The Nasdaq 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. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future.
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:
If you have been following my daily updates, you can skip down the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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Monday, November 2, 2020
R.O.C.K in the U. S.A.
Facts: +0.42% higher, Volume lower, Closing range: 53%, Red Body: 22%
Good: Stayed above Friday’s low, late day uptrend
Bad: Indecision/continuation candle
Highs/Lows: Higher low, lower high
Candle: Inside day, with a short body, longer lower wick than upper wick
Advance/Decline: 2.05, 2 advancers for every decliner
Sectors: Energy ( XLE +3.41%), Materials ( XLB +3.32%) were top, Communications ( XLC -0.05%) was bottom.
Expectation: Lower
The first day of trading for November starts off with some more choppy market action as the Nasdaq started in the positive, went negative and then back to positive by the end of the day. It was good that the index came up off afternoon lows, but it could just barely get back to the midpoint of the morning highs. The index ended up +0.42% on lower volume. The candle is an inside day with a thin 22% body and 53% closing range, not providing a clear winner of bulls or bears. There were 2 advancing stocks for every declining stock, which underperformed the broader market which had a 3:1 ratio.
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Tuesday, November 3, 2020
Stand straight, walk proud
‘Cause we shall be free
Facts: +1.85% higher, Volume higher, Closing range: 74%, Green Body: 58%
Good: Bulls led the day, and held near the day’s highs
Bad: Couldn’t break through 11,300 area
Highs/Lows: Higher low, higher high
Candle: Thick green body with a slightly longer upper wick
Advance/Decline: 3.78, Almost 4 advancers for every decliner
Sectors: Industrials ( XLI +2.95%), Financials ( XLF +2.22%), Consumer Discretionary ( XLY +2.20%) were at top. Energy ( XLE -0.57%) was the only losing sector.
Expectation: Sideways or Higher
It is finally Election Day! And the day brought the pleasant surprise of a positive expectation breaker for the Nasdaq. Yesterday’s trend lines and the indecisive candle pointed to losses for today, but it is good to be wrong sometimes. I set my expectations for the next day, but always be prepared for a break from those expectations, especially during these uncertain times. The Nasdaq gained +1.85% today, climbing to just under the September resistance area of 11,300. Volume was slightly higher than the previous day. The index closed at a 74% closing range after developing a 58% green body. There were nearly four advancers for every declining stock. That is all good signal in the market.
There is still some work for the Nasdaq to show strength, focusing on getting past the high of 10/29 at 11287.63, showing a breakout from Wednesday’s severe drop . Right now, it is still trading within the range of the previous four days.
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Wednesday, November 4, 2020
You shake my nerves and you rattle my brain
Facts: +3.85% higher, Volume higher, Closing range: 73%, Body: 55%
Good: Held near top of the range, back above 21d EMA , 50d MA and support areas
Bad: Gap up could, swing the other way to cover gap
Highs/Lows: Higher high, higher low
Candle: Bullish candle after a gap up, upper wick slightly longer
Advance/Decline: 1.16, About same amount of advancers and decliners
Sectors: Health ( XLV +4.44%), Communication Services ( XLC +4.31%), Technology ( XLK +3.89%) were at the top. Industrials ( XLI -1.03%), Financials ( XLF -1.17%), Utilities ( XLU -1.50%) and Materials ( XLB -1.70%) were all losers.
Expectation: Sideways or Higher
What a difference a day can make. The Nasdaq reacted sharply to a turn in sentiment toward election results when it became apparent the “Blue wave” would not happen as originally thought. Even as the presidential election remains undecided, it seems that the Republicans will retain control of the Senate, putting a damper on any radical changes in the near-term. The index responded with a gap up and turned in a +3.85% gain on a 12% increase in volume . The candle is a nice thick bullish green with a 55% body and a 73% closing range. Declining stocks were about the same amount as Advancing stocks representing the rotation for previous bets that investors were making on election.
This is the highest high the Nasdaq turned in since October 19 and closing the index back above the key levels of the 21d EMA and the 50d MA as well as the September and October support levels marked on the chart. It is reasonable to expect some pullback, but hopefully we can hold above these levels, adding strength to a new rally.
