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Market Week In Review - 3/22/2021 - 3/26/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes and market leaders each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Monday, March 22, 2021 Facts: +1.23%, Volume lower, Closing range: 60% (w/gap), Body: 56% Good: Zero lower wick, strong morning rally to above the 50d MA Bad: Could not stay above 50d MA, losing support late in the session Highs/Lows: Higher high, higher low Candle: No lower wick, green body under a long upper wick. Advance/Decline: Two declining stocks for every advancing stock Indexes: SPX (+0.70%), DJI (+0.32%), RUT (-0.91%), VIX (-9.88%) Sectors: Technology (XLK +1.75%) and Communication Services (XLC +0.66%) were top sectors. Financials (XLF -1.72%) and Energy (XLE -2.00%) were bottom Expectation: Sideways or Higher Technology stocks showed up big for the first day of the week. The sector outperformed for the day, carrying most of the major indexes to close with positive gains for the day. The advances were not broadly shared, with two declining stocks for every advancing stock. The Nasdaq closed with a +1.23% gain on significantly lower volume. The candle has no lower wick as the opening price level was never revisited after the morning rally. The 56% body sits under a long upper wick that formed during a sell-off just before close. The closing range of 60% includes a gap up at open and is positive, but does represent the weakness at close. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, March 23, 2021 Facts: +1.12%, Volume higher, Closing range: 12%, Body: -76% Good: Nothing Bad: Back below the 21d EMA with a thick red candle Highs/Lows: Lower high, lower low Candle: Mostly red body with tiny upper and lower wicks Advance/Decline: Ten declining stocks for every advancing stock Indexes: SPX (-0.76%), DJI (-0.94%), RUT (-3.58%), VIX (+7.54%) Sectors: Utilities (XLU +1.52%) and Consumer Staples (+0.41%) were top. Industrials (XLI -1.75%) and Materials (XLB -2.08%) were bottom. Expectation: Lower The character of the market continues to swing in opposite directions. Expectation was for Sideways or Higher for today, and we got lower. If we were keeping score, you'd notice the expectations I'm setting on a daily basis are broken very consistently over the past few weeks. But it's a good time to remind the reader that the expectations are not predictions, but they are to set and expectation, get our attention when the expectation is broken, and learn what might have changed in the market. Here we go. The Nasdaq closed with a -1.12% decline on higher volume. The candle has small upper and lower wicks, but is mostly red body. The closing range of 12% shows the day very much went to the bears. Few bulls came in to buy back the low prices. The selling was broad, across most sectors, segments and impacted all major indexes. There were 10 declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, March 24, 2021 Facts: -2.01%, Volume higher, Closing range: 0%, Body: 99% Good: Nothing, even more nothing than yesterday Bad: No wicks, all red body, close below 13,000 support Highs/Lows: Lower high, lower low Candle: Marubozu Black candle, no visible upper or lower wick, all red body Advance/Decline: Five declining stocks for every advancing stock Indexes: SPX (-0.55%), DJI (-0.01%), RUT (-2.35%), VIX (+4.43%) Sectors: Energy (XLE +2.51%) and Industrials (XLI +0.73%) were top. Consumer Discretionary (XLY -1.48%) and Communications (XLC -2.52%) were bottom. Expectation: Lower In the endless rotations, the four cyclical sectors moved from the bottom to the top of the sector list in another session of selling for big tech, consumer discretionary and growth stocks. The Nasdaq closed down -2.01% on higher volume. The 0% closing range comes after an all-day bearish move that formed a 99% red body candle. The tiny upper wick is barely visible and there is no lower wick. There were five declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, March 25, 2021 Facts: +0.19%, Volume lower, Closing range: 85%, Body: +60% Good: Closed near to intraday highs Bad: Lower low hit in the morning, resistance at 13,000 near close Highs/Lows: Lower high, lower low Candle: Mostly green body with a slightly longer lower wick from morning dip Advance/Decline: Three advancing stocks for every two declining stocks Indexes: SPX (+0.52%), DJI (+0.62%), RUT (+2.29%), VIX (-6.56%) Sectors: Financials (XLF +1.68%) and Industrials (XLI +1.60%) were top. Technology (XLK -0.06%) and Communications (XLC -0.49%) were bottom. Expectation: Lower Economic news seemed to weigh on the market after open, but investors shook off the weight later in the day to find gains across the major indexes. A short pullback to absorb the reaction from a weak 7y note auction was overcome to close near market intraday highs. The Nasdaq closed with a +0.19% gain. The candle gave us a lower high and lower low, but overall is bullish look despite a morning dip and afternoon pullback. The closing range is 85% and a thick green body covering 60% of the candle. The lower volume, and lower high mean the trend is still downward. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, March 26, 2021 Facts: +1.24%, Volume higher, Closing range: 96%, Body: +53% Good: Rally in afternoon to close near intraday high Bad: Nothing Highs/Lows: Higher high, higher low Candle: Thick green body with a long lower wick, very small upper wick Advance/Decline: More than one advancing stock for every declining stock Indexes: SPX (+1.66%), DJI (+1.39%), RUT (+1.76%), VIX (-4.80%) Sectors: Technology (XLK +2.54%) and Materials (XLB +2.48%) were top. Utilities (XLU +0.33%) and Communications (XLC -1.09%) were bottom. Expectation: Higher A late afternoon rally in the market closed the week with a positive day for all the major indexes. It's not clear what caused the sudden late afternoon rally. It could just be expiring options activity, or it could be investors outlook of the economy improving. Morning economic data was mixed, but the personal income numbers and consumer sentiment showed the possibility of an upcoming rise in spending. Data from UK and Germany was also positive on their economies. The Nasdaq closed the day with a +1.24% gain on higher volume. The closing range of 96% with a 53% green body over a long lower wick was enough to get a higher high on top of a higher low. The higher high and higher low with more volume than the previous day is a great indicator of strength. There were more advancing stocks than declining stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) The week started with supply chain issues as a semiconductor plant in Japan was on fire. The week also ended with supply chain issues as a container ship remained stuck in the Suez Canal, blocking a major shipping route. The blockage caused oil prices to spike and more pressure on an already stressed supply chain. Technology opened the week with huge gains from major leaders. But the gains were limited to big tech and all were on lower volume with no real breakouts. In the broader Nasdaq, there were two losers for every winner. On the surface, the chart looked ok, but the longer upper wick should have been another warning sign. The bears were back on Tuesday and the selling was broad. New lockdowns across Europe and data issues with vaccine trials complicated the pandemic recovery and investors reacted. Utilities and Consumer Staples were at the top of the sector list while the cyclical sectors moved to the bottom. Pandemic stocks got a new life with Netflix, Peloton and Zoom topping the charts again. Global investors fled the US dollar and US treasuries as a safe haven, but equities suffered with 10 declining stocks for every advancing stock on the Nasdaq. Wednesday brought another rotation. Cyclical sectors moved from the bottom of the sector list to the top of the sector list. Energy started to climb while a container ship blocking the Suez Canal, threatening oil and supply chain shortages. The US Dollar continued to rise. There were still five declining stocks for every advancing stock. The Nasdaq crossed below a key level of 12,985.05 and looked very bearish with a Marubozu Black candle (no upper or lower wick, just red body). For Thursday, the index needed to hold above 12,783.40 which was the bottom line of the channel from the March 2020 bottom. The index did hold, but not before testing that channel line. The Thursday candle is bullish. However, the lower high and lower low meant the downtrend continues. On the positive side, there were more advancing stocks than declining stocks. The US dollar gained again and the impact of a stronger dollar started to show up in the mega-caps list. Companies at the top of the gains list were ones that could benefit from a stronger dollar. Companies at the bottom of the list would have some negative impact by a strong dollar. Friday opened with a mix of economic news and the continued stress of the Suez Canal blockage. The rally in the final hour saved the day to close the index higher. The reason for the rally was unclear, but may have been from positive economic news in Europe or it could have been market maker activity to cover for expiring options. The volume was higher, but still not as high as average volume since the beginning of the year. To put more confidence in a rally, I'd like to see consistent buying throughout the day with higher than average volume. The Nasdaq declined -0.58% for the week on lower volume. The closing range of 53% is better than the previous week, but we have a lower high and a lower low. The Nasdaq gave us a lower high and a lower low this week. A symmetrical triangle is forming which is usually followed by a move in the direction of the previous trend. I focus on the Nasdaq because it holds many of the growth stocks that I tend to have in my portfolio. But I always keep an eye on the other major indexes in this report. The S&P 500 (SPX) had an all-time high close for the week and advanced +1.57%. The Dow Jones Industrial average (DJI) closed with a +1.36% gain. Small caps and the Russell 2000 (RUT) struggled for a second week. It dipped more than 8% at one point but climbed back to close with a 62% closing range and end the week with a -2.89% loss. The VIX volatility index closed the week at its lowest since March of 2020, declining -9.98% for the week. There were several changes of winners and losers during a week that ended with the S&P 500 at a record close. Technology ( XLK ) led for the first two days of the week. It held the lead on Tuesday, but was sold off heavily on Wednesday and Thursday, but then ended the week with a huge gain on Friday, putting it in third place. Utilities ( XLU ) topped the list on Tuesday as investors became defensive. Utilities didn't take the top weekly spot on until Thursday when investors became more cautious again. Consumer Staples ( XLP ) remained steady throughout the volatile week and ended the week at the top. After last week's rout, Energy ( XLE ) seemed to find a bottom on Tuesday. After a big gain on Wednesday, the sector opened back near the bottom on Thursday, but quickly recovered . By the end of Friday, it was able to end the week with a gain. Communication Services ( XLC ) and Consumer Discretionary ( XLY ) were the only two sectors to decline for the week. Communication Services ended the week at the bottom with more than a 4% decline. Although Technology sector fared well, there is still evidence of rotation from growth to value. Longer term treasury yields pulled back from recent gains. The US 30y bond and US 10y note yields both dropped relative to the 2y note. There was a brief scare with a disappointing 7y note auction on Thursday, but bonds did not sell off heavily like after the previous lackluster auctions. The yield curve still remains steep but has stopped steepening for the past few weeks. High Yields Corporate Bonds (HYG) and Investment Grade (LQD) corporate bond prices both advanced for the week. The spread between corporate bonds and short term treasury bonds tightened. The US Dollar (DXY) advanced +0.89% and is now having some impact on multinationals valuations. Silver (SILVER) and Gold (GOLD) both declined for the week. Crude Oil Futures (CRUDEOIL1!) remained about even for the week, despite a choppy up and down week. Timber (WOOD) advanced. Copper (COPPER1!) declined while Aluminum (ALI1!) advanced. The continuing growth in aluminum prices is a signal of the high demand created by the recovering economy and manufacturing companies trying to keep up with expected demand. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps Apple (AAPL) and Microsoft (MSFT) were able to end the week with gains while Amazon (AMZN) and Alphabet (GOOGL) declined for the week. Microsoft and Alphabet closed above their 10w moving average lines. Apple is below the 10w but above the 40w moving average. Amazon remains below both moving average lines. Relative to the Nasdaq, Microsoft and Alphabet have been outperforming while Apple and Amazon have been underperforming. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Four Recovery Stocks I picked four recovery stocks to track against the indexes and other indicators in this weekly report. Exxon Mobil was the only one to end the week with gains as oil prices are expected to rise with the continued blockage of the Suez Canal. The others sold off sharply early in the week as the pandemic seemed to pop back into investors' worries. They all recovered later in the week, but not enough to end the week with gains. All of the four recovery stocks are trading above both key moving average lines. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.753. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment and could mean an overbought market. The CNN Fear & Greed index is near to the neutral territory. The NAAIM exposure index moved down to 57.52. Money managers were reducing positions in the market as of Wednesday when the survey is taken. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead Next week will only have four days of trading. Markets will be closed for Good Friday. A few short term bill auctions are scheduled for Monday. Otherwise there is not much economic news for the start of the week. Investors will be watching for an update to the situation with the Suez Canal. On Tuesday, the CB Consumer Confidence numbers will be released just after market open. The API Weekly Crude Oil Stock will be updated after market close. There will be a few key updates on Wednesday morning. First employment data for March will be updated. Purchasing Managers Index data will indicate how much purchasing activity is happening in order to meet manufacturing demands. Pending Home Sales and Crude Oil Inventories will be released after market open. On Thursday, an OPEC meeting is scheduled which will impact outlook for oil supply/demand. Initial Jobless Claims data will be released. Additional Manufacturing data for March will indicate how the sector is recovering. The markets will be closed on Good Friday, but there will still be some economic data released. Hourly Earnings, Nonfarm Payrolls and the Unemployment Rate will all show how strong the labor market is recovering. There are no daily update earnings reports for Monday. Lululemon (LULU), Chewy (CHWY), Carnival Corp (CCL), and HyreCar (HYRE) will report earnings on Tuesday. Walgreens (WBA) and Riot Blockchain (RIOT) report on Wednesday. CarMax (KMX) reports on Thursday. No earnings reports for Good Friday. Be sure to check your portfolio for upcoming earnings reports. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side Looking broadly across the market, the S&P 500 closed at an all-time high. The Dow Jones Industrial average is near all-time highs. Despite the performance for the Nasdaq, broadly the markets are performing well. Investors continue to rotate into value stocks, away from growth stocks, but that was a necessary rebalancing. Soon the rebalance will be over and stocks can broadly advance together. Global investors are seeing safety and value in the US Dollar again, which helps to strengthen the bond market as well. That should keep yields and the yield curve under control at least for a while. The Fed will continue to buy up bonds to control the yield curve while not worrying up inflation. Rising consumer sentiment means record savings and new stimulus checks could be poured into the economy soon. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side The supply chain is strained from two big events this week and the higher spending expected in coming months could put more upward pressure on prices. Inflation could scare investors and cause more negative reactions in the bond and equity markets. The rising US Dollar is a signal of strength in the economy, but also could have impacts on multinationals that will cause further rotation and volatility. Add that rotation on top of the continuing rotation from growth stocks to value stocks. There is some discussion in the news of large margin calls linked to Archegos happening last week that may continue into next week. If so, there could be more downward pressure on the indexes. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch The Nasdaq stayed in a channel drawn from the March 2020 bottom and is forming a symmetrical triangle that should breakout this week or next. It could breakout to the upside or downside. On the positive side, the level we still want to reach is 13,620.71, but there's a few levels to pass before that happens: The 21d EMA is at 13,239.15. We need to get above that line and stay above it. The 50d MA is at 13,426.43. The 50d started to trend lower this week, and we need it to trend higher. After the 50d MA, this past weeks high of 13,455.64 is the next goal. We need a higher high for next week. The next line is 13,620.71 which is the high from two weeks ago. But it is also past the area of resistance that the index was rejected on 1/26, 3/2, and 3/16. 14,000 will be the next area of resistance. The all-time high is at 14,175.12. That might be a stretch to get there this week, but keep it in our sites. On the downside, the index must stay above 12,985.05 which was a previous neck line on a head and shoulders: 13,000 has been an area of support on 1/29, 2/23, 3/3. The index broke below that support area this week, but was able to rise back above it before the end of the week. 12,985.05 is just below that support area and a key level that would mark bearishness. The index also breached that line this past week. The lower line of the channel from the March 2020 bottom is around 12,924 for next week. The low of this past week is 12,786.81. Stay above that price to give us a higher low for this week. The next support area is 12,500-12,550. 12,397.05 is the current bottom of the recent correction on the Nasdaq. Let's not make a new bottom. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up It may not seem like it looking at growth stocks or small caps, but there was plenty of optimism in the market this past week. The optimism though was focused on the economic recovery and what sectors stocks will benefit the most over the coming months. Global investors are recognizing the strength of the US economic recovery and buying up the US dollar. As the balance of growth and value stocks starts to even out, we can expect some of that global investment to start to move into the 2020 winners again. Still there is no guarantee that what did well last year, will do well again this year. Find what is holding up well relative to their industry sectors and the indexes. Good luck, stay healthy and trade safe!
