Summary: The week opened with reassurances that the Fed would not change monetary policy, helping to move the dialogue off inflation and turn the trade back toward growth. However, caution remained. There were gains, but some indecision in the indexes remained, and rotation was back into value and defensive plays at the end of the week.
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 24, 2021
Facts: +1.41%, Volume lower, Closing range: 70%, Body: 66%
Good: Higher high, higher low, high closing range
Bad: Upper wick from fade before close, lower volume, A/D ratio
Highs/Lows: Higher high, higher low
Candle: Large green body under a long upper wick. No lower wick.
Advanced/Decline: More declining stocks than advancing stocks.
Indexes: SPX (+0.99%), DJI (+0.54%), RUT (+0.54%), VIX (-7.73%)
Sectors: Communications (XLC +1.82%) and Technology (XLK +1.78%) were top. Health (XLV +0.10%) and Utilities (XLU -0.18%) were bottom.
Expectation: Sideways or Higher
The Fed made new promises today to keep an easy monetary policy, helping boost growth stocks. Stocks that suffered from inflation fears were the ones that had the most gains today.
The Nasdaq rose +1.41%, but on lower volume for the day. The closing range of 70% results from a fade in prices before close, but the candle still has a 66% green body from the bullish day. Despite the bullish day in the indexes, there were more declining stocks than advancing stocks.
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Tuesday, May 25, 2021
Facts: -0.03%, Volume higher, Closing range: 21%, Body: 54%
Good: The higher high and higher low continues the uptrend
Bad: Could not revisit the high just after open, and higher volume in selling with low A/D
Highs/Lows: Higher high, higher low
Candle: Shallow red body within a tight intraday range. Slightly longer upper wick.
Advanced/Decline: Two declining stocks for every advancing stock.
Indexes: SPX (-24%), DJI (+0.24%), RUT (-0.97%), VIX (-7.73%)
Sectors: Consumer Discretionary (XLY +0.32%) and Real Estate (XLRE +0.28%) were top. Utilities (XLU -1.21%) and Energy (XLE -2.03%) were bottom.
Expectation: Sideways or Higher
The indices pulled back a bit from yesterday's gains after consumer confidence numbers were lower than expected, indicating some possible bumps in the economic recovery. That left us still waiting for a higher volume advance with more breadth in gains across the market.
The Nasdaq moved sideways with a small -0.03% declined by the end of the day. Volume was higher for the day. The index fell after a very brief rally after open, creating a 54% red body with small upper and lower wicks. The closing range of 21% is in the middle of the afternoon trading range, with the index moving sideways most of the day. There were two declining stocks for every advancing stock.
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Wednesday, May 26, 2021
Facts: +0.59%, Volume higher, Closing range: 83%, Body: 62%
Good: Higher volume with breadth of gains across index
Bad: No higher high
Highs/Lows: Lower high, higher low
Candle: Inside day. A shallow green body with the high and low within the previous day's range.
Advanced/Decline: Two advancing stocks for every declining stock.
Indexes: SPX (+0.19%), DJI (+0.03%), RUT (+1.97%), VIX (-7.31%)
Sectors: Consumer Discretionary (XLY +0.95%) and Energy (XLE +0.89%) were top. Consumer Staples (XLP -0.21%) and Health (XLV -0.58%) were bottom.
Expectation: Sideways or Higher
Investors put their inflation worries aside today and jumped back into growth and small-cap stocks. The breadth of gains across stocks on higher volume in the indices shows the kind of accumulation we've wanted. There is still overhead supply to deal with among many growth stocks, but today is a move in the right direction.
The Nasdaq closed the day with a +0.59% gain on higher volume. The candlestick is an inside day where the high and low are within the high and low of the previous day. The closing range of 83% over a 62% green body represents a bullish day, but the narrow trading range exposes some remaining caution among investors. There were more than two advancing stocks for every declining stock.
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Thursday, May 27, 2021
[chart[
Facts: -0.01%, Volume higher, Closing range: 46%, Body: 8%
Good: Higher high and higher low
Bad: Could not hold onto intraday gains
Highs/Lows: Higher high, higher low
Candle: Indecisive spinning-top red candle, thin red body in the middle of two long wicks.
Advanced/Decline: Three advancing stocks for every two declining stocks.
