Summary: You shake my nerves, and you rattle my brain! There is no question what investors worried about today. They took risk off the table at open ahead of the Fed minutes. Then morning comments from Fed member Quarles started to attract investors back in but at lowering volume. When the meeting minutes were released, volume popped back up as the market reacted.
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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Wednesday, May 19, 2021
Facts: -0.03%, Volume higher, Closing range: 2%, Body: 61%
Good: Thick green body shows buying after a gap down at open
Bad: Gap down at open
Highs/Lows: Lower high, lower low
Candle: All green body, barely visible upper and lower wicks
Advanced/Decline: Two declining stocks for every advancing stock
Indexes: SPX (-0.29%), DJI (-0.48%), RUT (-0.78%), VIX (+3.94%)
Sectors: Technology (XLK +0.35%) and Communications (XLC +0.16%) were top. Materials (XLB -1.53%) and Energy (XLE -2.49%)
Expectation: Sideways or Higher
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Market Overview
You shake my nerves, and you rattle my brain! There is no question what investors worried about today. They took risk off the table at open ahead of the Fed minutes. Then morning comments from Fed member Quarles started to attract investors back in but at lowering volume. When the meeting minutes were released, volume popped back up as the market reacted.
Here is the intraday volume on the QQQ ETF before and after the Fed minutes were released:
The Nasdaq closed with a -0.03% loss, much better than the -1.71% dip at open. Volume was higher than the previous day. The 95% green body and 98% closing range shows the buying throughout the day. There is the potential, as with 5/11, that the gap down caused some shorts to cover and take profits. But much of the action seemed to be centered around the 2 pm release of the Fed minutes. There were two declining stocks for every advancing stock.
The Russell 2000 (RUT) had the worst performance of the day with a -0.78% decline. The Dow Jones Industrial Average (DJI) declined -0.48%. The S&P 500 (SPX) closed the day with a -0.29% loss.
The VIX volatility index rose another +3.94% but recovered from a 22% intraday spike.
Technology (XLK +0.35%) and Communications (XLC +0.16%) were the only gaining sectors for the day. Materials (XLB -1.53%) and Energy (XLE -2.49%) were the bottom two sectors. It's interesting to note that Utilities (XLU) and Consumer Staples (XLP) led in the early morning before the major indices pivoted upward.
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Economic Indicators
The US Dollar (DXY) advanced +0.44% for the day.
The US 30y, 10y, and 2y Treasury yields all rose for the day, having dropped in the early morning hours but then climbing again after the Fed minutes were released.
Both High Yield Corporate Bond (HYG) prices and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) declined, and Gold (GOLD) was flat.
Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) declined.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) dropped nearly -30% in the morning before recording to around a -11% decline at the time of writing. Ethereum (ETHUSD) was down -45% and is now around a -23.5% loss for the day.
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Investor Sentiment
The put/call ratio rose to 0.806. 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 still in the fear zone.
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Market Leaders
Alphabet (GOOGL) was able to recover from the morning dip and end the day with a +0.40% gain. Microsoft (MSFT) ended with a slight gain of +0.02%. Amazon (AMZN) lost -0.01% and Apple (AAPL) declined -0.13%. The latter three are all trading below their 21d EMA and 50d MA lines. Alphabet is above its 50d MA but below its 21d EMA.
Salesforce (CRM) topped the mega-cap list with a +3.27% gain. Taiwan Semiconductor (TSM), Facebook (FB), and Intel (INTC) were also at the top of the list, with around 1% gains each. Tesla (TSLA), Exxon Mobil (XOM), AT&T (T), and Nike (NKE) were at the bottom of the list.
Enphase (ENPH) and Solar Edge (SEDG), two solar energy stocks, topped the daily update growth list with greater than 5% gains. Snowflake (SNOW) and Zynga (ZNGA) also were near the top of the list. CloudFlare (NET), Palantir (PLTR), and Ehang Holdings (EH) were at the bottom of the list.
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Looking ahead
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).
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Trends, Support, and Resistance
The index recovered from the morning gap down but remained well below the key moving average lines.
The early morning to afternoon gains created an upward sloping one-day trend-line that points to a +1.09% gain for tomorrow.
The five-day trend line leads to a +0.46% gain.
The trend-line from the 4/2 high shows a -1.89% decline on Thursday.
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Wrap-up
Worries about the Fed's reaction to inflation don't seem to go away, and today it was on display as trading volume shrank considerably as investors awaiting the release of the minutes from last month's Fed meeting. The minutes did mention the possibility of unwelcome inflation, which suggests some reaction from the Fed. But still, the overwhelming comments say that any tapering now of treasury buybacks could stunt the economic recovery.
