Daily Market Update for 8/19

Original Chart

Notes

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

Thursday, August 19, 2021

Facts: +0.11%, Volume higher, Closing range: 63%, Body: 63%
Good: Higher volume on gain, close near the 50d MA
Bad: Lower high, lower low continues downtrend
Highs/Lows: Lower high, lower low
Candle: No lower wick, large green body underneath upper wick
Advanced/Decline: 0.28, over three declining stocks for every advancing stock
Indexes:SPX (+0.13%), DJI (-0.19%), RUT (-1.22%), VIX (+0.46%)
Sector List: Technology ( XLK +0.98%) and Real Estate ( XLRE +0.84%) at the top. Materials ( XLB -0.89%) and Energy ( XLE -2.60%) at the bottom.
Expectation: Lower

Market Overview

Investors grappled today with reactions to the Fed meeting minutes released late on Wednesday. The minutes showed several officials in the Fed see the possibility that a key employment goal may be met before year-end and would allow tapering to begin. The result was a dip at open followed by a volatile day as the market priced in the impact .

The Nasdaq cleared a small gain for the day, advancing +0.11% and closing at the 50-day moving average line. Volume was higher than the previous day. The candle has no lower wick, a 63% green body, and a 37% upper wick. The index could not hold onto the gains from the morning rally. Despite the slight increase, there were more than three declining stocks for every advancing stock.

The S&P 500 (SPX) gained +0.13%, helped by gains in big tech. The Dow Jones Industrial Average (DJI) lost -0.19%. The Russell 2000 (RUT) fell -1.22%. The RUT closed above the lower support of a trading range it’s been within since February.

The VIXvolatility index rose +0.46%.

Technology ( XLK +0.98%) topped the sector list today, followed by the defensive sectors. The mega-caps helped drive the gains in Technology. Real Estate ( XLRE +0.84%) was the second-best sector, followed by the other defensive sectors. Materials ( XLB -0.89%) and Energy ( XLE -2.60%) were at the bottom, along with the other cyclical sectors.

Economic Indicators

Initial Jobless Claims came in better than expected, while Continue Jobless Claims was slightly higher than expected. The Philly Fed Manufacturing Index was lower than forecast, indicating a slowdown in demand.

The US Dollar DXY ) strengthened by +0.44%, setting a high for this year.

The US 30y and 10y Treasury Yields declined while the 2y Treasury Yield rose.

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

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

Bitcoin BTCUSD advanced +4.74%. Ethereum ETHUSD advanced +5.35%. (Time of writing)

Market Leaders

Three of the four largest mega-caps gained for the day. Microsoft MSFT ) had the most significant gain, advancing +2.08% to a new all-time high and helping carry the Technology sector higher. Apple AAPL ) and Alphabet GOOGL ) gained +0.23% and +0.17%, closing at or above their 21d EMA . Amazon ( AMZN ) continues to sink with a -0.42% loss for today.

Netflix NFLX ), Nvidia NVDA ), Cisco ( CSCO ), and United Health ( UNH ) were the top mega-caps today. Tesla TSLA ), Exxon Mobil XOM ), Toyota Motor TM ), and Alibaba (BABA) were the worst-performing mega-caps.

Nvidia Zynga ZNGA ), CloudFlare (NET), and Zscaler (ZS) were the top stocks in the daily update growth list. The Chinese stocks in the list dominated the bottom, with Alibaba (BABA), FUTU Holdings ( FUTU ), Ehang Holdings (EH), and UP Fintech ( TIGR ) all having significant losses. Robinhood (HOOD) is also in the bottom four with over a 10% loss today.

Investor Sentiment

The put/call ratio rose to .832. The put/call ratio ( PCCE ) is a contrarian indicator of 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 moved back into extreme fear.

Looking ahead

There is not much economic news scheduled for Friday. It is a monthly options expiration day.

Deere & Company (DE), Foot Locker FL ), and Buckle BKE ) are a few earnings reports to watch on a light day for earnings .

Trends, Support, and Resistance

The Nasdaq opened below 14,500 before recovering in the morning, retested the support area , and closed just under the 50d moving average line.

The one-day trend line points to a +0.62% gain for Friday.

The trend line from the 8/5 high points to a +0.16% gain tomorrow.

The five-day trend line ends with a -0.50% decline.

Wrap-up

Fears of early tapering and a slowing economy both weighed on investors today. The large mega-caps are helping to keep indexes up right now. Two of the largest ( AAPL GOOGL ) are testing support areas, while the third ( AMZN ) is breaking down further. If these mega-caps start distributing, it could mean a more significant pullback or a correction for the Nasdaq.

Also, keep an eye on the Russell 2000. The Index has been range-bound since February and closed just above the lower support area today. It could be the time for a turn higher, or things will get much worse if that lower support area fails.

The trend for the Nasdaq continues downward with a lower low and lower high today. Expectation for tomorrow remains at Lower.

Stay healthy and trade safe!

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