Summary: More yield curve inversion in bond markets raised eyebrows while a drop in oil prices helped equities rally.
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
I had a vacation last week and decided to stay away from the computer as much as possible, so no Daily Updates for the past week. Overall a constructive week for the market, but fear-driven volatility persists as global events unfold and the yield curve inverts for the first time since 2008.
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Monday, March 28, 2022
Facts: +1.31%, Volume lower, Closing Range: 100%, Body: 70% Green
Good: 100% closing range, consistent gains after morning dip.
Bad: Lower volume, and advance/decline ratio below 1.0
Highs/Lows: Higher high, Higher low
Candle: Thick green body above a medium lower wick. No upper wick.
Advance/Decline: 0.64, three declining stocks for every two advancing
Indexes: SPX (+0.71%), DJI (+0.27%), RUT (+0.00%), VIX (-5.67%)
Sector List: Consumer Discretionary (XLY +2.67%) and Real Estate (XLRE +1.27%) at the top. Materials (XLB -0.45%) and Energy (XLE -2.48%) at the bottom.
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Market Overview
More yield curve inversion in bond markets raised eyebrows while a drop in oil prices helped equities rally.
The Nasdaq gained +1.31% for the day, continuing the rally since March 14. Volume was lower than the previous day and there were more declining stocks than advancing stocks. So although the rally continues, it is slowing. That could be constructive, allowing for moving averages to catch up. Or it could mean another dip is ahead.
The S&P 500 (SPX) gained +0.71%. The Dow Jones Industrial Average (DJI) gained +0.27%. The Russell 2000 (RUT) stayed flat. The VIX Volatility Index declined -5.67%, continuing to drop back to normal levels, but still elevated.
Consumer Discretionary (XLY +2.67%) led the sector list, helped by Tesla's (TSLA) 8% gain. Real Estate (XLRE +1.27%) was the next best sector. Materials (XLB -0.45%) and Energy (XLE -2.48%) were at the bottom of the sector list. The Energy sector was brought down by a dip in oil prices.
The 5y Treasury Yield rose above the 30y yield for the first time since February 2006. Inversions signal future recessions. The inversion in 2006 preceeded the 2008 Financial Crisis and a 60% correction in US equity markets.
Brent Oil fell by -8.64% but remained above $105. The US Dollar index (DXY) rose +0.32% today. US 30y and 10y Treasury Yields declined while the 5y and 2y Treasury yields advanced. Both High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices rose. Silver and Gold both declined sharply.
The put/call ratio declined to 0.654.
The big six all gained today with Tesla (TSLA) leading the way with a +8.03% gain. Amazon (AMZN) and Microsoft (MSFT) followed with +2.56% and +2.31% gains. With Amazon moving above its 200d moving average, now all six are above the three key moving average lines.
Tesla topped the broader mega-cap list as well. Big oil companies were at the bottom of the list with Royal Dutch Shell (SHEL) having the biggest loss, declining by -2.90%.
The Daily Update Growth List did very well with only a handful of declining stocks in the list. At the top of the list was DoorDash (DASH), gaining +8.68%. GrowGeneration (GRWG) declined by -4.05%, ending down at the bottom of the list.
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Looking ahead
How Price Index data for January will be available in the morning. After the market opens, we'll see CB Consumer Confidence for March and the JOLTs Job Openings for February.
More Fed members are scheduled to speak tomorrow and investors will be watching for any aggressively hawkish comments.
API Weekly Crude Oil Stock comes in the afternoon.
Lululemon Athletica (LULU), Chewy (CHWY), RH (RH) are among some of the interesting earnings reports for Tuesday.
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Trends, Support, and Resistance
The Nasdaq seems to have support at 14,000 and is heading toward the support/resistance area of 14,500.
If the trend from the 3/14 low continues, we can expect a +1.89% advance for Tuesday.
The one-day trend line points to a +0.33%.
If the index returns to the five-day trend line, that would mean a -0.72% decline.
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Wrap-up
It will be interesting to watch how the market reacts to more inversion in the yield curve. The higher yields on shorter-term Treasuries could be a combination of worries about the war in Ukraine, but also could be over fears of a recession induced by the Fed's attempts to control inflation.
