Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
Wednesday, April 14, 2021
Facts: -0.99%, Volume lower, Closing range: 10%, Body: 75%
Good: Higher high, pullback is on lower volume
Bad: Selling almost entire day, couldn’t hold above 14,000
Highs/Lows: Higher high, lower low
Candle: Outside day, candle is mostly body with a longer upper wick from a rally at open
Advance/Decline: Slightly more declining stocks than advancing stocks
Indexes:SPX (-0.41%), DJI (+0.16%), RUT (+0.84%), VIX (+2.04%)
Sectors: Energy (+2.78%) and Materials (+0.72%) were top. Communications (-1.03%) and Technology ( XLK -1.06%) were bottom.
Expectation: Sideways or Lower
The cyclicals moved back to the top of the sector list as investors were motivated by positive import/export data and crude oil inventories. The data provided a good reason for investors to rotate back into the cyclical sectors after chasing gains in big tech over the past few weeks.
The Nasdaq pulled back from recent gains, closing the day with a -0.99% decline on lower volume . The 75% red body represents a day for the bears that ended in a 10% closing range. The index set a higher high in the morning but ended the day with a lower low, providing an outside bearish candle. There were more declining stocks than advancing stocks.
The S&P 500 (SPX) declined -0.41% for the day after setting a new all-time high. The Dow Jones Industrial average (DJI) also set a new all-time high and closed the day with a +0.16% gain, but the close was well below the intraday high. The Russell 2000 (RUT) preformed the best for the day with a +0.84% gain, but also closed below intraday highs.
Cyclical stocks were at the top o fthe sector list. Energy (+2.78%) and Materials (+0.72%) were the best performing. Energy was driven to the top by higher than expected demand for crude oil . Financials (+0.60%) also performed well, helped by earnings beats by big finance companies announced before market open. The big growth sectors of Communications (-1.03%) and Technology ( XLK -1.06%) that drove recent gains, were at the bottom of today’s sector list.
The US 30y treasury bond yield, and US 10y and 2y note yields all gained for the day.
Silver ( SILVER ) advanced while Gold ( GOLD ) declined. Crude Oil (CRUDEOIL1!) had a huge advance after data showed a surprisingly level of demand. Timber (WOOD) advanced slightly. Copper (COPPER1!) and Aluminum (ALI1!) both advanced . The outlook for economic activity, showing by the positive import/export data, is driving these prices higher along with the cyclical sectors.
The put/call ratio ended the day at 0.566. 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 in the neutral area, moving just a bit to the fear side.
All four big mega-caps declined for the day. I’ve been mentioning how extended they’ve gotten over the past two weeks, so a pullback is not a surprise, nor is it bad thing. Apple ( AAPL ) declined -1.79% but finally had its 21d EMA cross above the 50d MA, further confirming an uptrend for the stock. Microsoft ( MSFT ) declined -1.12%. Amazon ( AMZN ) declined -1.97%. Alphabet ( GOOGL ) declined -0.56%. Alphabet was already developing a based and may be the first to make the next breakout higher.
Exxon Mobil ( XOM ) and Chevron ( CVX ) topped the mega-cap list, driving the Energy sector performance for the day. PetroChina ( PTR ) and Bank of America ( BAC ) were also near the top. At the bottom of the list were Tesla ( TSLA ), PayPal ( PYPL ), Nvidia ( NVDA ) and Neftlix ( NFLX ).
The majority of the growth stock list had declines for the day. The biggest gainers in our list were UP Fintech ( TIGR ), Moderna ( MRNA ), FUTU Holdings ( FUTU ) and Fastly ( FSLY ). GrowGeneration ( GRWG ), Palantir ( PLTR ), Square ( SQ ) and Digital Turbine (APPS) were the biggest losers with more than 5% declines.
Investor’s attention was on the Coinbase (COIN) debut today with a 40% swing in prices from lows to highs and a close that was 23% below the intraday high.
Thursday has several economic data releases. Initial Jobless Claims data before the market opens will hopefully recover a bit from last week’s negative surprise. Retail Sales data for March should show an improvement over the February numbers that were brought down by weather events. The Manufacturing Index data and Industrial Production data will also be leading indicators on the recovery of economic activity.
The Financial sector earnings reports will include Bank of America ( BAC ), Citigroup (C), Charles Schwab ( SCHW ) and BlackRock ( BLK ). Taiwan Semiconductor ( TSM ), UnitedHealth ( UNH ), Delta Airlines (DAL) will also be closely watched earnings reports for the day.
Trends, Support and Resistance
The index popped above the 14,000 line briefly today before selling off the rest of the day. That type of round-number resistance is not unexpected as investors tend to place conditional rules at round numbers.
The five-day trend line points to a +1.30% gain for Thursday, back above 14,000.
The trend line from the 3/5 low points to a -0.33% as the index regresses back to the center line. The one-day trend line points to a -1.25% loss tomorrow which would leave the index around the 13,700 support area .
In the previous few updates, we recognized that the big tech and mega-cap names that were driving gains were also getting quite extended. As rotations go, investors took profits and moved them into the next opportunity for some gains which is the cyclicals and recovery stocks.
There is still some room for the mega-caps to pause and let moving average lines catch up with the recent gains. The expectation is for sideways or lower for tomorrow, but gains across a much broader set of stocks in the Nasdaq would be very welcome and healthy for the current bull market.
Stay healthy and trade safe!
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