Friday, October 23, 2020
We were runnin’ against the wind
Facts: 0.37% higher, Volume lower, Closing range: 100%, Green Body: +11%
Good: Held above key support at 21d EMA
Bad: Low volume , not much price movement
Highs/Lows: Higher high (by a fraction), higher low
Candle: Long lower wick as investors bought up the lows to end nearly where the day started.
Advance/Decline: 1.63, more advancers than decliners
Sectors: Communication Services ( XLC ) led the day with +0.94% gain. Consumer Discretionary ( XLY ) also had a good day at +0.88%.
One more day of reversals to close a choppy week. Every day this week had a morning move that reversed once or more by close. Earlier in the week it was higher highs that reversed to lower lows. At the end of the week, it was lows that reversed to close with gains. Today the Nasdaq ended with a +0.37% gain. The candle has a tiny 11% green body and 100% closing range as the day ended at its high, but not much above where it started. There were more advancing stocks than declining stocks at a ratio of 1.63. Volume was lower than the previous day and much lower than average volume over the past few weeks. The index tested the 21d EMA again and stayed above it.
The S&P500 had an even tighter range between open and close and ended with a similar +0.34% gain. Communication Services ( XLC +0.94%) had the best gains among sectors fueled by positive gains from social platforms. Consumer Discretionary ( XLY +0.88%) also did well today, with a mix of discount retailers, auto parts and restaurant/service companies doing well. Technology ( XLK -0.11%) and Energy ( XLE -0.49%) were the worst performing of the day. The Russell 2000 capped off a winning week with another +0.88% gain.
Google ( GOOG +1.59%) continued the momentum it has gained the last few weeks while Microsoft ( MSFT +0.62%) and Amazon ( AMZN +0.88%) finally found some support with significant gains. Apple ( AAPL -0.61%) and Amazon remain under their 21d EMA and 50d MA lines. The story of the week has been Snap (SNAP +10.78%) which continues to have incredible gains after it’s earnings release. More growth stocks have turned back toward gains which is a positive sign for continued gains next week.
Continuing today’s trend into Monday would mean around a +0.66% gain, splitting the difference between the 1d trend line and the trend drawn from the 9/3 correction. The trend from the 9/24 bottom is +2.67% from today’s close and is a possibility if good news comes over the weekend to fuel gains.
As the index continues to test the 21d EMA , it’s possible it can find itself below that line. That would continue this past week’s trend to a -1.29% loss and land under the October Support area . Further losses would find the 50d MA and the index would likely get support at that level.
I’m keeping the June Support line in view, but its ~13% below the Friday close and there are 4 key support levels that the index would have to break thru. If we have a significant downside that takes the index below 11,300, then I’ll add that possibility back to the chart.
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