Trend lines drawn from the 10/30 bottom (78d), 2/16 top (6d), 2/17 (5d) and today 2/23 (1d).
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, February 23, 2021
Facts: -0.5%, Volume higher, Closing range: 88%, Body: 39%
Good: Support at 13,000, successful retest at 50d MA, close in upper half of range
Bad: Gap down and 50d MA violation to morning low
Highs/Lows: Lower high, lower low
Candle: Green body in upper half of candle with longer lower wick
Advance/Decline: 0.31, 3 declining stocks for every advancing stock
Indexes: SPX (+0.13%), DJI (+0.05%), RUT (-0.88%), VIX (-1.45%)
Sectors: Energy (XLE +1.65%) and Utilities (XLU +0.83%) were top. Technology (XLK -0.28%) and Consumer Discretionary (XLY -0.66%) were bottom.
Expectation: Sideways or Higher
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Market Overview
Nerves of steel. That's what it took to keep your eyes on the market today. The Nasdaq opened up with a gap down and pierced below the 50d MA to reach the intraday low within 10 minutes of open. It finally found support at the 13,000 area and made a climb back above the 50d MA. After a retest of that area, it was finally able to climb to an afternoon high before pulling back slightly into close.
The index closed with a -0.5% loss which is better than where you might have expected to end up from the morning action. The volume was higher than the previous day and a long lower wick formed under a 39% green body that led to an 88% closing range. The candlestick almost resembles a bullish reversal hammer, but the body is a little thick for a perfect pattern. Still, the spirit of the hammer candlestick, that the market maybe found a bottom, is still represented in the intraday pattern. There were 3 declining stocks for every advancing stock.
The S&P 500 closed in the positive with a +0.13% gain after testing it's 50d MA and forming a long lower shadow candle. You might not believe it, so go look, but the Dow Jones Industrial average (DHI) set a new all-time high before settling back for a +0.05% gain at close. The Russell 2000 (RUT) closed with a -0.88% decline.
The VIX volatility index ended the day with a -1.45% decline.
The sectors followed a similar pattern to the previous day with one notable change. Utilities (XLU) moved from the bottom to the second place spot with +0.83% gain, behind Energy (XLE) which led the sector list with a +1.65% advance. The cyclical stocks all had gains again and 8 out of the 11 SPDR sector ETFs ended the day with gains. Technology (XLK -0.66%) and Consumer Discretionary (XLY -0.28%) were at the bottom for another day.
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Economic Indicators
The US Dollar (DXY) advanced +0.18%.
Yields on the 30y treasury bond rose just +0.17% while 10y treasury bond yields dropped. 2y treasury bond yields rose, tightening the spread between long term and short term bonds.
Both High Yield (HYG) corporate bonds and Investor Grade (LQD) corporate bonds prices advanced for the day. The spread been corporate bonds and treasury bonds remains about even over the past few weeks.
Silver (SILVER) and Gold (GOLD) both declined. Crude Oil (CRUDEOIL1!) advanced. Timber (WOOD) declined. Copper (COPPER1!) and Aluminum (ALI1!) both declined.
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Investor Sentiment
The put/call ratio rose to 0.632. 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.
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Market Leaders
Amazon (AMZN) and Alphabet (GOOGL) were able to pull out gains after taking dips early in the day. Amazon is trading below its 21d EMA and 50d MA. Alphabet dipped below its 21d EMA but closed about even with the key indicator line. Apple (AAPL) and Microsoft (MSFT) both declined for the day. Apple (AAPL) is below both moving average lines while Microsoft is below the 21d EMA but above the 50d MA.
The rest of the mega-caps did a little better than yesterday. Mastercard (MA) topped the list with a +2.87% gain. Walt Disney (DIS), Netflix (NFLX) and Facebook (FB) round out the top four mega-cap gainers. At the bottom of the list was Taiwan Semiconductor (TSM), PayPal (PYPL) and Home Depot (HD), all dropping more than 3%.
