Daily Market Update for 4/5

Original Chart

Trend lines drawn from the 3/5 low (21d), 3/29 (5d) and today 4/5 (1d).

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

Monday, April 5, 2021

Facts: +1.67%, Volume lower, Closing range: 94% (w/Gap), Body: +80%
Good: Three positive days in a row, above 13,700 confirmed with a quick retest
Bad: Lowering volume
Highs/Lows: Higher high, higher low
Candle: Gap up, mostly green body with a slightly longer upper wick
Advance/Decline: About the same number of advancing as declining stocks.
Indexes:SPX (+1.44%), DJI (+1.13%), RUT (+0.49%), VIX (+3.35%)
Sectors: Consumer Discretionary ( XLY +2.27%) and Communications ( XLC +2.11%) were top. Energy ( XLE -2.39%) was the only declining sector.
Expectation: Higher

Market Overview

The markets set new records on Monday led by gains from the largest public companies in Consumer Discretionary, Communications and Technology. The S&P 500 and Dow Jones Industrial marked new all-time highs with a bullish session that began the day with opening gap ups.

The Nasdaq closed the day with a +1.67% gain on lower volume . The closing range of 94% includes the morning gap-up that led to an 80% green body. A minor fade in the afternoon created a slightly longer upper wick than the lower wick but the higher high and higher low continue a strong uptrend from last week’s pivot . There were about the same number of gaining stocks as declining stocks.

The S&P 500 (SPX) gained +1.44% for the day. The Dow Jones Industrial average (DJI) gained +1.13%. Small caps also had gains, but not quite as strong as the large and mega-caps. The Russell 2000 (RUT) gains +0.49%.

The VIX volatility index advanced +3.35%.

Consumer Discretionary ( XLY +2.27%) , Communications ( XLC +2.11%) and Technology ( XLK +2.07%) are all worth mentioning as the top sectors. They were the three to outperform the SPX which means they were also responsible for much of the gains in the broader index. All three were led higher by at least one of the top ten mega-caps. Energy ( XLE -2.39%) was the only losing sector of the day due to a drop in crude oil prices.

Economic Indicators

The US Dollar DXY ) declined -0.47% adding support to large multi-nationals.

The US 30y treasury bond and 10y note yields rose slightly for the day, but seem under control. 2y notes yields rose a bit more and narrowed the spread between short and long term.

High Yield Corporate Bond ( HYG ) prices rose while Investment Grade Corporate Bond ( LQD ) prices declined. Both are in an uptrend.

Silver SILVER ) and Gold GOLD ) both declined slightly but seem to have support. Crude Oil (CRUDEOIL1!) futures declined as OPEC decided to increase production but then the pandemic seems to be worsening in Europe. Timber (WOOD) advanced Copper (COPPER1!) advanced while Aluminum (ALI1!) remained flat. The soaring commodity prices show recovering demand in the economy, but could also be sign of coming inflation .

Investor Sentiment

The put/call ratio dropped to 0.501. 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 moved more toward the greed side.

Market Leaders

The biggest four mega-caps produced some eye-popping charts today. Microsoft MSFT ) and Alphabet GOOGL ) broke out into new all-time highs with +2.77% and +4.19% gains. Both are trading above their 21d EMA and 50d MA lines. Amazon (AMAZN) gained +2.08% and moved back above the 50d MA, and trades above both lines as well. Apple AAPL ) gained a respectable +2.36%, but still has some work to do to get above the 50d MA.

Tesla TSLA ) found its way to the top of the mega-cap list after announcing record production and deliveries for the last quarter. Intel INTC ), Oracle ORCL ), Facebook FB ) and Alphabet all have gains of over 3% helping their respective sectors lead for the day. At the bottom of the list is Chevron ( CVX ) and Exxon Mobile ( XOM ).

The growth stock list is a bit harder to decipher. Results are mixed and overall lean toward losses. Outside of Tesla and Facebook topping the list, Pinterest (PINS), Dr Horton ( DHI ) and Zynga ZNGA ) had leading gains for the day. However, a good number of growth stocks had more than 2% losses for the day with Enphase ( ENPH ), Etsy ETSY ) , Solar Edge ( SEDG ) and DataDog DDOG ) leading the declines with more than 4% losses.

As the market turns toward a new rally, expect investors to be figuring out who the new winners and losers will be in the economic recovery.

Looking ahead

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 are no notable earnings reports for Tuesday except maybe PAYX that could confirm a positive outlook for the labor market.

Trends, Support and Resistance

The index moved above the 13,600-13,700 support area and stayed above despite a quick retest.

If the one-day trend continues, we can expect a +1.64% gain for Tuesday. The five-day trend line points to a +0.57% gain.

The trend line from the 3/5 low points to a -2.62% loss, which is below the 50d MA and just above the 21d EMA . There are some gaps to fill in the last few session opens, so it would not be a big surprise to revisit these areas. However, there is support at the 13,700 line and the 50d MA which could help reverse any dips.

Wrap-up

Big tech showed up again last Wednesday afternoon but faded into close. It can back with a vengeance on Thursday and now is proving they are here to stay. Having Microsoft and Alphabet clear new all-time highs is a positive. There’s no overhead supply for them to contend with for further gains.

On the other hand, there are plenty of other mega-caps and growth stocks alike that need to claw their way back to all-time highs. The overhead supply, investors holding since prior to the dips, will cause some resistance as the sell on the way back up.

The final characteristic from today is in deciphering investor sentiment for growth stocks. Some of the stocks that seemed poised to recover quickly pulled back again today despite the broader gains. Investors must be deciding which companies are the most likely to benefit from the recovering economy and new infrastructure proposals being debated in congress.

Stay healthy and trade safe!

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