Daily Market Update for 8/27

Original Chart

Notes

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

Friday, August 27, 2021

Facts: +1.23%, Volume higher, Closing Range: 92%, Body: 90% Green
Good: All green body, gain on higher volume , higher high/low
Bad: Nothing
Highs/Lows: Higher high, Higher low
Candle: Mostly green body with a short upper wick
Advance/Decline: 2.53, five advancing stocks for every two declining stocks
Indexes:SPX (+0.88%), DJIA (+0.69%), RUT (+2.85%), VIX (-13.00%)
Sector List: Energy ( XLE +2.67%) and Communications ( XLC +1.58%) at the top. Utilities ( XLU -0.03%) and Health ( XLV -0.11%) at the bottom.
Expectation: Higher

Market Overview

A dovish stance from the Fed’s Jerome Powell at the Jackson Hole Economic Symposium sent stocks higher today. Gains were broadly shared across the market, with small caps leading the way. The S&P 500 and Nasdaq closed at record highs.

The Nasdaq advanced +1.23% for the day. Volume was significantly higher than the previous days. The candle is mostly green body as the index rose throughout the day and only dipped near the close, leaving a short upper wick. The 92% closing range on top of a 90% body is bullish for the index. Gains were broadly shared, with five stocks advancing for every two declining stocks.

The Russell 2000 (RUT) led the way today with a massive +2.85% gain. The Fed’s stance is bullish for small caps that will benefit from low interest rates running into the near term. The S&P 500 (SPX) had another record close with a +0.88% gain today. The Dow Jones Industrial Average (DJI) gained +0.88%. The VIXVolatility Index ( VIX ) declined -13.00%.

Energy ( XLE +2.67%) capped off a week as the leading sector with another top performance today. Communications ( XLC +1.58%) was the second-best sector, followed by a mix of cyclical and growth sectors. Defensive sectors underperformed the S&P 500 , with Utilities ( XLU -0.03%) and Health ( XLV -0.11%) at the bottom of the list.

The US Dollar DXY ) sharply declined on the dovish position in Powell’s speech. US Treasury yields also fell, with short-term Treasury yields having the most significant decline. Both High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices increased. Commodities all tracked higher, with Aluminum (ALI1!) futures soaring to new highs. All of these show a bullish outlook for the economy and US corporations.

Investors Sentiment grew more bullish as well. The put/call ratio dropped to 0.607, which is not the lowest for this week but is still in a very bullish range. The CNN Fear & Greed index moved from Fear to Neutral. The NAAIM money manager exposure index moved up to 92.83 this week from 70.57 the previous week.

Alphabet GOOGL ) had a record-setting close with a +1.81% gain. Amazon ( AMZN advanced +1.01% to move back above its 21d EMA but remain below its 50d MA. ASML Holding ( ASML ) was the top mega-cap for the day, advancing +2.71% to a new record close. Broadcom ( AVGO ) broke out of a multi-month base to close +2.10% higher and set a new all-time high. Alibaba (BABA) was the worst mega-cap for the day as it struggles to stay above a 52-week low.

Workday WDAY ) surprised investors with earnings and advanced +9.13% today with a nice gap-up at market open. Upwork UPWK ) was the second-best in the daily update growth list, with a +5.84% advance. It was all bad news for Peloton (PTON) investors with missed earnings , price drops in key products, and warnings about DOJ, DHS, and SEC investigations. The stock dropped +8.55% on a day where almost everything else went up. Ouch! Chinese stocks, including Alibaba (BABA), FUTU Holdings ( FUTU ), and UP Fintech ( TIGR ), were also at the bottom of the growth list.

Consumer sentiment data came in a bit lower than the preliminary results earlier in the month. However, nothing could sour investor mood after the very clear message from the Fed. Jerome Powell was clear about the Fed’s future actions while also addressing the uncertainty in the current environment. He stated without a doubt that the Fed would begin tapering in the near future. But he also discussed that there is still work to do to reach full employment and monitor the situation with the Delta variant. That gave investors the confidence they needed to stay in the market.

Looking ahead

Pending Home Sales data will be available on Monday morning. China will release purchasing manager index data showing current economic activity in the late evening.

Zoom Video (ZM and StoneCo STNE ) will be earnings reports to watch on Monday after the close.

Trends, Support, and Resistance

The Nasdaq hit another all-time high and record close today on very bullish energy.

The trend line from the 8/19 low and the one-day trend line point to a +1.04% gain for Monday. The five-day trend line ends with a +0.03% lateral move.

Wrap-up

It was a great way to end a constructive week for the market. With a minimum of bad news to sour investor sentiment, the timing was perfect for Jerome Powell to boost confidence in the market and the Fed’s ability to help the economy weather near-term challenges.

The uptrend continues, and the expectation for Monday is higher.

Stay healthy and trade safe!

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