Growth stocks also did a little better. SNAP (SNAP) rose 11.10% after a wild session that had a trading range of 30%. Digital Turbine (APPS), Pinterest (PINS) and Twitter (TWTR) all did well as the communication stocks seemed to get a boost today. UP Fintech (TIGR) had another day of declines. Magnite (MGNI) was another popular growth stock with a big decline.
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Looking ahead
Wednesday will bring New Home Sales data for January as well as an update on Crude Oil Inventories. Those are schedule for aftermarket open. In addition, Fed Chair Jerome Powell will continue his testimony before congress.
Earnings reports will include Nvidia (NVDA), Lowe's (LOW), TJX (TJX), Teladoc (TDOC), Magnite (MGNI) and many others. Be sure to check the companies in your portfolio for upcoming earnings reports.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The index is in the bottom half of the long-term regression trend channel. The trend lines I draw are the mid-point of the channels.
The long-term trend line from the 10/30 bottom points to a +4.92% gain. That seems unlikely, and would need to push past resistance at the 21d EMA and the 14,000 support/resistance area.
The one-day trend line is pointing to a +1.79% advance.
The five-day and six-day trend line points to decline of -1.43%. That would rest the index right above the 50d moving average.
The index violated the 50d MA line today, but then recovered. After a morning high, it retested the 50d MA and found support. So it is reasonable to expect support here again. The 13,000 level also seems provided support for the index today. The index held the 12,550 area recently. If it passes that area, the next support area is 12,250.
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Wrap-up
The market followed-thru with yesterday's expectation for lower today. It moved lower, found support at 13,000 and then bounced off to regain ground before close. The hammer style candle-stick appears to mark a local bottom but the market will have to confirm that tomorrow.
There was certainly some fear in the market as it opened in the morning. But those fears were put aside as Jerome Powell insisted that we not worry about inflation and the fed monetary policy would remain the same. Cyclical stocks remain the leaders. The result is another day of rotation, although it may feel like a correction.
There is reason to be cautious, but no reason to be fearful. The expectation is set for sideways or higher based on the candle.
Stay healthy and trade safe!
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, February 23, 2021
Facts: -0.5%, Volume higher, Closing range: 88%, Body: 39%
Good: Support at 13,000, successful retest at 50d MA, close in upper half of range
Bad: Gap down and 50d MA violation to morning low
Highs/Lows: Lower high, lower low
Candle: Green body in upper half of candle with longer lower wick
Advance/Decline: 0.31, 3 declining stocks for every advancing stock
Indexes: SPX (+0.13%), DJI (+0.05%), RUT (-0.88%), VIX (-1.45%)
Sectors: Energy (XLE +1.65%) and Utilities (XLU +0.83%) were top. Technology (XLK -0.28%) and Consumer Discretionary (XLY -0.66%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Nerves of steel. That's what it took to keep your eyes on the market today. The Nasdaq opened up with a gap down and pierced below the 50d MA to reach the intraday low within 10 minutes of open. It finally found support at the 13,000 area and made a climb back above the 50d MA. After a retest of that area, it was finally able to climb to an afternoon high before pulling back slightly into close.
The index closed with a -0.5% loss which is better than where you might have expected to end up from the morning action. The volume was higher than the previous day and a long lower wick formed under a 39% green body that led to an 88% closing range. The candlestick almost resembles a bullish reversal hammer, but the body is a little thick for a perfect pattern. Still, the spirit of the hammer candlestick, that the market maybe found a bottom, is still represented in the intraday pattern. There were 3 declining stocks for every advancing stock.
The S&P 500 closed in the positive with a +0.13% gain after testing it's 50d MA and forming a long lower shadow candle. You might not believe it, so go look, but the Dow Jones Industrial average (DHI) set a new all-time high before settling back for a +0.05% gain at close. The Russell 2000 (RUT) closed with a -0.88% decline.
