Summary: Surprisingly robust earnings reports from big retail before market open sent major indices on a rally in the morning. Still, the bullish exuberance couldn't hold on, and the indices closed the day with losses. Despite the downward pressure on the indexes, the growth stock list had a relatively good day.
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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Tuesday, May 18, 2021
Facts: -0.56%, Volume higher, Closing range: 2%, Body: 61%
Good: Higher high, higher low
Bad: Couldn't hold morning rally, closed day at low
Highs/Lows: Higher high, higher low
Candle: Red body under a long upper wick and almost no lower wick
Advanced/Decline: More declining stocks than advancing stocks
Indexes: SPX (-0.85%), DJI (-0.78%), RUT (-0.73%), VIX (+8.22%)
Sectors: Real Estate (XLRE +0.19%) and Health (XLV +0.03%) were top. Industrials (XLI -1.46%) and Energy (XLE -2.32%) were bottom.
Expectation: Sideways or Lower
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Market Overview
Surprisingly robust earnings reports from big retail before market open sent major indices on a rally in the morning. Still, the bullish exuberance couldn't hold on, and the indices closed the day with losses. Despite the downward pressure on the indexes, the growth stock list had a relatively good day.
The Nasdaq closed with a -0.56% loss for the day but was able to turn in a higher high and higher low than the previous day. The index rose in the early morning but then fell the rest of the day, creating an upper wick in the morning but ending the day with a 2% closing range underneath a 61% red body. Volume was higher for the day, with intraday volume more elevated in the morning than in the afternoon. There were more declining stocks than advancing stocks.
The S&P 500 (SPX) led the losses for the day, declining -0.85%. The Dow Jones Industrial Average (DJI) fell -0.78%. The Russell 2000 (RUT) declined -0.73%.
The VIX volatility index rose another +8.22%.
Real Estate (XLRE +0.19%) and Health (XLV +0.03%) were the only sectors to gain for the day. Industrials (XLI -1.46%) and Energy (XLE -2.32%) were the bottom sectors. Energy continued last week's pattern of flip-flopping from top to bottom of the sector list.
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Economic Indicators
The US Dollar (DXY) declined -0.45%. The index compares the USD against other major currencies. While the US economy recovers, expect investors to load up on currencies in markets expected to rebound soon as they transition out of lockdowns and back into fully open economies.
The US 30y, 10y, and 2y Treasury yields all declined slightly.
Both High Yield Corporate Bond (HYG) prices and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) declined, and Gold (GOLD) advanced. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) declined.
Copper (COPPER1!) stayed flat while Aluminum (ALI1!) declined.
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Investor Sentiment
The put/call ratio rose to 0.595. 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. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index is still in the fear zone.
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Market Leaders
All four largest mega-caps declined. Amazon (AMZN) lost -1.17%, closing right at its 50d MA. Alphabet (GOOGL) declined -1.16%, closing just below the 21d EMA. Apple (AAPL) continues trading below both moving average lines, declining -1.12% today. Microsoft (MSFT) faired the best, only losing -0.86% today but still closing below both moving average lines.
Walmart (WMT) topped the mega-cap list with a +2.17% gain after surprising investors with better than expected earnings in their release before the market open. Retailer Alibaba (BABA) was the second-best mega-cap with a +1.27% gain. Toyota Motor Company (TM ) and Taiwan Semiconductor (TSM) round out the top four. At the bottom of the list were AT&T (T), Chevron (CVX), Exxon Mobil (XOM), and Facebook (FB).
Other retail reports were also positive, including Home Depot (HD). However, a lack of optimistic guidance and a dismal housing starts report put a damper on the positive report.
More than half of the daily update growth stock list had gains today. Ehang Holdings (EH), Sumo Digital (SUMO), Snowflake (SNOW), and Crowdstrike (CRWD) were the top gainers for the day. Dr Horton (DHI) was at the bottom of the list with nearly a 4% decline after the housing starts report. GrowGeneration (GRWG), Facebook, Workday (WDAY) were also at the bottom of the growth list, all with more than 1% losses.
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Looking ahead
Crude Oil Inventories get an update on Wednesday. In the afternoon, FOMC member Bostic speaks, and the FOMC Meeting Minutes will be released. Investors will look closely for wording that shows concern over inflation and any hints toward monetary policy changes.
Cisco (CSCO), Lowe's (LOW), JD.com (JD), Target (TGT), TJX (TJX), Synopsys (SNPS), Vipshop (VIPS), and FUTU Holdings (FUTU) report earnings.
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Trends, Support, and Resistance
The index attempted to rally toward the key moving average lines but faded late in the morning to close lower. The 21d EMA moved below the 50d MA, marking the downward trend.
The five-day trend-line points to a +1.83% gain tomorrow.
The one-day trend-line would result in a sideways move, with a slight -0.10% decline.
The trend-line from the 4/2 high shows a -1.71% decline on Wednesday.
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Wrap-up
So far this week, we have a mix of signals. The higher high and higher low today are good after yesterday's indecisive candle. However, they fade from the morning rally, and a low closing range on higher volume shows much caution among investors.
The defensive sectors leading for the day adds to the signal of caution. Maybe the positive retail earnings reports are just creating more fear that the economy is overheating. On the other hand, growth stocks fared pretty well in the market today. That could be from the declining US Dollar. However, I'd expect big tech might benefit from a declining US dollar as well, and we did not see that today.
