Summary: Another record was set for the Dow Jones Industrial average while value stocks continue to outpace growth stocks. Two intraday rallies might just be the action the Nasdaq needed to join the rally, but the gains were mostly isolated to the mega-caps.
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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Thursday, May 6, 2021
Facts: +0.37%, Volume higher, Closing range: 99%, Body: 38%
Good: High closing range with gain on higher volume
Bad: Lower low with dip below 50d moving average
Highs/Lows: Lower high, lower low
Candle: Hammer with long lower wick and smaller body in upper half of candle
Advance/Decline: Almost three declining stocks for every advancing stock
Indexes: SPX (+0.82%), DJI (+0.93%), RUT (+0.00%), VIX (-3.97%)
Sectors: Financials (XLF +1.49%) and Consumer Staples (XLP +1.29%) were top. Consumer Discretionary (XLY -0.22%) and Health (XLV -0.13%) were bottom.
Expectation: Sideways or Higher
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Market Overview
Another record was set for the Dow Jones Industrial average while value stocks continue to outpace growth stocks. Two intraday rallies might just be the action the Nasdaq needed to join the rally, but the gains were mostly isolated to the mega-caps.
The Nasdaq closed with a +0.37% gain on higher volume. The mid-day rallies formed a long lower wick with a smaller 38% green body in the upper half of the candle, forming a hammer. A hammer can signal a trend reversal but needs to be confirmed the following day. The closing range of 99% comes after a rally late in the afternoon.
The Dow Jones Industrial average (DJI) had another record close, gaining +0.93% for the day. The S&P 500 (SPX) climbed +0.82%. The Russell 2000 (RUT) closed just about where it opened for no gain or loss.
The VIX volatility index declined -3.97%.
Financials (XLF +1.49%) and Consumer Staples (XLP +1.29%) topped the sector list. All sectors ended the day with gains. Consumer Discretionary (XLY -0.22%) and Health (XLV -0.13%) were the worst performers.
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Economic Indicators
The US Dollar (DXY) stayed about the same with a -0.40% decline.
The US 30y, 10y declined while the 2y yields rose.
High Yield Corporate Bond (HYG) prices declined. Investment Grade Corporate Bond (LQD) prices advanced.
Silver (SILVER) declined and Gold (GOLD) advanced. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) advanced.
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Investor Sentiment
The put/call ratio declined to 0.722. 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 remains near neutral.
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Market Leaders
All four biggest mega-caps reversed intraday losses to end the day with gains. Apple (AAPL) advanced +1.28%. Microsoft (MSFT) had a +1.32% gain. Amazon (AMZN) gained +1.10%. Alphabet (GOOGL) gained +0.98%. Apple and Microsoft reversals came after tests of their 50 moving average. Alphabet (GOOGL) came close to the 21d EMA before moving higher.
Cisco (CSCO), Berkshire Hathaway (BRK), JP Morgan (JPM) and PayPal (PYPL) were the top mega-caps for today. The majority of mega-caps ended the day with gains. Pfizer (PFE) and Tesla (TSLA) were at the bottom of the list with more than 1% declines.
There were a few winners in the daily update growth stock list. Zynga (ZNGA) gained +5.62% after giving surprise guidance in their earnings call. Ehang Holdings (EH), PayPal (PYPL) and Facebook (FB) were other growth stocks at the top of the list. Fastly (FSLY) declined -27.13%, disappointing investors with their earnings release. Etsy (ETSY) also dropped after an earnings disappointment, declining -14.57%. CloudFlare (NET) declined -12.59%, but gained 8% after hours with an earnings report that exceeded expectations.
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Looking ahead
More labor statistics will be released on Friday with the Average Hourly Earnings data, Nonfarm Payrolls, Labor Participation data and the Unemployment rate all released before market open.
Adidas (ADDYY), BMW (BMWYY), DraftKings (DKNG), Cinemark (CNK) are a few of the companies to report on Friday and end a big earnings week.
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Trends, Support and Resistance
The index dipped below the 50d moving average, but closed above the line. It also touched the lower boundary of a channel drawn from March 2020.
The trend line from the 3/5 low points to a +4.22% advance which does not seem possible unless investor sentiment changed dramatically.
The one-day trend line points to a -0.63% loss.
The five-day trend line points to a -0.76% decline.
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Wrap-up
Initial jobless claims data was much lower than expected, helping drive the rally in the Dow Jones today. But the Nasdaq dipped below the 50d moving average twice before finally rallying into close.
Investors continued to react to the guidance in earnings reports much more closely than meeting current quarter expectations.
