Daily Market Update for 5/24

Original Chart

Notes

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

Monday, May 24, 2021

Facts: +1.41%, Volume lower, Closing range: 70%, Body: 66%
Good: Higher high, higher low, high closing range
Bad: Upper wick from fade before close, lower volume , A/D ratio
Highs/Lows: Higher high, higher low
Candle: Large green body under a long upper wick. No lower wick.
Advanced/Decline: More declining stocks than advancing stocks.
Indexes:SPX (+0.99%), DJI (+0.54%), RUT (+0.54%), VIX (-7.73%)
Sectors: Communications ( XLC +1.82%) and Technology ( XLK +1.78%) were top. Health ( XLV +0.10%) and Utilities ( XLU -0.18%) were bottom.
Expectation: Sideways or Higher

Market Overview

The Fed made new promises today to keep an easy monetary policy , helping boost growth stocks. Stocks that suffered from inflation fears were the ones that had the most gains today.

The Nasdaq rose +1.41%, but on lower volume for the day. The closing range of 70% results from a fade in prices before close, but the candle still has a 66% green body from the bullish day. Despite the bullish day in the indexes, there were more declining stocks than advancing stocks.

The S&P 500 (SPX) advanced +0.99%. The Dow Jones Industrial Average (DJI) gained +0.54%. The Russell 2000 (RUT) also rose +0.54% for the day.

The VIXvolatility index declined -7.73%.

Communications ( XLC +1.82%) and Technology ( XLK +1.78%) were the top sectors for the day. They were far above the next best sector, Real Estate ( XLRE +1.09%). Utilities ( XLU -0.18%) was the only declining sector for today.

Economic Indicators

The US Dollar DXY ) declined -0.21%.

The US 30y and 10y Treasury yields declined while the 2y treasure yield advanced .

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

Silver SILVER advanced Gold GOLD ) was flat.
Crude Oil (CRUDEOIL1!) advanced .
Timber (WOOD) declined.
Copper (COPPER1!) and Aluminum (ALI1!) advanced .

Bitcoin BTCUSD advanced 11.91%. Ethereum ETHUSD advanced +26.37%. Both reversed after huge drops over the weekend.

Investor Sentiment

The put/call ratio dropped to 0.616. 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. Below that level is overly bullish .

The CNN Fear & Greed index is moving more into the fear zone.

Market Leaders

All four largest mega-caps advanced today. Alphabet GOOGL ) had the biggest gain with a +2.92% advance, helping Communications to the top of the sector list. Microsoft MSFT ) climbed +2.29%. Both Microsoft and Alphabet are trading above their 21d EMA and 50d MA lines. Apple AAPL ) and Amazon ( AMZN ) are still looking for a solid move above those lines but could gain +1.33% and 1.31%, respectively.

Tesla TSLA ), Nvidia NVDA ), ASML Holding ( ASML ), Alphabet Facebook FB ), and PayPal ( PYPL ) all gained over 2.5%, topping the mega-cap list. AT&T (T), Pfizer PFE ), Home Depot (HD), and Alibaba (BABA) were at the bottom of the list.

Growth stocks benefited from the new confidence in the Fed today. The top of the daily update list includes Beyond Meat BYND ), DraftKings DKNG ), SNAP Inc. (SNAP), and Chewy CHWY ), all with gains of over 5.5%. JD .com ( JD ), UP Fintech ( TIGR ), Etsy ETSY ), and GrowGeneration GRWG ) did not fare as well, declining more than 1% each.

Looking ahead

Consumer Confidence and New Home Sales numbers will be released after the market opens on Tuesday.

Intuit INTU ), AutoZone (AZO), Zscaler (ZS), Nordstrom JWN ), MakeMyTrip MMYT ), and UP Fintech ( TIGR ) will release earnings updates.

Trends, Support, and Resistance

The index rose above the 21d EMA and 50d MA today before hitting resistance at 13,700 and fading into close. Staying above the key moving average lines would help the index move back towards 14,000 and all-time highs.

The one-day and five-day trend-lines point to a +0.27% to +0.53% advance for tomorrow.

The trend-line from the 4/2 high shows a -3.18% decline on Tuesday.

Wrap-up

Investors were happy to hear from Fed members today, reiterating the need for continued easy monetary policy . The result was a rush back into stocks that were severely beaten down on inflation fears. But the result was more declining stocks than advancing stocks and lower volume .

Based on the higher high and higher low today, it’s fair to expect another move higher tomorrow. But the move would give more confidence if it comes with breadth and higher volume .

Stay healthy and trade safe!

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