Trend lines drawn from the 3/5 low (23d), 3/31 (5d) and today 4/7 (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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Wednesday, April 7, 2021
Facts: -0.07%, Volume lower, Closing range: 44%, Body: +17%
Good: Stayed near 13,700 support, lower volume, not a distribution day
Bad: Indecisive candle, no signal on direction
Highs/Lows: Lower high, lower low
Candle: Long upper shadow above a thin green body
Advance/Decline: About three declining for every two advancing stocks.
Indexes: SPX (+0.15%), DJI (+0.05%), RUT (-1.60%), VIX (-5.30%)
Sectors: Communications (XLC +0.77%) and Technology (XLK +0.53%) were top. Industrials (XLI -0.46%) and Materials (XLB -1.72%) were bottom.
Expectation: Sideways
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Market Overview
It was a choppy side-ways session today for most of the market. The small caps suffered compared to the larger caps while mid-cap growth stocks had mixed results. Overall, investor sentiment remained cautious without many big reactions to economic news.
The Nasdaq closed with a -0.07% decline, another indecisive day without a clear signal on direction. The 17% body is in the lower half of the candle as the index attempted to find a rally twice but reversed quickly back to the 13,700 area. The closing range of 44% is better than the previous day, but the lower higher and lower low show the bears put up a good fight. There were nearly four declining stocks for every advancing stock.
The S&P 500 (SPX) closed the day with a +0.15% gain while the Dow Jones Industrial average (DJI) gained +0.05%. Both indexes were helped by mega-caps. The small caps didn’t fare so well. The Russell 2000 (RUT) fell -1.60% in a bearish day for the sector.
The VIX volatility index declined +5.30% and closed at its lowest point since before the pandemic.
Communications (XLC +0.77%) and Technology (XLK +0.53%) led the sector list. Industrials (XLI -0.46%) and Materials (XLB -1.72%) were at the bottom. Utilities (XLU -0.12%) retreated from the top of the list yesterday, signaling a bit more confidence among investors despite the subdued results in the indexes.
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Economic Indicators
The US Dollar (DXY) declined -0.29% but did not seem to be impacted by the morning change in sentiment.
The US 30y treasury bond and 10y note yields both advanced for the day while 2y note yield declined. The yield curve steepened, but is still in a flattening trend since the beginning of April.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined slightly for the day.
Silver (SILVER) and Gold (GOLD) both declined. Crude Oil (CRUDEOIL1!) gained for a second day. Timber (WOOD) advanced. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined. All are still showing strong demand.
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Investor Sentiment
The put/call ratio ended the day at 0.589. 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 remained about the same, on the greed side.
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Market Leaders
All four big mega-caps gained for the day and all four closed above the key moving average lines now that Apple (AAPL) finally closed above the 50d MA. The next milestone for these four will be to get the 21d EMA above the 50d MA showing a lasting trend after the dips in March. Microsoft (MSFT) and Alphabet (GOOGL) are already there. Apple (AAPL) and Amazon (AMZN) still have the 21d EMA below the 50d MA but are starting to close the gap.
Facebook (FB), Nvidia (NVDA), Amazon (AMZN) and JP Morgan Chase (JPM) are an interestingly diverse set of mega-caps to top the list for the day, representing four difference sectors. At the bottom of the list is Tesla (TSLA), Alibaba (BABA), Taiwan Semiconductor (TSM) and Walt Disney (DIS).
It was a challenging day for growth stocks as the majority of the daily update list had declines. SNAP (SNAP), Square (SQ), Twitter (TWTR) and PayPal (PYPL) topped the list, echoing the sector leaders. At the bottom of the list were yesterday's growth stock leaders including UP Fintech (TIGR) and Ehang Holdings (EH). Enphase (ENPH) and Solar Edge (SEDG) were also near the bottom despite getting a boost the previous day.
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Looking ahead
Thursday brings the weekly Job Claims in the morning. At noon, Fed Chair Jerome Powell is scheduled to speak which will be watched closely and balanced against the FOMC Meeting Minutes from last month that were released today.
There are no notable earnings reports for Thursday for the daily update.
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Trends, Support and Resistance
The index still has support in the 13,600-13,700 area and stayed above it after two tests today.
The five-day trend line points to a +1.89% gain on Wednesday. The one-day trend line is nearly flat and points to a sideways move tomorrow.
The trend line from the 3/5 low points to a -1.40% loss, which is just above the 50d MA.
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Wrap-up
Indecision. Investors eyes were on the FOMC Meeting Minutes but sentiment remained unchanged after they were released. It sent the same message we've been hearing from the Fed, including a strong commitment to economic recovery while pushing off any policy changes until substantial progress is made.
In a surprise at the end of the day, consumer credit for February was much higher than expected showing economic stimulus starting to work toward getting consumers spending again.
It seems that growth stocks are beginning to gain ground again compared to value stocks. Since the beginning of March, this chart that compares Growth to Value has pivoted from a sharp decline that started in August.
It has not been an easy rotation. There is still a lot of back and forth with growth stocks, and new winners are being sought out. The churn is likely caused by the mass exit of retail investors from the market. Those investors were heavily leaning on growth stocks in 2020 and the beginning of 2021, but volume has dropped significantly as lock downs end and consumers find other things to spend money on.
