrend, support at ~14,675
Bad: Long upper wick from afternoon selling, red body at bottom of candle
Highs/Lows: Higher high, lower low
Candle: Outside day, long upper wick signals a bearish reversal day
Advanced/Decline: 0.21, five decline stocks for every advancing stock
Indexes: SPX (-0.35%), DJI (-0.31%), RUT (-1.88%), VIX (+5.88%)
Sectors: Technology (XLK +0.41%) and Consumer Staples (XLP -0.03%) at the top. Consumer Discretionary (XLY -1.20%) and Real Estate (XLRE -1.30%) were the bottom.
Expectation: Lower
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Market Overview
Higher than expected inflation data wasn't enough to keep the indexes from making new highs, but the rally couldn't last, and markets closed lower on Tuesday. A weaker than expected 30y bond auction sent yields higher and spooked investors in the afternoon. Big tech held onto gains, helping the Technology sector end the day in the positive.
The Nasdaq closed the day with a -0.38% loss on higher volume. The candle has a long upper wick that represents the morning rally which turned into an afternoon sell-off. The 26% red body sits at the bottom of the candle, creating a 12% closing range above a short lower wick. The outside day with a bearish reversal confirms the underlying weakness where five stocks declined for every advancing stock.
The Dow Jones Industrial Average (DJI) declined -0.31% for the day. The S&P 500 (SPX) lost -0.35%. Small caps were hit the worst, with the Russell 2000 (RUT) dropping -1.88%.
The VIX volatility index rose +5.88%.
Technology (XLK +0.41%) was the only sector to end the day with gains. Consumer Staples (XLP -0.03%) was the second-best sector in the list. Consumer Discretionary (XLY -1.20%) and Real Estate (XLRE -1.30%) were the worst-performing. Despite great earnings reports, the outlook for big banks was not spectacular, sending the Financial sector (XLF -1.08%) lower.
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Economic Indicators
The US Dollar (DXY) advanced +0.60% for the day.
The US 30y, 10y, and 2y Treasury yields advanced for the day, and the gap between long-term and short-term yields widened. The 30y auction that occurred today was weaker than expected.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined significantly from recent highs.
Silver (SILVER) declined while Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) advanced.
Timber (Wood) declined.
Copper (COPPER1!) declined while Aluminum (ALI1!) advanced.
Bitcoin (BTCUSD) declined -1.51%. Ethereum (ETHUSD) declined -4.94%. (Time of writing)
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Investor Sentiment
The put/call ratio declined to 0.598. 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. Below that level is overly bullish.
The CNN Fear & Greed index is on the fear side.
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Market Leaders
Of the four largest mega-caps, only Amazon (AMZN) declined today, losing -1.11%. The others ended the day with gains and record closes but could not hold onto intraday highs. Microsoft (MSFT) rose +1.32%. Apple (AAPL) gained +0.79%. Alphabet (GOOGL) advanced +0.29%.
PepsiCo (PEP) topped the mega-cap list after pleasing investors with a great earnings report and raised forecast. Mastercard (MA), Alibaba (BABA), and Visa (V) make up the rest of the top four mega-caps for today. Tesla (TSLA) gave back much of yesterday's gains, ending today at the bottom of the list. Bank of America (BAC) and JP Morgan (JPM) were also at the bottom of the list despite JP Morgan releasing a great earnings report. Watch to see how the market responds to JPM over the next few days to signal how earnings season will go for this quarter.
It was not a great day for growth stocks, but there were some winners in the daily update list. Upwork (UPWK) gained over 5% and topped the list. JD.Com (JD), Alibaba (BABA) were number two and three as Chinese stocks began to climb back from the sell-off last week. Okta (OKTA) was the fourth-best growth stock on the list. The biggest losers were Etsy (ETSY), Penn National Gaming (PENN), Sumo Digital (SUMO), and Lemonade (LMND).
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Looking ahead
The producer price index data released on Wednesday will compliment Tuesday's consumer numbers. The produce prices show a leading indicator of inflation before it passes along to consumers. Jerome Powell is going before congress again to talk monetary policy. Play the suspense music here.
Bank of America (BAC), Wells Fargo (WFC), Citigroup (C ), BlackRock (BLK) are among the big finance companies reporting earnings before the market opens. Delta Airlines (DAL) will also be a critical earnings release to watch and measure how airlines are recovering as the economy reopened further this past quarter.
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Trends, Support, and Resistance
The Nasdaq set a new all-time high for a second day but could not hold the level, closing lower for the day. It seems there is support around 14,675, which we'll look to hold in tomorrow's session.
The trend line from the 5/12 low shows a +0.94% gain for Wednesday.
The five-day trend line leads to a +0.71% gain.
The one-day trend line points to a -0.53% loss.
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Wrap-up
It was a surprise to see the indexes rally after inflation data was higher than expected. The weak 30y bond auction was enough to reverse the positive sentiment and send indexes lower. Tomorrow's producer price index data will add to the story, providing a heads up for more or less inflation coming down the road.
Positive earnings reports for big banks didn't seem to matter today, but we'll see how investors respond to the sector over the next few days. The initial reaction may reverse, and we could see the sector go higher. That would be a positive sign for the next wave of earnings reports in the following weeks.
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.