Indexes: SPX (+0.12%), DJI (+0.41%), RUT (+1.06%), VIX (-3.57%)
Sectors: Industrials (XLI +1.37%) and Financials (XLF +1.15%) were top. Consumer Staples (XLP -0.62%) and Utilities (XLU -0.67%) were bottom.
Expectation: Sideways or Lower
Positive employment and durable goods orders data gave a boost to the cyclical sectors today. Investors rotated out of big tech and some growth stocks and into value stocks and small caps. Even so, there were a broad set of gains on higher volume, even in the tech-heavy Nasdaq.
The Nasdaq closed nearly where it opened with a slight -0.01% loss. The spinning-top style candle has a thin 8% red body in the middle of equal length upper and lower wicks, resulting in a 46% closing range. The candle signals indecision among investors, which is in line with this week's market character. Despite the slight loss, there were three advancing stocks for every declining stock.
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Friday, May 28, 2021
Facts: +0.09%, Volume lower, Closing range: 2%, Body: 59%
Good: Higher high and higher low
Bad: Low closing range, couldn't hold mid-day high
Highs/Lows: Higher high, higher low
Candle: Red body with no lower wick, visible upper wick.
Advanced/Decline: 0.76, more declining stocks than advancing stocks.
Indexes: SPX (+0.08%), DJI (+0.19%), RUT (-0.18%), VIX (+0.12%)
Sectors: Real Estate (XLRE +0.67%) and Utilities (XLU +0.54%) were top. Consumer Discretionary (XLY -0.14%) and Communications (XLC -0.33%).
Expectation: Sideways or Lower
Little by little. That's been how the index gains have come this week. Higher lows pushed up higher highs through the week as investors grapple with a mix of economic news and shrugged off inflation data. It was the same for Friday. Price index data was higher, but it didn't seem to bring any surprises. Consumer data was a mix of results against expectations, causing a bit of uncertainty. Add a three-day weekend, and investors moved into defensive plays.
The Nasdaq closed with a +0.09% gain but faded from the mid-day high. Volume was lower for the day and lower in the afternoon selling, which was a good sign for bulls. The closing range of 2% and red 59% body creates a candlestick with no lower wick. The upper wick formed from the morning rally. Today's session marks seven days of a higher low. There were more declining stocks than advancing stocks.
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The Meaning of Life (View on the Week)
The week opened with reassurances that the Fed would not change monetary policy, helping to move the dialogue off inflation and turn the trade back toward growth. However, caution remained. There were gains, but some indecision in the indexes remained, and rotation was back into value and defensive plays at the end of the week.
Monday was the best day of the week for the Nasdaq, gaining +1.41% for the day. It came on lower volume but started the upward trend in both price and volume for the rest of the week.
Tuesday brought a pull-back as investors took profits from Monday's session. However, Consumer Discretionary remained at the top of the sector list, and Technology had small gains despite the pull-back in the tech-heavy Nasdaq index. Overall, it still looked good for growth stocks.
Wednesday proved that investors were still interested in growth stocks. They put inflation worries to bed and reinvested, taking stocks higher on higher volume, with two advancing stocks for every declining stock.
The pace changed a bit on Thursday after attention moved back to infrastructure spending and robust economic recovery data. That caused a rotation back to cyclicals and value stocks that investors ignored earlier in the week. Still, the Nasdaq held close to the previous day's price on higher volume, and there was a breadth of gains across stocks in the index.
There were no surprises for the end of the week. The index moved higher in the morning but couldn't hold the gains as investors moved into defensive positions for the three-day weekend and the start of the typically low-performing summer months.
The Nasdaq climbed +2.06% for the week. Volume was higher than the previous week. The closing range was 73%, a good sign and strengthened by the higher high and higher low.
The small-cap Russell 2000 (RUT) had the best week of the major indices, gaining +2.42%. The S&P 500 (SPX) advanced +1.16%. The Dow Jones Industrial Average (DJI) gained +1.16%.
The VIX volatility index declined -16.36% for the week.
Growth sectors stole the show this week as investors put inflation worries aside and boosted Communications ( XLC ) and Technology ( XLK ) early in the week. The focus was on the growth sectors from Monday to Wednesday. Technology faded back in the list, buy Consumer Discretionary ( XLY ) joined Communications to end the week at the top of the list.