It could be that growth stocks declined so much that investors are just putting money into what they see as the bottom prices. Most of the growth stocks in the daily update list are down 50% or more from their 52-week highs. If investors see a bottom for growth stocks, it is time for a rotation from value back into growth. But expect any movement to be volatile as the market still watches inflation and the Fed very closely.
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=-
Tuesday, May 18, 2021
Facts: -0.56%, Volume higher, Closing range: 2%, Body: 61%
Good: Higher high, higher low
Bad: Couldn't hold morning rally, closed day at low
Highs/Lows: Higher high, higher low
Candle: Red body under a long upper wick and almost no lower wick
Advanced/Decline: More declining stocks than advancing stocks
Indexes: SPX (-0.85%), DJI (-0.78%), RUT (-0.73%), VIX (+8.22%)
Sectors: Real Estate (XLRE +0.19%) and Health (XLV +0.03%) were top. Industrials (XLI -1.46%) and Energy (XLE -2.32%) were bottom.
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Surprisingly robust earnings reports from big retail before market open sent major indices on a rally in the morning. Still, the bullish exuberance couldn't hold on, and the indices closed the day with losses. Despite the downward pressure on the indexes, the growth stock list had a relatively good day.
The Nasdaq closed with a -0.56% loss for the day but was able to turn in a higher high and higher low than the previous day. The index rose in the early morning but then fell the rest of the day, creating an upper wick in the morning but ending the day with a 2% closing range underneath a 61% red body. Volume was higher for the day, with intraday volume more elevated in the morning than in the afternoon. There were more declining stocks than advancing stocks.
The S&P 500 (SPX) led the losses for the day, declining -0.85%. The Dow Jones Industrial Average (DJI) fell -0.78%. The Russell 2000 (RUT) declined -0.73%.
The VIX volatility index rose another +8.22%.
Real Estate (XLRE +0.19%) and Health (XLV +0.03%) were the only sectors to gain for the day. Industrials (XLI -1.46%) and Energy (XLE -2.32%) were the bottom sectors. Energy continued last week's pattern of flip-flopping from top to bottom of the sector list.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.45%. The index compares the USD against other major currencies. While the US economy recovers, expect investors to load up on currencies in markets expected to rebound soon as they transition out of lockdowns and back into fully open economies.
The US 30y, 10y, and 2y Treasury yields all declined slightly.
Both High Yield Corporate Bond (HYG) prices and Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) declined, and Gold (GOLD) advanced. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) declined.
Copper (COPPER1!) stayed flat while Aluminum (ALI1!) declined.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose to 0.595. 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. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index is still in the fear zone.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All four largest mega-caps declined. Amazon (AMZN) lost -1.17%, closing right at its 50d MA. Alphabet (GOOGL) declined -1.16%, closing just below the 21d EMA. Apple (AAPL) continues trading below both moving average lines, declining -1.12% today. Microsoft (MSFT) faired the best, only losing -0.86% today but still closing below both moving average lines.
Walmart (WMT) topped the mega-cap list with a +2.17% gain after surprising investors with better than expected earnings in their release before the market open. Retailer Alibaba (BABA) was the second-best mega-cap with a +1.27% gain. Toyota Motor Company (TM ) and Taiwan Semiconductor (TSM) round out the top four. At the bottom of the list were AT&T (T), Chevron (CVX), Exxon Mobil (XOM), and Facebook (FB).
Other retail reports were also positive, including Home Depot (HD). However, a lack of optimistic guidance and a dismal housing starts report put a damper on the positive report.
More than half of the daily update growth stock list had gains today. Ehang Holdings (EH), Sumo Digital (SUMO), Snowflake (SNOW), and Crowdstrike (CRWD) were the top gainers for the day. Dr Horton (DHI) was at the bottom of the list with nearly a 4% decline after the housing starts report. GrowGeneration (GRWG), Facebook, Workday (WDAY) were also at the bottom of the growth list, all with more than 1% losses.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Crude Oil Inventories get an update on Wednesday. In the afternoon, FOMC member Bostic speaks, and the FOMC Meeting Minutes will be released. Investors will look closely for wording that shows concern over inflation and any hints toward monetary policy changes.
Cisco (CSCO), Lowe's (LOW), JD.com (JD), Target (TGT), TJX (TJX), Synopsys (SNPS), Vipshop (VIPS), and FUTU Holdings (FUTU) report earnings.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The index attempted to rally toward the key moving average lines but faded late in the morning to close lower. The 21d EMA moved below the 50d MA, marking the downward trend.
The five-day trend-line points to a +1.83% gain tomorrow.
The one-day trend-line would result in a sideways move, with a slight -0.10% decline.
The trend-line from the 4/2 high shows a -1.71% decline on Wednesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
So far this week, we have a mix of signals. The higher high and higher low today are good after yesterday's indecisive candle. However, they fade from the morning rally, and a low closing range on higher volume shows much caution among investors.
The defensive sectors leading for the day adds to the signal of caution. Maybe the positive retail earnings reports are just creating more fear that the economy is overheating. On the other hand, growth stocks fared pretty well in the market today. That could be from the declining US Dollar. However, I'd expect big tech might benefit from a declining US dollar as well, and we did not see that today.
It could be that growth stocks declined so much that investors are just putting money into what they see as the bottom prices. Most of the growth stocks in the daily update list are down 50% or more from their 52-week highs. If investors see a bottom for growth stocks, it is time for a rotation from value back into growth. But expect any movement to be volatile as the market still watches inflation and the Fed very closely.
Stay healthy and trade safe!