NASDAQ:IXIC
by drewby4321
2
Market Week In Review - 3/15/2021 - 3/19/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes and market leaders each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Monday, March 15, 2021 Facts: +1.05%, Volume higher, Closing range: 100%, Body: 73% Good: Close above last week's high and back above 50d MA Bad: Nothing Highs/Lows: Higher high, higher low Candle: No upper wick, most green body over lower wick Advance/Decline: About even advancing and declining stocks Indexes: SPX (+0.65%), DJI (+0.53%), RUT (+0.31%), VIX (-3.19%) Sectors: Consumer Discretionary (XLY +1.34%) and Utilities (XLU +1.28%) were top. Financials (XLF -0.58%) and Energy (XLE -1.14%) Expectation: Sideways or Higher It was a relatively smooth start to the week as bond yields stayed fairly tame compared to previous weeks. That allowed the tech heavy Nasdaq to continue a rally to catch up with the other indexes. There is still more catchup to do as the S&P 500, Dow Jones Industrial average and Russell 2000 set new all-time highs. After a brief test of the 21d EMA line, the Nasdaq rallied into close for a +1.05% gain on higher volume. The volume increased as the index moved up in the last 30 minutes of trading to end the day with a 100% closing range. The 73% green body is above a lower wick formed from some selling before noon. There were about the same number of advancing stocks as declining stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, March 16, 2021 Facts: +0.09%, Volume lower, Closing range: 33%, Body: 23% Good: Higher high, higher low, successful test of 50d MA Bad: Low closing range, longer upper wick, could not hold morning rally Highs/Lows: Higher high, higher low Candle: Thin red body underneath a long upper wick Advance/Decline: Over three declining stocks for every advancing stocks Indexes: SPX (-0.16%), DJI (-0.39%), RUT (-1.72%), VIX (-1.20%) Sectors: Communications (XLC +1.05%) and Technology (XLK +0.75%) were top. Industrials (XLI -1.42%) and Energy (XLE -2.85%) were bottom. Expectation: Sideways or Lower An attempted rally in the morning sold off as investors reacted to disappointing economic data, both for February retails sales and industrial and manufacturing production. Gains were limited to fewer stocks and dominated by mega-caps. The Nasdaq closed with a +0.09% gain, but that was down from a 1.19% gain earlier in the day. After testing the 50d MA, the index bounced back up to close a bit below where it opened and leaving behind a 23% red body. The 33% closing range is not great, but the volume was lower than the previous day and lower than average. There were over three declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, March 17, 2021 Facts: +0.40%, Volume higher, Closing range: 78%, Body: 58% Good: High closing range on slightly higher volume, support at 21d EMA Bad: Lower high, lower low, dipped below 50d MA Highs/Lows: Lower high, lower low Candle: Green body covers most of candle, similar upper and lower wicks Advance/Decline: About even advancing and declining stocks Indexes: SPX (+0.29%), DJI (+0.58%), RUT (+0.73%), VIX (-2.83%) Sectors: Consumer Discretionary (XLY +1.40%) and Industrials (XLI +1.15%) were top. Health (XLV -0.36%) and Utilities (XLU -1.63%) were bottom. Expectation: Sideways or Higher Investors got what they needed to hear from the fed's Jerome Powell. Interest rates will remain untouched and there will be no tapering of bond buying despite a big upgrade in the fed's outlook on the economy. The change in investor sentiment mid-day was clear as the indexes made a rally. The Nasdaq closed with a +0.4% gain after dipping below the 50d MA and 21d EMA in the morning. The dip came as yields soared and investors worried about what was to come from the Fed meeting. After rallying in the afternoon, the index closed on slightly higher volume with a 78% closing range. The short upper wick above a 58% green body was formed from a small pullback just before close. There were about equal number of advancing and declining stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, March 18, 2021 Facts: -3.02%, Volume higher, Closing range: 5%, Body: 82% Good: Nothing Bad: Broke below 50d MA and 21d EMA, selling most of the day Highs/Lows: Lower high, lower low Candle: Mostly red body, with no visible lower wick Advance/Decline: Four declining stocks for every advancing stock Indexes: SPX (-1.48%), DJI (-0.46%), RUT (-2.94%), VIX (+12.22%) Sectors: Financials (XLY +0.52%) was the only sector with gains. Technology (XLK -2.77%) and Energy (XLE -4.49%) were the worst performing. Expectation: Lower Did the market wake up with a hangover? After the positive news from the Fed caused a rally late yesterday, the market took a turn downward today. It started again with a surge in bond yields that impact the valuation of big tech and growth stocks. The Nasdaq closed down -3.02% in a painfully red session with only a 5% closing range. The 82% red body with no visible lower wick shows the selling throughout the day. A pause at the 21d EMA could not hold and the selling regained steam into close. There were 4 declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, March 19, 2021 Facts: +0.76%, Volume higher, Closing range: 83%, Body: 45% Good: Support at 13,000 to start morning rally Bad: Rally lost steam in afternoon, lower high, lower low Highs/Lows: Lower high, lower low Candle: Thin green body with lower wick slightly longer than upper wick Advance/Decline: One advancing stock for every declining stock Indexes: SPX (-0.06%), DJI (-0.71%), RUT (+0.88%), VIX (-2.92%) Sectors: Communications (XLC +0.87%) and Consumer Discretionary (XLY +0.60%) were top sectors. Financials (XLF -1.16%) and Real Estate (XLRE -1.33%) were bottom. Expectation: Sideways The markets ended another choppy week with one more rotation as investors continue to adjust against what's happening in the bond market. Yesterday's sale of bonds settled down and investors moved back into some growth stocks. But it was not a broad rally, with the Dow Jones Industrial and S&P 500 ending the day with losses. The Nasdaq gained +0.76% on higher volume, but made a new low compared to the previous day and didn’t manage a new high. The closing range of 83% with a 45% green body is from a bullish intraday that testing the 13,000 area and then rallied into the afternoon. The upper wick formed from a tapering in prices after the morning rally stalled. There were more advancing stocks than declining stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) This week was marked by a battle between the markets and the fed. Investors had to choose what to believe and how to respond. The week started with some nervousness on Monday morning with investors buying up defensive stocks in Utilities in the morning. By afternoon, that nervousness faded as treasury bond yields declined and confidence grew as the market rallied. Tuesday's disappointing retail sales for February didn't seem to have an impact in the morning. Yields were lower at market open, causing Technology and Communication Services stocks to rally. However, markets faded as yields rose throughout the day. By the end of the day, there were more decliners than advancers and the Nasdaq barely held onto a gain for the day. Wednesday was the pivotal day and could define how the market behave for the near term. The Federal Open Market Committee met to discuss the economic outlook and any changes to monetary policy. Jerome Powell spoke in early afternoon and was firm that interest rates would remain low through 2023 despite a better outlook on the economy for 2021. In addition, the Fed would continue to buy treasury bonds and mortgage-backed securities to keep borrowing costs down and investment in growth high. Powell's statement was just what the market wanted to here and stocks rallied into the close on Wednesday. Utilities sank to the bottom of the sector list while Consumer Discretionary and Industrials soared on the enthusiasm. The VIX volatility index dropped to its lowest level since February of 2020. The rally wouldn't last long though. Before the market opened on Thursday morning, treasury bonds sold off sharply and yields rose, bringing the yield curve to its steepest point since 2015. What was all the fuss about? Some of it could be uncertainty that remained in the bond market, maybe investors thinking Powell is underestimated or overestimated the economic rebound for 2021. Initial Jobless Claims were worse than expected, hinting toward more economic trouble New lockdowns in Europe not only hit Oil Prices and the Energy sector, but could make short and long term bonds less favorable. The underlying tone of the steep yield curve echoes the message from Jerome Powell. There is confidence in the shorter term economic recovery, keeping short term yields low. However, by the FOMC and Powell not seeing changes in monetary policy means they still are not confident about the longer term recovery. Investors are following Powell's caution about the longer term and therefore yields are rising faster on longer term bonds. Whatever the reasons, Thursday was marked with broad selling across every sector except Financials. The VIX soared 18% at its intraday high. Mega-caps, growth stocks, energy stocks, almost everything sold off for the day. The Nasdaq lost the 21d EMA and 50d MA lines again and rested just above the 13k area. Friday ended with gains for the Nasdaq, but was a triple-witching day where stock options, stock index futures , and stock index option contracts all expire on the same day. That makes it tough to discern what stocks were bought on high demand or in order to fulfill expiring contracts. Investors will have to wait until Monday to find out which way the market wants to move from here. The Nasdaq closed the week with a -0.79% decline on higher volume. The closing range of 30% shows the underlying weakness of Friday's short rally. It was good to have an upside reversal to close the week, but it wasn't enough to build confidence heading into next week. The Nasdaq did set a higher high and a higher low than the previous week. And the high was better than the high from two weeks ago. That's good news, but the mid-week rallies could not hold the highs for any of the indexes. The Russell 2000 (RUT) lost -2.77% for the week. The S&P 500 (SPX) ended down -0.77% and the Dow Jones Industrial average (DJI) declined -0.46%. The VIX volatility index closed the week with a +1.26 gain. The sectors were all over the place this week, all driven by nervousness about an overheating economy and how the fed might react. Monday started the week with the defensive sector Utilities ( XLU ) at the top. On Tuesday, Retail sales data for February showed the economy wasn't overheating and inflation may not be on the rise. That gave investors some confidence and despite bond yields rising, interest rate sensitive sectors such as Technology ( XLK ) and Communication Services ( XLC ) rose to the top. After the FOMC meeting on Wednesday, Jerome Powell acknowledge the increased outlook on the economy for 2021, but made a firm statement that interest rates would not be raised and bond purchasing programs would continue. You can clearly see the spike in Technology and Communications again after 2:00p on Wednesday. But then bond investors had their reaction on Thursday. As market open approached, bond investors sold heavily in the morning, sending yields on a surge again. Industrials ( XLI ) did well for most of the day but sold off before close. Only Financials ( XLF ) ended the day with a gain. Finally on Friday, bond yields climbed but at a smaller rate with the yield curve flattening a bit. That allowed several sectors to find some upside. Communication Services ended the week as the top sector. Energy ( XLE ) was the worst performing sector of the week as crude oil prices plummeted on less demand, losing over 7.5% and dragging down the Dow Jones Industrial average (DJI) with it. Keep in mind that treasury bond yields are still not extraordinarily high. The US 30y yield and US 10y yield are returning to 2019 and early 2020 levels. But the signal to read from the chart is the yield curve. You can see the US 2y yield has barely moved in relation to the longer term yields. That means investors are seeing less risk in the short term, but more risk in the longer term. The yield curve is at its steepest point since 2015. However, in 2015 it wasn't particularly steep. The concern though is that the trend is toward steepening, and that the only reason it hasn't accelerated further is because the fed is buying bonds to control the yield curve. If the bond buying stopped, it would cause even more volatility in both bonds and equities. The definition of "Taper Tantrum". High Yields Corporate Bonds (HYG) and Investment Grade (LQD) corporate bond prices both declined for the week. The spread between corporate bonds and short term treasury bonds remain about the same. The US Dollar (DXY) advanced +0.25% for the week and seems to be basing around the current support area. Silver (SILVER) and Gold (GOLD) both advanced for a second week. Crude Oil Futures (CRUDEOIL1!) declined sharply on fears of less demand. Timber (WOOD) declined, but still trading near all-time highs. Copper (COPPER1!) declined while Aluminum (ALI1!) advanced, but both still showing upward trends. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps All four of the largest mega-caps declined for the week. On the weekly chart, I track against the 10 week and 40 week moving averages. Only Alphabet (GOOGL) is trading above both lines. Amazon (AMZN) is below both lines and the 10 week line is about to pass under the 40 week line. Microsoft (MSFT) moved below the 10 week line, but still trades above the 40 week line. Apple (AAPL) has been trading below the 10 week line, but above the 40 week line for the past several weeks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Four Recovery Stocks I picked four recovery stocks to track against the indexes and other indicators in this weekly report. This week, Exxon Mobil (XOM) pulled back almost 9% along with other energy stocks. Delta Airlines (DAL) also had losses for the week on fears that transportation may not rebound as quickly as previously thought. Carnival Cruise Lines (CCL) and Marriott (MAR) had gains but did not end the week with a bullish follow through. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.696. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The CNN Fear & Greed index is near to the neutral territory. The NAAIM exposure index moved up to 78.55. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead Existing Home Sales data will be released on Monday right after market open. On Tuesday, New Home Sales data will be released. Also, API Weekly Crude Oil stock will be revealed. Several economic news will be released on Wednesday. Durable Goods Orders for February will give a heads-up on manufacturing activity. That will be measured against Manufacturing and Services purchasing data for March which can indicate some direction on increasing or decreasing activity in these sectors. Crude Oil Inventory data will also be released. Fed Chairman Jerome Powell is scheduled to testify before congress on Wednesday. His statements are always watched closely for possible sentiment changes. Given the situation expect him to make very measured statements on economic outlook and reaffirm that monetary policy will not change. Thursday will bring an update on 2020 Q4 GDP numbers. Initial Jobless Claims will also be watch closely for trends in the labor market. On Friday, the most watched data will likely be the producer price index data that will show how much cost is going into produced goods. It's typically a good early indicator on inflation, but there is enough pressure on consumer prices right now that increased costs by producers doesn't necessarily translate to consumer price increases. Tencent Music Entertainment (TME) will release earnings on Monday. Adobe (ADBE) will release earnings on Tuesday. Let's not fool ourselves that it actually matters, but it's still interesting that GameStop (GME) will also announce earnings on Tuesday. Tencent (TCEHY), General Mills (GIS), RH (RH), KB Home (KBH), GrowGeneration (GRWG), and Guess (GES) are all reporting earnings on Wednesday. For the daily/weekly update, there are no interesting earnings releases on Thursday. On Friday, Up Fintech (TIGER) will release their earnings update. Be sure to check your portfolio for upcoming earnings reports. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side Don't fight the fed! Jerome Powell could not have been clearer that interest rates will remain low and that bond buying programs will continue, even as the FOMC increased their outlook for the economy in 2021. Ultimately that will be good news for American individuals and companies that want to borrow money. There is rotation from high growth stocks that were performing well in 2020 to cyclical and recovery stocks that are expected to do well in 2021. But overall money continues to pour into US equity markets from both domestic and foreign investors. In order to buy US equities, foreign investors must first by the US Dollar which is now starting to strengthen compared to other currencies. That will attract investors back to US Dollar based instruments, including bonds as a safe haven, stabilizing yields. US consumers will soon have stimulus checks and will start to spend no only the checks, but a record amount of savings build up during the pandemic. That will be a boon for everything from retail to leisure and travel. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side The economic recovery is looking great, but it may be better than what Jerome Powell and the FOMC is predicting. As consumers start to spend and the demand for goods and services gets ahead of the capacity and materials, that will drive up prices. That would accelerate inflation to a level that requires a response from the Fed. Any change in monetary policy will certainly be met with a reaction by the market. That may be months away, but the market is always ahead of the reality. Treasury bond yield volatility is scaring investors. As long as yields can spike at any moment, investors will be fickle and rotations will continue to wreak havoc on equities. The volatility in both bonds and equities will have global investors looking elsewhere to find more stable and predictable returns. Growth stocks outpaced value stocks at a historical rate in 2020. Value stocks have been catching up this year, but there is still some catch up and maybe correction before this rotation is done. b -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch The Nasdaq is at a decision point right now with two key levels to watch for on the bullish and bearish side. On the positive side, the level we want to reach is 13,620.71, but there's a few levels to pass before that happens: The 21d EMA is at 13,309.62. We need to get above that line and stay above it. The 50d MA is at 13,422.90. That's the next line to get above, stay above and eventually get the 21d EMA back above the 50d MA to signal the positive trend. After the 50d MA, the next line is 13,620.71 which is this past week's high. But it is also past the area of resistance that the index was rejected on 1/26, 3/2, and 3/16. 14,000 will be the next area of resistance. The all-time high is at 14,175.12. That might be a stretch to get there this week, but keep it in our sites. On the downside, the index must stay above 12,985.05 which was a previous neck line on a head and shoulders: 13,000 has been an area of support on 1/29, 2/23, 3/3. 12,985.05 is just below that support area and a key level that would mark bearishness. The next support area is 12,500-12,550. 12,397.05 is the current bottom of the recent correction on the Nasdaq. Let's not make a new bottom. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up It's tough to tell at times whether the market is correcting or rotating. Certainly, it has been a difficult several weeks for the Nasdaq as big tech and growth stocks that heavily trade on the index have not done well. But there are many reasons to believe in underlying support in US equities, but the focus is shifting among sectors and growth vs value. The best thing to do at these times is study the stocks in your portfolio and watchlist. Because of the choppiness the last few weeks, you can learn a lot about what other investors, especially institutional investors, believe about your picks. Look for strength against the indexes and against their sector. Pay close attention to volume on up days and down days. Is there more volume during selling or buying? How are they performing on the weekly chart vs the daily chart? Are they holding above key moving average lines (21d EMA, 50d MA, 200d MA, etc)? Not only will that help you discover where your own investment focus should be, but it will help you identify whether the broader market is bearish or bullish, instead of worrying too much about the swings in the major indexes. Good luck, stay healthy and trade safe!
