Daily Market Update for 8/25

Original Chart

Notes

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

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Wednesday, August 25, 2021

Facts: +0.15%, Volume lower, Closing Range: 63%, Body: 6% Green
Good: Low volatility day, high A/D ratio, green candle.
Bad: Indecision marked by thin body
Highs/Lows: Higher high, Higher low
Candle:Spinning top candle with thin body in the middle of similar length wicks.
Advance/Decline: 1.14, more advancing than declining stocks
Indexes:SPX (+0.22%), DJIA (+0.11%), RUT (+0.37%), VIX (-2.50%)
Sector List: Financials ( XLF +1.18%) and Energy ( XLE +0.76%) at the top. Consumer Staples ( XLP -0.17%) and Health ( XLV -0.27%) at the bottom.
Expectation: Sideways

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Market Overview

The Nasdaq and S&P 500 had another set of record closes while the small-cap Russell 2000 continues to outperform as the market heads higher. Economic news was slightly bullish , with core durable goods and crude oil inventories showing more demand than expected.

The Nasdaq closed with a +0.15% gain, just slightly higher than where it opened. Volume was lower than the previous day and remained lower than the 20-day average. The spinning top candle, marked by a thin body in the middle of short upper and lower wicks, shows indecision in the market as the index hits new all-time highs. There were more advancing than declining stocks.

The Russell 2000 (RUT) led for another day with a +0.37% gain. The S&P 500 (SPX) had a record close, gaining +0.22%. The Dow Jones Industrial Average (DJI) gained +0.11%. The VIXVolatility Index declined -2.50%.

Cyclicals led for the day after the House approved the $3.5 trillion budget proposal yesterday and promised to vote on the infrastructure bill before the end of September. Financials ( XLF +1.18%) and Energy ( XLE +0.76%) were the top sectors for the day. Consumer Staples ( XLP -0.17%) and Health ( XLV -0.27%) were at the bottom of the sector list.

The US Dollar declined for another day after hitting its highest point in 2021 last week. US 30y, 10y, and 2y Treasury Yields rose while the gap between long-term and short-term yields expanded. Investors continue to buy up High Yield Corporate Bonds ( HYG ) in search of returns not available in other bonds, sending prices higher today. Investment Grade Corporate Bonds (IQD) declined for the day. Commodities continue to strengthen with Oil gaining for another day. Timber and Copper gained. Aluminum dropped a bit but remains near record highs.

The put/call ratio rose to 0.560. The CNN Fear & Greed index moved closer to neutral but is still on the Fear side.

Taiwan Semiconductor ( TSM ) and Nvidia NVDA ) led semiconductors higher for the day. Large banks, including JP Morgan Chase ( JPM ) and Wells Fargo ( WFC ), also outperformed other mega-caps. Penn National Gaming ( PENN ) and DraftKings DKNG ) topped the daily update growth list as pro and college football seasons kick-off in the US. UP Fintech ( TIGR ) and FUTU Holdings ( FUTU ) were at the bottom of the list as they continue to trade with high volatility along with other Chinese stocks.

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Looking ahead

The weekly Initial Jobless Claims numbers will be available before the market opens on Thursday. An update to the Q2 GDP numbers will also be released, which are expected to be slightly higher than the previous preliminary data.

Thursday’s earnings reports include Dell (DELL), VMWare VMW ), Workday WDAY ), Dollar General (DG), Woolworths (WOLZY), Peloton Interactive (PTON), Dollar Tree DLTR ), Gap ( GPS ), and UP Fintech ( TIGR ).

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Trends, Support, and Resistance

The Nasdaq set another new all-time high and record close today, building some support above the 15,000 area.

The five-day trend line , which starts at the 8/19 low, points to a +1.65% gain for Thursday.

The one-day trend line continues with another small gain of +0.14% for tomorrow.

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Wrap-up

It wasn’t a very exciting day, but that’s a good thing. Economic news was positive but was only supportive of where prices are now. The news was not enough to boost the indexes for another leg-up. More importantly, the economic news was not negative, which seems to have more impact as indexes are at all-time highs.

Given the indecision show in today’s spinning top candle, the expectation for tomorrow is Sideways.

Stay healthy and trade safe!

Comments

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