The index was choppy after the 2p release of the minutes, but volume popped up higher as investors consumed the new data. In the end, investors bought back into some riskier assets, sending big tech in the Technology and Communications sectors higher for the day. Cryptocurrencies recovered some of the morning losses. Treasury yields rose as investors sold the safe-haven asset.
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=-
Wednesday, May 19, 2021
Facts: -0.03%, Volume higher, Closing range: 2%, Body: 61%
Good: Thick green body shows buying after a gap down at open
Bad: Gap down at open
Highs/Lows: Lower high, lower low
Candle: All green body, barely visible upper and lower wicks
Advanced/Decline: Two declining stocks for every advancing stock
Indexes: SPX (-0.29%), DJI (-0.48%), RUT (-0.78%), VIX (+3.94%)
Sectors: Technology (XLK +0.35%) and Communications (XLC +0.16%) were top. Materials (XLB -1.53%) and Energy (XLE -2.49%)
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
You shake my nerves, and you rattle my brain! There is no question what investors worried about today. They took risk off the table at open ahead of the Fed minutes. Then morning comments from Fed member Quarles started to attract investors back in but at lowering volume. When the meeting minutes were released, volume popped back up as the market reacted.
Here is the intraday volume on the QQQ ETF before and after the Fed minutes were released:
The Nasdaq closed with a -0.03% loss, much better than the -1.71% dip at open. Volume was higher than the previous day. The 95% green body and 98% closing range shows the buying throughout the day. There is the potential, as with 5/11, that the gap down caused some shorts to cover and take profits. But much of the action seemed to be centered around the 2 pm release of the Fed minutes. There were two declining stocks for every advancing stock.
The Russell 2000 (RUT) had the worst performance of the day with a -0.78% decline. The Dow Jones Industrial Average (DJI) declined -0.48%. The S&P 500 (SPX) closed the day with a -0.29% loss.
The VIX volatility index rose another +3.94% but recovered from a 22% intraday spike.
Technology (XLK +0.35%) and Communications (XLC +0.16%) were the only gaining sectors for the day. Materials (XLB -1.53%) and Energy (XLE -2.49%) were the bottom two sectors. It's interesting to note that Utilities (XLU) and Consumer Staples (XLP) led in the early morning before the major indices pivoted upward.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) advanced +0.44% for the day.
The US 30y, 10y, and 2y Treasury yields all rose for the day, having dropped in the early morning hours but then climbing again after the Fed minutes were released.
Both High Yield Corporate Bond (HYG) prices and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) declined, and Gold (GOLD) was flat.
Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) declined.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) dropped nearly -30% in the morning before recording to around a -11% decline at the time of writing. Ethereum (ETHUSD) was down -45% and is now around a -23.5% loss for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose to 0.806. 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 still in the fear zone.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Alphabet (GOOGL) was able to recover from the morning dip and end the day with a +0.40% gain. Microsoft (MSFT) ended with a slight gain of +0.02%. Amazon (AMZN) lost -0.01% and Apple (AAPL) declined -0.13%. The latter three are all trading below their 21d EMA and 50d MA lines. Alphabet is above its 50d MA but below its 21d EMA.
Salesforce (CRM) topped the mega-cap list with a +3.27% gain. Taiwan Semiconductor (TSM), Facebook (FB), and Intel (INTC) were also at the top of the list, with around 1% gains each. Tesla (TSLA), Exxon Mobil (XOM), AT&T (T), and Nike (NKE) were at the bottom of the list.
Enphase (ENPH) and Solar Edge (SEDG), two solar energy stocks, topped the daily update growth list with greater than 5% gains. Snowflake (SNOW) and Zynga (ZNGA) also were near the top of the list. CloudFlare (NET), Palantir (PLTR), and Ehang Holdings (EH) were at the bottom of the list.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
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).
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The index recovered from the morning gap down but remained well below the key moving average lines.
The early morning to afternoon gains created an upward sloping one-day trend-line that points to a +1.09% gain for tomorrow.
The five-day trend line leads to a +0.46% gain.
The trend-line from the 4/2 high shows a -1.89% decline on Thursday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Worries about the Fed's reaction to inflation don't seem to go away, and today it was on display as trading volume shrank considerably as investors awaiting the release of the minutes from last month's Fed meeting. The minutes did mention the possibility of unwelcome inflation, which suggests some reaction from the Fed. But still, the overwhelming comments say that any tapering now of treasury buybacks could stunt the economic recovery.
The index was choppy after the 2p release of the minutes, but volume popped up higher as investors consumed the new data. In the end, investors bought back into some riskier assets, sending big tech in the Technology and Communications sectors higher for the day. Cryptocurrencies recovered some of the morning losses. Treasury yields rose as investors sold the safe-haven asset.
Stay healthy and trade safe!