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Thursday, November 5, 2020
I need a shot again, that sweet adrenaline
Facts: +2.59% higher, Volume higher, Closing range: 76%, Body: 53%
Good: Third day of big gains, no looking back
Bad: Another gap up, may need to fill
Highs/Lows: Higher high, higher low
Candle: Bullish thick body candle after a gap up
Advance/Decline: 3.25, three advancing stocks for every declining stock
Sectors: Materials ( XLB +4.08%) and Technology ( XLK +3.11%) were top. Health ( XLV +0.22%) and Energy ( XLE 0.00%) were bottom.
Expectation: Sideways or Lower
The Nasdaq continued an energetic rally with another gap up day and big gains on Thursday. The fed left interest rates alone. Although it did not meet expectations, Jobless Claims continued to decline and seemed acceptable in the current context. The election still does not have a definitive winner. Although Biden is in the lead, there is still a chance for the count to turn Trump’s way, or for legal victories in court. The Senate still seems to be going to the Republicans, holding back a “blue wave”.
The index closed up +2.59% on higher volume , a follow-thru day for investors who track Investors Business Daily’s market reports. Many people considered yesterday an in-spirit follow-through day that confirmed the market uptrend, so today is just further evidence. The candle is almost identical to the past two days with a thick green 53% green body and 76% closing range. For the past three days, the average body is around 55% and average closing range around 75%, representative of the energy at the beginning of this rally. Advancing stocks outnumbered declining stocks at a 3 to 1 ratio, an improvement over yesterday.
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Friday, November 6, 2020
I don't know why you say goodbye, I say Hello
Facts: +0.04% higher, Volume higher, Closing range: 86%, Body: 14%
Good: Recovered from morning lows and closed near highs
Bad: Nothing, the index needed a pause
Highs/Lows: Lower high, lower low
Candle: Bullish thick body candle after a gap up
Advance/Decline: 0.63, three declining stocks for every two advancing stock
Sectors: Consumer Staples ( XLP +0.46%) and Technology ( XLK +0.35%) were top. Energy ( XLE -2.79%) was the worst performing.
Expectation: Sideways
The morning started with a pullback in the markets but then the indexes, including the Nasdaq rallied back to yesterday’s highs after better than expected employment data. It was not a stellar day of gains like the previous three days, but it was a good pause to cool off from one of the hottest weeks since April. The index ended the day with a +0.04% gain and a +9.01% gain for the week. The candle has a high tight body of 14% and a closing range of 86%. The bulls win the day, but any gains were focused to a smaller slice of the market. Declining stocks outnumbered advancing stocks at a 3 to 2 ratio.
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The Meaning of Life (Larger View on the Week)
The previous week was the worst since March, so why not follow it up with the best week since April. The Nasdaq closed the week with +9.01% gains. The index regained all key support levels and tempted the highs of 10/12 where it had previously pivoted down. The change in momentum came as investors realized the “blue wave” they previously predicted would not happen and their would at least be a Republican senate to temper any radical changes proposed by a Democratic Whitehouse.
The week started as expected, with money continuing to move into sectors that would benefit from a “blue wave” election. Tuesday further firmed up the strategy as it seemed a sure thing that Democrats would win across the board. It was Tuesday 9:00pm EST when the first hints came that the election might not be so perfect for the Democrats. It even looked like Trump was ahead for the Presidency. Nasdaq 100 E-mini Futures shot up almost 5% and started a back and forth that eventually turned into a +3.85% gain on Wednesday, another +2.59% gain on Thursday and a small sideways move on Friday.
Investors Business Daily, a great site with market updates for CANSLIM investors, moved back to a Confirmed Uptrend, only three trading days after marking a Correction. Things can change quickly, especially when the market is preparing for an outcome suddenly changes direction.
US Treasury Bond Yield spreads were also impacted by the expectation changes for the election. The 30Y-10Y Spread tightened but recovered by the end of the week. The 10Y-2Y spread tightened for the week but is well above any point that would cause worry. Nonetheless, there is a step-change in where investors are putting their money.
The Sectors really put on a good show this week along side the back-and-forth election expectations and growing impact of the pandemic.
First it was Energy ( XLE ) on Monday with Technology ( XLK ) and Communications ( XLC ) taking a back seat. The seat all the way in the back. Then it was Industrials ( XLI ) chance to be out in front with hopes of a "blue wave" stimulus that would benefit the sector.
Next the election completely flipped investors on expectations for the "blue wave." Health Care ( XLV ) soared to the top, followed by Technology ( XLK ) and Communications ( XLC ). From there, Technology ( XLK ) took back the top spot as the week's leading sector and continuing its leadership for the year.
