Daily Market Update for 4/6

Original Chart

Trend lines drawn from the 3/5 low (22d), 3/30 (5d) and today 4/6 (1d).

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

Tuesday, April 6, 2021

Facts: -0.05%, Volume lower, Closing range: 24%, Body: +16%
Good: Higher high, higher low, held support around 13,700
Bad: Long upper shadow from afternoon selling
Highs/Lows: Higher high, higher low
Candle: Long upper shadow above a thin green body
Advance/Decline: About three declining for every two advancing stocks.
Indexes:SPX (-0.10%), DJI (-0.29%), RUT (-0.25%), VIX (+1.17%)
Sectors: Utilities ( XLU +0.53%) and Consumer Discretionary ( XLY +0.43%) were top. Health Services ( XLV -0.38%) and Technology ( XLK -0.43%)
Expectation: Sideways or Higher

Market Overview

There was caution in the market on Tuesday after several days of record setting gains. Investors are monitoring the progress of infrastructure plans and the potential for new taxes. At the same time, the pandemic keeps popping up new fears as Canada declares a very serious third wave.

The Nasdaq closed with a small -0.05% loss, after climbing 0.5% in the morning. The closing range of 24% is above a thin 16% body signaling indecision. The long upper wick was formed from a morning rally that sold off in the afternoon. Still, the index seemed to have support around the 13,700 area, testing the area twice and settling just below the line at the close. There were 3 declining stocks for every 2 advancing stocks.

The S&P 500 closed the day with a -0.10% after setting another all-time high in the morning. The Dow Jones Industrial average (DJI) and Russell 2000 (RUT) both delivered inside days (lower high, higher low) with -0.29% and -0.25% declines.

The VIX volatility index advanced +1.17%.

The sectors show a clear shift in investor sentiment about an hour after open. Energy was leading the sector list in the morning before a downgrade of Chevron by Goldman Sachs. The downgrade doesn’t explain it all as Exxon Mobil and oil prices also came down from morning highs.

The other signal of investor nervousness was the shift of Utilities ( XLU ) from the bottom sector in the morning to the top sector at close. The only other sector that seemed to react to the change in sentiment was Financials ( XLF ) likely as investors bought up treasuries and brought long term yields down.

Utilities ( XLU ) and Consumer Discretionary ( XLY ) ended the day at the top sector list. Health Services ( XLV ) and Technology ( XLK ) ended the day at the bottom.

Economic Indicators

The US Dollar DXY ) declined -0.29% but did not seem to be impacted by the morning change in sentiment.

The US 30y treasury bond and 10y note yields both declined for the day while 2y note yields rose. The yield curve continues to flatten.

High Yield Corporate Bond ( HYG ) and Investment Grade Corporate Bond ( LQD ) prices advanced and continue in an uptrend.

Silver SILVER ) and Gold GOLD ) both advanced Crude Oil (CRUDEOIL1!) ended the day with gains, despite pulling back from morning highs. Timber (WOOD) advanced Copper (COPPER1!) declined while Aluminum (ALI1!) advanced . All are still showing strong demand.

Investor Sentiment

The put/call ratio ended the day at 0.523. 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 remained about the same, on the greed side.

Market Leaders

Among the big four mega-caps, only Apple AAPL ) ended the day with gains. However the declines across the other three were not enough to invalidate breakouts. With the big gains over the previous three sessions, there should be no surprise for prices to pause here. Microsoft MSFT ), Amazon ( AMZN ) and Alphabet GOOGL ) are all trading above both key moving average lines (the 21d EMA and 50d MA). Apple hit resistance at the 50d MA and closed below the line.

Alibaba (BABA), Nike NIKE ) and AT&T (T) were some of the top mega-cap gainers for the day. At the bottom were Intel INTC ), United Health ( UNH ), Taiwan Semiconductor ( TSM ) and ASML Holding ( ASML ).

Most of the growth stocks in the daily update list had gains for the day. Top winners were ROKU (ROKU), UP Fintech ( TIGR ), Ehang Holdings (EH) and DataDog DDOG ). Investors still seem a bit uncertain which of these growth names will benefit with the economic recovery as they still chop back and forth regularly. For example Zynga ZNGA ) was near the top of the list yesterday, and at the bottom of the list today. DataDog at the bottom of the list yesterday and near the top today.

Looking ahead

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.

There are no notable earnings reports for Wednesday for the daily update.

Trends, Support and Resistance

The index still has support in the 13,600-13,700 area and stayed above it after two tests today.

The five-day trend line points to a +2.10% gain on Wednesday. The one-day trend line is nearly flat and points to a sideways move tomorrow.

The trend line from the 3/5 low points to a -1.90% loss, which is just above the 50d MA.

Wrap-up

Investors showed some nervousness today mid-morning, changing momentum in the market for several sectors. Despite the switch in sentiment, key areas of support held and we could view the day’s result as a pause during a fairly aggressive uptrend the past few days.

Still, the candle itself has that appearance of a shooting star that signals the end of an uptrend. So it could be things need to move sideways a bit here or even pull back once more before proceeding. With the overall economic situation continuing to approve, more upside seems in the future, but only the market can tell us when it will happen.

Stay healthy and trade safe!

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