Summary: Is the big tech trade finished? Or is this just a pause before another leg up? Economic data in the morning caused volatility at the market open, which eventually went to the bears. The selling continued until the afternoon when the buyers came back into the market.
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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Thursday, July 15, 2021
Facts: -0.70%, Volume higher, Closing range: 46%, Body: 47%
Good: Bounce off support at 21d EMA
Bad: Another LH/LL on slightly higher volume
Highs/Lows: Lower high, lower low
Candle: Thick red body in upper half of candle, long lower wick
Advanced/Decline: 0.5, two declining stocks for every advancing stock
Indexes: SPX (-0.33%), DJI (+0.15%), RUT (-0.55%), VIX (+4.17%)
Sectors: Utilities (XLU +1.13%) and Consumer Staples (XLP +0.41%) at the top. Technology (XLK -0.82%) and Energy (XLE -1.40%) were bottom
Expectation: Sideways or Lower
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Market Overview
Is the big tech trade finished? Or is this just a pause before another leg up? Economic data in the morning caused volatility at the market open, which eventually went to the bears. The selling continued until the afternoon when the buyers came back into the market.
The Nasdaq closed the day with a -0.70% loss on slightly higher volume. The candle has a thick red body in the upper half and a long lower wick in the lower half. The closing range is 46%, and the body covers 47% of the candle. There were two declining stocks for every advancing stock.
The Dow Jones Industrial Average (DJI) gained +0.15%. The S&P 500 (SPX) declined -0.33%. The Russell 2000 (RUT) dropped another -0.55%.
The defensive sectors were at the top of the sector list again today. Utilities (XLU +1.13%) and Consumer Staples (XLP +0.41%) were the best performing sectors, signaling the unease over continued inflation and uncertainty in the economic recovery. Technology (XLK -0.82%) had its first decline after five days of gains. Energy (XLE -1.40%) continues to slide.
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Economic Indicators
Continuing Jobless Claims continues to fall while Initial Jobless Claims was even, meeting expectations. The NY Empire State Manufacturing Index blew away expectations at 43 (analysts expected 18). However, the Philadelphia Fed Manufacturing Index fell to 21.9, well below expectations. Regardless, the Philly index is still at a historically high level.
The US Dollar (DXY) rose +0.21% for the day.
The US 30y and 10y Treasury yields fell significantly again while the 2y Treasury yield remained even. Bond investors listened closely to the Fed Jerome Powell's comments in front of the Senate this week. Powell is walking a line between calming fears over inflation and letting people know the Fed is willing to step in and control inflation if it proves not as transitory as expected.
High Yield Corporate Bond (HYG) bond prices declined. Investment Grade Corporate Bond (LQD) prices advanced.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) declined.
Copper (COPPER1!) advanced, and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) declined -3.21%. Ethereum (ETHUSD) declined -3.57%. (Time of writing)
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Investor Sentiment
The put/call ratio rose to 0.764. 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. Below that level is overly bullish.
The CNN Fear & Greed index moved more into the fear side, getting closer to extreme fear.
The NAAIM Money Manager exposure index rose to 93.27. Buying the dip?
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Market Leaders
All big four mega-caps declined today but remain well above key moving average lines. Amazon (AMZN) had the biggest loss, declining -1.37%. Alphabet (GOOGL) declined -0.96%. Microsoft (MSFT) fell -0.52%. Apple (AAPL) lost -0.45%.
Danaher Corporation (DHR) barely rose above 200B market capitalization to make it into the mega-cap list. The stock tops the list today with a +1.75% gain. Alibaba (BABA), United Health (UNH), and Home Depot (HD) were the other top mega-caps for the day. Taiwan Semiconductor (TSM) is at the bottom of the list with a -5.51% decline. The company released earnings before the market open. They increased profits from the previous year but were still slightly below analyst expectations. Also at the bottom of the mega-cap list is Nvidia (NVDA), Oracle (ORCL), and Eli Lilly (LLY).
It has not been a good week for growth stocks. Most of the stocks in the daily update list declined for another day. Chinese stocks did well, with FUTU Holdings (FUTU), UP Fintech (TIGR), JD.com (JD), and Alibaba (BABA) topping the growth list. At the bottom of the list are Fiverr (FVRR), SNAP (SNAP), Enphase (ENPH), and Nvidia (NVDA).
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Looking ahead
The focus will be on Retail Sales data on Friday morning. Consumer Sentiment and Consumer Expectations data will be available after the market opens. Consumer Inflation Expectations will also watch closely as higher expectations tend to play out to be self-fulfilling.
Friday's earning reports include Honeywell (HON) and Charles Schwab (SCHW).
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Trends, Support, and Resistance
Support around 14,650 did not hold. However, the index did get support at the 21d exponential moving average line. Buyers came back into the market at soon as the index hit the line.
The trend line from the 5/12 low shows a +2.11% gain for Friday. If the index moves lower from here, I'll retire this long trend-line and replace it with a line from the 7/14 top. There is nothing to complain about a two-month uptrend.
The five-day trend line leads to a 0.22% gain.
The one-day trend line points to a -1.16% loss.
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Wrap-up
There were likely several things at play in today's decline:
1. Big tech companies were due for a pullback. As the primary source of gains over the past week, the pullback of big tech impacted the major indexes.
2. The Philly manufacturing index number coming in lower than expected was a shocker for investors, despite being historically high.