On Thursday, there was a rotation into cyclicals, bringing Industrials ( XLI ) higher in the list. Industrials ended the week in fourth place.
Friday brought out the defensive plays heading into a three-day weekend and the start of the summer months. That gave a boost to Real Estate ( XLRE ), Health Care ( XLV ), Utilities ( XLU ), and Consumer Staples ( XLP ). Real Estate ( XLRE ) ended in third place for the week, while Health Care and Utilities remained at the bottom two sectors for the week.
The US Treasury 30y, 10y, and 2y yields declined for the week, and the spread between long and short-term yields tightened more.
The High Yield Corporate Bond (HYG) and Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) seemed to find an area of support around 90, dipping early in the week but then ending the week with a +0.03% advance.
Silver (SILVER) advanced +1.38%, and Gold (GOLD) advanced +1.19%.
Crude Oil (CRUDEOIL1!) advanced +4.21%, hitting recent highs.
Timber (WOOD) declined -0.10%. This is the third week of declines.
Copper and Aluminum had significant advances on Thursday thanks to a renewed focus on infrastructure spending.
Copper (COPPER1!) advanced +3.50%.
Aluminum (ALI1!) advanced +5.48%.
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Big Four Mega-caps
Alphabet (GOOGL) continues to be the strongest of the four largest mega-caps this week. It has consistently outperformed the index this year. This week, Alphabet advanced +2.73%, continuing the climb after touching its 10w moving average line. Microsoft (MSFT) is also doing well with a +1.84% gain this week and topping the 10w line before closing below it. Amazon (AMZN) gained +0.62%, losing momentum from earlier in the week and closing just above the 40w moving average line. Apple (AAPL) had its fifth week of declines, losing -0.65% this week.
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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. Exxon Mobil (XOM) was the only one with a loss this week, declining -0.93% but getting support at the 10w moving average line. Carnival Cruise Lines (CCL) rose +8.80% for the week and could be ready to break out of a base. Delta Airlines (DAL) moved above the 10w moving average line with a +5.46% gain. Marriott (MAR) gained +3.29% but remained below the 10w moving average line.
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Cryptocurrency
I started 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, tracking five cryptocurrencies, including these four (Ripple is the fifth).
The cryptocurrencies bounced back from two weeks of losses. Bitcoin (BTCUSD) gained +4.29%. Ethereum (ETHUSD) gained +18.79%. Litecoin (LTCUSD) gained +26.37%. Bitcoin Cash (BCHUSD) gained +24.21%. Ethereum is the only of the four near its 10w moving average, having poked above it earlier in the week. The other three are trading in between the 10w and 40w moving average lines.
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Investor Sentiment
The put/call ratio (PCCE) moved lower, ending the week at 0.593. 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 remains on the fear side.
The NAAIM money manager exposure index rose to 68.3 after dipping to 44.2 the previous week.
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The Week Ahead
Monday
Monday is Memorial Day in the US, and the markets will be closed.
Tuesday
On Tuesday, the ISM will release Manufacturing data, including the purchasing managers index and employment data, showing the sector preparing for future rise or fall in demand.
Zoom Video (ZM), Hewlett Packard (HPE), and Digital Turbine (APPS) will release earnings reports on Tuesday.
Wednesday
Some more updates from the Federal Reserve come on Wednesday with the release of the Beige book and comments from Fed member Raphael Bostic in the afternoon. API Weekly Crude oil stock updates come after market close.
Advanced Auto Parts (AAP) will release earnings. Otherwise, there are not many interesting earning reports for the daily update.
Thursday
More employment data is coming on Thursday with Nonfarm Employment Change, Initial Jobless Claims, Productivity, and Labor Costs. Services PMI is a leading indicator of demand for services such as hotels, restaurants, and others. Crude Oil Inventories will be available late in the morning. Fed members are scheduled to speak in the afternoon.
Thursday's earnings reports include Broadcom (AVGO), Crowdstrike (CRWD), Lululemon (LULU), Docusign (DOCU), Slack (WORK), MongoDB (MDB), Five Below (FIVE), Pagerduty (PD), Sumo Logic (SUMO),
Friday
Fed Chair Jerome Powell is scheduled to speak early in the morning on Friday. Then more employment data will be released before markets open. After the market opens, Factory Orders will be released.