NASDAQ:IXIC
by drewby4321
4
Market Week In Review - 3/8/2021 - 3/12/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Monday, March 8, 2021 Facts: -2.41%, Volume lower, Closing range: 2%, Body: 73% Good: Held above 12,600 as market closed Bad: Could not hold short rally in morning, selling the rest of afternoon Highs/Lows: Higher high, higher low Candle: Short upper wick over a thick red body, no lower wick Advance/Decline: More than one declining stock for every advancing stock Indexes: SPX (-0.54%), DJI (+0.97%), RUT (+0.49%), VIX (+3.28%) Sectors: Utilities (XLU +1.41%) and Materials (XLB +1.34%) were the top sectors. Communications (XLC -1.34%) and Technology (XLK -2.42%) were bottom. Expectation: Lower The rotation continues. It's not often that a rotation is so clearly seen, with the Dow Jones ending the day up nearly 1% and the Nasdaq ending the day down 2.41%. Nine sectors outperformed the broader S&P 500 index, while the other two sectors lost enough to bring down the index for a loss by the end of the day. The Nasdaq closed the day with a -2.41% loss on lower volume. The closing range of 2% followed an afternoon of selling that formed the 73% red body underneath a small upper wick from the short morning rally. There were more declining stocks than advancing stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, March 9, 2021 Facts: +3.69%, Volume higher, Closing range: 71%, Body: 56% Good: Good gain on higher volume, higher high, higher low, above 13k Bad: Selling in last hour of day Highs/Lows: Higher high, higher low Candle: Slightly longer upper wick with a thick green body Advance/Decline: Two advancing stocks for every declining stock Indexes: SPX (+1.42%), DJI (+0.10%), RUT (+1.91%), VIX (-5.65%) Sectors: Consumer Discretionary (XLY +3.78%) and Technology (XLK +3.40%) were the top sectors. Financials (XLF -0.91%) and Energy (XLE -1.75%) were bottom. Expectation: Sideways or Higher The rotation reverses. Today saw a reversal of the past several days rotation as money flooded back into big tech, consumer discretionary, and growth stocks. Treasury bond yields seemed to stabilize a bit allowing investors to turn their eyes on the stimulus and the impact it will have on performance in the near term. The Nasdaq closed with +3.69% gain on higher volume. The closing range of 72% came after some selling in the final hour of trading, forming the upper wick. The green body covers 56% of the candle and represents a day that was dominated by the bulls. There were two advancing stocks for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, March 10, 2021 Facts: -0.04%, Volume lower, Closing range: 14%, Body: 69% Good: Higher high, higher low, support above 13,000 Bad: Rejection off 21d EMA in morning led to selling and close near low Highs/Lows: Higher high, higher low Candle: Thick red body with small upper and lower wicks, low closing range Advance/Decline: More advancing stocks than declining stocks Indexes: SPX (+0.60%), DJI (+1.46%), RUT (+1.81%), VIX (-6.12%) Sectors: Energy (XLE +2.53%) and Financials (XLF +2.04%) were back on top. Technology (XLK -0.40%) was bottom. Expectation: Sideways or Lower The rotation settles. There was still signs of rotation in the market today, with the sector list flipping once again. But the effect is much more subdued than the past week. The passing of the stimulus has investors eyes wide open while they sent the Dow Jones Industrial to all-time highs. The Nasdaq was not able to benefit from the enthusiasm as it declined -0.04%. A sideways move, but still a day marked by selling after a morning gap-up. The closing range of 14% is underneath a thick red body of 69% and slightly longer upper wick formed just after the market opened. There were more advancing stocks than declining stocks, however volume on declining stocks was higher. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, March 11, 2021 Facts: +2.52%, Volume lower, Closing range: 81%, Body: 67% Good: Another higher high and higher low, back above 21d EMA and 50d MA Bad: Not much, resistance at 13,400 Highs/Lows: Higher high, higher low Candle: Thick red body with small upper and lower wicks, low closing range Advance/Decline: Almost three advancing stocks for every declining stock Indexes: SPX (+1.04%), DJI (+0.58%), RUT (+2.31%), VIX (-2.88%) Sectors: Technology (XLK +2.14%) and Communications (XLC +1.89%) were top. Utilities (XLU -0.26%) and Financials (XLF -0.29%) were bottom. Expectation: Sideways or Higher The back and forth continues as the Nasdaq and technology stocks rise again. The sector list has flipped back and forth the last several days as investors rotate in and out of big tech and growth stocks. Today, the market rallied as jobs reports showed positive gains in the labor market and the stimulus is proceeding to Biden's signature. Technology was back on top while Financials moved to the bottom. The Nasdaq closed with a +2.52% gain on lower volume. The 67% green body was formed in the morning as the index quickly rose to intraday highs around 13,400 and stayed there the rest of the day. The short upper wick is above an 81% closing range. There were almost three advancing stocks for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, March 12, 2021 Facts: -0.59%, Volume lower, Closing range: 97%, Body: 58% Good: Bulls bought back the morning lows to bring index back above 21d EMA Bad: Lower high and lower low Highs/Lows: Lower high, lower low Candle: Green body above a lower wick with very small upper wick Advance/Decline: About even advancing and declining stocks Indexes: SPX (+0.10%), DJI (+0.90%), RUT (+0.61%), VIX (-5.57%) Sectors: Real Estate (XLRE +1.72%) and Utilities (XLU +1.35%) were top. Communications (XLC -0.28%) and Technology (XLK -0.72%) were bottom. Expectation: Sideways or Higher Are you dizzy yet? This rotation just won't end. Every day this week the Technology sector flipped from the bottom of the sector list to the top and then the next day to the bottom. Yesterday it was at the top. Today it's back at the bottom. As long term bond yields are reaching for pre-pandemic highs, investors are still trying to determine the impact on valuations of big tech and growth stocks. The Nasdaq closed the week with a green candle, but ended the day with a -0.59% decline. Volume was lower but the bulls bought up a morning dip to bring the index back above the 21d EMA in the afternoon. A closing range of 97% means a very small upper wick. The longer lower wick rests underneath a 58% green body. There were about the same number of advancing and declining stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) It was a wild week of rotation instigated by volatility in the treasury bond markets. Economists and investors weighed the impact of stimulus on inflation, currencies, bonds and equities. The outcomes could have opposite effects on different sectors. Technology and Communications, that have growth mega-caps, could be negatively impacted by higher yields, raising the costs of borrowing money to drive growth. Financials could benefit from the higher yields driving interest rates and additional revenue on both mortgages and commercial borrowing. The winners from the stimulus bill will be industrials and materials as the economy returns to pre-pandemic levels and these sectors benefit. The market made that clear as the Dow Jones Industrial gained 1% on Monday while the Nasdaq declined -2.41%. Utilities, Industrials and Materials were top sectors along with Financials. All cyclicals, but as the first three would remain steady throughout the week, Financials was up and down depending on bond performance. But it also seemed no one was quite ready to give up on big tech and growth stocks. Tuesday was "buy the dip" day, sending the Technology sector back to the top of the list. Growth companies like Tesla (TSLA) gained 20%, rebounding off recent lows. The four big mega-caps all closed the day with gains. Financials and Energy moved to the bottom of the sector list. The 3y note auction brought some optimism back to the bond market, bringing yields back down from recent gains. The 10y auction on Wednesday also brought some confidence back to the bonds market. Yields on treasury bonds pulled back a little. But even as yields came down, the yield curve steepened. A steep yield curve forecasts higher interest rates and could mean other monetary policy changes from the Fed. That's where the fear is focused. Technology moved back to the bottom of the sector list on Wednesday. A quick refresh on the yield curve. The yield of a treasury bond can be viewed as the level of risk investors see in the bond. Shorter term bonds are paid back quickly and therefore investors usually assign lower risk and therefore require lower yields. Longer term bonds are viewed with higher risk, there's more time between now and the maturity date of the bond for something happening that will impact the value, so yields are higher. Risk/reward. The yield curve is a plotting of the interest rates from short term to long term. When the yield curve is normal, there should be an upward sloping curve. From the shortest term bonds to the middle term, yields will accelerate. As you move past the middle, the longer the maturity date moves out the difference in yields level off. An inverted yield curve shows the opposite and means that there is much more risk in the short term than the long term, so yields are higher on short term bonds. What we are seeing this week is normal in that short term yields are lower than long term, but the curve is unusually steep. It's at its steepest slope since 2015/16. Investors see short term bonds as much safer than long term bonds, likely on the optimism of the short term economic recovery this year. Longer term, investors are more uncertain. What will happen to the dollar? When will the fed stop its easy money policy? So there is less demand for long term bonds, investors selling, bond prices drop, and yields go up. If the fed wants to get revenues from selling 10y, 20y, 30y bonds, what do they need to do? They need to entice bond investors by covering the risk with greater reward. They need to either stop injecting money into the economy which is devaluing the dollar (and making long term bonds risky), increase purchases of longer term bonds to control the yield curve, or they need to raise interest rates. Regardless of comments from the fed that they are not concerned with the increasing yields, it has investors spooked, sending them back and forth between fear and greed. Technology was back on top on Thursday. Long term yields were higher, but seemed under control. Friday Technology was back to the bottom, but after a morning dip, buyers brought the Nasdaq back up to close near an intraday high. Despite the yield curve steepening again with the 30y and 10y yields hitting their highest since early 2020, inflation numbers and consumer sentiment were better than expected. That was enough to give bullish investors optimism and end the week with the DJI and RUT at all time-highs and the SPX knocking on the door. Despite all the turmoil, the Nasdaq closed the week with a +3.09% gain on slightly lower volume. The closing range of 86% is far better than the previous weeks. The index had a higher low but a lower high, making this an inside week. I've redrawn the channel from the March bottom. If the index can stay in this channel, then it would seem the economic outlook has been priced into big tech and growth stocks, and the index can start to follow along with the gains we've seen in the Dow Jones Industrial and Russell 2000. The S&P 500 (SPX) advanced +2.64%. The Dow Jones Industrial average (DJI) gained 4.07%. The Russell 2000 (RUT) gained 7.32% for the week. The VIX volatility index closed the week with a -16.10% decline. It was a wild week for the sectors as investors rotated in and out of Technology and Communications stocks. All sectors ended the week with gains. Consumer Discretionary ( XLY ) was the big winner. Large stimulus checks will be delivered soon that are expected to be poured into the economy via consumer spending on both needs and wants. Technology ( XLK ) and Communications ( XLC ) spent Monday at the bottom of the sector list, Tuesday at the top, Wednesday at the bottom, Thursday at the top, and Friday at the bottom. In the end, the two sectors landed just behind the SPX in performance, but did have gains for the day. Financials ( XLF ) was also one to watch. It flipped back and forth as investors followed closely what was happening in the bond markets. The increase in yields could be a boon for Financials. The increased yields would have the opposite impact on big technology and communications companies and smaller growth companies. As yields went back and forth, so did the performance of these sectors. Energy ( XLE ) ended the week as the worst sector. Although it had a big gain on Wednesday, it wasn't enough to cover the losses on Monday and Tuesday. Utilities ( XLU ) and Real Estate ( XLRE ) did not have any big days, but were on a steady rise throughout the week. They ended the week in 2nd and 3rd place on the list. The two sectors are often used as defensive plays. Steep yield curve. You can see the spread between the US 10y and 2y treasury bond yields in the top chart, also marked with a green horizontal line so you can see just how long since the spread has been that wide. Also note that US 30y and 10y yields are back to pre-pandemic levels. Inflation and the possibility of a weakening US dollar means long term bonds are out of vogue. High Yields Corporate Bonds (HYG) and Investment Grade (LQD) corporate bond prices both declined for the week. The spread between corporate bonds and short term treasury bonds remain about the same. The US Dollar (DXY) pulled back from the recent gains, declining -0.32% for the week. Silver (SILVER) and Gold (GOLD) both advanced for the week. Crude Oil Futures (CRUDEOIL1!) declined just slightly from its highest point since 2018. Timber (WOOD) advanced and is trading at all-time highs. Copper (COPPER1!) and Aluminum (ALI1!) both declined but are still in upward trending channels. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps The four big mega-caps had mixed results for the week. Microsoft (MSFT) and Amazon (AMZN) closed the week with +1.79% and 2.97% gains. Amazon likely got a boost from the stimulus checks expected to increase consumer spending while people are still nervous to shop at brick-and-mortar stores. Apple (AAPL) lost -0.32% for the week. Alphabet (GOOGL) was down-2.24%. Microsoft and Alphabet are trading above 10w and 40w moving average lines. Apple is trading below the 10w MA line and Amazon is trading below both the 10w and 40w moving average liens. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Four Recovery Stocks I picked four recovery stocks to track against the indexes and other indicators in this report. This week all four had gains. Carnival Cruise Lines (CCL) gained over 9% this week. Delta Airlines (DAL) advanced +7.83%. Marriott International (MAR) gained +2.23%. Exxon Mobil gained +1.71%. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.606, showing investors getting a little more bullish. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The CNN Fear & Greed index moved toward the greed side. The surprise was seeing the NAAIM exposure index go down to 0.48. That's a fairly low level and indicates nervousness from institutional investors. If exposure to equities by money managers is below 50%, then what is driving prices higher? -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead Monday's TIC Net Long-Term Transactions data will give an idea of how much investor money is flowing in and our of US markets. More inflows means foreign investors are buying US equities and as a proxy, buying the US dollar to buy those equities. On the other side, US investors may be buying more foreign equities, using those markets currencies. Retail Sales data will be released Tuesday before market open. Industrial Production data will also be released, both indicating the pace at which economic activity is recovering. On Wednesday, we'll get news on Building Permits and Housing Starts before the market opens. After the opening bell, Crude Oil Inventories will be released. In the afternoon, FOMC economic projections and interest rate projections will be released. The weekly initial jobless claims data will be released on Thursday. Manufacturing data will also be released that will provide insight into how manufacturing is recovering to meet demand. Monday's earning reports will include a couple interesting small-caps: Vuzix (VUZI) and Desktop Metal (DM). Volkswagen (VWAGY) will report on Tuesday. In addition, FUTU Holdings (FUTU), Coupa Software (COUP), Jabil Circuit (JBL), Eastman Kodak (KODK) will report. Wednesday will include Pinduoduo (PDD), BMW ADR (BMWYY), Cintas (CTAS), Five Below (FIVE). On Thursday, Nike (NIKE), Accenture (ACN), FedEx (FDX), Dollar General (DG), Weibo Corp (WB), Utz Brands (UTZ) will report. Be sure to check your portfolio for upcoming earnings reports. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side Did you see the Dow Jones Industrial average index? Six consecutive days of gains to set a new all-time high to close the week! The stimulus, passed through congress and signed by President Biden, is a huge amount of support to the economic recovery. Industrial stocks and small-caps are going to lead the charge and eventually the economics will be priced into big tech and growth stocks and they will join the rally. Never fight the fed. The Fed is continuing easy monetary policy that is fueling massive liquidity in the market. Many weekly charts look good. It's always important to take a step back and look beyond the daily turmoil. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side Treasury bonds continue to have unusual volatility. Bond investors don't like volatility. Note only does it make it harder to use in hedging strategies, but popular trading strategies using multiple maturities of bonds become more difficult. The steepening curve Is an indicator of future interest rate increases, that will continue to worry equity investors away from the tech mega-caps and growth stocks. That will have an overweight influence on indexes and impact investor sentiment. The NAAIM exposure index doesn't represent all institutional investors, but it is an indicator of professional portfolio managers sentiment toward the market. At less than 50% exposure, one must question what is driving prices higher. It could be retail traders and passive indexation that is driving the current rally. That may be a recipe for disaster. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch Although the broader market is clearly not in correction, the Nasdaq is still lagging behind the other indexes. To build confidence in big tech and growth stocks traded on the Nasdaq, some gains on higher volume is required. If key levels on the downside breakdown, we can expect the big players in the Nasdaq to also pull down the other indexes. On the positive side: The Nasdaq closed above the 21d EMA on Friday, but below the 50d MA. That's the first key level to pass for next week. That level is at 13,367.48. Last week's high is at 13,601.33. This week could not make a new high, so having the index make that milestone next week will be important. 14,000 will be the next area of resistance. The all-time high is at 14,175.12. That might be a stretch to get there this week, but keep it in our sites. On the downside, there are several key levels to raise caution flags: Stay above the 21d EMA which is a currently at 13,290.28. The 10d MA is at 13,105.93. Going below this line will be a red flag. If the index has a pull back, the 13,000 is a support area that must hold. 12,599.23 is the low from this week. Stay above that level to make a higher low. The next support area is 12,500-12,550. 12,397.05 is the current bottom of the correction on the Nasdaq. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up This was a week that reminded us to take a step back and look at the weekly charts. The Nasdaq chopped back and forth, that seems like losses. But on the weekly chart, the index had a good gain with a great closing range. At the same time, the choppiness may continue into the coming week and cause investors to get overly nervous. Although the other major indexes are performing well, eventually the big players in the Nasdaq could pull down those indexes as well. It's important to avoid predictions. Instead, set some expectations for what you might think will happen. Watch those key levels in the Nasdaq, and follow the price action of the index and your favorite stocks. Keep stop losses up to date to protect from a sudden turn to the downside. But lets hope for upside. The report is a bit brief this week since I'm heading out to vacation. I hope you have a great week ahead! I'll be trading from the beach. :) Good luck, stay healthy and trade safe!