3. Whether yields go up or down, volatility in the bond market is never good for equities.
There's a great quote from Steve Eisman in The Big Short (book): "The equity world is like a f***ing zit compared to the bond market." Truth.
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=-
Thursday, July 15, 2021
Facts: -0.70%, Volume higher, Closing range: 46%, Body: 47%
Good: Bounce off support at 21d EMA
Bad: Another LH/LL on slightly higher volume
Highs/Lows: Lower high, lower low
Candle: Thick red body in upper half of candle, long lower wick
Advanced/Decline: 0.5, two declining stocks for every advancing stock
Indexes: SPX (-0.33%), DJI (+0.15%), RUT (-0.55%), VIX (+4.17%)
Sectors: Utilities (XLU +1.13%) and Consumer Staples (XLP +0.41%) at the top. Technology (XLK -0.82%) and Energy (XLE -1.40%) were bottom
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Is the big tech trade finished? Or is this just a pause before another leg up? Economic data in the morning caused volatility at the market open, which eventually went to the bears. The selling continued until the afternoon when the buyers came back into the market.
The Nasdaq closed the day with a -0.70% loss on slightly higher volume. The candle has a thick red body in the upper half and a long lower wick in the lower half. The closing range is 46%, and the body covers 47% of the candle. There were two declining stocks for every advancing stock.
The Dow Jones Industrial Average (DJI) gained +0.15%. The S&P 500 (SPX) declined -0.33%. The Russell 2000 (RUT) dropped another -0.55%.
The defensive sectors were at the top of the sector list again today. Utilities (XLU +1.13%) and Consumer Staples (XLP +0.41%) were the best performing sectors, signaling the unease over continued inflation and uncertainty in the economic recovery. Technology (XLK -0.82%) had its first decline after five days of gains. Energy (XLE -1.40%) continues to slide.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
Continuing Jobless Claims continues to fall while Initial Jobless Claims was even, meeting expectations. The NY Empire State Manufacturing Index blew away expectations at 43 (analysts expected 18). However, the Philadelphia Fed Manufacturing Index fell to 21.9, well below expectations. Regardless, the Philly index is still at a historically high level.
The US Dollar (DXY) rose +0.21% for the day.
The US 30y and 10y Treasury yields fell significantly again while the 2y Treasury yield remained even. Bond investors listened closely to the Fed Jerome Powell's comments in front of the Senate this week. Powell is walking a line between calming fears over inflation and letting people know the Fed is willing to step in and control inflation if it proves not as transitory as expected.
High Yield Corporate Bond (HYG) bond prices declined. Investment Grade Corporate Bond (LQD) prices advanced.
Silver (SILVER) and Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) declined.
Copper (COPPER1!) advanced, and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) declined -3.21%. Ethereum (ETHUSD) declined -3.57%. (Time of writing)
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose to 0.764. 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. Below that level is overly bullish.
The CNN Fear & Greed index moved more into the fear side, getting closer to extreme fear.
The NAAIM Money Manager exposure index rose to 93.27. Buying the dip?
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All big four mega-caps declined today but remain well above key moving average lines. Amazon (AMZN) had the biggest loss, declining -1.37%. Alphabet (GOOGL) declined -0.96%. Microsoft (MSFT) fell -0.52%. Apple (AAPL) lost -0.45%.
Danaher Corporation (DHR) barely rose above 200B market capitalization to make it into the mega-cap list. The stock tops the list today with a +1.75% gain. Alibaba (BABA), United Health (UNH), and Home Depot (HD) were the other top mega-caps for the day. Taiwan Semiconductor (TSM) is at the bottom of the list with a -5.51% decline. The company released earnings before the market open. They increased profits from the previous year but were still slightly below analyst expectations. Also at the bottom of the mega-cap list is Nvidia (NVDA), Oracle (ORCL), and Eli Lilly (LLY).
It has not been a good week for growth stocks. Most of the stocks in the daily update list declined for another day. Chinese stocks did well, with FUTU Holdings (FUTU), UP Fintech (TIGR), JD.com (JD), and Alibaba (BABA) topping the growth list. At the bottom of the list are Fiverr (FVRR), SNAP (SNAP), Enphase (ENPH), and Nvidia (NVDA).
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
The focus will be on Retail Sales data on Friday morning. Consumer Sentiment and Consumer Expectations data will be available after the market opens. Consumer Inflation Expectations will also watch closely as higher expectations tend to play out to be self-fulfilling.
Friday's earning reports include Honeywell (HON) and Charles Schwab (SCHW).
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
Support around 14,650 did not hold. However, the index did get support at the 21d exponential moving average line. Buyers came back into the market at soon as the index hit the line.
The trend line from the 5/12 low shows a +2.11% gain for Friday. If the index moves lower from here, I'll retire this long trend-line and replace it with a line from the 7/14 top. There is nothing to complain about a two-month uptrend.
The five-day trend line leads to a 0.22% gain.
The one-day trend line points to a -1.16% loss.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
There were likely several things at play in today's decline:
1. Big tech companies were due for a pullback. As the primary source of gains over the past week, the pullback of big tech impacted the major indexes.
2. The Philly manufacturing index number coming in lower than expected was a shocker for investors, despite being historically high.
3. Whether yields go up or down, volatility in the bond market is never good for equities.
There's a great quote from Steve Eisman in The Big Short (book): "The equity world is like a f***ing zit compared to the bond market." Truth.
Stay healthy and trade safe!
