Daily Market Update for 4/19

Original Chart

Notes

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

Monday, April 19, 2021

Facts: -0.98%, Volume lower, Closing range: 36%, Body: 35%
Good: Afternoon support after hitting 13,850
Bad: Lower high, lower low, back below 14,000 line
Highs/Lows: Lower high, lower low
Candle: Body in the middle of candle, about equal upper and lower wicks
Advance/Decline: Almost four declining stocks for every advancing stock
Indexes:SPX (-0.53%), DJI (-0.36%), RUT (-1.36%), VIX (+6.40%)
Sectors: Real Estate ( XLRE +0.31%) and Health ( XLV +0.02%) were only gaining sectors. Technology ( XLK -0.83%) and Consumer Discretionary ( XLY -1.12%) were bottom.
Expectation: Sideways or Lower

Market Overview

After closing last week at record highs, it’s reasonable that the equity markets pull back a bit before advancing again. That pull back came abruptly as the session opened in the morning but the markets found some support heading into the afternoon.

The Nasdaq declined -0.98% on lower volume for the day. The upper wick formed in the first 15 minutes of trading, The declines came mostly in the morning, forming the lower wick. The candle finished the day with a 36% closing range at the bottom of a red 35% body in the center of the candle. There were almost 4 declining stocks for every one advancing stock on a day of lower highs and lower lows.

All four major indexes tracked in the daily update declined for the day with the small cap Russell 2000 (RUT) having the worst performance, losing -1.36% and dropping back to the bottom of a two week base. The S&P 500 (SPX) declined -0.53%. The Dow Jones Industrial average (DJI) declined -0.36%.

The VIX volatility index dropped another +6.40%.

Real Estate ( XLRE +0.31%) and Health ( XLV +0.02%) were only gaining sectors for the day. Technology ( XLK -0.83%) and Consumer Discretionary ( XLY -1.12%) were bottom. Communications ( XLC -0.56%) joined the latter two as the three sectors that underperformed the S&P 500 index .

Economic Indicators

The US Dollar DXY ) continues its downward trend with a -0.58% decline today.

The US 30y treasury bond and the US 10y treasury note yield advanced while the 2y note yield declined for the day.

High Yield Corporate Bond ( HYG ) and Investment Grade Corporate Bond ( LQD ) prices declined for the day.

Silver SILVER ) and Gold GOLD ) both declined. Crude Oil (CRUDEOIL1!) advanced . Timber (WOOD) remained about flat after Friday’s huge gain. Copper (COPPER1!) and Aluminum (ALI1!) both advanced .

Investor Sentiment

The put/call ratio ended the day higher at 0.679. 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 still on the greed side, despite the pullbacks in the market.

Market Leaders

Apple AAPL ) and Alphabet GOOGL ) both gained for the day while Microsoft MSFT ) and Amazon ( AMZN ) declined. They all are still trading within a forming base after multiple weeks of gains. Moving average lines look good and they seem to be building support for a move higher.

Netflix NFLX ) topped the mega-cap list ahead of tomorrow’s earnings release. Pfizer PFE ), Coca-Cola (KO) and Apple AAPL ) round out the top four. At the bottom of the list are ASML Holding ( ASML ), Taiwan Semiconductor ( TSM ), Tesla TSLA ) and Nvidia NVDA ). That majority of mega-caps declined for the day.

The same was true for growth stocks, with most in the daily update list declining. Top gainers included FUTU Holdings ( FUTU ), UP Fintech ( TIGR ), NIO NIO ) and RH RH ). Those names look familiar as I noted they swung between the top and the bottom of the list on a daily basis last week. At the bottom of the growth list today are Chewy CHWY ), PENN National gaming ( PENN ), Peloton (PTON), and Ehang Holdings (EH), all with more than 6% declines.

Looking ahead

Tuesday’s economic calendar is light. The API weekly crude oil stock update will come at market close.

Johnson & Johnson JNJ ) and Proctor & Gamble ( PG ) will both release earnings on Tuesday. They will be joined by Netflix NFLX ), Abbot Labs ( ABT ), Philip Morris (PM) and Lockheed Martin LMT ).

Trends, Support and Resistance

The index dropped back below the 14,000 line. We want to see it get back above that point and stay above it to work toward new all-time highs.

The five-day trend line points to a +0.76% gain, above 14,000. The trend line from the 3/5 low points to +0.40% gain, just below 14,000.

The one-day trend line points to a -0.88% decline, if today’s selling continues.

Wrap-up

The pullback today shouldn’t be a huge surprise as the mega-caps and the major indexes are making big weekly gains and investors are likely wanting to protect some profits. There has not been broad support across the index with the advance/decline line remaining under 1.0 for a seventh session in a row.

Some of this could also be from jitters in the market that some of the crazy retail volatility is still lurking. You can see this from the Dogecoin frenzy over the weekend. Stocks like AMC and GME still continue to hold high valuations compared to where analysts would price them, but other popular stocks with retail investors are losing steam. As retail investors tire of losses, they’ll add to the selling.

Looking forward, I would think we’d still see some sideways movement or even more pullback. To really see the index reach new highs, we’ll need more juice from the mega-caps and also more broadly shared advances across segments.

Stay healthy and trade safe!

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