Energy ( XLE ) ended up the worst performing sector and continuing to be the worst sector of the year.
The big four mega-caps look very different than they did at the end of last week. All of them are trading above their 21d EMA and 50d MA. They are also performing with or better than the index, whereas only Google was beating the index last week. It’s important that these big four mega-cap stocks are performing well because of their influence on the rest of the market. Most mega-caps were up for the week.
The put/call ratio is also something to keep an eye on. The contrarian indicator can show when there is too much bullish sentiment or too much bearish sentiment in the market. It’s heading toward the bullish side now (below 0.7) but not at the extreme lows seen in June and late August which led to pullbacks.
Commodities got a boost in prices as the dollar weakened this week. That also powered gains in the Materials (XLB) sector.
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The Week Ahead
Heading into next week after a big week of gains, there are many questions to be answered. The election results continue to drag on and are likely to be contested for some time in the weeks ahead. The pandemic continues to grow in severity with a second wave turning out more daily cases than the first way. Now that the pandemic is less politicized, there could be a tidal change in how it is handled moving forward. There is not much confidence that congress and the Whitehouse can push through a stimulus plan, given the election results.
Consumer Price Index and Produce Price Index data will be announced on Thursday and Friday respectively.
Beyond Meat (BYND), Datadog (DDOG), D.R. Horton (DHI) and Draftkings (DKNG) are some of the growth stocks reporting earnings next week.
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Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
On the downside, there are several key levels to raise red flags, many similar to what we watched for last week:
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Wrap-up
There will likely be a lot of emotion and turmoil next week as decisions are made around the election. Keep in mind how this is impacting your psychology. Stick to your trading rules. Have a plan for the many possible outcomes.
Good luck, stay healthy and trade safe!
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 larger view on the past week
- What's coming in the next week
- Key index levels to watch out for
- Wrap-up
If you have been following my daily updates, you can skip down the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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Monday, November 2, 2020
R.O.C.K in the U. S.A.
Facts: +0.42% higher, Volume lower, Closing range: 53%, Red Body: 22%
Good: Stayed above Friday’s low, late day uptrend
Bad: Indecision/continuation candle
Highs/Lows: Higher low, lower high
Candle: Inside day, with a short body, longer lower wick than upper wick
Advance/Decline: 2.05, 2 advancers for every decliner
Sectors: Energy ( XLE +3.41%), Materials ( XLB +3.32%) were top, Communications ( XLC -0.05%) was bottom.
Expectation: Lower
The first day of trading for November starts off with some more choppy market action as the Nasdaq started in the positive, went negative and then back to positive by the end of the day. It was good that the index came up off afternoon lows, but it could just barely get back to the midpoint of the morning highs. The index ended up +0.42% on lower volume. The candle is an inside day with a thin 22% body and 53% closing range, not providing a clear winner of bulls or bears. There were 2 advancing stocks for every declining stock, which underperformed the broader market which had a 3:1 ratio.
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Tuesday, November 3, 2020
Stand straight, walk proud
‘Cause we shall be free
Facts: +1.85% higher, Volume higher, Closing range: 74%, Green Body: 58%
Good: Bulls led the day, and held near the day’s highs
Bad: Couldn’t break through 11,300 area
Highs/Lows: Higher low, higher high
Candle: Thick green body with a slightly longer upper wick
Advance/Decline: 3.78, Almost 4 advancers for every decliner
Sectors: Industrials ( XLI +2.95%), Financials ( XLF +2.22%), Consumer Discretionary ( XLY +2.20%) were at top. Energy ( XLE -0.57%) was the only losing sector.
Expectation: Sideways or Higher
It is finally Election Day! And the day brought the pleasant surprise of a positive expectation breaker for the Nasdaq. Yesterday’s trend lines and the indecisive candle pointed to losses for today, but it is good to be wrong sometimes. I set my expectations for the next day, but always be prepared for a break from those expectations, especially during these uncertain times. The Nasdaq gained +1.85% today, climbing to just under the September resistance area of 11,300. Volume was slightly higher than the previous day. The index closed at a 74% closing range after developing a 58% green body. There were nearly four advancers for every declining stock. That is all good signal in the market.
There is still some work for the Nasdaq to show strength, focusing on getting past the high of 10/29 at 11287.63, showing a breakout from Wednesday’s severe drop . Right now, it is still trading within the range of the previous four days.
