Daily Market Update for 8/23

Original Chart

Notes

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

Monday, August 23, 2021

Facts: +1.55%, Volume higher, Closing Range:
91% (w/gap), Body: 89% Green
Good: No lower wick and small upper wick, thick green body with big gain on higher volume
Bad: Nothing
Highs/Lows: Higher high, Higher low
Candle: Gap up at open, thick green body under a small upper wick
Advance/Decline: 2.18, more than two advancing stocks for every declining stock
Indexes:SPX (+0.85%), DJI (+0.61%), RUT (+1.88%), VIX (-7.60%)
Sector List: Energy ( XLE +3.75%) and Technology ( XLK +1.29%) at the top. Real Estate ( XLRE -0.38%) and Utilities ( XLU -1.29%) at the bottom.
Expectation: Sideways or Higher

Market Overview

On Monday, the market turned optimistic after the FDA fully approved Pfizer’s vaccine, adding a third day of gains off of last week’s pivot low and ending with a record for the Nasdaq. Gains were broadly shared across stocks, and the defensive sectors dropped to the bottom of the sector list.

The Nasdaq gained +1.55% for the day and set a new all-time high and record close. Volume was higher than the previous day. The candle has no lower wick for the third straight day. The thick green body covers 89% of the candle and is under a tiny upper wick, resulting in a 91% closing range (including the gap up at open). There were more than two advancing stocks for every declining stock.

The Russell 2000 (RUT) small-caps led the day, with the index gaining +1.88%. The S&P 500 (SPX) advanced +0.85%. The Dow Jones Industrial Average (DJI) gained +0.61%.

Energy ( XLE +3.75%) jumped to the top of the sector list after a huge weekly loss this past week. Technology ( XLK +1.29%) was the second-best sector, with the other growth sectors following close behind. The defensive sectors were at the bottom of the list, with Real Estate ( XLRE -0.38%) and Utilities ( XLU -1.29%) having the most considerable losses.

Both the mega-cap list and daily update growth list were dominated by gainers today. Nvidia was the top mega-cap with a +5.49% gain. Pfizer PFE ) gained +2.48% as its vaccine gained full FDA approval. Competitors in the health sector declined, with United Health ( UNH ), Johnson & Johnson JNJ ), and Eli Lilly ( LLY ) all having more than 1% losses.

Manufacturing and Services Purchasing Managers Index data came in less than expected, but Existing Homes Sales was higher than expected. The Dollar ( DXY ) dropped -0.52%, while US Treasuries remained about the same. High Yield Corporate Bond ( HYG ) prices rose for a second day. Investment Grade Corporate Bond ( LQD ) prices also gained. Oil prices gained over 5% for the day. Commodities also gained for the day, with Aluminum heading back toward record highs.

Investor sentiment is bullish , with the put/call ratio ( PCCE ) dropping to .593 and the CNN Fear & Greed index moving back toward Neutral (but is still in the Fear zone).

Looking ahead

New Home Sales will be available on Tuesday morning. API Weekly Crude Oil Stock comes after the market closes.

Medtronic ( MDT ), Intuit INTU ), Pinduoduo PDD ), and Best Buy BBY ) are some of the earnings reports to watch for Tuesday.

Trends, Support, and Resistance

The index set a new all-time high today but leveled off just below the 15,000 level, which is expected. Round numbers provide a resistance point as they trigger trading rules.

The three-day rally created a trend line from the 8/19 bottom, ending with a +1.42% gain for Tuesday.

The one-day trend line points to a +1.00% gain.

The five-day trend line ends with a -0.34% decline for tomorrow.

Wrap-up

It was another excellent structural day for the market as gains were shared broadly across the key segments that move indexes higher over time. All the components were there for a bullish run. High advanced /decline ratio and higher volume created a gap-up , higher high and higher low, and a very positive gain.

We’ve also been tracking the Russell 2000, which bounced off a lower support area that’s defined the bottom of a trading range since February. We’ll continue to watch it as it approaches the upper boundary of that range.

The expectation is for sideways or higher tomorrow. It will be no surprise if the Nasdaq hits more resistance at 15,000 before moving above that line.

Stay healthy and trade safe!

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