NASDAQ:IXIC
by drewby4321
12
Market Week In Review - 3/1/2021 - 3/5/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Monday, March 1, 2021 Facts: +3.01%, Volume lower, Closing range: 97%, Body: 78% Good: Strong buying throughout day, close above 21d EMA Bad: Nothing Highs/Lows: Higher high, higher low Candle: Thick green body with short upper/lower wicks, slightly longer lower wick Advance/Decline: More than three advancing stocks for every declining stock Indexes: SPX (+2.38%), DJI (+1.95%), RUT (+3.37%), VIX (-16.46%) Sectors: Technology (XLK +3.22%) and Financials (XLF +3.13%) were top. Consumer Staples (XLP +1.01%) and Real Estate (XLRE +0.11%) were bottom. Expectation: Higher Monday kicked off the week with an upside reversal from last week's downtrend. A small gap up was closed early in the session that was dominated by buying the rest of the day. The gains were large and broad across the market as manufacturing data released in the morning was better than expected. The Nasdaq closed the day with a +3.01% gain. Volume was lower than Friday. The closing range of 97% represented the buying that continued into close after gains throughout the day created a 78% green body. More than three stocks gained for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, March 2, 2021 Facts: -1.69%, Volume lower, Closing range: 3%, Body: 97% Good: Stayed above 50d MA Bad: All red body, no visible upper/lower wicks, back below 21d EMA Highs/Lows: Higher high, lower low Candle: Marubozu black candle with no wicks, all red body, outside day Advance/Decline: More than three declining stocks for every advancing stock Indexes: SPX (-0.81%), DJI (-0.46%), RUT (-1.93%), VIX (+3.21%) Sectors: Materials (XLB +0.56%) only gaining sector. Consumer Discretionary (XLY -1.15%) and Technology (XLK -1.59%) were bottom. Expectation: Sideways or Lower The market gave up half of yesterday's gains in a continuation of two weeks of choppiness as investors await a stimulus bill that will have both positive and negative impacts on equities. Today's expectation breaker after yesterday's session requires a deeper look to understand. Investment has been rotating in and out of Consumer Discretionary and Technology for the past two weeks. The Nasdaq closed the day with a -1.69% decline on lower volume. The 97% red body with no visible upper and lower wick forms a Marubozu (shaven head) candlestick. The 3% of lower wick was formed in just the last few minutes of trading as most of the day was dominated by selling. There were three declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, March 3, 2021 Facts: -2.7%, Volume higher, Closing range: 1%, Body: 90% Good: 13,000 just barely holding on Bad: Higher volume selling day shows institutional distribution Highs/Lows: Lower high, lower low Candle: Tiny upper wick created at open, thick red body with no lower wick Advance/Decline: More than two declining stocks for every advancing stock Indexes: SPX (-1.31%), DJI (-0.39%), RUT (-1.06%), VIX (+10.66%) Sectors: Energy (XLE +1.47%) and Financials (XLF +0.78%) were the top sectors. Consumer Discretionary (XLY -2.35%) and Technology (XLK -2.52%) were bottom. Expectation: Sideways or Lower The market continued its retreat on Wednesday with another session of selling that was shared broadly across the indexes. Only a few cyclical sectors were able to hang onto gains for the day as investors moved from high priced big tech and consumer discretionary stocks to recovery stocks expected to benefit from the economic recovery. The Nasdaq closed the day with a -2.70% loss on higher volume, marking a clear distribution day for the index. For a second day in a row, the index sold off for most of the day, producing a thick red body with no visible lower wick. The closing range was 1% and the red body covers 90% of the candle. Over two stocks declined for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, March 4, 2021 Facts: -2.11%, Volume higher, Closing range: 33%, Body: 45% Good: Support at 12,550 area Bad: Rejected at 13,000, new low for year Highs/Lows: Lower high, lower low Candle: Red body in center of candle with upper and lower wicks from choppy session Advance/Decline: Over seven declining stocks for every advancing stock Indexes: SPX (-1.34%), DJI (-1.11%), RUT (-2.76%), VIX (+7.12%) Sectors: Energy (XLE +2.39%) was the only sector with gains. Consumer Discretionary (XLY -2.12%) and Technology (XLK -2.21%) were bottom. Expectation: Lower The sky is not falling. But the market is! It can be confusing to see the news of reopening of economies around the US and world, positive signs of economic recovery, and yet to have the market be correcting at the same time. Thursday continued the market slide, caused by investor's fears that the economy will recover too fast and inflation will take off beyond the desired 2% that the fed targets, impacting negatively the valuations of mega-caps and growth stocks. The Nasdaq closed down another -2.11% on much more volume than the previous two sessions. The closing range was a little better at 33%, but still not great. The 45% red body sits in the middle of the candle with an upper wick created by a morning rally to 13,000 and a lower wick created by the afternoon dip to 12,550. The support at 12,550 was expected, but may be temporary. There were over seven declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, March 5, 2021 Facts: +1.55%, Volume lower, Closing range: 96%, Body: 11% Good: Morning selling turned into afternoon buying, high closing range Bad: Shrinking volume into afternoon, lower high, lower low Highs/Lows: Lower high, lower low Candle: The long lower wick shows the morning selling was bought back for a rally into afternoon Advance/Decline: About three advancing stocks for every two declining stocks Indexes: SPX (+1.95%), DJI (+1.85%), RUT (+2.11%), VIX (-13.69%) Sectors: Energy (XLE +3.74%) and Industrials (XLI +2.37%) were the top sectors. Real Estate (XLRE +1.15%) and Consumer Discretionary (XLY +0.64%) were bottom. Expectation: Sideways or Higher The week ended with some positive market gains to take into the weekend. It's a start, but there are still several tests for the indexes to pass and prove investors are here to stay and rally next week. The Nasdaq closed the day with a +1.55% on slightly lower volume than the previous day, but higher than average. The closing range was a high 96% with a thin body of 11% that rests above a very long lower wick. There were three advancing stocks for every two declining stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) There is a lot to look at in reviewing this past week's market. An outsized rotation among sectors presented itself as a correction in the Nasdaq. The rotation pulled the index down 10% from all-time highs, the level typically viewed as correction in a market. If you kept your eyes only on the Nasdaq, you might have missed that eight out of the eleven sectors defined by the SPDR ETFs ended the week with positive gains. Several sectors never dipped into the negative. The question on my mind and many investors' minds is where does it go from here. Of course, the market will always do what the market wants to do. But we can pick apart some of the signals we have in front of us and build some expectations for the coming week. From those expectations, I build a game plan to make sure I'm protected from further loss but also don't miss a potential huge buying opportunity. Monday started the week with a huge positive gain coming off the tough previous week. Stimulus progress over the weekend and some easing of concerns over inflation brought the buyers back into tech stocks. Things looked good and I set an expectation for higher on Tuesday. That expectation was busted over the next three days. Tuesday's candle set off alarms with no upper and lower wick; just a tick red body. A short-lived rally midday couldn't fend off the bears as the index moved back toward the 50d moving average line. Wednesday continued to sell, but still closed above the 13,000 support area that held several times since the beginning of the year. That area also marked a neck line in a head and shoulders pattern on the chart. Thursday broke the neck line and sent the index back to 12,500 area and erasing the year to date gains. That brings us to Friday. The day was confusing to me. Much of the media claimed victory for the markets as a result of better than expected employment data. That data came at 8:30 in the morning, but the market opened with high volume distribution that didn't stop until 11:30. For the Nasdaq, the selling stopped right at 12,400 and the rest of the day was accumulation, but at much lower volume. It was very similar to the intraday pattern on 2/23 which was followed by a low volume accumulation day on 2/24. 2/25 brought the worst distribution day since September. The Nasdaq closed the week down -2.06% on higher volume. It's the third week in a row of distribution for the tech heavy index. The closing range for the week was 43%. That's not too bad for closing range and reflects the bounce on Friday that brought the other major indexes back to positive closes for the week. The glaring characteristic on the weekly chart is the breakdown of the channel drawn from the March bottom. However, if you rewind the chart to the week of October 26th, the lower line of the channel drawn at that point was also violated (causing us to redraw the current channel). The following week was a 9% gain. The S&P 500 (SPX) advanced +0.81%. The Dow Jones Industrial average (DJI) gained 1.82%. The Russell 2000 (RUT) lost -0.40% for the week. The VIX volatility index closed the week with a -11.77% decline. If you kept your eyes only on big tech and growth stocks, you might have missed that many sectors had fairly good advances this week. The sector chart supports the thesis that there is an outsized rotation in progress that is presenting as a correction, but that there is still a level of support in the broader equities market. The top two sectors, Energy ( XLE ) and Financials ( XLF ), never dipped into negative territory even with Thursday's broad sell-off. The other cyclical Industrials ( XLI ) and Materials ( XLB ) also performed well for the week. Materials was leading for the week at the end of Tuesday, but backed off a bit later in the week. There was caution visible in the sectors as Utilities ( XLU ) and Consumer Staples ( XLP ) advanced. These are safe bet sectors during corrections. Investors moved from sectors that are more exposed to pressures from inflation and higher yields. Consumer Discretionary ( XLY ) and Technology ( XLK ) were the hardest hit among the sectors. Real Estate ( XLRE ) is also at the bottom of the list. At center stage is the bond market sell-off that is driving higher yields. Interest rates that are based on the yields will make borrowing costs higher. Add to that fears of higher inflation would bring interest rate adjustments earlier than initially expected. The higher interest rates benefit big banks that drive the Financials sector higher. But it depresses the future value that was priced into high growth sectors like Technology. US 30y and 10y Treasury Bond yields continued to rise and widen the gap with shorter term treasury bonds. In addition the shorter term bonds, including the 2y, are experiencing a higher than usual level of volatility. That volatility makes them less useful as a hedge for investors, causing further selling and higher yields. Yields go up when bond prices go down. High Yields Corporate Bonds (HYG) actually increased a bit after last week's dip. Investment Grade (LQD) corporate bond prices continued to decline. The US Dollar (DXY) advanced +1.21% for the week. The strengthening dollar comes at the expense of currencies that were doing well earlier in the pandemic cycle including the Australian Dollar and Swiss Franc. Those countries were seen as recovering faster than the United States. As the US economy picks up momentum, the US dollar will continue to strengthen. Silver (SILVER) and Gold (GOLD) both declined for another week. Crude Oil Futures (CRUDEOIL1!) had another week of gains as OPEC decided to not increase production. Timber (WOOD) advanced for the week. Copper (COPPER1!) declined while Aluminum (ALI1!) gained for the week. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps The four big mega-caps all had very different performance this week. Alphabet (GOOGL) did very well, gaining +3.72% for the week. Apple (AAPL) had a small gain, but still trades well below its 10w moving average. Microsoft (MSFT) had a -0.34% loss, but was able to close the week above the 10w moving average line. Amazon (AMZN) continued to move lower with a -2.99% and a close below the 40w moving average. The recovery stocks I featured last week, with the exception of Exxon Mobil, had losses for the week. However, they are all trading above key moving average lines and still in upward trends. Exxon Mobil has almost doubled in price since November. That milestone could happen this week. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Looking Deeper at the Rebound I want to take a deeper look at Friday's rebound after the morning dip. The timing didn't make much sense as I couldn't find any discernable catalyst to reverse the morning selling. The reverse happened around 11:30, two hours after the positive employment data hit the market. The reversal was also at a very odd round 12,400 for the Nasdaq. The below chart is the intraday 15m chart and the thing that sticks out is the contrast of volume in the morning selling vs the volume as investors came in to buy the dip. This would indicate that larger institutions were distributing in the morning, but a smaller number of investors were accumulating in the afternoon. In fact, the Volume Weighted Average Price for the day did not regain positive territory. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Growth vs Value I've shared growth vs value charts in the past that show the amazing parabolic difference between growth stocks and value stocks, especially in 2020 after the pandemic. February saw a dramatic dip in the chart as investors are moving from growth to value. That move started even before the scare around inflation and higher bond yields. Even if the volatility in bonds gets under control, there is still going to be plenty of rotation in the system until value stocks have a chance to catch up a bit with growth stocks. That rotation is likely to continue putting pressure on the Nasdaq that carries a high percentage of high tech and growth stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.816, with investors still showing balance of bullish and bearish sentiment. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction. It hit a low of 0.503 two weeks ago leading into this correction. The CNN Fear & Greed index moved is neutral. Money managers are at a 65 leveraged level as measured by the NAAIM Exposure Index. That's down from being over 100 a few weeks ago. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead The big news for Monday has already happened. The stimulus bill passed in the Senate along party lines and now moves to the House where it's expected to pass. The vote is scheduled for Tuesday. Otherwise, there is not much other economic news planned for Monday. The EIA Short-Term energy outlook will be released before market opens on Tuesday. After market close, the API Weekly Crude Oil stock numbers will be released. The house will vote on the stimulus bill on Tuesday. Another look at inflation will come on Wednesday with the release of consumer price index data in the morning. Crude Oil Inventories data will come after the market opens. Maybe one of the most significant economic events for the week will be the 10y Note Auction at 1pm. Thursday will bring an update to Initial Jobless Claims and the JOLTs Job Openings report. Both are expected to improve over previous numbers. Friday's producer price index data will complement the consumer price data earlier in the week. In addition, the inflation expectation and consumer sentiment numbers released after the market opens will be watched closely. Earnings reports will again be dominated by smaller cap companies. Earnings reports on Monday will include Livongo (LVGO), Niu Tech (NIU), Gohealth (GOCO). On Tuesday, MongoDb (MDB) and Open Lending (LPRO) will report. Oracle (ORCL) will report on Wednesday. Joining Oracle, will be Campbell Soup (CPB), Cloudera (CLDR) and Sumo Logic (SUMO). JD.com (JD) is the big mega-cap reporting on Thursday before market opens. DocuSign (DOCU) and Celsius (CELH) will also report Thursday. Shard (SHCAY) will report earnings on Friday before market open. Be sure to check for scheduled earnings reports for stocks in your own portfolio. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side Should we start, or end with the $1.9 trillion stimulus bill. Or both. It's a near certainty that the bill will pass through the house this week with the vote scheduled for Tuesday. The bill will include stimulus checks to be paid out based on household size and income. Additional money will be put toward vaccinations and testing. There is aid for state and local governments facing higher costs and lower tax revenue. Critical infrastructure projects, including broadband internet, were added to the bill this week. There is a plethora of other protections for families struggling in the pandemic with unemployment, rent and health insurance. Airlines, Airports and Small Businesses will get extra support. All of that could be a catalyst to more spending by consumers. In addition to the stimulus checks going toward new purchases, there is a record amount of consumer savings accumulated during the pandemic. Debt is at all-time lows. As the lockdowns are lifted, consumers will want to get out and spend money, especially on long-overdue vacations. Despite the distribution on the Nasdaq, the S&P 500 and the Dow Jones Industrial average had good weeks. The number of sectors that ended the week with gains supports the thesis that an oversized rotation from growth stocks to value stocks has presented itself as a correction, but underneath the charts is still broad support for the equities markets among investors. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side The shock in the bond markets and impact on equities is far from over. As the dollar gains strength and consumer spending picks up after the stimulus, there will certainly be more pressure on bond prices, sending yields even higher. That will not only impact the cost of servicing debt in high growth companies, but will increase adjustable mortgage payments based on the bond yields. With the increased consumer spending expected after the stimulus, inflation will be closely watched by investors. If the economy overheats, the fed will be forced to rethink monetary policy. When that happens we could find ourselves in another 'taper tantrum'. The term was given to the surprise on May 22, 2013 when investors found the fed would reduce bond purchasing. Yields rose as bond prices dipped and small pull back occurred in equity markets over the next few weeks. Only this time around, the impact is likely to be much bigger to match the unprecedented amount of quantitative easing being used to prop the economy. The rebound in prices on Friday was a welcome change. However, the volume profile throughout the day gives the appearance that big institutions were distributing. The accumulation in the afternoon came with much smaller volume as possibly investors were buying the dip. Those kind of weak gains don't last long. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch The index has several tests to pass this week to build confidence in a rally attempt. First on the positive side: First, the index needs to close back above the 13,000 support/resistance area. That area has been the pivot point for several rallies and dips since early December. That would also bring the index back above the neck line of the head and shoulders pattern. The next goal will be to close back above the 50d moving average, currently at 13,340.74. Sustaining prices above that line will bring the 10d MA back up above the line also, signaling an uptrend. The 21d EMA is approaching a cross under the 50d MA. The index needs to get above 13,390.23 to put the 21d EMA back in an uptrend. 13,601.33 is the high of this past week. Make a higher high while also providing a higher low to end the downtrend on the weekly chart. 14,000 will be the next area of resistance. The index spent only 5 days above this mark. The all-time high is at 13,175.12. That might be a stretch to get there this week, but keep it in our sites. On the downside, there are several key levels to raise caution flags: At 12,757.61, the Nasdaq is 10% below the all-time high, a significant level for investors. 12,500-12,550 is a support area that held on Thursday before the index broke below it on Friday. 12,397.05 is the low of the past week where the index started its upside reversal on Friday. Several possible areas of support at 12,550, 12,250, and 12,000. The 200d MA is about 10% below the index at 11,622.33. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up The Nasdaq moved into "official" correction this week as it dipped more than 10% off all-time highs. But there is more than what appears at the surface in the index chart. The rotation from growth to value and mega-cap to small-cap really started in early August and is now accelerating as the economy begins to show more signs of recovery. If you've been investing in growth stocks, it's probably been a tough few weeks. Many of those companies will show great performance, but their stock prices may still come down as investors weigh the net present value of those investments vs value stocks that are due to grow in 2021. Now is a great time to take a look at your watch lists. Trim the stocks that are performing worse than the rest of the market. Add stocks that are doing well relative to the dip in the market. The correction status remains and it's not a great time to make big bets until the market confirms a rally. But don't check out. Keep an eye on the daily moves and look for a few days of gains on higher volume and regaining a key moving average line like the 21d EMA. Those will be solid signs that investors are accumulating again and risk is lower. Good luck, stay healthy and trade safe!