There are no earnings reports relevant for the daily update on Friday.
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The Bullish Side
Investors turned their attention back to the growth stock trade this past week. The new confidence comes after the Fed reinforced that they will make no monetary policy changes until they see employment and economic activity recovers fully.
That also helped the US Dollar and interest rates remain low, which can boost big tech and growth stocks. It's reasonable to expect more upside for growth stocks in the next few weeks.
It also seems that retail investors are entering back into the picture. For better or worse, the meme stocks that got much attention early in the year are starting to see the same gains again. Once those trades play out, we could see additional retail activity in some of the favorite growth names as well.
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The Bearish Side
Sell in May and go away is the age-old mantra. As investors came to the end of this week, we saw them move into defensive sectors that tend to stay steady regardless of the ups and downs of the market. That could be because there is a three-day weekend coming up, but investors may also be prepping for the drawdowns that often come in the summer months.
The months of June to September historically don't do as well as other months. Each of those months has gains less than 60% of the time in stock market history.
Any economic news this week that is disappointing may be the catalyst that ensures investors go away.
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Key Nasdaq Levels to Watch
The index moved back above the 21d EMA and 50d MA lines this week. The 21d EMA is approaching the 50d MA and may cross above in the next week, confirming a good uptrend. The index is also back above the 13,600 - 13,700 support/resistance area. It rose above this area on Wednesday and stayed above it through the end of the week.
On the positive side, the levels are:
On the downside, there are a few key levels:
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Wrap-up
It was the most exciting rally this week. It started with a bang but then slowed through the remainder of the week. A slow, steady climb may be boring, but it isn't necessarily a bad thing, helping build new support levels that can keep the index moving higher instead of making new lows.
Next week is a short week with a lighter set of economic news and earnings reports. The main concern now is how the market enters the summer and whether investors will go on vacation or keep driving prices higher.
If you are in the US, enjoy your Memorial Day Weekend!
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 24, 2021
Facts: +1.41%, Volume lower, Closing range: 70%, Body: 66%
Good: Higher high, higher low, high closing range
Bad: Upper wick from fade before close, lower volume, A/D ratio
Highs/Lows: Higher high, higher low
Candle: Large green body under a long upper wick. No lower wick.
Advanced/Decline: More declining stocks than advancing stocks.
Indexes: SPX (+0.99%), DJI (+0.54%), RUT (+0.54%), VIX (-7.73%)
Sectors: Communications (XLC +1.82%) and Technology (XLK +1.78%) were top. Health (XLV +0.10%) and Utilities (XLU -0.18%) were bottom.
Expectation: Sideways or Higher
The Fed made new promises today to keep an easy monetary policy, helping boost growth stocks. Stocks that suffered from inflation fears were the ones that had the most gains today.
The Nasdaq rose +1.41%, but on lower volume for the day. The closing range of 70% results from a fade in prices before close, but the candle still has a 66% green body from the bullish day. Despite the bullish day in the indexes, there were more declining stocks than advancing stocks.
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Tuesday, May 25, 2021
Facts: -0.03%, Volume higher, Closing range: 21%, Body: 54%
Good: The higher high and higher low continues the uptrend
Bad: Could not revisit the high just after open, and higher volume in selling with low A/D
Highs/Lows: Higher high, higher low
Candle: Shallow red body within a tight intraday range. Slightly longer upper wick.
Advanced/Decline: Two declining stocks for every advancing stock.
Indexes: SPX (-24%), DJI (+0.24%), RUT (-0.97%), VIX (-7.73%)
Sectors: Consumer Discretionary (XLY +0.32%) and Real Estate (XLRE +0.28%) were top. Utilities (XLU -1.21%) and Energy (XLE -2.03%) were bottom.
Expectation: Sideways or Higher
The indices pulled back a bit from yesterday's gains after consumer confidence numbers were lower than expected, indicating some possible bumps in the economic recovery. That left us still waiting for a higher volume advance with more breadth in gains across the market.
The Nasdaq moved sideways with a small -0.03% declined by the end of the day. Volume was higher for the day. The index fell after a very brief rally after open, creating a 54% red body with small upper and lower wicks. The closing range of 21% is in the middle of the afternoon trading range, with the index moving sideways most of the day. There were two declining stocks for every advancing stock.