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Tuesday, July 13, 2021
Facts: -0.38%, Volume higher, Closing range: 12%, Body: 26%
Good: Higher high, outside day that keeps index in uptrend, support at ~14,675
Bad: Long upper wick from afternoon selling, red body at bottom of candle
Highs/Lows: Higher high, lower low
Candle: Outside day, long upper wick signals a bearish reversal day
Advanced/Decline: 0.21, five decline stocks for every advancing stock
Indexes: SPX (-0.35%), DJI (-0.31%), RUT (-1.88%), VIX (+5.88%)
Sectors: Technology (XLK +0.41%) and Consumer Staples (XLP -0.03%) at the top. Consumer Discretionary (XLY -1.20%) and Real Estate (XLRE -1.30%) were the bottom.
Expectation: Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Higher than expected inflation data wasn't enough to keep the indexes from making new highs, but the rally couldn't last, and markets closed lower on Tuesday. A weaker than expected 30y bond auction sent yields higher and spooked investors in the afternoon. Big tech held onto gains, helping the Technology sector end the day in the positive.
The Nasdaq closed the day with a -0.38% loss on higher volume. The candle has a long upper wick that represents the morning rally which turned into an afternoon sell-off. The 26% red body sits at the bottom of the candle, creating a 12% closing range above a short lower wick. The outside day with a bearish reversal confirms the underlying weakness where five stocks declined for every advancing stock.
The Dow Jones Industrial Average (DJI) declined -0.31% for the day. The S&P 500 (SPX) lost -0.35%. Small caps were hit the worst, with the Russell 2000 (RUT) dropping -1.88%.
The VIX volatility index rose +5.88%.
Technology (XLK +0.41%) was the only sector to end the day with gains. Consumer Staples (XLP -0.03%) was the second-best sector in the list. Consumer Discretionary (XLY -1.20%) and Real Estate (XLRE -1.30%) were the worst-performing. Despite great earnings reports, the outlook for big banks was not spectacular, sending the Financial sector (XLF -1.08%) lower.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) advanced +0.60% for the day.
The US 30y, 10y, and 2y Treasury yields advanced for the day, and the gap between long-term and short-term yields widened. The 30y auction that occurred today was weaker than expected.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined significantly from recent highs.
Silver (SILVER) declined while Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) advanced.
Timber (Wood) declined.
Copper (COPPER1!) declined while Aluminum (ALI1!) advanced.
Bitcoin (BTCUSD) declined -1.51%. Ethereum (ETHUSD) declined -4.94%. (Time of writing)
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Investor Sentiment
The put/call ratio declined to 0.598. 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. Below that level is overly bullish.
The CNN Fear & Greed index is on the fear side.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Of the four largest mega-caps, only Amazon (AMZN) declined today, losing -1.11%. The others ended the day with gains and record closes but could not hold onto intraday highs. Microsoft (MSFT) rose +1.32%. Apple (AAPL) gained +0.79%. Alphabet (GOOGL) advanced +0.29%.
PepsiCo (PEP) topped the mega-cap list after pleasing investors with a great earnings report and raised forecast. Mastercard (MA), Alibaba (BABA), and Visa (V) make up the rest of the top four mega-caps for today. Tesla (TSLA) gave back much of yesterday's gains, ending today at the bottom of the list. Bank of America (BAC) and JP Morgan (JPM) were also at the bottom of the list despite JP Morgan releasing a great earnings report. Watch to see how the market responds to JPM over the next few days to signal how earnings season will go for this quarter.
It was not a great day for growth stocks, but there were some winners in the daily update list. Upwork (UPWK) gained over 5% and topped the list. JD.Com (JD), Alibaba (BABA) were number two and three as Chinese stocks began to climb back from the sell-off last week. Okta (OKTA) was the fourth-best growth stock on the list. The biggest losers were Etsy (ETSY), Penn National Gaming (PENN), Sumo Digital (SUMO), and Lemonade (LMND).
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
The producer price index data released on Wednesday will compliment Tuesday's consumer numbers. The produce prices show a leading indicator of inflation before it passes along to consumers. Jerome Powell is going before congress again to talk monetary policy. Play the suspense music here.
Bank of America (BAC), Wells Fargo (WFC), Citigroup (C ), BlackRock (BLK) are among the big finance companies reporting earnings before the market opens. Delta Airlines (DAL) will also be a critical earnings release to watch and measure how airlines are recovering as the economy reopened further this past quarter.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq set a new all-time high for a second day but could not hold the level, closing lower for the day. It seems there is support around 14,675, which we'll look to hold in tomorrow's session.
The trend line from the 5/12 low shows a +0.94% gain for Wednesday.
The five-day trend line leads to a +0.71% gain.
The one-day trend line points to a -0.53% loss.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It was a surprise to see the indexes rally after inflation data was higher than expected. The weak 30y bond auction was enough to reverse the positive sentiment and send indexes lower. Tomorrow's producer price index data will add to the story, providing a heads up for more or less inflation coming down the road.
Positive earnings reports for big banks didn't seem to matter today, but we'll see how investors respond to the sector over the next few days. The initial reaction may reverse, and we could see the sector go higher. That would be a positive sign for the next wave of earnings reports in the following weeks.
Stay healthy and trade safe!
