Daily Market Update for 5/28

Original Chart

Notes

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

Friday, May 28, 2021

Facts: +0.09%, Volume lower, Closing range: 2%, Body: 59%
Good: Higher high and higher low
Bad: Low closing range, couldn’t hold mid-day high
Highs/Lows: Higher high, higher low
Candle: Red body with no lower wick, visible upper wick.
Advanced/Decline: 0.76, more declining stocks than advancing stocks.
Indexes:SPX (+0.08%), DJI (+0.19%), RUT (-0.18%), VIX (+0.12%)
Sectors: Real Estate ( XLRE +0.67%) and Utilities ( XLU +0.54%) were top. Consumer Discretionary ( XLY -0.14%) and Communications ( XLC -0.33%).
Expectation: Sideways or Lower

Market Overview

Little by little. That’s been how the index gains have come this week. Higher lows pushed up higher highs through the week as investors grapple with a mix of economic news and shrugged off inflation data. It was the same for Friday. Price index data was higher, but it didn’t seem to bring any surprises. Consumer data was a mix of results against expectations, causing a bit of uncertainty. Add a three-day weekend, and investors moved into defensive plays.

The Nasdaq closed with a +0.09% gain but faded from the mid-day high. Volume was lower for the day and lower in the afternoon selling, which was a good sign for bulls. The closing range of 2% and red 59% body creates a candlestick with no lower wick. The upper wick formed from the morning rally. Today’s session marks seven days of a higher low. There were more declining stocks than advancing stocks.

The Russell 2000 (RUT) pulled back from its recent rally with a -0.18% decline today. The Dow Jones Industrial Average (DJI) gained +0.19%, and the S&P 500 (SPX) advanced +0.08%.

The VIXvolatility index rose +0.12%.

The defensive sectors topped the sector list today. That includes Real Estate ( XLRE +0.67%) and Utilities ( XLU +0.54%), Health ( XLV +0.39%) and Consumer Staples ( XLP +0.21%). However, tucked into the top sector list is Technology ( XLK +0.36%), leading at mid-day. At the bottom of the list were the other growth sectors, Consumer Discretionary ( XLY -0.14%) and Communications ( XLC -0.33%).

Economic Indicators

The US Dollar DXY ) rose +0.06%.

The US 30y, 10y, and 2y Treasury yields declined, with the spread tightening a bit.

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

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

Bitcoin BTCUSD ) declined -7.30%. Ethereum ETHUSD ) declined -11.96%.

Investor Sentiment

The put/call ratio rose slightly to 0.593. 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

Of the four largest mega-caps, only Microsoft MSFT ) held onto a gain, advancing +0.15% for the day. Microsoft MSFT ) is trading above the key moving average lines, the 21d EMA and 50d MA. Alphabet GOOGL ) is also trading above the key lines, with a -0.25% decline today. Apple AAPL ) and Amazon ( AMZN ) are below the two lines, with a -0.53% and -0.22% loss for today.

Salesforce.com ( CRM ) topped the mega-cap list, beating expectations and analyst outlook for full-year guidance. Nvidia NVDA ) had a delayed reaction to great earnings earlier in the week, coming up second on the mega-cap list today. ASML Holding ( ASML ) and Taiwan Semiconductor ( TSM ) also topped the list. At the bottom of the mega-cap list were Facebook FB ), Intel INTC ), AT&T (T), and Tesla (T).

Despite some of the larger names in the Technology sector losing for the day, the sector outperformed thanks to significant gains by Salesforce.com, Nvidia , Adobe ( ADBE ) and smaller increases by Microsoft and Visa (V), which provided support for the sector. That helped the sector perform even as investors took defensive positions outside of growth stocks.

Lemonade LMND ), GrowGeneration GRWG ), Nvidia , and Ehang Holdings (EH) topped the daily update growth list. The list is about 50% gainers and 50% losers for the day. At the bottom of the list are Peloton (PTON), Fastly (FSLTY), Chewy CHWY ), and Snowflake (SNOW)

Looking ahead

Monday is Memorial Day in the US, and the markets will be closed.

On Tuesday, the ISM will release Manufacturing data, including the purchasing managers index and employment data, showing the sector preparing for future rise or fall in demand.

Zoom Video (ZM), Hewlett Packard ( HPE ), and Digital Turbine (APPS) will release earnings reports on Tuesday.

Trends, Support, and Resistance

Similar to Thursday, the index made a higher high today before settling back to where it opened. It’s still above the 13,600-13,700 area.

Following the five-day trend-line would result in a +0.60% gain on Tuesday.

The one-day trend line points to a +0.03% gain.

Following the trend-line from the 4/2 high would result in a -2.05% decline for Tuesday.

Wrap-up

There was plenty to be nervous about today looking at the rising wedge in the index chart this past week. Inflation data, recovery data, and the three-day weekend could result in a much worse outcome. As expected, the defensive plays in sectors like Real Estate, Utilities, and Consumer Staples came into play, especially as the afternoon progressed. However, notice that investors did not punish companies with great earnings reports as they sometimes do when the timing isn’t quite right.

In the end, the week gave us a higher high and a higher low than the previous week. That’s a step in the right direction as we end May and move into the summer months. The summer months (June to September) are not historically the best months for the market, but hopefully, we can keep moving in a positive direction.

Stay healthy and trade safe!

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