The VIX volatility index ended the day with a -1.45% decline.
The sectors followed a similar pattern to the previous day with one notable change. Utilities (XLU) moved from the bottom to the second place spot with +0.83% gain, behind Energy (XLE) which led the sector list with a +1.65% advance. The cyclical stocks all had gains again and 8 out of the 11 SPDR sector ETFs ended the day with gains. Technology (XLK -0.66%) and Consumer Discretionary (XLY -0.28%) were at the bottom for another day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) advanced +0.18%.
Yields on the 30y treasury bond rose just +0.17% while 10y treasury bond yields dropped. 2y treasury bond yields rose, tightening the spread between long term and short term bonds.
Both High Yield (HYG) corporate bonds and Investor Grade (LQD) corporate bonds prices advanced for the day. The spread been corporate bonds and treasury bonds remains about even over the past few weeks.
Silver (SILVER) and Gold (GOLD) both declined. Crude Oil (CRUDEOIL1!) advanced. Timber (WOOD) declined. Copper (COPPER1!) and Aluminum (ALI1!) both declined.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose to 0.632. 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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Amazon (AMZN) and Alphabet (GOOGL) were able to pull out gains after taking dips early in the day. Amazon is trading below its 21d EMA and 50d MA. Alphabet dipped below its 21d EMA but closed about even with the key indicator line. Apple (AAPL) and Microsoft (MSFT) both declined for the day. Apple (AAPL) is below both moving average lines while Microsoft is below the 21d EMA but above the 50d MA.
The rest of the mega-caps did a little better than yesterday. Mastercard (MA) topped the list with a +2.87% gain. Walt Disney (DIS), Netflix (NFLX) and Facebook (FB) round out the top four mega-cap gainers. At the bottom of the list was Taiwan Semiconductor (TSM), PayPal (PYPL) and Home Depot (HD), all dropping more than 3%.
Growth stocks also did a little better. SNAP (SNAP) rose 11.10% after a wild session that had a trading range of 30%. Digital Turbine (APPS), Pinterest (PINS) and Twitter (TWTR) all did well as the communication stocks seemed to get a boost today. UP Fintech (TIGR) had another day of declines. Magnite (MGNI) was another popular growth stock with a big decline.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Wednesday will bring New Home Sales data for January as well as an update on Crude Oil Inventories. Those are schedule for aftermarket open. In addition, Fed Chair Jerome Powell will continue his testimony before congress.
Earnings reports will include Nvidia (NVDA), Lowe's (LOW), TJX (TJX), Teladoc (TDOC), Magnite (MGNI) and many others. Be sure to check the companies in your portfolio for upcoming earnings reports.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The index is in the bottom half of the long-term regression trend channel. The trend lines I draw are the mid-point of the channels.
The long-term trend line from the 10/30 bottom points to a +4.92% gain. That seems unlikely, and would need to push past resistance at the 21d EMA and the 14,000 support/resistance area.
The one-day trend line is pointing to a +1.79% advance.
The five-day and six-day trend line points to decline of -1.43%. That would rest the index right above the 50d moving average.
The index violated the 50d MA line today, but then recovered. After a morning high, it retested the 50d MA and found support. So it is reasonable to expect support here again. The 13,000 level also seems provided support for the index today. The index held the 12,550 area recently. If it passes that area, the next support area is 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The market followed-thru with yesterday's expectation for lower today. It moved lower, found support at 13,000 and then bounced off to regain ground before close. The hammer style candle-stick appears to mark a local bottom but the market will have to confirm that tomorrow.
There was certainly some fear in the market as it opened in the morning. But those fears were put aside as Jerome Powell insisted that we not worry about inflation and the fed monetary policy would remain the same. Cyclical stocks remain the leaders. The result is another day of rotation, although it may feel like a correction.
There is reason to be cautious, but no reason to be fearful. The expectation is set for sideways or higher based on the candle.
Stay healthy and trade safe!
