Daily Market Update for 4/01

Original Chart

Trend lines drawn from the 3/5 low (20d), 3/26 (5d) and today 4/1 (1d).

Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.

Thursday, April 1, 2021

Facts: +1.76%, Volume lower, Closing range: 96% (w/ Gap), Body: +79%
Good: Rally above and stayed above 50d MA
Bad: Flat after initial rally
Highs/Lows: Higher high, higher low
Candle: Gap up, Mostly green body with barely visible upper and lower wicks.
Advance/Decline: Two advancing stocks for every declining stock
Indexes: SPX (+1.18%), DJI (+0.52%), RUT (+1.50%), VIX (-10.67%)
Sectors: Energy ( XLE +2.55%) and Technology ( XLK +2.01%) were top. Health ( XLV -0.30%) and Consumer Staples ( XLP -0.48%) were bottom.

Expectation: Sideways or Higher

Market Overview

Hello April and Q2! The Nasdaq leapt into the new month and quarter with a gap up and rise above the 50d moving average while the S&P 5000 closed over 4000 for the first time in history. Solid breakouts from big tech and a breadth of gains across indexes and sectors helped put strength behind the moves.

The Nasdaq closed with a +1.76% gain on lower volume . The 96% closing range includes the gap and represents a quick rise in the morning that leveled off but never gave back the gains. The 79% body includes a few tests of the 50d MA in intraday trading, but support held. There were two advancing stocks for every declining stock.

The S&P 500 (SPX) set a milestone , advancing +1.18%, to close above 4000 for the first time ever. The Russell 2000 (RUT) put in its third day of gains with a +1.50% advance. The Dow Joins Industrial (DJI) average climbed +0.52%.

The VIX volatility index declined -10.67% to close at its lowest point since before the pandemic.

Energy ( XLE +2.55%) topped the sector list as crude oil prices spiked on better than expected inventory data for Crude and Gasoline, demonstrating high demand. Technology ( XLK +2.01%) also topped the sector list, boosted by big tech gains from Microsoft and Apple and generally great performance across the entire sector. Health ( XLV -0.30%) and Consumer Staples ( XLP -0.48%) were at the bottom of the list. Utilities ( XLU -0.09%) was also at the bottom of the list, not participating in the gains.

Economic Indicators

The US Dollar DXY ) declined -0.02% and has leveled off from recent gains, helping alleviate some risk for large multi-nationals.

The US 30y treasury bond and 10y note yields both dropped while the 2y note yield rose, helping bring back down the steep yield curve.

High Yield Corporate Bond ( HYG ) prices pulled back from recent gains while Investment Grade Corporate Bond ( LQD ) prices continued to advance.

Silver SILVER ) and Gold GOLD ) both continued to advance. Crude Oil (CRUDEOIL1!) advanced . Timber (WOOD) advanced Copper (COPPER1!) and Aluminum (ALI1!) advanced . All of this shows a bullish outlook on the economy.

Investor Sentiment

The put/call ratio dropped to 0.538. The put/call ratio ( PCCE ) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish ) and below, watch for a possible pullback in the market.

The CNN Fear & Greed index is moving back toward Greed, but not at an extreme level.

Market Leaders

All of biggest four mega-caps had gains for the day, gains that had a lot more strength than the previous day. Alphabet GOOGL ) had the largest gain of the four with a +3.26% advance and a record-setting close. Microsoft MSFT ) couldn’t quite reach all-time highs but advanced +2.79% in a clear breakout from a base. Amazon ( AMZN ) had a +2.16% gain but stopped short of its 50d MA line. Apple AAPL advanced +0.70%, closing just above its 21d EMA but well below its 50d MA.

Semiconductors and Communication stocks topped the mega-cap list. Taiwan Semiconductor ( TSM Nvidia NVDA ), Netflix NFLX ) and Alphabet were the top four gainers. Most mega-caps advanced for the day. UnitedHealth ( UNH ), Toyota Motor â„¢ and Alibaba (BABA) were at the bottom of the list, all declining more than 1%.

Growth Stocks also had a good day. Topping the daily update list were MongoDB MDB ), Pinterest (PINS), DataDog DDOG ) and Fastly FSLY ). All four of these sold off heavily in February and March and are trying to regain ground. At the bottom of the list were Chewy CHWY ), Ehang Holdings (EH) and FUTU Holdings ( FUTU ).

Looking ahead

Markets are closed on Good Friday, but employment data will be released. At the time of this writing, the data is already released and showed great recovery in the labor market.

Monday will kick-off the week with Purchasing Managers data for March that is a leading indicator for economic activity. That data will be complemented by Factor Orders data just after market open.

There are no notable earnings reports for the daily update next week except maybe PAYX on Tuesday that could confirm a positive outlook for the labor market.

Trends, Support and Resistance

The index moved above the 50d moving average in the morning and stayed above the line.

The five-day trend line points to a +0.47% gain for Monday. The one-day trend line points sideways to a minor -0.05% decline and stays above the 50d MA line.

The trend line from the 3/5 low points to a -1.67% loss, which below the 50d MA and just above the 21d EMA .

Wrap-up

The expectation was higher for today. Thankfully the market didn’t pull an April Fools.

Thursday was the kind of day we want to see as a new month and new quarter starts. Gains across all the indexes and most of the sectors. Volatility at its lowest in over a year. Energy and Technology leading the sector list. Solid moves from the large mega-caps. Commodity prices advanced on expected demand. The US Dollar is strengthening but not out of control. The yield curve is starting to show some control.

The only thing missing was volume . It was lower than the previous day. However, that may also be a positive sign as volume has been running high since the beginning of December and peaked in February. Maybe, just maybe, some of the frenzy of retail investing as subsided and volume is coming back down to normal levels. Maybe, just maybe, lower volume means continued lower volatility as well.

That looks good, but things can change quickly, so always trade with a stop loss. 🙂

Stay healthy and trade safe!

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