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Wednesday, November 4, 2020
You shake my nerves and you rattle my brain
Facts: +3.85% higher, Volume higher, Closing range: 73%, Body: 55%
Good: Held near top of the range, back above 21d EMA , 50d MA and support areas
Bad: Gap up could, swing the other way to cover gap
Highs/Lows: Higher high, higher low
Candle: Bullish candle after a gap up, upper wick slightly longer
Advance/Decline: 1.16, About same amount of advancers and decliners
Sectors: Health ( XLV +4.44%), Communication Services ( XLC +4.31%), Technology ( XLK +3.89%) were at the top. Industrials ( XLI -1.03%), Financials ( XLF -1.17%), Utilities ( XLU -1.50%) and Materials ( XLB -1.70%) were all losers.
Expectation: Sideways or Higher
What a difference a day can make. The Nasdaq reacted sharply to a turn in sentiment toward election results when it became apparent the “Blue wave” would not happen as originally thought. Even as the presidential election remains undecided, it seems that the Republicans will retain control of the Senate, putting a damper on any radical changes in the near-term. The index responded with a gap up and turned in a +3.85% gain on a 12% increase in volume . The candle is a nice thick bullish green with a 55% body and a 73% closing range. Declining stocks were about the same amount as Advancing stocks representing the rotation for previous bets that investors were making on election.
This is the highest high the Nasdaq turned in since October 19 and closing the index back above the key levels of the 21d EMA and the 50d MA as well as the September and October support levels marked on the chart. It is reasonable to expect some pullback, but hopefully we can hold above these levels, adding strength to a new rally.
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Thursday, November 5, 2020
I need a shot again, that sweet adrenaline
Facts: +2.59% higher, Volume higher, Closing range: 76%, Body: 53%
Good: Third day of big gains, no looking back
Bad: Another gap up, may need to fill
Highs/Lows: Higher high, higher low
Candle: Bullish thick body candle after a gap up
Advance/Decline: 3.25, three advancing stocks for every declining stock
Sectors: Materials ( XLB +4.08%) and Technology ( XLK +3.11%) were top. Health ( XLV +0.22%) and Energy ( XLE 0.00%) were bottom.
Expectation: Sideways or Lower
The Nasdaq continued an energetic rally with another gap up day and big gains on Thursday. The fed left interest rates alone. Although it did not meet expectations, Jobless Claims continued to decline and seemed acceptable in the current context. The election still does not have a definitive winner. Although Biden is in the lead, there is still a chance for the count to turn Trump’s way, or for legal victories in court. The Senate still seems to be going to the Republicans, holding back a “blue wave”.
The index closed up +2.59% on higher volume , a follow-thru day for investors who track Investors Business Daily’s market reports. Many people considered yesterday an in-spirit follow-through day that confirmed the market uptrend, so today is just further evidence. The candle is almost identical to the past two days with a thick green 53% green body and 76% closing range. For the past three days, the average body is around 55% and average closing range around 75%, representative of the energy at the beginning of this rally. Advancing stocks outnumbered declining stocks at a 3 to 1 ratio, an improvement over yesterday.
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Friday, November 6, 2020
I don't know why you say goodbye, I say Hello
Facts: +0.04% higher, Volume higher, Closing range: 86%, Body: 14%
Good: Recovered from morning lows and closed near highs
Bad: Nothing, the index needed a pause
Highs/Lows: Lower high, lower low
Candle: Bullish thick body candle after a gap up
Advance/Decline: 0.63, three declining stocks for every two advancing stock
Sectors: Consumer Staples ( XLP +0.46%) and Technology ( XLK +0.35%) were top. Energy ( XLE -2.79%) was the worst performing.
Expectation: Sideways
The morning started with a pullback in the markets but then the indexes, including the Nasdaq rallied back to yesterday’s highs after better than expected employment data. It was not a stellar day of gains like the previous three days, but it was a good pause to cool off from one of the hottest weeks since April. The index ended the day with a +0.04% gain and a +9.01% gain for the week. The candle has a high tight body of 14% and a closing range of 86%. The bulls win the day, but any gains were focused to a smaller slice of the market. Declining stocks outnumbered advancing stocks at a 3 to 2 ratio.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Meaning of Life (Larger View on the Week)
The previous week was the worst since March, so why not follow it up with the best week since April. The Nasdaq closed the week with +9.01% gains. The index regained all key support levels and tempted the highs of 10/12 where it had previously pivoted down. The change in momentum came as investors realized the “blue wave” they previously predicted would not happen and their would at least be a Republican senate to temper any radical changes proposed by a Democratic Whitehouse.
