Summary: Apple gets an upgrade, and big tech rises again as the rest of the market fades around it. Producer Price Index data was higher than expected. Still, Jerome Powell continued to focus on inflation being transitory and the need for further economic support until the jobs market fully recovers.
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, July 14, 2021
Facts: -0.22%, Volume lower, Closing range: 8%, Body: 86%
Good: Nothing
Bad: Thick red body, closing range, lower high
Highs/Lows: Lower high, lower low
Candle: Mostly red body surrounded by tiny wicks
Advanced/Decline: 0.28, more than three decline stocks for every advancing stock
Indexes: SPX (+0.12%), DJI (+0.13%), RUT (-1.63%), VIX (-4.62%)
Sectors: Consumer Staples (XLP +0.89%) and Real Estate (XLRE +0.88%) at the top. Financials (XLF -0.46%) and Energy (XLE -2.98%) were the bottom.
Expectation: Lower
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Market Overview
Apple gets an upgrade, and big tech rises again as the rest of the market fades around it. Producer Price Index data was higher than expected. Still, Jerome Powell continued to focus on inflation being transitory and the need for further economic support until the jobs market fully recovers.
Despite the advances in big tech, the Nasdaq closed -0.22% lower. Showing the lopsided gains in the market, the QQQ ETF (weighted by cap size) was up +0.18%, while the QQQE ETF (equal-weighted) was down -0.12%. The Nasdaq candle is almost all red body (86%), with tiny upper and lower wicks. The closing range is 8%. There were more than three declining stocks for every advancing stock.
The Dow Jones Industrial Average (DJI) gained +0.13%, while the S&P 500 (SPX) advanced +0.12%. The Russell 2000 (RUT) continues to slide with a -1.63% loss today.
The defensive sectors were at the top of the sector list today. Consumer Staples (XLP +0.89%) and Real Estate (XLRE +0.88%) at the top. Utilities (XLU +0.87%) was third. With the help of the big mega-caps, Technology (XLK +0.74%) also ended the day with gains.
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Economic Indicators
The US Dollar (DXY) declined -0.44% for the day.
The US 30y, 10y, and 2y Treasury yields declined for the day. Yields were already falling in the morning, but further declines came after Powell's testimony.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices both advanced.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) advanced +0.86%. Ethereum (ETHUSD) advanced +3.55%. (Time of writing)
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Investor Sentiment
The put/call ratio rose to 0.630. 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 moving more into the fear side.
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Market Leaders
Apple (AAPL) hit the headlines with a +2.41% advance after JP Morgan upgraded the price target for the stock. Alphabet (GOOGL) rose +0.70%. Microsoft (MSFT) gained +0.54%. Amazon (AMZN) advanced +0.12%.
Apple was the top mega-cap. Coca-Cola (KO) was a surprise second, perhaps getting some positive impact from Pepsi's stellar earnings report the previous day. MasterCard (M) and Visa (V) were third and fourth in the mega-cap list. At the bottom of the list were Nvidia (NVDA), Exxon Mobil (XOM), Tesla (TSLA), and Bank of America (BAC).
Other than the excitement with big tech, it was another dismal day for growth stocks in the daily update list. Twitter (TWTR), Alibaba (BABA), ServiceNow (NOW), and D.R. Horton (DHI) were the only gainers in the list (it is not an exhaustive list of growth stocks). Upwork (UPWK) fell -17.38%. Since May, the stock nearly doubled, and it seems investors were taking profits as the broader market pulled back. GrowGeneration (GRWG) also dropped, declining -11.10%. Solar Edge (SEDG) and UP Fintech (TIGR) round out the bottom four in the growth list.
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Looking ahead
Two sets of data will be in focus on Thursday. First, the weekly Initial Jobless Claims will show how the labor market is progressing. Second, the Manufacturing and Industrial Production data in the morning will be closely watched as investors continue to measure the speed of the economic recovery. Jerome Powell will continue testimony in front of Congress in the morning.
Taiwan Semiconductor (TSM) will release earnings on Thursday. The earnings release and commentary should show how stretched the semiconductor giant is to meet demand. The impact may be among auto manufacturers who've had to put plants on hold, waiting for chips from suppliers. Other large producers of electronics will also be impacted.
In addition, UnitedHealth (UNH), Morgan Stanley (MS), U.S. Bancorp (USB), Progressive (PGR), and Cintas (CTAS) will be interesting reports to watch out for on Thursday.
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Trends, Support, and Resistance
I marked a support area for the Nasdaq around 14,675 yesterday. The index dropped below that today, but there is still a case for support in the range of 14,645 - 14,675. If a further decline comes tomorrow, I'll remove that support area as it isn't holding.
The trend line from the 5/12 low shows a +1.36% gain for Thursday.
The five-day trend line leads to a +1.11% gain.
The one-day trend line points to a -0.68% loss.
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Wrap-up
You are not alone. If you feel like your portfolio is moving lower while the indexes march higher, you've got many friends. Mega-caps are stealing the show right now and sending the major indexes higher while the market continues to weaken underneath them.