Based on the hammer candlestick today, I'll look for sideways or higher tomorrow as an expectation. If so, that would be a nice confirmation of the reversal represented by today's candle. If not, then I'll continue to feel the pain while value stocks feel the gain.
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=-
Thursday, May 6, 2021
Facts: +0.37%, Volume higher, Closing range: 99%, Body: 38%
Good: High closing range with gain on higher volume
Bad: Lower low with dip below 50d moving average
Highs/Lows: Lower high, lower low
Candle: Hammer with long lower wick and smaller body in upper half of candle
Advance/Decline: Almost three declining stocks for every advancing stock
Indexes: SPX (+0.82%), DJI (+0.93%), RUT (+0.00%), VIX (-3.97%)
Sectors: Financials (XLF +1.49%) and Consumer Staples (XLP +1.29%) were top. Consumer Discretionary (XLY -0.22%) and Health (XLV -0.13%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Another record was set for the Dow Jones Industrial average while value stocks continue to outpace growth stocks. Two intraday rallies might just be the action the Nasdaq needed to join the rally, but the gains were mostly isolated to the mega-caps.
The Nasdaq closed with a +0.37% gain on higher volume. The mid-day rallies formed a long lower wick with a smaller 38% green body in the upper half of the candle, forming a hammer. A hammer can signal a trend reversal but needs to be confirmed the following day. The closing range of 99% comes after a rally late in the afternoon.
The Dow Jones Industrial average (DJI) had another record close, gaining +0.93% for the day. The S&P 500 (SPX) climbed +0.82%. The Russell 2000 (RUT) closed just about where it opened for no gain or loss.
The VIX volatility index declined -3.97%.
Financials (XLF +1.49%) and Consumer Staples (XLP +1.29%) topped the sector list. All sectors ended the day with gains. Consumer Discretionary (XLY -0.22%) and Health (XLV -0.13%) were the worst performers.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) stayed about the same with a -0.40% decline.
The US 30y, 10y declined while the 2y yields rose.
High Yield Corporate Bond (HYG) prices declined. Investment Grade Corporate Bond (LQD) prices advanced.
Silver (SILVER) declined and Gold (GOLD) advanced. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) advanced.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio declined to 0.722. 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 remains near neutral.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All four biggest mega-caps reversed intraday losses to end the day with gains. Apple (AAPL) advanced +1.28%. Microsoft (MSFT) had a +1.32% gain. Amazon (AMZN) gained +1.10%. Alphabet (GOOGL) gained +0.98%. Apple and Microsoft reversals came after tests of their 50 moving average. Alphabet (GOOGL) came close to the 21d EMA before moving higher.
Cisco (CSCO), Berkshire Hathaway (BRK), JP Morgan (JPM) and PayPal (PYPL) were the top mega-caps for today. The majority of mega-caps ended the day with gains. Pfizer (PFE) and Tesla (TSLA) were at the bottom of the list with more than 1% declines.
There were a few winners in the daily update growth stock list. Zynga (ZNGA) gained +5.62% after giving surprise guidance in their earnings call. Ehang Holdings (EH), PayPal (PYPL) and Facebook (FB) were other growth stocks at the top of the list. Fastly (FSLY) declined -27.13%, disappointing investors with their earnings release. Etsy (ETSY) also dropped after an earnings disappointment, declining -14.57%. CloudFlare (NET) declined -12.59%, but gained 8% after hours with an earnings report that exceeded expectations.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
More labor statistics will be released on Friday with the Average Hourly Earnings data, Nonfarm Payrolls, Labor Participation data and the Unemployment rate all released before market open.
Adidas (ADDYY), BMW (BMWYY), DraftKings (DKNG), Cinemark (CNK) are a few of the companies to report on Friday and end a big earnings week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The index dipped below the 50d moving average, but closed above the line. It also touched the lower boundary of a channel drawn from March 2020.
The trend line from the 3/5 low points to a +4.22% advance which does not seem possible unless investor sentiment changed dramatically.
The one-day trend line points to a -0.63% loss.
The five-day trend line points to a -0.76% decline.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Initial jobless claims data was much lower than expected, helping drive the rally in the Dow Jones today. But the Nasdaq dipped below the 50d moving average twice before finally rallying into close.
Investors continued to react to the guidance in earnings reports much more closely than meeting current quarter expectations.
Based on the hammer candlestick today, I'll look for sideways or higher tomorrow as an expectation. If so, that would be a nice confirmation of the reversal represented by today's candle. If not, then I'll continue to feel the pain while value stocks feel the gain.
Stay healthy and trade safe!