The week started as expected, with money continuing to move into sectors that would benefit from a “blue wave” election. Tuesday further firmed up the strategy as it seemed a sure thing that Democrats would win across the board. It was Tuesday 9:00pm EST when the first hints came that the election might not be so perfect for the Democrats. It even looked like Trump was ahead for the Presidency. Nasdaq 100 E-mini Futures shot up almost 5% and started a back and forth that eventually turned into a +3.85% gain on Wednesday, another +2.59% gain on Thursday and a small sideways move on Friday.
Investors Business Daily, a great site with market updates for CANSLIM investors, moved back to a Confirmed Uptrend, only three trading days after marking a Correction. Things can change quickly, especially when the market is preparing for an outcome suddenly changes direction.
US Treasury Bond Yield spreads were also impacted by the expectation changes for the election. The 30Y-10Y Spread tightened but recovered by the end of the week. The 10Y-2Y spread tightened for the week but is well above any point that would cause worry. Nonetheless, there is a step-change in where investors are putting their money.
The Sectors really put on a good show this week along side the back-and-forth election expectations and growing impact of the pandemic.
First it was Energy ( XLE ) on Monday with Technology ( XLK ) and Communications ( XLC ) taking a back seat. The seat all the way in the back. Then it was Industrials ( XLI ) chance to be out in front with hopes of a "blue wave" stimulus that would benefit the sector.
Next the election completely flipped investors on expectations for the "blue wave." Health Care ( XLV ) soared to the top, followed by Technology ( XLK ) and Communications ( XLC ). From there, Technology ( XLK ) took back the top spot as the week's leading sector and continuing its leadership for the year.
Energy ( XLE ) ended up the worst performing sector and continuing to be the worst sector of the year.
The big four mega-caps look very different than they did at the end of last week. All of them are trading above their 21d EMA and 50d MA. They are also performing with or better than the index, whereas only Google was beating the index last week. It’s important that these big four mega-cap stocks are performing well because of their influence on the rest of the market. Most mega-caps were up for the week.
The put/call ratio is also something to keep an eye on. The contrarian indicator can show when there is too much bullish sentiment or too much bearish sentiment in the market. It’s heading toward the bullish side now (below 0.7) but not at the extreme lows seen in June and late August which led to pullbacks.
Commodities got a boost in prices as the dollar weakened this week. That also powered gains in the Materials (XLB) sector.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Week Ahead
Heading into next week after a big week of gains, there are many questions to be answered. The election results continue to drag on and are likely to be contested for some time in the weeks ahead. The pandemic continues to grow in severity with a second wave turning out more daily cases than the first way. Now that the pandemic is less politicized, there could be a tidal change in how it is handled moving forward. There is not much confidence that congress and the Whitehouse can push through a stimulus plan, given the election results.
Consumer Price Index and Produce Price Index data will be announced on Thursday and Friday respectively.
Beyond Meat (BYND), Datadog (DDOG), D.R. Horton (DHI) and Draftkings (DKNG) are some of the growth stocks reporting earnings next week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
- 11965.54 is the 10/12 pivot day high and currently putting resistance on the index. Passing this will be the first test for next week.
- Passing 12074.06 would be a new all-time high and a clear sign that the bull market is back.
On the downside, there are several key levels to raise red flags, many similar to what we watched for last week:
- Friday’s low of 11,737.13. If the index drops below there it’s likely to fill the gap to the high of Thursday.
- Thursday’s low of 11,394.21. There is another gap to fill below that line until the high of Friday.
- October Support is at 11,400, and near the 21d EMA of 11,416.48.
- September Support is at 11,300, and just below the 50d MA of 11,308.07.
- 10,822.57 is Friday and last week’s low. The index needs to hold above that low to prevent even further correction-level losses.
- The next area to watch is the July support area at 10,600. Approaching that area would be a significant pullback and put the market back into correction.
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Wrap-up
There will likely be a lot of emotion and turmoil next week as decisions are made around the election. Keep in mind how this is impacting your psychology. Stick to your trading rules. Have a plan for the many possible outcomes.
Good luck, stay healthy and trade safe!