NASDAQ:IXIC
by drewby4321
6
Market Week In Review - 2/22/2021 - 2/26/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Monday, February 22, 2021 Facts: -2.46%, Volume lower, Closing range: 1%, Body: 80% Good: Nothing Bad: Gap down, thick red body, rejected trying to regain the 21d EMA Highs/Lows: Lower high, lower low Candle: Mostly red body under a short upper wick, nearly zero lower wick Advance/Decline: 0.46, 2 declining stocks for every advancing stock Indexes: SPX (-0.77%), DJI (+0.09%), RUT (-0.69%), VIX (+6.35%) Sectors: Energy (XLE +3.46%) Financials (XLF +0.39%) were top. Technology (XLK -2.21%), Consumer Discretionary (XLY -2.11%) Expectation: Lower It was a tough day for the Nasdaq, big tech, and growth stocks. On days like this, it is important to take a step back and view things from both sides. Avoid trying to make predictions. In this daily update let's look at what's going on more broadly, set an expectation for the index tomorrow and look for a follow-through or an expectation breaker. The Nasdaq closed the day with a -2.46% decline. The volume was lower, but the move was decisive with a thick red 80% body and a dismal 1% closing range. The candle's short upper wick and nearly invisible lower wick represent a day where the bears ruled on the Nasdaq. Over two stocks declined for every advancing stocks. -=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 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. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, February 24, 2021 Facts: +0.99%, Volume lower, Closing range: 97%, Body: 62% Good: Another quick test at the 50d MA before climbing the rest of the day Bad: Not much Highs/Lows: Higher high, higher low Candle: Thick green body at top of the candle, longer lower wick Advance/Decline: 1.99, 2 advancing stocks for every declinging stock Indexes: SPX (+1.14%), DJI (+1.35%), RUT (+2.38%), VIX (-7.66%) Sectors: Energy (XLE +3.54%) and Financials (XLF +1.94%) were top. Consumer Staples (XLP -0.06%) and Utilities (XLU -1.17%) Expectation: Higher Thank you Jerome Powell. Fears of inflation gave way to more bullish sentiment as investors anticipate a new round of stimulus coming soon. The tech sector stopped it's multiple day decent and all of the major indexes turned in gains for the day. The Nasdaq ended the day with a +0.99% gain. The confirmation of yesterday's bullish reversal candle resulted in a higher high and a higher low after the index successfully tested the 50d MA in the morning. The 97% closing range and 62% green body sit above a longer lower wick that result from a brief morning dip. Two stocks advanced for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, February 25, 2021 Facts: -3.52%, Volume higher, Closing range: 10%, Body: 73% Good: Stayed above 13,000 Bad: Thick red body, low closing range, selling all day Highs/Lows: Lower high, Lower low Candle: Thick red body with an upper wick from a brief morning upward move Advance/Decline: Over eight declining stocks for every advancing stocks Indexes: SPX (-2.45%), DJI (-1.75%), RUT (-3.69%), VIX (+35.88%) Sectors: Utilities (XLU -0.90%) and Healthcare (XLB -1.00%)) were top. Expectation: Lower Caution turns to fear. There is not much positive to look at in today's indexes or the market indicators I use for the daily update. Nonetheless, it's best to look at both sides of action and set some expectations and a plan for tomorrow. The market opened with mixed economic news. Initial Jobless Claims and Durable Goods Orders were better than expected, but Q4 GDP and Pending Home Sales for January were disappointing. After a quick rise in the first minutes, the market started a sell-off that lasted the rest of the day. A brief rally as the afternoon started quickly stalled and reversed. The Nasdaq closed the day with a -3.52% loss. With higher volume and the breadth of the selling, it was clearly a distribution day. The 10% closing range left the index near it's late-in-the-day low with a 73% red body covering the candle. The only positive is that the index held support above the 13,000 area. Every stock declined except GME and AMC. Not really, but feels like that. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, February 26, 2021 Facts: +0.56%, Volume lower, Closing range: 49%, Body: 12% Good: Successful test of 13,000 again Bad: Lower high, lower low, indecisive spinning top candle, close below 50d MA Highs/Lows: Lower high, Lower low Candle: Thin red body in the middle of candle, long upper and lower wicks Advance/Decline: More than two declining stocks for every advancing stock Indexes: SPX (-0.48%), DJI (-1.50%), RUT (+0.04%), VIX (-3.25%) Sectors: Technology (XLK +0.53%) and Consumer Discretionary (XLY +0.42%) were top. Energy (XLE -2.37%) and Financials (XLF -1.91%) were bottom. Expectation: Sideways or Lower A week dominated by selling ended with a day of indecision. Investor fears of inflation were lifted a bit by economic data that showed inflation might not be as accelerated as thought. Consumer sentiment numbers rose. Personal spending was lower than expected. That resulted in rising treasury bond yields to back off a bit and the US Dollar to strengthen. The Nasdaq closed the day with a +0.56% gain on lower volume. The thin 12% body is in the middle of a candle with longer upper and lower wicks. The closing range very near to the open and in the center of the candle at 49% shows as a spinning top candle. The candle is a sign of indecision as both the bulls and the bears had moments throughout the trading session without a winner. There were more than two declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) It started on Monday with a gap down to open the week, a brief climb in the morning, and then a sell-off that would set the tone for the rest of the week. For the broader market, it looked more like a rotation that just hit the tech-heavy Nasdaq and mega-caps while the rest of the market was OK. The small-cap Russell 2000 barely dipped for the day. Tuesday brought the hammer. Another gap down and a huge sell-off in the morning that took the Nasdaq down 4% before finding support at the 13,000 level and climbing back above the 50d moving average for the close. It seemed the market may have found a local bottom for this pullback. Although Tuesday was another day of losses for big tech, there were other positives. The Dow Jones Industrial average hit a new all-time high. Eight out of eleven SPDR sectors ended the day with gains. Despite those positives, three stocks declined for every advancing stock on the Nasdaq. Because of the hammer candlestick on Tuesday, the expectation was for a move higher on Wednesday to confirm the upside reversal. That expectation was fulfilled with a positive gain. Comments from Fed Chairman Jerome Powell seemed to calm fears of inflation and rising bond yields. Energy and Financials sectors moved back to the top of the sector list. Two stocks advanced for every declining stock. The VIX volatility index returned to normal levels. Corporate bond prices rose. Commodities advanced. Everything looked bullish. So what happened? Was the repeated increase in volatility to stocks like GME and AMC enough to spook the market? Could it be the bullish rise in the index was driven by overly bullish investors causing a dip of the put/call level to 0.5? The short rally day did not have the volume to give it strength and futures faded into Thursday's open. Perhaps the fed's reassurances were not enough, yields continued to rise and scare investors from the potential impact of higher interest rates. Thursday turned out to be a crushing session where every sector declined, every cap segment lost and it seemed like every stock except GME and AMC were sold off. There were over eight declining stocks for every advancing stock. Treasury bond yields, especially short term, spiked, causing more selling among equities. Corporate bonds sold off sharply as investors considered higher possibility of defaults. The mega-caps busted. Growth stocks reversed. Dogs and cats started living together. It was clearly a distribution day. There was one positive to Thursday. 13,000. That area was tested three times this week and held. Friday brought another test of the 13,000 but then a turnaround for the Nasdaq lifted the index into the afternoon. Although treasury bond yields came back down a bit, the US dollar strengthened and commodity prices dipped. Gains were isolated to Technology, Communications, and Consumer Discretionary. After hitting the intraday highs twice, investors sold in the final few minutes of the day to have the index return close to its open for the session. That created an indecisive spinning top candle for Friday and left us wondering over the weekend what will come next. The Nasdaq closed the week down -4.92%. Volume was lower than the previous week in our indicator, but other data sources show volume as higher for the week. The closing range of 25% marks a second week in a row where the closing range is below 40%. The Nasdaq remained within a parallel channel drawn from the March 2020 bottom. The last time the index tested the bottom channel line was the last week of October. The following week, the index recovered with a 9% gain. So we'll mark that as a level to watch later in this review. The S&P 500 (SPX) declined -2.45% for the week. The Dow Jones Industrial average (DJI) declined -1.78%. The Russell 2000 (RUT) lost -2.90%. The VIX volatility index closed the week with a +26.76% gain, but still well below highs of January and October. It's a good week to take a close look at the sectors and see how the market moved around during pullbacks in the major indexes. Energy ( XLE ) and Financials ( XLF ) were joined at the hip, finding themselves at the top of the sector list on Monday and Wednesday and at the bottom of the list on Friday. However the days spent at the top were enough to allow them to end the week in 1st and 2nd place. However, Energy was the only sector that could keep gains to end the week in the positive. Consumer Discretionary ( XLY ) and Technology ( XLK ) took a beating throughout the week as investors moved away from these sectors fearing the impact of inflation and higher interest rates. Utilities ( XLU ) is usually in play when investors are nervous. It showed up at the top of the list on Tuesday and Thursday, but ended the week at the bottom of the list. The cyclical stocks Industrials ( XLI ) and Materials ( XLB ) outperformed the SPX for a second week. Along with Energy and Financials, these cyclical sectors were top performers for the whole month of February. US 30y and 10y Treasury Bond yields continued to rise and widen the gap with shorter term treasury bonds. The rising bond yields are a big part of what is spooking investors who are concerned about the impact on corporate costs to service debt. As yields continue to rise, investors will price it into the market indiscriminately by avoiding specific sectors. High Yields Corporate Bonds (HYG) and Investment Grade (LQD) corporate bonds both declined for another week. The yield spread widened between high yield corporate bonds and short term treasury bonds. The US Dollar (DXY) advanced +0.57% for the week. Most of that gain came on Friday after pricing data showed inflation may not be as bad as expected. Also consumer sentiment data was stronger than expected. Investors sold riskier currencies and bought the US Dollar as a safer investment. Currencies such as the Australian Dollar and the Swiss Franc, that were outperforming the dollar in 2020, sold off sharply at the end of the week. That's an interesting change to keep an eye on for the coming weeks. Silver (SILVER) and Gold (GOLD) both declined for the week. Crude Oil Futures (CRUDEOIL1!) continued the rise and is now at its highest price since November 2018. Timber (WOOD) declined for the week. Copper (COPPER1!) and Aluminum (ALI1!) both gained for the week, despite having a few days of showing weakness. Some of the impact on commodity prices is due to the sudden strengthening of the US dollar. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps All four big mega-caps declined for the week. Apple (AAPL) and Amazon (AMZN) had the biggest declines with losses of -6.63% and -4.83%, respectively. Microsoft (MSFT) and Alphabet (GOOGL) did a little better with declines of -3.56% and -3.20%. Referring to the chart above you can see that Microsoft and Alphabet are both still above their 10w moving average and outperforming the Nasdaq (relative candle indicator at bottom of each chart). Apple and Amazon are trading below their 10w moving average and Amazon is just above the 40w moving average. Both are underperforming the broader index. While the big four mega-caps and growth stocks are struggling the past few weeks, what segments are doing well? Many of the stocks that were down in 2020 due to the pandemic are performing well relative to the market now. That confirms the despite the fears about higher yields driving interest rates higher, investors are still confident that the economy is recovering and that recovery will bring relief to industries hit hard during the pandemic. That doesn't mean to rush out and buy these recovery stocks. We still need the overall market to perform well. If we are entering a more severe correction, there are always industries and stocks that move down last. In a correction, everything eventually gets hit. However, if we find more support at 13k and the market can stabilize then finding these opportunities could be profitable. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.810, showing a move to more caution among investors. The indicator hit near 0.5 earlier in the week as investors became overly bullish just before Thursday's sell-off. Even as the market sold off on Thursday, investors poured money into the leveraged TQQQ ETF. It was the top ETF inflow for the day. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction. The CNN Fear & Greed index moved into the Fear side for the first time since January. Money managers are at a 85 leveraged level as measured by the NAAIM Exposure Index. That's down from being over 100 for the past two weeks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead Manufacturing data will be released on Monday as the market opens, providing a view into economic activity in the sector. Weekly Crude Oil Stock numbers will be released on Tuesday after market close. Wednesday's economic news will include non-manufacturing economic numbers. Employment data will be released before the market opens. Crude Oil Inventory data will be released in the afternoon. Thursday will bring Initial Jobless Claims, Nonfarm Productivity, and Unit Labor Costs, all providing a view on the recovering labor market and the impact on business productivity. Finally the week will finish with more employment data on Friday as well as Import and Export numbers. Earnings releases next week will be focused on small, mid and large cap segments with the concentration of reports with smaller companies. There are also a large number retail companies reporting. Zoom Video (ZM) will kick things off on Monday along with MercadoLibre (MELI), Nio (NIO), and Lemonade (LMND). Tuesday will include Sea (SE), Target (TGT), Veeva Systems (VEEV), Ross Stores (ROST), and Kopin (KOPN). Wednesday's reports include Snowflake (SNOW), Okta (OKTA), Marvell (MRVL), Splunk (SPLK), Dollar Tree (DLTR). Thursday will include Broadcom (AVGO), Costco (COST), Kroger (KR), Burlington Stores (BURL), Gap (GPS). Big Lots (BIG) will report on Friday. Be sure to check for scheduled earnings reports for stocks in your own portfolio. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side Over the weekend, we already have two great pieces of news to be bullish about. The stimulus bill made a big step forward by passing in the House. Now it's up to the senate to vote and pass it into law with Biden's signature. In addition, the US authorized Johnson & Johnson's single-dose vaccine which will enable millions more American's to receive shots in the coming weeks. Consumer confidence numbers on Friday showed Americans are starting to have a more positive outlook. As confidence grows, that could unleash record amounts of household savings into the economy. Although that may drive inflation up a bit, the increase in spending will be welcome for sectors hard hit by the 2020 pandemic. Those sectors will include airlines, travel and leisure, hotels and energy. Treasury bond yields already started to back off a bit on Friday after data showed inflation might not be as worrisome as previously thought. If the US Dollar continues to strengthen, that could bring yields down even further as global investment starts to feel better about sticking money into USD based bonds. Having the put/call ratio rise above 0.7 and the CNN Fear & Greed index move to fear could be a good sign of a tempering of the overly bullish sentiment. That could bring less volatility to the market and make near term gains build on a more solid base. The Nasdaq tested the 13,000 level and successfully stayed above the line three times in the past week. The strength of that support can be a base for getting back to the uptrend and more bullish rally ahead. Investor support showed up in the form of ETF inflows for SPY, TQQQ, IWM, QQQ being far higher than outflows. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side This was the worst setback in the market since the end of October which saw an almost 6% decline in the Nasdaq. The indecision on Friday provided no assurance that the pullback was over. Although 13,000 is a clear support area now, a breakdown below that level could send the index even further down in the coming week. The passing of the stimulus bill maybe be great for the economy and still send the markets into a plunge. As stimulus checks go out, the increase in demand for consumer products might just send inflation to the levels that investors have been worried about. That will negatively impact many of the companies that have an overweighted influence on the indexes. As the indexes come down, eventually so does all of the market. Apple and Amazon are trending down, trading below their 10w moving average and threatening the 40w moving average lines. As these mega-caps weigh on the indexes, it will continue to sour investor sentiment. The frothy exuberance of investors was no more apparent than when the leveraged TQQQ ETF showed up at the top of the ETF inflows list for Thursday as the market was dipping. Buy the Dip is the mantra of the retail investor and that mantra just might come back to haunt us in the weeks to come. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch This section can be a bit repetitive during multiple weeks of rally. This week, it becomes one of the more important sections as we watch key levels for a market direction. First on the positive side: The first step is for the index to close above the 50d MA which is at 13,299.28 as of Friday's close. Next will be to close above the 21d EMA at 13,578.90. Hopefully those two moves will be on higher volume to further confirm the progress. After getting above the moving average lines, creating a higher weekly high will be the next sign of progress. This past week's high was on Monday at 13,757.06. 14,000 is a possible resistance area so look for the index to get above and stay above this area. A rejection below this would start to form a head and shoulders pattern that indicates a failed rally attempt by bulls. Finally, the all-time high from 2/16 of 14,175.12 will be the next test. That would be a weekly advance of 7.45% which is well within reason if that market can find momentum. On the downside, there are several key levels to raise caution flags: The lower line of the weekly parallel channel, drawn from the March 2020 bottom, is pointing to 13,022. Violating that lower line could signal further weakness in the long term rally. The low of this past week is 13,003.98. Stay above this level to start a new uptrend. Next is the 13,000 support area that has held up very well the past few weeks. It also held the index in January before making further gains in February. At 12,757.61, the Nasdaq is officially in correction by the 10% standard. Several possible areas of support at 12,550, 12,250, and 12,000. The 200d MA moved above is about 17% below the index at 11,407.58. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up That's two weeks in a row, where the market ended Friday with indecision. This week the market followed thru with a gap down and sell-off on Monday that continued for the rest of the week. There's a possibility we found the bottom at 13,000 and the market could make an upside reversal from here. There are no guarantees. As investors respond to increasing bond yields, positive and negative news events, it all can cause more volatility. Influences on the market will have investors searching for assets that can safely produce returns or at least protect against further losses. That brings us to weekend homework. I'll repeat it from Friday's daily update. Take a close look at positions in your portfolio. How are each performing in the context of the pullback? Which ones are acting relatively well and maybe you are willing to take a bit further draw down to protect the positions? Which ones are not acting well and should be trimmed or sold outright? If the market does reverse and move up next week, what stocks should be in your watch list? What's your plan for timing and starting those positions? Where should you add to existing positions at the dip? And most importantly, where will you set stops in order to protect against a surprise to the downside. Good luck, stay healthy and trade safe!
