Daily Market Update for 4/20

Original Chart

Notes

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

Tuesday, April 20, 2021

Facts: -0.92%, Volume lower, Closing range: 38%, Body: 47%
Good: Support at 21d EMA and 13,700 area
Bad: Closing range from morning sell-off
Highs/Lows: Lower high, lower low
Candle: Thick red body with a longer lower wick
Advance/Decline: Almost five declining stocks for every advancing stock
Indexes:SPX (-0.68%), DJI (-0.75%), RUT (-1.96%), VIX (+8.00%)
Sectors: Utilities ( XLU +1.27%) and Real Estate ( XLRE +1.11%) were the top sectors. Financials ( XLF -1.87%) and Energy ( XLE -2.65%) were bottom.
Expectation: Sideways or Lower

Market Overview

The market continued to pull back for another day as investors begin to absorb more earnings reports. Those results and the guidance not only impact to their respective stock prices but also indicate what parts of the economy are recovering faster or slower.

The Nasdaq closed down -0.92% on lower volume with a closing range of 38%. That closing range came after heavy morning selling, a bounce off the 21d EMA and a few tests of the 13,700 area. The index find support there and rallied a bit into close to finish with a thick red 47% red body over a longer lower wick. There were almost five declining stocks for every advancing stock.

The Russell 2000 (RUT) led the losses for the major indexes with a -1.96% decline. The S&P 500 (SPX) declined -0.68% and the Dow Jones Industrial average (DJI) declined -0.75%.

The VIX volatility index gained another +6.40%.

Utilities ( XLU +1.27%) and Real Estate ( XLRE +1.11%) were the top sectors. Consumer Staples ( XLP +0.55%) and Health Services ( XLV +0.39%) were the only other gaining sectors. Financials ( XLF -1.87%) and Energy ( XLE -2.65%) were bottom.

Economic Indicators

The US Dollar DXY ) gained +0.13%.

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

High Yield Corporate Bond ( HYG ) prices declined while Investment Grade Corporate Bond ( LQD ) prices advanced .

Silver SILVER ) was flat while Gold GOLD advanced Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) declined on news that demand would retreat later in the year. Copper (COPPER1!) was flat while Aluminum (ALI1!) declined.

Investor Sentiment

The put/call ratio remained 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

All four big mega-caps declined for the day. Apple AAPL ) lost -1.28%, Amazon ( AMZN ) lost -1.11%, Alphabet GOOGL ) lost -0.47%, and Microsoft MSFT ) lost -0.19%. All bases are still intact and these mega-caps are trading well above their 21d EMA and 50d MA.

Johnson & Johnson JNJ ) topped the mega-cap list with UnitedHealth ( UNH ), Procter & Gamble PG ) and Walmart ( WMT ) filling out the top four mega-cap performers. At the bottom of the list are Nike NKE ), Abbott Labs ABT ), Bank of America ( BAC ) and Walt Disney (DIS).

It was another tough day for growth stocks with only a handful in the daily update list advancing for the day. Enphase ( ENPH ) climbed 4.15% after getting analyst upgrades today. Other top growth stock gainers were Tesla TSLA ), NIO NIO ) and Facebook FB ), but the gains were not huge. FUTU FUTU ) followed up yesterday’s big gain with a huge loss of -23.43% after the company announced a secondary issue of stock. UP Fintech ( TIGR ) also lost -14.10% for the day. SUMO Logic (SUMO) and DataDog DDOG ) were other growth stock losers for the day.

Looking ahead

Wednesday, additional crude oil inventory data will be released in the morning. A 20y treasury bond auction will happen in the afternoon.

On Wednesday, Roche Holding (RHBY), Verizon ( VZ ), Chipotle ( CMG ) will release earnings updates.

Trends, Support and Resistance

The index found support at the 13,700 area today and ended with a short rally.

The index is in the lower half of the regression trend channel from the 3/5 low. The midline points to +1.39% gain, just below 14,000.

The five-day trend line points to a -0.03% sideways move.

The one-day trend line points to a -1.31% decline.

Wrap-up

We’ve gone eight days on the Nasdaq where there are more declining stocks than advancing stocks. It’s clear the influence is still in the mega-caps. They are extended after a couple weeks of big gains, and may take some more time to form second stage bases and move up again.

More broadly, there is no indication that investor sentiment will change and end the pullback in small caps and growth stocks. Perhaps some earnings reports or economic news later this week can help (or hurt). For many of the growth stocks I follow, it doesn’t feel they could go much lower. But then again, it didn’t feel they could go any lower last week either.

Stay healthy and trade safe!

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