Typically, an inversion signals a recession that is still months to a couple of years away.
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.
I had a vacation last week and decided to stay away from the computer as much as possible, so no Daily Updates for the past week. Overall a constructive week for the market, but fear-driven volatility persists as global events unfold and the yield curve inverts for the first time since 2008.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Monday, March 28, 2022
Facts: +1.31%, Volume lower, Closing Range: 100%, Body: 70% Green
Good: 100% closing range, consistent gains after morning dip.
Bad: Lower volume, and advance/decline ratio below 1.0
Highs/Lows: Higher high, Higher low
Candle: Thick green body above a medium lower wick. No upper wick.
Advance/Decline: 0.64, three declining stocks for every two advancing
Indexes: SPX (+0.71%), DJI (+0.27%), RUT (+0.00%), VIX (-5.67%)
Sector List: Consumer Discretionary (XLY +2.67%) and Real Estate (XLRE +1.27%) at the top. Materials (XLB -0.45%) and Energy (XLE -2.48%) at the bottom.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
More yield curve inversion in bond markets raised eyebrows while a drop in oil prices helped equities rally.
The Nasdaq gained +1.31% for the day, continuing the rally since March 14. Volume was lower than the previous day and there were more declining stocks than advancing stocks. So although the rally continues, it is slowing. That could be constructive, allowing for moving averages to catch up. Or it could mean another dip is ahead.
The S&P 500 (SPX) gained +0.71%. The Dow Jones Industrial Average (DJI) gained +0.27%. The Russell 2000 (RUT) stayed flat. The VIX Volatility Index declined -5.67%, continuing to drop back to normal levels, but still elevated.
Consumer Discretionary (XLY +2.67%) led the sector list, helped by Tesla's (TSLA) 8% gain. Real Estate (XLRE +1.27%) was the next best sector. Materials (XLB -0.45%) and Energy (XLE -2.48%) were at the bottom of the sector list. The Energy sector was brought down by a dip in oil prices.
The 5y Treasury Yield rose above the 30y yield for the first time since February 2006. Inversions signal future recessions. The inversion in 2006 preceeded the 2008 Financial Crisis and a 60% correction in US equity markets.
Brent Oil fell by -8.64% but remained above $105. The US Dollar index (DXY) rose +0.32% today. US 30y and 10y Treasury Yields declined while the 5y and 2y Treasury yields advanced. Both High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices rose. Silver and Gold both declined sharply.
The put/call ratio declined to 0.654.
The big six all gained today with Tesla (TSLA) leading the way with a +8.03% gain. Amazon (AMZN) and Microsoft (MSFT) followed with +2.56% and +2.31% gains. With Amazon moving above its 200d moving average, now all six are above the three key moving average lines.
Tesla topped the broader mega-cap list as well. Big oil companies were at the bottom of the list with Royal Dutch Shell (SHEL) having the biggest loss, declining by -2.90%.
The Daily Update Growth List did very well with only a handful of declining stocks in the list. At the top of the list was DoorDash (DASH), gaining +8.68%. GrowGeneration (GRWG) declined by -4.05%, ending down at the bottom of the list.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
How Price Index data for January will be available in the morning. After the market opens, we'll see CB Consumer Confidence for March and the JOLTs Job Openings for February.
More Fed members are scheduled to speak tomorrow and investors will be watching for any aggressively hawkish comments.
API Weekly Crude Oil Stock comes in the afternoon.
Lululemon Athletica (LULU), Chewy (CHWY), RH (RH) are among some of the interesting earnings reports for Tuesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq seems to have support at 14,000 and is heading toward the support/resistance area of 14,500.
If the trend from the 3/14 low continues, we can expect a +1.89% advance for Tuesday.
The one-day trend line points to a +0.33%.
If the index returns to the five-day trend line, that would mean a -0.72% decline.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It will be interesting to watch how the market reacts to more inversion in the yield curve. The higher yields on shorter-term Treasuries could be a combination of worries about the war in Ukraine, but also could be over fears of a recession induced by the Fed's attempts to control inflation.
Typically, an inversion signals a recession that is still months to a couple of years away.
Stay healthy and trade safe!
