Daily Market Update for 5/26

Original Chart

Notes

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

Wednesday, May 26, 2021

Facts: +0.59%, Volume higher, Closing range: 83%, Body: 62%
Good: Higher volume with breadth of gains across index
Bad: No higher high
Highs/Lows: Lower high, higher low
Candle: Inside day. A shallow green body with the high and low within the previous day’s range.
Advanced/Decline: Two advancing stocks for every declining stock.
Indexes:SPX (+0.19%), DJI (+0.03%), RUT (+1.97%), VIX (-7.31%)
Sectors: Consumer Discretionary ( XLY +0.95%) and Energy ( XLE +0.89%) were top. Consumer Staples ( XLP -0.21%) and Health ( XLV -0.58%) were bottom.
Expectation: Sideways or Higher

Market Overview

Investors put their inflation worries aside today and jumped back into growth and small-cap stocks. The breadth of gains across stocks on higher volume in the indices shows the kind of accumulation we’ve wanted. There is still overhead supply to deal with among many growth stocks, but today is a move in the right direction.

The Nasdaq closed the day with a +0.59% gain on higher volume . The candlestick is an inside day where the high and low are within the high and low of the previous day. The closing range of 83% over a 62% green body represents a bullish day, but the narrow trading range exposes some remaining caution among investors. There were more than two advancing stocks for every declining stock.

Small caps and the Russell 2000 (RUT) performed well today. The RUT advanced +1.97%, bouncing back from yesterday’s decline. The S&P 500 (SPX) gained +0.59%. The Dow Jones Industrial Average (DJI) moved sideways with just a +0.03% gain.

The VIXvolatility index declined -7.31%.

Consumer Discretionary ( XLY +0.95%) and Energy ( XLE +0.89%) were the top sectors for the day. Energy got a boost from better than expected demand for oil . Only three sectors lost for the day. Technology ( XLK -0.01%) had a slight loss, which is significant on a day that the Nasdaq performed well. Consumer Staples ( XLP -0.21%) and Health ( XLV -0.58%) were today’s worst-performing sectors.

Economic Indicators

The US Dollar DXY ) climbed +0.42%.

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

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

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

Bitcoin BTCUSD advanced +2.37%. Ethereum ETHUSD advanced +6.85%.

Investor Sentiment

The put/call ratio dropped to 0.541. 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 still on the fear side.

Market Leaders

The four largest mega-caps had mixed results. Alphabet GOOGL ) rose +0.74% and put more room between the current price and the 21d EMA and 50d MA lines. Amazon ( AMZN advanced +0.19% and closed above the 21d EMA for the first time since the beginning of May. Apple AAPL ) lost -0.04% and remained below the two key moving average lines. Microsoft also declined, losing -0.09%, and created another doji style candle signaling indecision.

Tesla TSLA ), Comcast ( CMCSA ), Nike NKE ), and Taiwan Semiconductor ( TSM ) were the top mega-caps for the day, all gaining over 1.5%. Abbott Labs ABT ), Mastercard (MA), Pfizer PFE ), and ASML Holding ( ASML ) were at the bottom of the list.

Only two stocks in the daily update growth list declined for the day, Facebook FB ) and Pinterest (PINS). At the top of the list were Ehang Holdings (EH), UP Fintech ( TIGR ), Zscaler (ZS), and Lemonade LMND ), all gaining over 10%.

Looking ahead

On Thursday, Durable Goods orders data will get an update. We will also get the revised GDP numbers for Q1, which should align with the previously released numbers. Initial Jobless Claims and Pending Home Sales will also get an update.

Salesforce.com ( CRM ), Medtronic ( MDT ), Costco (COST), VMWare VMW ), Autodesk ADSK ), Dollar General (DG), Veeva Systems ( VEEV ), HP Inc HPQ ), Best Buy BBY ), Dollar Tree DLTR ), Burlington Stores (BURL), GameStop ( GME ), and Gap ( GPS ) release earnings on Thursday.

Trends, Support, and Resistance

The index moved above the 13,600 – 13,700 resistance area . That should become a support area as well.

Following the five-day trend-line would result in a +0.69% gain for tomorrow.

The one-day trend line points to a +0.29% gain.

A return to the trend-line from the 4/2 high would result in a -2.83% decline for Thursday.

Wrap-up

Positive price action. Higher volume . A breadth of gains across the market. What more can I ask for? Now I’d like to see a higher high to show a move toward a new all-time high. To do that, the Technology sector will likely need to participate as well.

Otherwise, the environment looks right for more gains, and the expectation is set for sideways or higher for tomorrow.

Stay healthy and trade safe!

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