The expectation will remain for a move Lower tomorrow. Some good economic news could be enough to start the rally again, but a rally will only have strength with higher volume and an advance/decline ratio above 1.0.
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, July 14, 2021
Facts: -0.22%, Volume lower, Closing range: 8%, Body: 86%
Good: Nothing
Bad: Thick red body, closing range, lower high
Highs/Lows: Lower high, lower low
Candle: Mostly red body surrounded by tiny wicks
Advanced/Decline: 0.28, more than three decline stocks for every advancing stock
Indexes: SPX (+0.12%), DJI (+0.13%), RUT (-1.63%), VIX (-4.62%)
Sectors: Consumer Staples (XLP +0.89%) and Real Estate (XLRE +0.88%) at the top. Financials (XLF -0.46%) and Energy (XLE -2.98%) were the bottom.
Expectation: Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Apple gets an upgrade, and big tech rises again as the rest of the market fades around it. Producer Price Index data was higher than expected. Still, Jerome Powell continued to focus on inflation being transitory and the need for further economic support until the jobs market fully recovers.
Despite the advances in big tech, the Nasdaq closed -0.22% lower. Showing the lopsided gains in the market, the QQQ ETF (weighted by cap size) was up +0.18%, while the QQQE ETF (equal-weighted) was down -0.12%. The Nasdaq candle is almost all red body (86%), with tiny upper and lower wicks. The closing range is 8%. There were more than three declining stocks for every advancing stock.
The Dow Jones Industrial Average (DJI) gained +0.13%, while the S&P 500 (SPX) advanced +0.12%. The Russell 2000 (RUT) continues to slide with a -1.63% loss today.
The defensive sectors were at the top of the sector list today. Consumer Staples (XLP +0.89%) and Real Estate (XLRE +0.88%) at the top. Utilities (XLU +0.87%) was third. With the help of the big mega-caps, Technology (XLK +0.74%) also ended the day with gains.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.44% for the day.
The US 30y, 10y, and 2y Treasury yields declined for the day. Yields were already falling in the morning, but further declines came after Powell's testimony.
High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices both advanced.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) advanced +0.86%. Ethereum (ETHUSD) advanced +3.55%. (Time of writing)
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Investor Sentiment
The put/call ratio rose to 0.630. 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 moving more into the fear side.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Apple (AAPL) hit the headlines with a +2.41% advance after JP Morgan upgraded the price target for the stock. Alphabet (GOOGL) rose +0.70%. Microsoft (MSFT) gained +0.54%. Amazon (AMZN) advanced +0.12%.
Apple was the top mega-cap. Coca-Cola (KO) was a surprise second, perhaps getting some positive impact from Pepsi's stellar earnings report the previous day. MasterCard (M) and Visa (V) were third and fourth in the mega-cap list. At the bottom of the list were Nvidia (NVDA), Exxon Mobil (XOM), Tesla (TSLA), and Bank of America (BAC).
Other than the excitement with big tech, it was another dismal day for growth stocks in the daily update list. Twitter (TWTR), Alibaba (BABA), ServiceNow (NOW), and D.R. Horton (DHI) were the only gainers in the list (it is not an exhaustive list of growth stocks). Upwork (UPWK) fell -17.38%. Since May, the stock nearly doubled, and it seems investors were taking profits as the broader market pulled back. GrowGeneration (GRWG) also dropped, declining -11.10%. Solar Edge (SEDG) and UP Fintech (TIGR) round out the bottom four in the growth list.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Two sets of data will be in focus on Thursday. First, the weekly Initial Jobless Claims will show how the labor market is progressing. Second, the Manufacturing and Industrial Production data in the morning will be closely watched as investors continue to measure the speed of the economic recovery. Jerome Powell will continue testimony in front of Congress in the morning.
Taiwan Semiconductor (TSM) will release earnings on Thursday. The earnings release and commentary should show how stretched the semiconductor giant is to meet demand. The impact may be among auto manufacturers who've had to put plants on hold, waiting for chips from suppliers. Other large producers of electronics will also be impacted.
In addition, UnitedHealth (UNH), Morgan Stanley (MS), U.S. Bancorp (USB), Progressive (PGR), and Cintas (CTAS) will be interesting reports to watch out for on Thursday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
I marked a support area for the Nasdaq around 14,675 yesterday. The index dropped below that today, but there is still a case for support in the range of 14,645 - 14,675. If a further decline comes tomorrow, I'll remove that support area as it isn't holding.
The trend line from the 5/12 low shows a +1.36% gain for Thursday.
The five-day trend line leads to a +1.11% gain.
The one-day trend line points to a -0.68% loss.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
You are not alone. If you feel like your portfolio is moving lower while the indexes march higher, you've got many friends. Mega-caps are stealing the show right now and sending the major indexes higher while the market continues to weaken underneath them.
The expectation will remain for a move Lower tomorrow. Some good economic news could be enough to start the rally again, but a rally will only have strength with higher volume and an advance/decline ratio above 1.0.
Stay healthy and trade safe!