NASDAQ:IXIC
by drewby4321
10
Market Week In Review - 2/16/2021 - 2/19/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, February 16, 2021 Facts: -0.34%, Volume higher, Closing range: 29%, Body: 58% Good: Higher high, lower low, new ATH Bad: Could not hold the morning high Highs/Lows: Higher high, higher low Candle: Red body with slightly longer lower wick than upper wick Advance/Decline: 0.84, slightly more declining stocks than advancing stocks Indexes: SPX (-0.06%), DJI (+.20%), RUT (-0.72%), VIX (+7.4%) Sectors: Energy (XLE +2.51%) and Financials (XLF +1.71%) were top. Real Estate (XLRE -1.07%) and Utilities (XLU -1.12%) were bottom. Expectation: Sideways or Higher The week opened with all-time highs, but the market could not hold on to those highs. After the first hour of trading, the indexes dropped going into mid-day and then spent the afternoon trading in back and forth choppiness. Despite declines, the major indexes put in higher highs and higher lows for the day. The Nasdaq closed with a -0.34% decline on slightly higher volume. The closing range of 29% is not great, but is above a low which is higher than Friday's low. The 58% body was formed from the opening gap up and quick sell-off in the morning. There were more declining stocks than advancing stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, February 17, 2021 Facts: -0.58%, Volume lower, Closing range: 94%, Body: 31% Good: Mid-day reversal off lows to close near the day's high at end of session Bad: Gap-down open and below the 14,000 support line Highs/Lows: Lower high, lower low Candle: Green body in upper half of candle with a long lower wick Advance/Decline: 0.46, two declining stocks for every advancing stock Indexes: SPX (-0.03%), DJI (+0.29%), RUT (-0.74%), VIX (+0.19%) Sectors: Energy (XLE +1.49%) and Consumer Discretionary (XLY +0.58%) were top. Industrials (XLI -0.28%) and Technology (XLK -0.88%) were bottom. Expectation: Sideways or Higher Higher than expected Retail Sales data was enough for Amazon, but not enough to excite the overall market in the morning hours of trading. The higher than expected producer price index data forecasts upcoming inflation. That expected rise in inflation brings up the question of whether the Fed will raise interest rates earlier than previously stated. Higher interest rates tend to impact high growth companies and technology companies the most. The result was a gap-down and morning sell-off of the tech heavy Nasdaq. Fears began to subside with reassurances from FOMC members comments throughout the day and the release of the FOMC meeting minutes in the afternoon. Those minutes stated that the committee unanimously agreed to keep interest rates low for the foreseeable future. That brought the Nasdaq back up to close near the high of the day. The Nasdaq closed the day with a -0.58% loss on lower volume. The closing range of 94% resulted from a 31% green body that is above a long lower wick. That long lower wick was formed in the morning sell-off. There were two declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, February 18, 2021 Facts: -0.72%, Volume lower, Closing range: 79%, Body: 26% Good: Support at 21d EMA, turned into upside for rest of day Bad: Another morning sell-off, and the selling into close. Highs/Lows: Lower high, lower low Candle: Green body in upper half of candle with a long lower wick Advance/Decline: 0.27, almost 4 declining stocks for every advancing stock Indexes: SPX (-0.44%), DJI (-0.38%), RUT (-1.67%), VIX (+4.60%) Sectors: Utilities (XLU +0.60%) and Consumer Discretionary (XLY +0.04%) were top. Energy (XLE -2.26%) was bottom. Expectation: Sideways or Lower Today produced a very similar candle to the day before, and another step back for the Nasdaq. The market opened again reacting to bad economic news, selling heavily in the morning. However, buyers came in as the index hit the 21d exponential moving average. The Nasdaq closed the day with a -0.72% loss on lower volume. The similar candle to the day before had another high closing range over a long lower wick. The upper wick is slightly longer due to the selling just before close. The closing range was 79% and the green body in the upper half covers 26% of the candle. There were nearly four declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, February 19, 2021 Facts: +0.07%, Volume higher, Closing range: 22%, Body: 38% Good: Higher high, lower low Bad: Morning gains lost in afternoon selling, low closing range and red body Highs/Lows: Higher high, higher low Candle: Red body in lower half of candle with longer upper wick Advance/Decline: 1.67, 3 advancing stocks for every two declining Indexes: SPX (-0.19%), DJI (-0.0%), RUT (+2.18%), VIX (+1.96%) Sectors: Materials (XLB +1.83%) and Energy (XLE +1.67%) were top. Consumer Staples (XLP -1.26%) and Utilities (XLU -1.49%) were bottom. Expectation: Sideways It was day for almost everyone but the mega-caps. Gainers outnumbered losers at more than a three to two ratio. But the mega-caps, especially in tech, lost ground while the rest of the market advanced. Equal weighted QQQE gained +0.36% while the cap weighted QQQ lost -0.44%. The Nasdaq closed with a +0.07% gain on higher volume. The candle has a longer upper wick over a 38% red body and a dismal 22% range that was created from morning gains being sold off in the afternoon. There were over three advancing stocks for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) The short week brought a lot of choppiness in the equity markets. There was a mid-day reversal every day of the week. Tuesday was the gap-up that sold off in the afternoon. Wednesday and Thursday started with morning selling that was bought back in the second half of the sessions. Friday finished the week with a rise in the morning only to lose those gains in the afternoon. What was all the fuss about? It seemed that investors are trying to price in the possibility of higher than expected inflation and the potential for interest rates going up earlier than anticipated. Despite comments from the Fed that monetary policy would remain the same, the worries in the market continued to rise. Many now believe a huge stimulus will super charge inflation as American's unleash stimulus checks and record savings accounts back into the economy. The expectations I had throughout the week were broken daily. Tuesday I saw support at the 14,000 level and thought the market would build off of that for gains. Wednesday I saw the huge buy back in the afternoon and thought the momentum would lead into the next day's trading. So Thursday I gave up and finally called for Sideways or Lower on Friday. The gap down on Wednesday and close below the 10d MA should have been the signal for me to set an expectation for lower on Thursday. On Thursday, the bounce off the 21d EMA should have told me that gains were possible in the next day, so should have set Sideways or Higher. Anyway, they are just expectations and not predictions. Part of this weekly review exercise is to learn from the chart, especially where it went against my expectations. The Nasdaq closed the week down -1.57%. Volume was lower than the previous week. The closing range of 35% is lower than desired but the index did achieve a higher high for the week and closed above last week's low. The average closing range for the past 16 weeks is at 70%. Although the closing range this week is at 35%, the index is hugging the mid-line of the channel drawn from the March bottom. The S&P 500 (SPX) declined -0.71% for the week. The Dow Jones Industrial (DJI) advanced +0.11%. The Russell 2000 (RUT) lost -0.99%. The VIX volatility index closed the week a bit higher but still remains at a very low level compared to the last several months. It was a week for the cyclical stocks. Energy ( XLE ), Financials ( XLF ), Materials ( XLB ), and Industrials ( XLI ) were the only sectors to close the week with gains. That was not the case for the entire week. Communication Services ( XLC ) started the week with gains but faded in the last two days. Utilities ( XLU ) had one day as the leading sector on Thursday, but moved back to the bottom of the list on Friday. Health Care ( XLV ) was the worst performing sector of the week. US 30y and 10y Treasury Bond yields continued to rise and widen the gap with shorter term treasury bonds. This is despite a week when equity investors seemed nervous. The bond yields could rise even faster as a stimulus is released into the economy and start to have a negative impact on companies carrying debt. High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bonds (LQD) prices both dropped for the week. The US Dollar (DXY) declined just -0.07% for the week. Silver (SILVER) finished the week about even while and GOLD (GOLD) declined. Crude Oil Futures (CRUDEOIL1!) fell back just slightly from the previous week's gains. Timber (WOOD) also declined for the week. However Copper (COPPER1!) and Aluminum (ALI1!) both gained as demand in manufacturing is expected to outpace supply for these metals. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps It was a disappointing week for the big four mega-caps, all closing the week with a loss. Amazon (AMZN) seemed like it would have a great week, having gains each day from Tuesday to Thursday, but it gave up all those gains on Friday to close the week with a -0.85% weekly decline. Apple (AAPL) continued to pullback, closing under its 10 week moving average and a weekly loss of -4.06%. Microsoft (MSFT) was down -1.64% for the week while Alphabet (GOOGL) was down -0.30%. Both are still well-above their 10 week moving average. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.575, still at the level of overly bullish optimism. It did spike to 0.667 on Thursday but quickly returned to the low level on Friday. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction. The CNN Fear & Greed index is still in a Greed level, but is not at an extreme level. Money managers are at a 108 leveraged level as measured by the NAAIM Exposure Index. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead Consumer confidence numbers will be released on Tuesday that can predict consumer spending and drive economic activity. Also on Tuesday, Fed Chair Jerome Powell is scheduled to speak to congress about the economic outlook. New Home Sales data will be the focus for Wednesday as the market opens. Thursday will bring an update on Durable Goods Orders, Initial Jobless Claims and Pending Home Sales. Core Price Index data released on Friday will give another view into inflation. In addition, personal spending and consumer sentiment data will be released Friday. Oil inventories will be updated with the Weekly Crude Oil Stock on Thursday and the Crude Oil Inventories on Wednesday. Earnings reports will keep growth investors busy next week with many popular stocks reporting quarterly results. Monday will kick off with a report from Berkshire Hathaway (BRKa) before the market opens. On Tuesday, reports will come from Square (SQ), Intuit (INTU), Upwork (UPWK), among others. On Wednesday, we will get updates for Nvidia (NVDA), Lowe's (LOW), TJX (TJX), Teladoc (TDOC), Magnite (MGNI) and many others. Thursday will add to the tsunami of reports with Salescore.com (CRM), Anheuser Busch (BUD), MercadoLibre (MELI), Moderna (MRNA), Autodesk (ADSK), Workday (WDAY), DoorDask (DASK), Vmware (VMW), Dell (DELL), Zscaler (ZS), Wayfair (W), Etsy (ETSY), Plug Power (PLUG), Farfetch (FTCH), Vipshop (VIPS), Novocure (NVCR), Beyond Meat (BYND), the list just keeps going. Friday will include DraftKings (DKNG), and Cinemark (CNK). Be sure to check for scheduled earnings reports for stocks in your own portfolio. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side The inflation outlook came as a surprise this week. But the good news is that it’s a sign of economic activity returning faster than anticipated. Recovery is happening even as we wait for more stimulus. Commodity prices, including important metals like Copper and Aluminum are climbing. Retail Sales for January were much higher than expected. Services and Manufacturing PMI showed activity was healthy in those sectors. Building Permits were higher. Both the Import and Export Price indexes were higher than expected. All of the is bullish for the USD and the economy. The top four sectors for the week were Energy, Financials, Industrials and Materials. Even when the rest of the market was down, these four cyclical sectors ended the week with gains. These are the sectors impacted the most by the economic downturn last week and having them show strength in a week that the market was weak is a bullish sign. Although the Put/Call ratio is in an overly bullish area, the CNN Fear & Greed index remains moderately on the greed side. Nowhere near the extreme greed level that often predicates a pullback. The Nasdaq was down for the week, but it is still hugging the midline of the upward channel from the March 2020 bottom. This week produce another all-time high and closed above the previous weeks low. That still reads uptrend. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side But how high can it go? That's the question on everyone's mind. And that's the reason that investors continue to be bullish but keep one foot out the door, ready to exit the market on any bad news. Yields on long term treasury bonds have soared over the past two weeks. With the new stimulus bill seemingly just around the corner that could send yields even higher. On one hand that is an indicator of investor confidence. On the other hand it has an impact on other financial instruments including adjustable loans based on the 10y treasury bond yield. That can have a negative impact in other areas of the economy and equity markets. Outflows were high for corporate bond ETFs showing investors getting nervous about corporate debt as treasury bond yields signal higher costs to service the debt. Mega-caps are showing relative weakness to the market. Amazon finally attempted a rally, but it broke down on Friday and gave back the week's gains. Apple is trading below its 10w moving average. Tesla is trading below its 21d EMA. It's important for these mega-caps to perform well to keep the indexes moving and keep investor sentiment high. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side: The 10d MA is at 13,969.82. The first test is for the index to close back above that line. 14,000 is the current support/resistance area so look for the index to get above and stay above this area. Monday's high of 14,175.12 will be the next test. Another weekly high would be a great sign for a continued rally. On the downside, there are several key levels to raise caution flags: The low of the previous week is 13,845.47 and the index closed this week just above that point. Staying above here next week will be a sign of strong buyer support. The low of this week was 13,714.35. Stay above that low to reclaim the trend of higher highs and higher lows. The 21d EMA is at 13,712.41. That is around 1.0% below Friday's close. It's good that it is catching up, but would be better that the index stays above the line. The 50d MA is at 13,204.03. A violation of this line would be a warning side. It has not been tested since 11/4. There is support at the 13,000 area, seen in the lows from the first weeks of January. Several possible areas of support at 12,550, 12,250, and 12,000. The 200d MA moved above is about 17% below the index at 11,407.58. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up I was hoping for a more decisive move on Friday to signal going into next week. Instead the index came to rest inside the gap between the close of the first week of February and the open of the second week. Instead, we got an indecisive finish to the week created by strength in small caps and weakness in large and mega-caps. Democrats are optimistic about a vote for the stimulus bill happening this week. That could create some more turmoil as investors grapple with the short term benefit to the market weighed against the longer term impact to inflation. One of the best signals next week will be the massive amount of earnings reports that will be spread across cap-size segments and industry sectors. Watch for how the market reacts to the reports. If the reports are positive but the stock price doesn't budge or worse goes down, that can be a red flag. On the other hand, if reports are good and the market responds positively, it could be a melt-up situation. Good luck, stay healthy and trade safe!
NASDAQ:IXIC
by drewby4321
8
Market Week In Review - 2/8/2021 - 2/12/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Monday, February 8, 2021 Facts: +0.95%, Volume higher, Closing range: 100%, Body: 54% Good: New all-time high, no upper wick, bullish into close Bad: Small gap to fill Highs/Lows: Higher high, higher low Candle: Upper half of candle is body, lower wick from morning dip but did not fill gap Advance/Decline: 3.36, more than three advancing stocks for every declining stock Indexes: SPX (+0.74%), DJI (+0.76%), RUT (+2.53%), VIX (+1.77%) Sectors: Energy (XLE +4.18%) and Financials (XLF +1.29%) were top. Utilities (XLU -0.77%) was the only losing sector. Expectation: Higher There was a lot to be excited about in the market today. The Nasdaq gapped up at open, as investors had high optimism for a stimulus bill to pass through congress. Democrats added new details of more than $50b to go toward transportation industries. That not only sent airline stocks soaring, but also pumped up the Energy sector. When the Energy sector leads, in most cases, the whole market follows. The Nasdaq closed with a +0.95% gain on a big spike in volume. There was a morning dip that nearly closed a gap-up at open, but bulls took over early and led the afternoon to a new all-time high and 100% closing range. The 54% green body in the upper half of the candle was the result of a rally into close. More than three stocks advanced for every stock that declined. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, February 9, 2021 Facts: +0.14%, Volume higher, Closing range: 52%, Body: 52% Good: New all-time high, higher low, close above 14,000 Bad: Upper wick, tested high three times but closed in middle of range Highs/Lows: Higher high, higher low Candle: Lower half of candle is body, upper wick formed after testing high 3 times Advance/Decline: 1.45, about three advancing stocks for every two declining stocks Indexes: SPX (-0.11%), DJI (-0.03%), RUT (+0.40%), VIX (+1.84%) Sectors: Energy (XLE +4.18%) and Financials (XLF +1.29%) were top. Utilities (XLU -0.77%) was the only losing sector. Expectation: Sideways or Higher The market continues to move higher, albeit at a slower pace than the previous week. Today brought another new all-time high for the Nasdaq and a higher low. However better than expected Job Openings data wasn't enough for the index to stay at the top of the range, testing the high three times before closing in about the middle of the intraday trading range. The Nasdaq closed with a +0.14% gain on higher volume than the previous day. The closing range of 52% is above a 52% body that covers the lower half of the candle with no lower wick. A higher high and a higher low is a sign of strength and closing above 14,000 was a key level to look for this week. About three stocks advanced for every two stocks that declined. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, February 10, 2021 Facts: -0.25%, Volume higher, Closing range: 48%, Body: 46% Good: New all-time high, close above yesterday's low Bad: Morning dip below previous low, again fading into close Highs/Lows: Higher high, lower low Candle: Bearish outside day with hanging man candlestick Advance/Decline: 0.88, slight more declining stocks than advancing stocks Indexes: SPX (-0.03%), DJI (+0.20%), RUT (-0.72%), VIX (+1.66%) Sectors: Energy (XLE +1.91%) and Communications (XLC +0.95%) were top. Consumer Discretionary (XLY -0.99%) was the bottom sector. Expectation: Sideways Wednesday was a wild session for the markets with a big dip in the morning as investors reacted to Core Consumer Price Index data that showed inflation was lower than expected. Inflation is something economists want to see at just the right level, not too much and not too little. The market recovered as morning turned into the afternoon, but then dipped again into close after statements from Fed Chairman Jerome Powell. The Nasdaq closed with a -0.25% loss on higher volume. The closing range of 48% is good considering the morning dip and that the close is higher than yesterday's open. However, the candle has a hanging man pattern that shows sellers are ready to take over as soon as any bad news hits the market. There were slightly more declining stocks than advancing stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, February 11, 2021 Facts: +0.38%, Volume higher, Closing range: 77%, Body: 14% Good: Finished higher, after selling pressure in morning Bad: Long lower shadow for second day showing more selling pressure Highs/Lows: Lower high, higher low Candle: Inside day with long lower shadow, small negative body in upper half of candle Advance/Decline: 0.54, two declining stocks for every advancing stock Indexes: SPX (+0.17%), DJI (-0.02%), RUT (+0.13%), VIX (-3.37%) Sectors: Technology (XLK +1.10%) and Health (XLV +0.19%) were top. Energy (XLE -1.54%) was the bottom sector. Expectation: Sideways The Nasdaq moved sideways today as the fight between buyers and sellers created a second day of choppiness. The morning sell-off was possibly prompted by disappointing employment data and a continued outlook from the Fed of an economy that needs support. The index closed with a +0.38% gain on slightly higher volume than the previous day. The inside day, marked by a lower high and a higher low, saw a big dip in the morning and another dip in the afternoon before bulls took prices higher into close and ended the day with a slight gain. The action resulted in a closing range of 77% and a small 14% red body in the upper half of the candle. There were two declining stocks for every advancing stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, February 12, 2021 Facts: +0.50%, Volume lower, Closing range: 96%, Body: 71% Good: Good gains in the morning, higher prices into close Bad: Nothing Highs/Lows: Higher high, higher low Candle: Mostly green body with tiny upper wick as index closed near the high Advance/Decline: 0.89, slightly more declining stocks than advancing stocks Indexes: SPX (+0.47%), DJI (+0.09%), RUT (+0.18%), VIX (-6.02%) Sectors: Energy (XLE +1.48%) and Materials (XLB +1.03%) were top. Real Estate (XLRE -0.03%) and Utilities (XLU -0.73%) were bottom. Expectation: Higher The market rallied into the end of the week, closing at or near all-time highs across the major indexes. Despite lower than expected consumer sentiment data, investors were optimistic about the stimulus talks and progress with vaccines to end the pandemic. As a sign of that confidence, the defensive play of Utilities remained at the bottom of the sector list heading into a three-day weekend. The Nasdaq closed with a +0.50% gain, just below the all-time high. The volume was lower than the previous day, but the 96% closing range and 71% green body appear very bullish. Most of the gains came in the last 30 minutes of trading. However, there were more declining stocks than advancing stocks on the Nasdaq. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) The second week of February began and ended with a rally to all-time highs. Overall, it was a bullish week, but the bears were always present. Monday opened with a gap up that was quickly tested with a dip in the morning, before climbing to close the day with a nearly a 1% gain. Tuesday set a new all-time high but could not hold onto the high and closed in the middle of the day's price range. Wednesday and Thursday is when the bears made the biggest attempt with big morning and afternoon dips that kept the index in a sideways move. The close from Tuesday to Thursday only changed by 0.13%, but the trading range was nearly 2%. That left Friday as the deciding day on whether the week would be bullish or bearish. The bulls won. Energy stocks showed up big this week, building on news of a large stimulus targeted at transportation. Add that crude oil prices continued higher throughout the week. On the other hand, Consumer stocks did poorly after consumer price index data showed inflation lower than expected. Consumer confidence and spending data released later in the week confirmed there was less demand for consumer products. None of that data was enough to scare investors from the market. Yields on long-term treasury bonds moved higher as investors remained in equity markets. Even within the stock market, the typical defensive plays used by investors did not show up. Utilities remained as the worst performing sector even as Friday closed into a three-day weekend. The Nasdaq closed the week up +1.73% from the previous weeks close. Volume was higher than the previous week, driven by the two day fight of bulls and bears on Wednesday and Thursday. The closing range of 95% was thanks to a rally in the last 30 minutes of trading on Friday, that brought the index near to the all-time high set earlier in the week. The average closing range for the past 15 weeks is at 72%. This past week broke a pattern of ups and downs over the previous six weeks with two high weekly closes in a row. The Russell 2000 (RUT) outperformed the other indexes with a +2.51% weekly gain. The S&P 500 (SPX) gained +1.23% while the Dow Jones Industrial (DJI) gained +1.00%. The VIX volatility index closed at its lowest point since before the February 2020 highs turned into the 2020 market crash. Energy ( XLE ) led for a second week in a row as crude oil prices continue to rise and optimism for economic recovery to bring demand back to oil and gas as transportation, travel and leisure sectors bounce back. In particular, transportation companies got a boost on Monday from news of a targeted stimulus to help the sector. In turn, that projects well for Energy. Technology ( XLK ) and Health ( XLV ) led for Thursday as Energy pulled back for a day. However, Energy bounced back up to the week's highs on Friday. Consumer Staples ( XLP ) and Consumer Discretionary ( XLY ) both lost for the week. Core CPI numbers showed lower than expected inflation and weighed down on the two sectors. Utilities ( XLU ) was the bottom sector for the week. There was not much interest in this defensive play for equities this week. US 30y and 10y Treasury Bond yields continued to rise and widen the gap with shorter term treasury bonds. The yield curve steepens to levels not seen since 2015. This a signal of confidence from investors in the ability for the economy to recover earlier than expected with many analysts projected a full recovery in the second half of this year. That confidence can also been seen in corporate bonds. High Yield Corporate Bonds (HYG) prices are climbing. Those higher risk bonds are being bough while safer Investment Grade Corporate Bonds (LQD) are being sold. Investors are confident in corporations being able to meet commitments on these bonds. The US Dollar (DXY) declined -0.62% for the week. Silver (SILVER) and GOLD (GOLD) both finished the week with gains. The real story with commodities is the two week rise of Crude Oil Futures (CRUDEOIL1!), Timber (WOOD), Copper (COPPER1!), and Aluminum (ALI1!). These are all key commodities required to support economic activity. Seeing the two week rise is a bullish sign for the recovering economy. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps I had a great conversation in the comments of the daily market update this week about the markets and the big four mega-caps. It reminded me how important it is to look at the weekly charts to see trends. Apple (AAPL) and Amazon (AMZN) have been somewhat disappointing as you watch the daily charts. You might think there is something wrong. However, taking a step back and looking at the weekly shows them still in uptrends, with higher lows closing in one the highs. As the price range narrows with lowering volume, you can expect a breakout in one direction or the other. Microsoft (MSFT) and Alphabet (GOOGL) already had their breakouts and continue to trade well above the key moving average lines. The performance of the big mega-caps has an impact on the indexes. The indexes influence investor sentiment and impact passive instruments including ETFs. Those all impact overall market prices. That's the reason to keep an eye on daily and weekly charts of these top four mega-caps. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.584, still at the level of overly bullish optimism. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction. The CNN Fear & Greed index moved more toward Greed level, but is not at an extreme level. Money managers moved back to a 110 leveraged level as measured by the NAAIM Exposure Index. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Bumble IPO Bumble entered the market with an IPO on Thursday and ended the week with a 75% gain over the initial price of $43. Happy Valentine's Day to all the Bumble users and especially the Bumble investors this week. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead Markets will be closed on Monday for the President's Day holiday. Tuesday will be lite on economic news with an update on Manufacturing data in the morning, FOMC Member Daly comments in the afternoon. Wednesday will have more important news with core producer price index data being released in the morning. The producer price index data can also be an early indicator of inflation so this data will be interesting to watch after last week's consumer price index data disappointed economists. Retail sales data, Industrial Production and weekly Crude Oil stock numbers will also be released on Wednesday. Thursday will bring Building Permits and Housing Starts data for January. The weekly update on Initial Jobless Claims will also come before market opens. Import/Export price data released on Thursday can impact the US dollar. There will be another update on Crude Oil Inventories later in the morning. Friday will finish the week with more Home Sales data and the Manufacturing and Service PMI data. The week will include a number of earnings reports, albeit at a slower pace from previous weeks. CVS Health (CVS), Occidental (OXY) and Avis (CAR) will be interesting to watch on Tuesday. Baidu (BIDU) and Synopsys (SNPS) report on Wednesday. Walmart (WMT) will be an important one to watch on Thursday. Be sure to check for scheduled earnings reports for stocks in your own portfolio. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side Looking just at the equity markets, it's hard to argue with the statement made late on Friday. After a few days of back and forth, the market moved decidedly bullish headed into a three day weekend. Not only did investors not make defensive plays, they bought up assets at a discount relative to where they think prices will go next week. The impeachment trial is behind us. Congress is now free to focus in on legislating about bills that can help the economy, including the $1.9tn stimulus bill. Core CPI and consumer confidence and spending numbers released last week may look bleak. But the bright side of those numbers is that Americans are saving money at record levels. Americans don't save money. Eventually as confidence grows, that money is sure to be released into the economy, driving consumer prices higher and driving stock prices higher as well. The Fed made another affirmation this past week of keeping monetary policy in place for the foreseeable future. A short-term pullback or even small correction is sure to be limited by the asset purchases and low interest rates that will keep money in equity markets. The breakouts from Microsoft and Alphabet a few weeks ago are still in-tact. It seems any moment new breakout runs could come from Apple and Amazon. These four big mega-caps can carry the market to new highs and that momentum can spread across to a breadth of sectors and stocks. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side Investor optimism continues to remain at extreme highs. The put/call ratio is far in the overly bullish range. The CNN Fear & Greed index is moving higher. Money managers only moved out of leverage for one week and now the NAAIM index shows they are back in leverage again this week. All that optimism could be an overwhelming amount of froth that's just waiting for an excuse to see investors run for the exit. Parts of the stimulus, including the amount of checks and the number of citizens who will benefit from them, continues to be debated. Some of the optimism in the market depends on these checks getting out to as much of the population as possible and driving an increase in economic activity. If this part of the stimulus disappoints investors, it could be a reason to take profits from equities and move money to other asset classes. The media loves to uncover stories that show faults in the vaccine roll out. Whether its supply chain limitations or the effectiveness of the vaccine, any bad news has a negative impact on sentiment. As I noted several times in the daily updates, there is a lot of signal to say that investors are bullish, but have one foot out the door and ready to move out at the sign of any bad news. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side: Wednesday's high of 14,109.12 will be the first test. Another weekly high would be a great sign for a continued rally. Reaching 14,250 would keep moving the weekly highs along an upper channel line from the past few weeks. On the downside, there are several key levels to raise caution flags: 14,000 is now an area of support that held this past week. Staying above this line will make that support stronger. The low of the week this past week is 13,845.47. The 21d EMA is at 13,609.55. That is around 3.5% below Friday's close. The 50d MA is at 13,083.19. A violation of this line will be an added warning side. It has not been tested since 11/4. There is support at the 13,000 area, seen in the lows from the first weeks of January. Several possible areas of support at 12,550, 12,250, and 12,000. The 200d MA moved above the lows of October and is now about 20% below the index at 11,303.89. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up This week was an impressive fight between the bulls and the bears. Both sides of the market showed itself throughout the week. But in the end, the bulls won the fight. There's a lot of reason to believe the bull market will continue into next week. As investors come back from a three-day weekend, it's becoming increasingly likely that stimulus will pass in congress. Then it's on to a massive infrastructure bill that Biden wants to see congress pass. At the same time, it's important to realize the market is extended as it continues its rally. Many growth stocks that have been driving the indexes upwards are extended way beyond normal levels. Any news that would spook investors, could bring a pullback or small correction. Or an even bigger correction. It's always important to manage risk in your portfolio. Keep stop losses up to date and make sure you are comfortable with draw down that could occur. I write these reminders as much for me as I do for any readers of these updates. :) Happy Valentines Day! Good luck, stay healthy and trade safe!
Editors' picks
NASDAQ:IXIC
by drewby4321
57
Market Week In Review - 2/1/2021 - 2/5/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Monday, February 1, 2021 Facts: +2.55%, Volume lower, Closing range: 91%, Body: 59% Good: Close back above the 21d EMA, steady climb after morning dip Bad: Nothing Highs/Lows: Higher high, higher low Candle: Thick green body with longer lower wick Advance/Decline: 3.19, three advancing stocks for every declining stock Indexes: SPX (+1.61%), DJI (+0.76%), RUT (+2.53%), VIX (-8.61%) Sectors: Consumer Discretionary (XLY +2.60%) and Technology (XLK +2.51%) were top. Consumer Staples (XLP +0.09%) and Health Services (XLV +0.38%) were bottom. Expectation: Sideways or Higher February kicked off with broad gains across the Nasdaq. The index took a short dip in the morning and then headed upward for the rest of the day. Manufacturing data released after market open was a little lower than analyst expectations, but still high compared to the two-year monthly average. The Nasdaq closed the day with a +2.55% gain on lower volume. The closing range of 91% and the 59% green body show the strong buying that occurred throughout the day after a morning dip. The index closed above the 21d EMA, a key area of support. Many participants benefited from the gains as there were three advancing stocks for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, February 2, 2021 Facts: +1.56%, Volume higher, Closing range: 82% (with gap), Body: 60% Good: Solid gains throughout the morning and early afternoon. Bad: Slight fade in late afternoon Highs/Lows: Higher high, higher low Candle: Gap up, thick green body with small upper wick from fade Advance/Decline: 2.81, almost three advancing stocks for every declining stock Indexes: SPX (+1.39%), DJI (+1.57%), RUT (+1.19%), VIX (-15.48%) Sectors: Financials (XLF +2.42%) and Consumer Discretionary (XLY +2.12%) were top. Real Estate (XLRE +0.43%) and Health Services (XLV +0.29%) were bottom. Expectation: Higher The market added to Monday's gains with another positive day on Tuesday. Volatility fell back to more stable levels while gains continued to be spread broadly across stocks. The market faded slightly going into close, possibly as investors prepared for earnings reports from Amazon (AMZN) and Alphabet (GOOGL). The Nasdaq closed the day with a +1.56% gain on higher volume. The closing range with the gap was 82% and a 60% green body sits under a short upper wick created by the late afternoon fade. The rising window candle indicates a bullish continuation, but with some caution given the fade into close. Almost three stocks advanced for each declining stock, the second day of broad advances. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, February 3, 2021 Facts: -0.02%, Volume higher, Closing range: 18%, Body: 78% Good: Higher high, higher low, held support above morning low Bad: Sell off late afternoon Highs/Lows: Higher high, higher low Candle: Mostly red body formed from morning and afternoon dips Advance/Decline: 1.65, almost three advancing stocks for every two declining stocks Indexes: SPX (+0.10%), DJI (+0.12%), RUT (+0.38%), VIX (-10.37%) Sectors: Energy (XLE +4.27%) and Communications (XLC +1.34%)were top. Consumer Discretionary (XLY -0.56%) and Health Services (XLV +0.29%) were bottom. Expectation: Sideways or Lower The Nasdaq paused today after two days of big gains. It made two attempts to have another day of gains, but dipped in morning and late afternoon trading. Still there were advances across a large number of stocks, fueled by great earnings reports from big mega-caps the day before. The Nasdaq closed with a -0.02% loss, moving sideways after gaining over 4% the past two days. Volume was slightly higher than the previous days. The closing range of 18% and a red body of 78% are the result of the morning and late-afternoon dips. Overall, the candle presents bearish, so expectations are set for sideways or lower. Advancing stocks did outnumber declining stocks on a 3 to 2 ratio. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, February 4, 2021 Facts: +1.23%, Volume lower, Closing range: 100%, Body: 71% Good: Constant gain after morning dip, new all-time high Bad: Nothing Highs/Lows: Higher high, higher low Candle: Mostly green body with short lower wick, no upper wick Advance/Decline: 2.70, More than two advancing stocks for every declining stock Indexes: SPX (+1.09%), DJI (+1.08%), RUT (+1.98%), VIX (-4.98%) Sectors: Financials (XLF +2.22%) and Technology (XLK +1.60%) were top. Materials (XLB -0.36%) was the only sector to lose for the day. Expectation: Higher A positive expectation breaker is always welcome in the Daily Market Update. Despite yesterday's candle showing some bearish indication, today the Nasdaq proved it wasn't ready to move back down. A new all-time high adds to the string of higher highs and higher lows we've had all week. The index closed with a +1.23% gain. Volume was lower than the previous day but continues to be higher than the 50d moving average volume. The candle has a closing range of 100% created by a spike in prices in the last 10 minutes of trading. The short lower wick was created in a 30 minute window of volatility in the morning. There were more than two advancing stocks for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, February 5, 2021 Facts: +0.57%, Volume lower, Closing range: 81%, Body: 27% Good: New all-time high, not overly heated gain Bad: Some pullback in the afternoon Highs/Lows: Higher high, higher low Candle: Thin body in upper half of the candle, longer lower wick from morning dip. Advance/Decline: 1.95, two advancing stocks for every declining stock Indexes: SPX (+0.39%), DJI (+0.30%), RUT (+1.40%), VIX (-4.13%) Sectors: Materials (XLB +1.72%) and Communications (XLC +1.26%) were top. Technology (XLK -0.22%) was the bottom sector for the day. Expectation: Higher The markets topped a bullish week with one more gain on Friday. Every day this week produced a higher high and a higher low on the Nasdaq. The broad market rally continued despite disappointing employment data as investors hope the data will accelerate the stimulus bill through congress. The index closed with a +0.57% gain on lower volume. The closing range was 81%. The long lower wick, created by a morning dip right after open, is below a 27% body. The opening price became support in the afternoon as the index tested the area twice. There were two advancing stocks for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) This was one of the best weeks since November. The previous was the worst week since October. Déjà vu. You may remember the very short market correction we had back in late October. Within just a few days we had into a new market correction and back to a confirmed uptrend. This past two weeks marks a similar journey, dipping from new all-time highs to below the 21d EMA in a few days, and then back to new all-time highs a few days later. The Nasdaq finished the week with a +6.01% gain on lower volume. Volume was lower, but still above average. The closing range of 97% and a 85% green body marks a week where every day had a higher low and higher high. The steady climb throughout the week only paused on Wednesday. The bullish week was shared across segments with the Russell 2000 and S&P 500 reaching new all-time highs and the Dow Jones Industrial approaching a new all-time high. All sectors in the SPDR ETF list had gains for the week. The rally was fueled by growing investor confidence and optimism for the stimulus. The previous week, investor confidence was shaken by a flurry of retail trading targeted at a few stocks which disrupted hedge funds and trading platforms. The average closing range for the past 14 weeks has been at 70%, but is 60% over the past six weeks. The closing range for the past six weeks has rotated weekly from the lower half of the weekly candles to the upper half of the weekly candles. One week will be an accelerated gain, followed up by a week to pause or even pullback. The S&P 500 (SPX) gained +4.65% for the week. The Dow Jones Industrial (DHI) advanced +3.89%. The Russell 2000 (RUT) was the top performer of the major indexes with a +7.70% gain. Energy ( XLE ) was back on top for the first week of February. The sector benefited from higher than expected demand in oil that also raise crude oil prices throughout the week. Technology ( XLK ) started the week in the lead, having a strong Monday. The Consumer Discretionary ( XLY ) took the lead on Tuesday. Financials ( XLF ) briefly moved to the top spot on Thursday, but was soon passed by Energy again. Health Care ( XLV ) was at the bottom of the list for the week. Materials ( XLB ) was the worst performing sector on Thursday, but led the sectors on Friday. The US 30y and 10y Treasury Bond yields both rose significantly for the week. The US 2y treasury bond yield dropped. This resulted in a yield curve that is at its steepest since 2015. The steep curve is a result of investors seeing better growth for the economy in the short term, given that some form of stimulus is just around the corner. Economic activity is already recovering and more stimulus will make it stronger. High Yield Corporate Bonds (HYG) had its highest weekly close since before the March market crash. Investors are preferring the riskier High Yield Corporate bonds to the Investment Grade Corporate bonds (LQD). The US Dollar (DXY) advanced +0.51% for the week. Silver (SILVER) had a wild ride this week as it was targeted by retail traders. It ended the week down -0.15%. Gold (GOLD) dropped -1.83%. Crude Oil Futures (CRUDEOIL1!) gained a massive +8.40% week and drove Energy (XLE) to the top of the sector list. Timber (WOOD) was up +4.95%. Similar to the indexes, it has been rotating up and down for the past six weeks. Copper (COPPER!1) advanced +2.20%. Aluminum (ALI1!) advanced +1.85%. Much of the advance for these came in the last day of the week when the Materials sector (XLB) also led the sector list for the day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Big Four Mega-caps We've been tracking the breakouts of the four big mega-caps over the past few weeks. Since the September correction, that had all been consolidating. However, the past two weeks brought earnings announcements. Microsoft (MSFT)'s breakout is going well, gaining 14% over the past three weeks. Alphabet (GOOGL) has advanced over 20% in the same time. Apple (AAPL) attempted a breakout last week, but the breakout broke down and did not resume this week. However, it is still holding above the 10w MA and is creating higher lows each week. It's reasonable to expect another breakout move in the next week. Amazon (AMZN) released earnings this past week and although the numbers were great, the market reacted to the news that Jeff Bezos would step aside. Nonetheless, you see a pattern of higher highs and higher lows leading the stock out of the consolidation range. The action of these mega-caps influences the indexes which influence the market. Keep an eye on them. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Investor Sentiment The put/call ratio (PCCE) ended the week at 0.578, back to overly bullish optimism. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction. The CNN Fear & Greed index moved back to the Greed level, but is not at an extreme level. Money managers lowered their exposure level for another week according to the NAAIM Exposure Index. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead There is no major economic events scheduled for Monday, however keep an eye on the stimulus progress as it moves through congress. Tuesday will bring the EIA short-term energy outlook and a new JOLTs Job Openings report for December. Core CPI for January will be released on Wednesday before market open. This is a key indicator to measure inflation and is how the Fed targets the 2% ideal inflation number. Crude Oil Inventories will be updated after the market opens. Thursday brings the OPEN Monthly Report in the morning. Initial Jobless Claims will be released before market open. And the Fed will release its Monetary Policy Report mid-morning. On Friday, we'll get an update on Consumer Sentiment for February. It will be another busy week for earnings reports. Softbank (SFTBF) will announce on Monday. Chegg (CHGG) releases earnings after market close on Monday. Twitter (TWTR) announces on Tuesday. Coca-Cola (KO), Toyota (TM), Uber (UBER), and General Motors (GM) all release earnings on Wednesday. Zillow (Z), Zynga (ZNGA) also on Wednesday. Walt Disney (DIS), Pepsi (PEP), DexCom (DXCM), DataDog (DDOG), Cloudflare (NET), Expedia (EXPE) are all on Thursday. That is a very abbreviated list of earnings throughout the week. Be sure to check for scheduled earnings reports for stocks in your own portfolio. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side After a bearish week last week, the market told us it was not ready to back down yet. This week's strong recovery and steady bullish gains throughout the week are a statement to investors. The rally was driven by confidence in the economic recovery and optimism that a new stimulus bill will make economic recovery even better. It seems we've cleared past the retail investor craziness of the past few weeks. Although Wall Street Bets will continue to exist, I think a large enough number of those investors got burned by buying near the top that we'll see less commitment to future short squeeze attempts. Earnings reports have continued to outperform expectations. As you page through the reports for the past two weeks, earnings expectations are being beat in all cap segments and all industry sectors. Those expectations were lowered by analysts worried about the economy, but the results bring more confidence in the strength of the recovery. The treasury yield curve is a big indicator of what investors are expecting from the economic recovery and impact of further stimulus. Investors are moving away from longer term bonds and into shorter term treasury bonds. They are moving from safe Investment Grade corporate bonds to riskier High Yield corporate bonds. Energy is back at the lead for the sectors. Energy doesn't have to lead for market rallies, but when it is leading, the market is almost always in a rally. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side Investor optimism remains a mix of overly bullish sentiment represented by the put/call ratio, but caution as seen by the CNN Fear & Greed indicators. The mix means investors want to stay in the market and capitalize on gains, but seem to have one foot out the door in case things go bad. That has resulted in this back and forth of up and down weeks the past six weeks. That back and forth has also resulted in a number of huge spikes in the VIX volatility index over the past 1.5 months. Analysts often see the number of spikes of 20% or more as an indicator of a pending downturn in the market. The passing of a stimulus seems likely, but is not guaranteed. It also seems certain that the package will change as negotiations continue in congress. The market may be sensitive to those changes and would definitely react negatively of the stimulus talks stall. There has been great progress in getting vaccines out to the public, but we are not out of the woods yet. Bad news could be new mutations or failure of the supply chain for producing the vaccines. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side: Friday's high of 13,878.61 will be the first test. Another weekly high would be a great sign for a continued rally. The next level will be 14,000 which could be met with round-number resistance. This is the tendency for traders to pick round-numbers for profit taking. Some may view 14,000 as potential top and move to the sidelines for safety. On the downside, there are several key levels to raise caution flags: The 21d EMA is at 13,357.48. That is around 3.5% below Friday's close. The low of the week this past week is 13,132.47. Not creating a new low will be the first test of the downside. There is support at the 13,000 area, seen in the lows from the first week of 1/11. The 50d MA is at 12,899.22. A violation of this line will be an added warning side. It has not been tested since 11/4. Several possible areas of support at 12,550, 12,250, and 12,000. The 200d MA moved above the lows of October and is now about 20% below the index at 11,170.35. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up It was a powerful week that many traders and investors saw a tremendous number of gains. That makes it tough to have an expectation for the next week. Will investors want to take some profits and move to the sidelines or will the rally continue, fueled by stimulus and more earnings reports that beat expectations? The key thing this past two weeks point out is that you can't overreact to market signals. Ending last week, you might have wanted to sell everything and run to safety. However, you would have missed out on a huge week of gains. So how do you handle the mixed signals? Follow your system. Look at where you're individual stock picks are doing against your buy and sell rules. If the market is signaling caution and fear is creeping in, then reduce position sizes, but avoid panic selling. Let's hope for another great week of gains! Good luck, stay healthy and trade safe!