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Wednesday, May 26, 2021
Facts: +0.59%, Volume higher, Closing range: 83%, Body: 62%
Good: Higher volume with breadth of gains across index
Bad: No higher high
Highs/Lows: Lower high, higher low
Candle: Inside day. A shallow green body with the high and low within the previous day's range.
Advanced/Decline: Two advancing stocks for every declining stock.
Indexes: SPX (+0.19%), DJI (+0.03%), RUT (+1.97%), VIX (-7.31%)
Sectors: Consumer Discretionary (XLY +0.95%) and Energy (XLE +0.89%) were top. Consumer Staples (XLP -0.21%) and Health (XLV -0.58%) were bottom.
Expectation: Sideways or Higher
Investors put their inflation worries aside today and jumped back into growth and small-cap stocks. The breadth of gains across stocks on higher volume in the indices shows the kind of accumulation we've wanted. There is still overhead supply to deal with among many growth stocks, but today is a move in the right direction.
The Nasdaq closed the day with a +0.59% gain on higher volume. The candlestick is an inside day where the high and low are within the high and low of the previous day. The closing range of 83% over a 62% green body represents a bullish day, but the narrow trading range exposes some remaining caution among investors. There were more than two advancing stocks for every declining stock.
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Thursday, May 27, 2021
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Facts: -0.01%, Volume higher, Closing range: 46%, Body: 8%
Good: Higher high and higher low
Bad: Could not hold onto intraday gains
Highs/Lows: Higher high, higher low
Candle: Indecisive spinning-top red candle, thin red body in the middle of two long wicks.
Advanced/Decline: Three advancing stocks for every two declining stocks.
Indexes: SPX (+0.12%), DJI (+0.41%), RUT (+1.06%), VIX (-3.57%)
Sectors: Industrials (XLI +1.37%) and Financials (XLF +1.15%) were top. Consumer Staples (XLP -0.62%) and Utilities (XLU -0.67%) were bottom.
Expectation: Sideways or Lower
Positive employment and durable goods orders data gave a boost to the cyclical sectors today. Investors rotated out of big tech and some growth stocks and into value stocks and small caps. Even so, there were a broad set of gains on higher volume, even in the tech-heavy Nasdaq.
The Nasdaq closed nearly where it opened with a slight -0.01% loss. The spinning-top style candle has a thin 8% red body in the middle of equal length upper and lower wicks, resulting in a 46% closing range. The candle signals indecision among investors, which is in line with this week's market character. Despite the slight loss, there were three advancing stocks for every declining stock.
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Friday, May 28, 2021
Facts: +0.09%, Volume lower, Closing range: 2%, Body: 59%
Good: Higher high and higher low
Bad: Low closing range, couldn't hold mid-day high
Highs/Lows: Higher high, higher low
Candle: Red body with no lower wick, visible upper wick.
Advanced/Decline: 0.76, more declining stocks than advancing stocks.
Indexes: SPX (+0.08%), DJI (+0.19%), RUT (-0.18%), VIX (+0.12%)
Sectors: Real Estate (XLRE +0.67%) and Utilities (XLU +0.54%) were top. Consumer Discretionary (XLY -0.14%) and Communications (XLC -0.33%).
Expectation: Sideways or Lower
Little by little. That's been how the index gains have come this week. Higher lows pushed up higher highs through the week as investors grapple with a mix of economic news and shrugged off inflation data. It was the same for Friday. Price index data was higher, but it didn't seem to bring any surprises. Consumer data was a mix of results against expectations, causing a bit of uncertainty. Add a three-day weekend, and investors moved into defensive plays.
The Nasdaq closed with a +0.09% gain but faded from the mid-day high. Volume was lower for the day and lower in the afternoon selling, which was a good sign for bulls. The closing range of 2% and red 59% body creates a candlestick with no lower wick. The upper wick formed from the morning rally. Today's session marks seven days of a higher low. There were more declining stocks than advancing stocks.
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The Meaning of Life (View on the Week)
The week opened with reassurances that the Fed would not change monetary policy, helping to move the dialogue off inflation and turn the trade back toward growth. However, caution remained. There were gains, but some indecision in the indexes remained, and rotation was back into value and defensive plays at the end of the week.
