Nasdaq Market Update for 10/29

Original Chart

Trend lines drawn the 10/12 pivot day (14d), 10/22 (5d), and today 10/29 (1d).

Thursday, October 29, 2020

It’s something unpredictable
But in the end is right
I hope you had the time of your life

Facts: +1.65% lower, Volume lower, Closing range: 60%, Green Body: 47%
Good: Traded above yesterday’s low, fat green bullish body
Bad: Selling at end of day after 50d MA resistance
Highs/Lows: Higher low, higher high
Candle: Thick green body, majority in lower part of candle, long top wick
Advance/Decline: 1.85, about 2 advancers for every decliner
Sectors: Energy ( XLE +3.07%), Communications ( XLC +2.25%) were top, Health ( XLV -0.82%) was bottom.
Expectation: Sideways

Market Overview

It was a reasonably good day following the sell-off on Wednesday. The Nasdaq finished up +1.64% after tempting itself with the 50d MA and September Resistance line. Volume was lower, returning to the recent levels that have represented the wait-and-see level of activity in the market, well below the 50d average volume . The candle has a 47% green body with a 60% closing range which is good considering the bounce from yesterday but also shows not everyone is back in the game yet. Breadth was ok with two advancing stocks for every declining stock.

Indexes and Sectors

The S&P 500 SPX +1.19%) had a similar day with gains on lower volume that somewhat dropped back at the end of the day. Both the S&P 500 and the Dow Jones Industrial Average (DJI +0.52%) had lower highs and lower lows, putting them further below their key moving averages with the 21d EMA slipping below the 50d MA. Energy ( XLE +3.07%) and Communication Services ( XLC +2.52%) were the best performing sectors with Energy passing Communications in the last 30 minutes of trading. Keeping an eye on Technology ( XLK +1.67%), it had decent gains today ahead of some important earnings announcements. Consumer Staples ( XLP -0.03%) and Health ( XLV -0.82%) were the only two sectors with losses.

The VIX volatility index increased finally took a step back, losing -6.68%, but the close remains above the September numbers.

Bonds

Treasury Bond spreads increased for the day. The spreads are in an upward trend channel from an August pivot .

Market Leaders

The mega-caps all faired well after yesterday’s selling. Apple AAPL +3.71%), Amazon ( AMZN +1.52%) Microsoft MSFT +1.01%) and Google GOOG +3.34%) had significant gains as did the majority of mega cap companies. Pinterest (PINS +26.92%) followed up great earnings with a huge gain, trying to keep up with rival Snap (SNAP -1.49%) which had is starting to build a base after the huge gains from last week. Lots of growth stocks had good gains on the day. Shopify (SHOP -4.84%) and Spotify (SPOT -3.36%) retreated heading into earnings .


So let’s talk about earnings . All of the big tech companies that released earnings reports today, beat expectations. Apple Google , Amazon, Facebook all had good reports compared to expectations, yet except for Google they sold off in after hours. The same story played out for Shopify. Spotify missed slightly but had great customer adds data. Apple had higher revenue but low performance in China and no guidance. The market, not willing to stomach that, sold off AAPL over -4% in after hours. Facebook is down -2.88% after market, Amazon is down -1.81%. This is also a continuation of earnings beats earlier in the week that have seen losses in the stock price. Investors are looking for the extremely good beats and expectations like the ones we saw from Snap and Pinterest.

Looking ahead to Tomorrow

Tomorrow will be a big day for Energy as Exxon Mobile ( XOM +4.43%) and Chevron ( CVX +2.87%) will announce earnings before market open. In addition, a plethora of other large cap companies will report before market open. Employment Wages and Personal Consumption Expenditures aren’t expected to have much impact in the context to this week’s other economic indicators and impact of earnings reactions. We already know people are spending more while earning less based on other economic indicators.

Trends, Support and Resistance

As I stated in yesterday’s update, I removed the trend lines from 9/3 and 9/24 which were having less and less relevance since we pivoted on 10/12 and are approaching the lows of September. For tomorrow, the one day trend line would point to a +2.30% gain that breaks back above the key 21d EMA and 50d MA that often act as support or resistance.

Continuing the trend from the 10/12 pivot day as well ad the last five days would result in a -1.06% drop . This is where the trend line points to, but it’s reasonable to believe a continued loss for Friday and into Monday that would take us to the 10,600 support level . Breaking through this area would be dangerous as there is not much trading activity in the second half of the year in between that line and the June support area of 10,000. I have added back the future possibility of reaching that line, a -9.41% loss from today’s close. This downward trend seems to be how the market is heading into the election on Tuesday. Following Tuesday, we could finally see a turn for the better.

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