Keep an eye out for new opportunities as the 2021 winners begin to emerge.
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=-
Wednesday, April 7, 2021
Facts: -0.07%, Volume lower, Closing range: 44%, Body: +17%
Good: Stayed near 13,700 support, lower volume, not a distribution day
Bad: Indecisive candle, no signal on direction
Highs/Lows: Lower high, lower low
Candle: Long upper shadow above a thin green body
Advance/Decline: About three declining for every two advancing stocks.
Indexes: SPX (+0.15%), DJI (+0.05%), RUT (-1.60%), VIX (-5.30%)
Sectors: Communications (XLC +0.77%) and Technology (XLK +0.53%) were top. Industrials (XLI -0.46%) and Materials (XLB -1.72%) were bottom.
Expectation: Sideways
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
It was a choppy side-ways session today for most of the market. The small caps suffered compared to the larger caps while mid-cap growth stocks had mixed results. Overall, investor sentiment remained cautious without many big reactions to economic news.
The Nasdaq closed with a -0.07% decline, another indecisive day without a clear signal on direction. The 17% body is in the lower half of the candle as the index attempted to find a rally twice but reversed quickly back to the 13,700 area. The closing range of 44% is better than the previous day, but the lower higher and lower low show the bears put up a good fight. There were nearly four declining stocks for every advancing stock.
The S&P 500 (SPX) closed the day with a +0.15% gain while the Dow Jones Industrial average (DJI) gained +0.05%. Both indexes were helped by mega-caps. The small caps didn’t fare so well. The Russell 2000 (RUT) fell -1.60% in a bearish day for the sector.
The VIX volatility index declined +5.30% and closed at its lowest point since before the pandemic.
Communications (XLC +0.77%) and Technology (XLK +0.53%) led the sector list. Industrials (XLI -0.46%) and Materials (XLB -1.72%) were at the bottom. Utilities (XLU -0.12%) retreated from the top of the list yesterday, signaling a bit more confidence among investors despite the subdued results in the indexes.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.29% but did not seem to be impacted by the morning change in sentiment.
The US 30y treasury bond and 10y note yields both advanced for the day while 2y note yield declined. The yield curve steepened, but is still in a flattening trend since the beginning of April.
Both High Yield Corporate Bond (HYG) and Investment Grade Corporate Bond (LQD) prices declined slightly for the day.
Silver (SILVER) and Gold (GOLD) both declined. Crude Oil (CRUDEOIL1!) gained for a second day. Timber (WOOD) advanced. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined. All are still showing strong demand.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio ended the day at 0.589. 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 remained about the same, on the greed side.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All four big mega-caps gained for the day and all four closed above the key moving average lines now that Apple (AAPL) finally closed above the 50d MA. The next milestone for these four will be to get the 21d EMA above the 50d MA showing a lasting trend after the dips in March. Microsoft (MSFT) and Alphabet (GOOGL) are already there. Apple (AAPL) and Amazon (AMZN) still have the 21d EMA below the 50d MA but are starting to close the gap.
Facebook (FB), Nvidia (NVDA), Amazon (AMZN) and JP Morgan Chase (JPM) are an interestingly diverse set of mega-caps to top the list for the day, representing four difference sectors. At the bottom of the list is Tesla (TSLA), Alibaba (BABA), Taiwan Semiconductor (TSM) and Walt Disney (DIS).
It was a challenging day for growth stocks as the majority of the daily update list had declines. SNAP (SNAP), Square (SQ), Twitter (TWTR) and PayPal (PYPL) topped the list, echoing the sector leaders. At the bottom of the list were yesterday's growth stock leaders including UP Fintech (TIGR) and Ehang Holdings (EH). Enphase (ENPH) and Solar Edge (SEDG) were also near the bottom despite getting a boost the previous day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Thursday brings the weekly Job Claims in the morning. At noon, Fed Chair Jerome Powell is scheduled to speak which will be watched closely and balanced against the FOMC Meeting Minutes from last month that were released today.
There are no notable earnings reports for Thursday for the daily update.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The index still has support in the 13,600-13,700 area and stayed above it after two tests today.
The five-day trend line points to a +1.89% gain on Wednesday. The one-day trend line is nearly flat and points to a sideways move tomorrow.
The trend line from the 3/5 low points to a -1.40% loss, which is just above the 50d MA.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Indecision. Investors eyes were on the FOMC Meeting Minutes but sentiment remained unchanged after they were released. It sent the same message we've been hearing from the Fed, including a strong commitment to economic recovery while pushing off any policy changes until substantial progress is made.
In a surprise at the end of the day, consumer credit for February was much higher than expected showing economic stimulus starting to work toward getting consumers spending again.
It seems that growth stocks are beginning to gain ground again compared to value stocks. Since the beginning of March, this chart that compares Growth to Value has pivoted from a sharp decline that started in August.
It has not been an easy rotation. There is still a lot of back and forth with growth stocks, and new winners are being sought out. The churn is likely caused by the mass exit of retail investors from the market. Those investors were heavily leaning on growth stocks in 2020 and the beginning of 2021, but volume has dropped significantly as lock downs end and consumers find other things to spend money on.
Keep an eye out for new opportunities as the 2021 winners begin to emerge.
Stay healthy and trade safe!
The growth/value chart didn't get included correctly.