NASDAQ:IXIC
by drewby4321
2
Market Week In Review - 1/19/2021 - 1/22/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future. I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time. If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas. The structure is the following: A recap of the daily updates that I do here on TradingView. The Meaning of Life, a view on the past week What's coming in the next week The Bullish View, The Bearish View Key index levels to watch out for Wrap-up If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Tuesday, January 19, 2021 Facts: +1.53%, Volume lower, Closing range: 92%, Body: 50% Good: Solid gains in afternoon after morning low, high closing range Bad: Nothing Highs/Lows: Higher high, higher low Candle: Longer lower wick from morning dip, thick green body from afternoon Advance/Decline: 2.04, two advancing stocks for every declining stock. Indexes: SPX (+0.81%), DJI (+0.38%), RUT (+1.32%), VIX (-4.52%) Sectors: Energy (XLE +2.01%), Communications (XLC +1.81%), and Technology (XLK +1.30%) were top. Real Estate (XLRE -0.66%), Consumer Staples (XLP -0.44%), Utilities (XLU -0.38%) were bottom. Expectation: Higher The market started the trading week on a note of optimism after a long weekend. The end of the last week was marked with defensive moves into lower risk sectors and safe haven assets. Today, the opposite moves were made to begin a week that brings a transition for the US, the inauguration of President Biden. The Nasdaq closed with a +1.53% gain on lower volume. The closing range of 92% and a thick 50% green body are representative of the confident buying in the afternoon that produced the bullish session. The lows in the morning were just above Friday's open. After testing that low three times in the morning, the index finally turned to the upside for the rest of the session. There were two advancing stocks for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wednesday, January 20, 2021 Facts: +1.97%, Volume higher, Closing range: 90%, Body: 73% Good: Gains the whole day and closing near the top of the range Bad: Gap up Highs/Lows: Higher high, higher low Candle: Mostly green body with a tiny lower wick and more visible upper wick from some selling at close Advance/Decline: 1.29, more advancing stocks than declining stock. Indexes: SPX (+1.39%), DJI (+0.83%), RUT (+0.44%), VIX (-7.14%) Sectors: Communications (XLC +3.14%) and Real Estate (XLRE +2.08%) were top. Financials (XLF -0.42%) was the only losing sector. Expectation: Sideways or Higher If the equity market could talk, I think it would say Happy Inauguration Day. Investors breathed a sigh of relief that maybe some of the turmoil is behind us. That sentiment translated into a gap up at open with steady gains throughout the day. The Nasdaq closed with a big +1.97% gain on higher volume. The candle has a closing ranging of 82%, but including the gap the actual closing range is even better at 90%. The 73% green body and tiny lower wick shows the nearly constant gains that happened throughout the trading session. There were more advancing stocks than declining stocks, but note that the breadth was not as wide as the previous day. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Thursday, January 21, 2021 Facts: +0.55%, Volume higher, Closing range: 72%, Body: 9% Good: New all-time high, support at yesterday's close for higher low Bad: Thin body, indecisive candle Highs/Lows: Higher high, higher low Candle: Thin green body with visible upper and lower wicks could be a spinning top Advance/Decline: 0.79, more declining stocks than advancing stocks. Indexes: SPX (+0.03%), DJI (-0.04%), RUT (-0.89%), VIX (-1.20%) Sectors: Technology (XLK +1.29%), Consumer Discretionary (XLY +0.47%), and Communications (XLC +0.35%) were the only advancing sectors. Energy (XLE -3.38%) was the worst performing sector. Expectation: Sideways It was a choppy session with some indecision from open to close on which direction the indexes wanted to move. In the end, investors ignored bleak unemployment data and ended the day with gains, albeit very concentrated in specific sectors. The Nasdaq ended with a +0.55% gain on higher volume. However the 9% body shows the indecision from open to close. The index dipped to create a long lower wick, then made new all-time highs before closing just above the open. The closing range of 72% and the higher high and higher low, makes for a slightly bullish candle. More stocks declined than advanced. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Friday, January 22, 2021 Facts: +0.09%, Volume lower, Closing range: 77%, Body: 66% Good: Higher high and higher low, tested but stayed above low Bad: Pullback in last hour created upper wick Highs/Lows: Higher high, higher low Candle: Thick green body under a longer upper wick than lower wick Advance/Decline: 1.54, about three advancing for every one declining stock Indexes: SPX (-0.30%), DJI (-0.57%), RUT (+1.28%), VIX (+2.77%) Sectors: Real Estate (XLRE +0.25%), Utilities (XLU +0.14%) and Communications (XLC +0.04%) were the only gaining sectors. Financials (XLF -0.72%) was the bottom sector. Expectation: Sideways or Higher Welcome back to the game RUT! It was a mixed session for most of the major indexes. But the Russell 2000 proved there is more room for small-caps to grow. The Nasdaq was also able to end with a small gain for the day after fighting off morning bears and making a new all-time high before dropping back slightly at close. The Nasdaq ended with a +0.09% gain on lower volume. The closing range was 77% with a thick 66% green body in the candle. The visible upper wick was created near the end of the day as investors took profits and shifted to defensive positions headed into the weekend. About three stocks advanced for every declining stock. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Meaning of Life (View on the Week) As the previous week was full of caution and indecision, this week the market as full of optimism. The gap-up on Wednesday, Inauguration Day, was the biggest statement of the week. Investment poured back into mega-caps with several of the biggest companies rising to new all-time highs after months of sideways consolidation. But small-caps and growth stocks were not left behind. It was a positive week across all the indexes. The Nasdaq gained +4.19% for the week, leading the major indexes. The S&P 500 (SPX) gained +1.94% and the Dow Jones Industrial (DJI) gained +0.59%. The small-cap Russell 2000 (RUT) gained +2.15%. All of the indexes hit new all-time highs during the week. The week kicked off with investors moving out of the defensive positions of the previous week and back into riskier sectors. Defensive sectors like Utilities and Real Estate were sold while long-term US Treasury bond yields rose. Riskier corporate bonds were bought up on confidence in the economic recovery. Wednesday was the pivotal day that would define the rest of the week. Mega-caps came alive with breakouts for Apple, Microsoft and Alphabet. The latter two would reach new all-time highs. Another mega-cap, Netflix would soar after surprising investors with subscription growth and announcing they were on pace for sustainable cash flow positive and would consider stock buy backs. Thursday and Friday slowed a bit, but still turned in positive gains for the Nasdaq. Friday the Russell 2000 proved that small-caps have more room to grow as well, leading the major indexes for the day. There were some moves back into defensive plays late on Friday as has become typical to close recent weeks. The index has set a new high for 9 weeks in a row, even on the weeks that ended in a loss. Average closing range continues to be very high with the most recent week closing with a 95% closing range. The volume was the lowest of the last three weeks, but still higher than average volume for the past six months. Communications ( XLC ) led the week with a big +5.44% gain, but only after a big pullback the week prior. The sector was led by Alphabet ( GOOGL ) and Facebook ( FB ) with +9.55% and +9.21% gains respectively. Those two companies make up 44% of the ETF . Netflix ( NFLX ) also had a huge gain of +13.49% but only represents 5% of the ETF . Technology ( XLK ) finished the week in second place, also with the mega-caps, Apple ( AAPL ) and Microsoft ( MSFT ) contributing the most to the gains. Financials ( XLF ) continued to underperform as more financial institutions reported earnings and disappointed investors. Energy ( XLE ) was the worst performing sector of the week. There is probably some influence from the new administration policies. However, the more immediate impact was from surprise surplus in oil supplies, signaling much lower demand for oil than anticipated. The only significant pivots during the week were on Wednesday, January 20th which was inauguration day. That day saw a spike in Communications, Technology and Real Estate ( XLRE ). The pivot for Communications and Technology were likely reinvestment into mega-caps that didn't seem to be in the crosshairs of any new policies, alleviating some fears of policies that would hurt big tech. The Real Estate pivot was driven by the additional assistance for renters proposed in the new stimulus package. The stimulus approved in December only covered the estimated amount of back rent owed, but the new stimulus package would extend rental assistance into the future. US 10y and 20y Treasury Bond yields rose for the week and continue an uptrend from a July 2020 dip. The US 2y Treasury Bond yield dropped, widening the yield spread between long term and short term bonds. High Yield Corporate Bonds (HYG) prices advanced for the week while Investment Grade Bond (LQD) prices dropped. That indicates a move from safer investments to riskier investments, although the moves are not very large. The US Dollar (DXY) declined -0.54% for the week. The put/call ratio (PCCE) ended the week at 0.517, an low value that shows overly bullish optimism among traders. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction. The CNN Fear & Greed index is also increasing toward the Greed side, but not within the Extreme Greed range yet. Probably the most alarming of the contrarian sentiment indicators is the NAAIM Exposure Index which is at 112.93. This is the highest leveraged exposure among money managers since December 2017. The exposure tends to be cyclical in that when it reaches above 100, it often marks the beginning of a dip in market prices and likewise in the NAAIM Exposure index. However, November and December provided a unique moment in the index history as the exposure remained above 100 for five weeks in a row. Silver (SILVER) was up -2.98% and Gold (GOLD) was up +1.49% for the week. Crude Oil futures were up +0.26%. Timber (WOOD) was up +3.091%. Copper (COPPER!1) was even at -0.01% while Aluminum (ALI1!) gained +1.03%. One of the questions coming into this week was when would the biggest four mega-caps join the market rally. They answered big on Wednesday with breakouts among Apple, Microsoft and Alphabet. Amazon still has a bit to go before confirming the breakout, but also had a big move. All are now trading above key moving average lines. Still, a little more volume will help confirm these moves. Earnings releases will start in the next week and could provide that additional boost. Or they could send investors running. MSFT on 1/26, AAPL on 1/27, AMZN on 1/30 and GOOGL on 2/2. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Week Ahead Consumer Confidence numbers for January will be updated on Tuesday. Core Durable Good Orders for December will be released on Wednesday. The data provides insight into manufacturing activity which has been at its highest level in 14 years. Probably the most important economic news for the week will come on Wednesday afternoon when the Federal Open Market Committee makes a statement and the Fed announces any decisions on Interest Rate changes. GDP data for Q4 of 2020 will be released on Thursday before market open. Initial Jobless Claims will also be updated. Friday will bring more employment data, and several inflation related metrics including PCE consumer price indexes and near and long term inflation expectations. This week will put us at the height of the earnings season with several significant companies making earnings announcements. Microsoft (MSFT), Johnson & Johnson (JNJ), Starbucks (SBUX), AMD (AMD), American Express (AXP), Dr Horton (DHI) are several of the big releases on Tuesday. Wednesday will bring reports from Apple (AAPL), Tesla (TSLA), Boeing (BA), Facebook (FB). Thursday won't provide any rest as Visa (V), Mastercard 9MA), McDonald's (MCD), Atlassian (TEAM), Western Digital (WDC), American Airlines (AAL). Friday will end the week with reports from Eli Lilly (LLY), Chevron (CVX) and Honeywell (HON). No doubt I've missed some of your favorites as I can't list them all here. Make sure you know when the earnings dates are for the companies in your portfolio. Then act according to your plan whether you hold thru earnings or reduce positions. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bullish Side The market made a big statement on Wednesday as the US transitioned to a new administration and a government dominated by the Democrats. The gains signaled investor confidence in the economic recovery and optimism for more stability in markets less impacted by turmoil in politics. The largest mega-caps, which have not participated fully in the rally since early November, finally broke out of consolidation patterns. The mega-caps influence not only the major indexes, sector indexes, but also have influence over investor sentiment. The $1.9 trillion dollar stimulus proposed by the Biden administration brings more strength to the recovering economy. The plan will reduce further negative impacts on employment and relieve worries from the unemployed that they might lose their homes. The stimulus checks have added to a record amount of household savings since the pandemic began. Those savings have yet to be unleashed by nervous consumers back into the economy. While still requiring an extraordinary amount of coordination across the public and private sector, we finally have a plan for mass vaccination in the US that puts the end of the pandemic insight. Pandemic news is one of the remaining sources of big market reactions over the past few months. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- The Bearish Side Investor sentiment is at a very bullish level which should bring caution to the smart investor. The NAAIM exposure index shows a high level of leverage among money managers. At that high level, it only has one direction to go which is down. Money manager can reduce leverage if more money flows into the market, but more likely it will be lowered by reducing position sizes. The surprise surge in Oil inventories this past week show that the pandemic is still having a big impact on many sectors from leisure to travel and transportation. Yet the surge in oil inventories has not meant a reduction in prices for consumers or industries depending on shipping and transportation of goods. That brings us to inflation. The fed has been very specific about its goals for higher inflation and there are signs now that their fiscal programs are starting to get the desired result. The US Dollar value remains low while commodity prices rise. As consumers begin to unleash the record savings into new purchases, demand will outpace supply quickly and raise prices. Some inflation could be bullish if it also impacts employment and wages, but there is more likely a cycle in which employment and wages stay lower while inflation moves prices higher. Additionally, at some point the Fed will have to decide inflation is high enough and take actions to control it. Those actions will likely be met with a negative response from investors, even if temporary. None of this would play out within the next week, but are things to keep an eye on as we keep the bearish side in mind. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Key Nasdaq Levels to Watch There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side: The high of Friday at 13,567.14. Can the index continue to make newer highs each week? Thursday and Friday both fell short of breaking thru 13,600. That would be the next level to watch. On the downside, there are several key levels to raise caution flags: The low of last week is 13,078.70. Stay above that line to set a higher low next week. 13,045.66 is the 21d EMA. That is 3.65% below Friday's close. It would be nice for that line to catch up a bit before its tested. If the index dips below, it would be a concern. 13,000 is an area of support. 12,558.09 is the 50d moving average. The 50d moving average is key support line that has not been tested since 11/4. The 200d MA moved above the lows of October and is now about 20% below the index at 10,913.59. -=x=-=x=-=x=-=x=-=x=-=x=-=x=- Wrap-up After a week of optimistic gains in the market, it wouldn't be bad for some pause and sideways movement or even a small pullback next week. That would give the key moving average lines, which provide areas of support, some time to move up closer to the indexes. It would also allow a tapering off of the overly bullish sentiment in less dramatic way than a small or large correction. Overall, the market continues its bullish rally with a higher high and a lower low this week. The indicators are just indicators and don't drive the market. While some caution is necessary, there are many reasons to be confident in the market in the short term. Good luck, stay healthy and trade safe!
Editors' picks
NASDAQ:IXIC
by drewby4321
36