Trend lines drawn from 9/3 (35d), 9/24 bottom (21d), 10/12 pivot day (9d), 10/16 (5d), and today 10/22 (1 day).
Thursday, October 22, 2020
Livin’ on a prayer.
Facts: 0.19% higher, Volume lower, Closing range: 76%, Red Body: -12%
Good: Reversed from morning lows to end day positive
Bad: Dipped below 21d EMA
Highs/Lows: Lower high, Lower low
Candle: Looks like a hammer, 12% red body with 76% closing range.
Advance/Decline: 1.76, more advancers than decliners
Sectors: Energy (XLE) had a huge 4.13% gain. Financial (XLF), Health (XLV) and Utilities (XLU) also had good days.
Expectation: Sideways or Higher
Finally, there is a bit of character change in the market. After several days of morning gains selling off in afternoon trading, the opposite happened on Thursday. A big morning loss that took the index below the 21d EMA was bought back in the afternoon to end the day with gains. The Nasdaq ended the day with a 0.19% gain. The candle, with a 76% closing range and 12% red body looks like a reversal hammer. That will need to be confirmed with the next few days of trading. Volume was lower (my indicator above is based on QQQ volume) for the Nasdaq and continues to be lower than average volume in recent weeks. For a true hammer candlestick, we'd want to see higher volume. There were more advancing stocks than declining stocks at a ratio of 1.76. It’s a positive sign that the index regained it’s ground and closed above the 21 day EMA.
The S&P500 had a similar pattern and closed the day with a 0.52% gain, led by Energy (XLE +4.13%) and Financial (XLF +1.99%). Most of the sectors saw gains on the day. Technology (XLK -0.24%) and Real Estate (XLRE -0.70%) were the worst performing. The Russell 2000 Index had gains of 1.65% as investors looked for good opportunities in small cap stocks.
Google (GOOG +1.38%) led the mega-cap stocks with it’s second day of solid gains. Apple (AAPL -0.96%) and Amazon (AMZN -0.27%) had losses on the day and continue to trade below their 50 day MA. It would be a positive sign for an overall upward trend if these mega-caps got back above this key line. Chevron (CVX +3.57%) and Exxon Mobil (XOM +5.13%) along with almost every energy stock saw gains after talk of consolidation in the industry and layoffs at Exxon. Snap (SNAP +6.77%) continued it’s rally after an earnings breakout. Several growth stocks such as Restoration Hardware (RH +4.34%) and Zoom (ZM +1.43%) had gains after several days of losses. This is all a good sign, but needs to be confirmed with additional gains from more growth stocks.
If the candlestick hammer is confirmed and we see gains from here, trend lines point to two possibilities. The first is a +1.01% gain in the area between today’s trend line and the trend drawn from the 9/3 correction start. Additional positive news could accelerate gains to reach the trend line draw from the 9/23 bottom. That would mean a +3.42% gain.
If the index cannot hold above the 21d EMA, then the 5 day trend and trend from the 10/12 pivot would point to a -1.50%. This is where the 50d MA line is at and where we’ve seen support from September trading.
I'm keeping the June Support line in view, but its ~13% below the Thursday close and there are 4 key support levels that the index would have to break thru. If we have a significant downside that takes the index below 11,300, then I'll add that possibility back to the chart.
Thursday, October 22, 2020
Livin’ on a prayer.
Facts: 0.19% higher, Volume lower, Closing range: 76%, Red Body: -12%
Good: Reversed from morning lows to end day positive
Bad: Dipped below 21d EMA
Highs/Lows: Lower high, Lower low
Candle: Looks like a hammer, 12% red body with 76% closing range.
Advance/Decline: 1.76, more advancers than decliners
Sectors: Energy (XLE) had a huge 4.13% gain. Financial (XLF), Health (XLV) and Utilities (XLU) also had good days.
Expectation: Sideways or Higher
Finally, there is a bit of character change in the market. After several days of morning gains selling off in afternoon trading, the opposite happened on Thursday. A big morning loss that took the index below the 21d EMA was bought back in the afternoon to end the day with gains. The Nasdaq ended the day with a 0.19% gain. The candle, with a 76% closing range and 12% red body looks like a reversal hammer. That will need to be confirmed with the next few days of trading. Volume was lower (my indicator above is based on QQQ volume) for the Nasdaq and continues to be lower than average volume in recent weeks. For a true hammer candlestick, we'd want to see higher volume. There were more advancing stocks than declining stocks at a ratio of 1.76. It’s a positive sign that the index regained it’s ground and closed above the 21 day EMA.
The S&P500 had a similar pattern and closed the day with a 0.52% gain, led by Energy (XLE +4.13%) and Financial (XLF +1.99%). Most of the sectors saw gains on the day. Technology (XLK -0.24%) and Real Estate (XLRE -0.70%) were the worst performing. The Russell 2000 Index had gains of 1.65% as investors looked for good opportunities in small cap stocks.
Google (GOOG +1.38%) led the mega-cap stocks with it’s second day of solid gains. Apple (AAPL -0.96%) and Amazon (AMZN -0.27%) had losses on the day and continue to trade below their 50 day MA. It would be a positive sign for an overall upward trend if these mega-caps got back above this key line. Chevron (CVX +3.57%) and Exxon Mobil (XOM +5.13%) along with almost every energy stock saw gains after talk of consolidation in the industry and layoffs at Exxon. Snap (SNAP +6.77%) continued it’s rally after an earnings breakout. Several growth stocks such as Restoration Hardware (RH +4.34%) and Zoom (ZM +1.43%) had gains after several days of losses. This is all a good sign, but needs to be confirmed with additional gains from more growth stocks.
If the candlestick hammer is confirmed and we see gains from here, trend lines point to two possibilities. The first is a +1.01% gain in the area between today’s trend line and the trend drawn from the 9/3 correction start. Additional positive news could accelerate gains to reach the trend line draw from the 9/23 bottom. That would mean a +3.42% gain.
If the index cannot hold above the 21d EMA, then the 5 day trend and trend from the 10/12 pivot would point to a -1.50%. This is where the 50d MA line is at and where we’ve seen support from September trading.
I'm keeping the June Support line in view, but its ~13% below the Thursday close and there are 4 key support levels that the index would have to break thru. If we have a significant downside that takes the index below 11,300, then I'll add that possibility back to the chart.