Monday was the best day of the week for the Nasdaq, gaining +1.41% for the day. It came on lower volume but started the upward trend in both price and volume for the rest of the week.
Tuesday brought a pull-back as investors took profits from Monday's session. However, Consumer Discretionary remained at the top of the sector list, and Technology had small gains despite the pull-back in the tech-heavy Nasdaq index. Overall, it still looked good for growth stocks.
Wednesday proved that investors were still interested in growth stocks. They put inflation worries to bed and reinvested, taking stocks higher on higher volume, with two advancing stocks for every declining stock.
The pace changed a bit on Thursday after attention moved back to infrastructure spending and robust economic recovery data. That caused a rotation back to cyclicals and value stocks that investors ignored earlier in the week. Still, the Nasdaq held close to the previous day's price on higher volume, and there was a breadth of gains across stocks in the index.
There were no surprises for the end of the week. The index moved higher in the morning but couldn't hold the gains as investors moved into defensive positions for the three-day weekend and the start of the typically low-performing summer months.
The Nasdaq climbed +2.06% for the week. Volume was higher than the previous week. The closing range was 73%, a good sign and strengthened by the higher high and higher low.
The small-cap Russell 2000 (RUT) had the best week of the major indices, gaining +2.42%. The S&P 500 (SPX) advanced +1.16%. The Dow Jones Industrial Average (DJI) gained +1.16%.
The VIX volatility index declined -16.36% for the week.
Growth sectors stole the show this week as investors put inflation worries aside and boosted Communications ( XLC ) and Technology ( XLK ) early in the week. The focus was on the growth sectors from Monday to Wednesday. Technology faded back in the list, buy Consumer Discretionary ( XLY ) joined Communications to end the week at the top of the list.
On Thursday, there was a rotation into cyclicals, bringing Industrials ( XLI ) higher in the list. Industrials ended the week in fourth place.
Friday brought out the defensive plays heading into a three-day weekend and the start of the summer months. That gave a boost to Real Estate ( XLRE ), Health Care ( XLV ), Utilities ( XLU ), and Consumer Staples ( XLP ). Real Estate ( XLRE ) ended in third place for the week, while Health Care and Utilities remained at the bottom two sectors for the week.
The US Treasury 30y, 10y, and 2y yields declined for the week, and the spread between long and short-term yields tightened more.
The High Yield Corporate Bond (HYG) and Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) seemed to find an area of support around 90, dipping early in the week but then ending the week with a +0.03% advance.
Silver (SILVER) advanced +1.38%, and Gold (GOLD) advanced +1.19%.
Crude Oil (CRUDEOIL1!) advanced +4.21%, hitting recent highs.
Timber (WOOD) declined -0.10%. This is the third week of declines.
Copper and Aluminum had significant advances on Thursday thanks to a renewed focus on infrastructure spending.
Copper (COPPER1!) advanced +3.50%.
Aluminum (ALI1!) advanced +5.48%.
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Big Four Mega-caps
Alphabet (GOOGL) continues to be the strongest of the four largest mega-caps this week. It has consistently outperformed the index this year. This week, Alphabet advanced +2.73%, continuing the climb after touching its 10w moving average line. Microsoft (MSFT) is also doing well with a +1.84% gain this week and topping the 10w line before closing below it. Amazon (AMZN) gained +0.62%, losing momentum from earlier in the week and closing just above the 40w moving average line. Apple (AAPL) had its fifth week of declines, losing -0.65% this week.
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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. Exxon Mobil (XOM) was the only one with a loss this week, declining -0.93% but getting support at the 10w moving average line. Carnival Cruise Lines (CCL) rose +8.80% for the week and could be ready to break out of a base. Delta Airlines (DAL) moved above the 10w moving average line with a +5.46% gain. Marriott (MAR) gained +3.29% but remained below the 10w moving average line.
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Cryptocurrency
I started 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, tracking five cryptocurrencies, including these four (Ripple is the fifth).
The cryptocurrencies bounced back from two weeks of losses. Bitcoin (BTCUSD) gained +4.29%. Ethereum (ETHUSD) gained +18.79%. Litecoin (LTCUSD) gained +26.37%. Bitcoin Cash (BCHUSD) gained +24.21%. Ethereum is the only of the four near its 10w moving average, having poked above it earlier in the week. The other three are trading in between the 10w and 40w moving average lines.
