Summary: 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.
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 27, 2021
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
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Market Overview
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.
The small-cap Russell 2000 (RUT) index led again today with a +1.06% gain. The Dow Jones Industrial Average (DJI) gained +0.41%. The S&P 500 (SPX) gained +0.12%.
The VIX volatility index declined -3.57%.
Cyclical sectors led the list today. Industrials (XLI +1.37%) and Financials (XLF +1.15%) were top, with Materials (XLB +0.80%) in third place. Technology (XLK -0.53%) had the second day of underperformance relative to the tech-heavy Nasdaq index. Consumer Staples (XLP -0.62%) and Utilities (XLU -0.67%) were the bottom sectors of the day. Investors did not focus on the defensive strategy of these sectors.
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Economic Indicators
The US Dollar (DXY) declined -0.05%. The dollar seems to have found a base of support over the past two weeks.
The US 30y, 10y, and 2y treasure yields all advanced, with the spread remaining about the same.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) advanced.
Timber (WOOD) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) advanced considerably, aligning with the performance of the Industrial and Materials sectors.
Bitcoin (BTCUSD) declined -2.05%. Ethereum (ETHUSD) declined -5.14%.
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Investor Sentiment
The put/call ratio rose slightly to 0.550. 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 still 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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Market Leaders
The four largest mega-caps declined today. Apple (AAPL) lost -1.24% while Amazon (AMZN) declined -1.07%. Both are trading below the key 21d EMA and 50d MA lines. Microsoft (MSFT) declined -0.87% but stopped short of dipping below the 21d EMA. Alphabet (GOOGL) remains well above the two key moving average lines, despite declining -0.74% today.
Tesla (TSLA) tops the mega-cap list again today. JP Morgan Chase (JPM), Facebook (FB), Walt Disney (DIS) were also in the top-performing mega-caps for the day. At the bottom of the list is Proctor & Gamble (PG), Adobe (ADBE), Salesforce.com (CRM), and Nvidia (NVDA).
The majority of stocks in the daily update growth list gained for the day. Beyond Meat (BYND), DoorDash (DASH), Snowflake (SNOW), and Cloudflare (NET) topped the list. Okta (OKTA) declined almost 10% after disappointing investors with their earnings, despite beating expectations. Workday (WDAY), Paycom (PAYC), and ServiceNow (NOW) are also at the bottom of the list.
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Looking ahead
Friday will bring another update on inflation with the PCE Price Index data, an indicator of inflation. In addition, we will see updates for Goods Trade Balance, Personal Spending, Retail Inventories, and Consumer Sentiment.
Big Lots (BIG) and Ehang Holdings (EH) will release earnings.
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Trends, Support, and Resistance
The index made a higher high today before settling back to where it opened. It's still above the 13,600-13,700 area.
Following the five-day trend-line would result in a +0.81% gain for tomorrow.
The one-day trend line points to a +0.10% gain.
A return to the trend-line from the 4/2 high would result in a -2.84% decline for Friday.
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Wrap-up
On the one hand, we have a red candle with a daily loss for the Nasdaq. That doesn't seem optimistic for tech and growth stocks. On the other hand, there is higher volume and broad gains across the stocks in the index. Overall, you could call that a structural day that builds a base for further increases.
The last six candles all have higher lows, which is good. The highs, however, have been decelerating relative to the higher lows, creating a topping pattern. That makes setting an expectation for Friday all the more challenging and reflects the indecision in the market this week.
The expectation is Sideways or Lower for Friday. The primary risk will be in the pre-market Price Index data that may raise inflation fears with investors. There may also be more rotation back into recovery stocks and cyclical sectors, or even defensive sectors, as investors take some profits heading into a three-day weekend.
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 27, 2021
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
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
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.
The small-cap Russell 2000 (RUT) index led again today with a +1.06% gain. The Dow Jones Industrial Average (DJI) gained +0.41%. The S&P 500 (SPX) gained +0.12%.
The VIX volatility index declined -3.57%.
Cyclical sectors led the list today. Industrials (XLI +1.37%) and Financials (XLF +1.15%) were top, with Materials (XLB +0.80%) in third place. Technology (XLK -0.53%) had the second day of underperformance relative to the tech-heavy Nasdaq index. Consumer Staples (XLP -0.62%) and Utilities (XLU -0.67%) were the bottom sectors of the day. Investors did not focus on the defensive strategy of these sectors.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.05%. The dollar seems to have found a base of support over the past two weeks.
The US 30y, 10y, and 2y treasure yields all advanced, with the spread remaining about the same.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) advanced.
Timber (WOOD) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) advanced considerably, aligning with the performance of the Industrial and Materials sectors.
Bitcoin (BTCUSD) declined -2.05%. Ethereum (ETHUSD) declined -5.14%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose slightly to 0.550. 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 still on the fear side.
The NAAIM money manager exposure index rose to 68.3 after dipping to 44.2 the previous week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
The four largest mega-caps declined today. Apple (AAPL) lost -1.24% while Amazon (AMZN) declined -1.07%. Both are trading below the key 21d EMA and 50d MA lines. Microsoft (MSFT) declined -0.87% but stopped short of dipping below the 21d EMA. Alphabet (GOOGL) remains well above the two key moving average lines, despite declining -0.74% today.
Tesla (TSLA) tops the mega-cap list again today. JP Morgan Chase (JPM), Facebook (FB), Walt Disney (DIS) were also in the top-performing mega-caps for the day. At the bottom of the list is Proctor & Gamble (PG), Adobe (ADBE), Salesforce.com (CRM), and Nvidia (NVDA).
The majority of stocks in the daily update growth list gained for the day. Beyond Meat (BYND), DoorDash (DASH), Snowflake (SNOW), and Cloudflare (NET) topped the list. Okta (OKTA) declined almost 10% after disappointing investors with their earnings, despite beating expectations. Workday (WDAY), Paycom (PAYC), and ServiceNow (NOW) are also at the bottom of the list.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Friday will bring another update on inflation with the PCE Price Index data, an indicator of inflation. In addition, we will see updates for Goods Trade Balance, Personal Spending, Retail Inventories, and Consumer Sentiment.
Big Lots (BIG) and Ehang Holdings (EH) will release earnings.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The index made a higher high today before settling back to where it opened. It's still above the 13,600-13,700 area.
Following the five-day trend-line would result in a +0.81% gain for tomorrow.
The one-day trend line points to a +0.10% gain.
A return to the trend-line from the 4/2 high would result in a -2.84% decline for Friday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
On the one hand, we have a red candle with a daily loss for the Nasdaq. That doesn't seem optimistic for tech and growth stocks. On the other hand, there is higher volume and broad gains across the stocks in the index. Overall, you could call that a structural day that builds a base for further increases.
The last six candles all have higher lows, which is good. The highs, however, have been decelerating relative to the higher lows, creating a topping pattern. That makes setting an expectation for Friday all the more challenging and reflects the indecision in the market this week.
The expectation is Sideways or Lower for Friday. The primary risk will be in the pre-market Price Index data that may raise inflation fears with investors. There may also be more rotation back into recovery stocks and cyclical sectors, or even defensive sectors, as investors take some profits heading into a three-day weekend.
Stay healthy and trade safe!
