Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
Monday, April 26, 2021
Facts: +0.87%, Volume higher, Closing range: 89%, Body: 64%
Good: Move up on higher volume and broadly shared gains
Highs/Lows: Higher high, higher low
Candle: Longer lower wick from dip at open, short upper wick after testing new high
Advance/Decline: Three advancing stocks for every two declining stocks
Indexes:SPX (+0.18%), DJI (-0.18%), RUT (+1.15%), VIX (+1.79%)
Sectors: Energy ( XLE +0.67%) and Materials ( XLB +0.59%) were top. Utilities ( XLU -0.57%) and Consumer Staples ( XLP -1.12%) were bottom.
Momentum from the end of last week continued into Monday as markets open the week higher and the S&P 500 and Nasdaq set new records. There are some signs that investors are rotating out of safe bets and buying up speculative positions ahead of earnings reports.
The Nasdaq had a record-setting close, ending the with a +0.87% gain and fell just shy of setting a new all-time high price. Volume was higher and advancing stocks outnumbered declining stocks, great bullish signals for the rally. The closing range of 89% comes after a small dip before close. A longer lower wick was created by a dip just after open before the bulls quickly took over.
The S&P 500 also had a record-setting close, advancing +0.18%. The Russell 2000 (RUT) led the major indexes for a fourth day, gaining +1.15% as it attempts to climb back towards highs. The Dow Jones Industrial average (DJI) declined -0.18%.
Energy ( XLE +0.67%) and Materials ( XLB +0.59%) were the top sectors of the day. Financials ( XLF +0.40%) started the day in the lead, but faded thru the day. Utilities ( XLU -0.57%) and Consumer Staples ( XLP -1.12%) were at the bottom of the sector list.
The US 30y treasury bond and US 10y and 2y note yields all advanced for the day.
Silver ( SILVER ) and Gold ( GOLD ) advanced . Crude Oil (CRUDEOIL1!) advanced . Timber (WOOD) advanced . Copper (COPPER1!) and Aluminum (ALI1!) both advanced . Core Durable Goods orders for March indicate increased demand for commodities .
The put/call ratio dropped to 0.492. 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 remains just on the greed side of the neutral area.
All four biggest mega-caps gained today heading into earnings reports this week. Amazon ( AMZN ) gained +2.04%, nearing the top of a three week base. Apple ( AAPL ), Microsoft ( MSFT ) and Alphabet ( GOOGL ) had smaller gains but are also tempting breakouts from recent bases. Investors are optimistic for positive earnings reports from these giants.
Taiwan Semiconductor ( TSM ), PayPal ( PYPL ), Amazon ( AMZN ) and Nvidia ( NVDA ) topped the mega-cap list. Tesla ( TSLA ) also was near the top heading into an earnings report that beat but sent the stock back down after hours. Some of that may be jitters about safety issues domestically and controversy in China, but something a negative reaction to positive earnings is something to watch closely with other mega-cap earnings this week.
At the bottom of the mega-cap list were Walmart ( WMT ), Coca-Cola (KO), Pepsico ( PEP ) and Procter & Gamble ( PG ). These are the top four by cap in the consumer staples sector ( XLP ). Investors are rotating out of consumer staples and into riskier assets.
It was another good day for the growth stock list with almost all the stocks tracked by the daily update having gains. At the top of the list were Ehang Holdings (EH), MongoDb ( MDB ), GrowGeneration ( GRWG ) and UP Fintech ( TIGR ). At the bottom of the list were Twitter ( TWTR ), JD .com ( JD ), SNAP (SNAP) and Etsy ( ETSY ).
The House Price Index data on Tuesday will be interesting. It has been at its highest level since 2014. Higher prices are supposed to be bullish for the USD. Consumer Confidence data will be released just after market open. The API Weekly crude oil report will be released after close.
Probably more important than the economic news will be the earnings reports. On Tuesday, Microsoft ( MSFT ), Alphabet ( GOOGL ), Visa (V), Eli Lily ( LLY ), United Parcel Service (UPS), Starbucks ( SBUX ), General Electric ( GE ), 3M ( MMM ), AMD ( AMD ), ABB ( ABB ), Pinterest (PINS), Enphase ( ENPH ), and FireEye ( FEYE ).
Be sure to check your portfolio for earnings reports so you are not surprised.
Trends, Support and Resistance
The index neared the all-time high, stopped just short of it, but still set a record close.
The trend line from the 3/5 low, points to a -0.39% decline.
The speculation ahead of earnings reports is a bit obvious in Monday’s market movements. Rotations out of defensive plays and into growth sectors is coupled with a dip in the put/call ratio to an overly bullish level. Nonetheless, we have been waiting for a momentum signal of broad gains on higher volume .
But investors should be careful since the market may be pricing in the positive earnings ahead of the actual reports. The first example is Tesla beat expectations, but its price is dropping after hours. Tesla’s drop may be from other issues and not the earnings reports. But it could be that the market priced in the beat ahead of time and sold the news. If that continues throughout the week, it would be an ominous signal for big-tech and growth stocks.
Stay healthy and trade safe!
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