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Investor Sentiment
The put/call ratio (PCCE) moved lower, ending the week at 0.593. 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 remains on the fear side.
The NAAIM money manager exposure index rose to 68.3 after dipping to 44.2 the previous week.
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The Week Ahead
Monday
Monday is Memorial Day in the US, and the markets will be closed.
Tuesday
On Tuesday, the ISM will release Manufacturing data, including the purchasing managers index and employment data, showing the sector preparing for future rise or fall in demand.
Zoom Video (ZM), Hewlett Packard (HPE), and Digital Turbine (APPS) will release earnings reports on Tuesday.
Wednesday
Some more updates from the Federal Reserve come on Wednesday with the release of the Beige book and comments from Fed member Raphael Bostic in the afternoon. API Weekly Crude oil stock updates come after market close.
Advanced Auto Parts (AAP) will release earnings. Otherwise, there are not many interesting earning reports for the daily update.
Thursday
More employment data is coming on Thursday with Nonfarm Employment Change, Initial Jobless Claims, Productivity, and Labor Costs. Services PMI is a leading indicator of demand for services such as hotels, restaurants, and others. Crude Oil Inventories will be available late in the morning. Fed members are scheduled to speak in the afternoon.
Thursday's earnings reports include Broadcom (AVGO), Crowdstrike (CRWD), Lululemon (LULU), Docusign (DOCU), Slack (WORK), MongoDB (MDB), Five Below (FIVE), Pagerduty (PD), Sumo Logic (SUMO),
Friday
Fed Chair Jerome Powell is scheduled to speak early in the morning on Friday. Then more employment data will be released before markets open. After the market opens, Factory Orders will be released.
There are no earnings reports relevant for the daily update on Friday.
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The Bullish Side
Investors turned their attention back to the growth stock trade this past week. The new confidence comes after the Fed reinforced that they will make no monetary policy changes until they see employment and economic activity recovers fully.
That also helped the US Dollar and interest rates remain low, which can boost big tech and growth stocks. It's reasonable to expect more upside for growth stocks in the next few weeks.
It also seems that retail investors are entering back into the picture. For better or worse, the meme stocks that got much attention early in the year are starting to see the same gains again. Once those trades play out, we could see additional retail activity in some of the favorite growth names as well.
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The Bearish Side
Sell in May and go away is the age-old mantra. As investors came to the end of this week, we saw them move into defensive sectors that tend to stay steady regardless of the ups and downs of the market. That could be because there is a three-day weekend coming up, but investors may also be prepping for the drawdowns that often come in the summer months.
The months of June to September historically don't do as well as other months. Each of those months has gains less than 60% of the time in stock market history.
Any economic news this week that is disappointing may be the catalyst that ensures investors go away.
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Key Nasdaq Levels to Watch
The index moved back above the 21d EMA and 50d MA lines this week. The 21d EMA is approaching the 50d MA and may cross above in the next week, confirming a good uptrend. The index is also back above the 13,600 - 13,700 support/resistance area. It rose above this area on Wednesday and stayed above it through the end of the week.
On the positive side, the levels are:
- The high of this past week was 13,820.87.
- The rally attempt of two weeks ago made it to 13,828.62. A move above that level adds confidence to this rally.
- 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.
On the downside, there are a few key levels:
- The key moving averages are lined up close to each other. The 50d MA is at 13,611,29.
- The 21d EMA is at 13,596.57.
- The 10d MA is at 13,553.05.
- The low of this past week is 13,551.01.
- There is a support area at 13,000.
- 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.
- 12,612.16 is the 200d MA. This could be a support point if the index falls below 13,000.
- 12,397.05 is a low pivot point from the early March dip.
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Wrap-up
It was the most exciting rally this week. It started with a bang but then slowed through the remainder of the week. A slow, steady climb may be boring, but it isn't necessarily a bad thing, helping build new support levels that can keep the index moving higher instead of making new lows.
Next week is a short week with a lighter set of economic news and earnings reports. The main concern now is how the market enters the summer and whether investors will go on vacation or keep driving prices higher.
If you are in the US, enjoy your Memorial Day Weekend!
Good luck, stay healthy, and trade safe!
