Daily Market Update for 8/31

Original Chart

Notes

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

Tuesday, August 31, 2021

Facts: -0.04%, Volume higher, Closing Range: 74%, Body: 5% Red
Good: Higher low continues uptrend, sideways move allows moving averages to catch up
Bad: Lower high, higher volume on decline, A/D ratio
Highs/Lows: Lower high, Higher low
Candle: Inside day with thin body at top of the candle
Advance/Decline: 0.81, more declining than advancing stocks
Indexes:SPX (-0.13%), DJI (-0.11%), RUT (+0.34%), VIX (+1.79%)
Sector List: Real Estate ( XLRE +0.59%) and Communications ( XLC +0.38%) at the top. Technology ( XLK -0.53%) and Energy ( XLE -0.68%) at the bottom.
Expectation: Sideways

Market Overview

Markets closed the month of August moving sideways, but capped another bullish month of gains. The day started with investors swarming defensive sectors, but sentiment flipped, and the sector list scrambled.

The Nasdaq closed with a -0.04% decline on higher volume than the previous day. The inside day started with a dip at open but climbed back to set an intraday high before another more minor dip before the close. That created a thin red body above a longer lower wick, all within the high and low of the previous day. There were more declining stocks than advancing stocks.

Today, the Russell 200 (RUT) was the only major index to book gains with a +0.34% advance. The S&P 500 declined -0.13%, while the Dow Jones Industrial Average (DJI) lost -0.11%. The VIXVolatility Index rose +1.79%.

The sector list shuffled after the morning dips. Defensive sectors were the top four at 10:00 am. But then growth sectors started to regain initial losses. Real Estate ( XLRE +0.59%) and Communications ( XLC +0.38%) ended the day at the top. Technology ( XLK -0.53%) and Energy ( XLE -0.68%) were at the bottom.

The Chicago PMI for August was lower than expected, indicating a dip in economic activity. However, a subcomponent of the index that tracks order backlogs hit its highest point since 1951. CB Consumer Confidence was also lower than forecast. The S&P CoreLogic Case-Shiller index covering 20 cities showed home prices gaining at a record rate in July.

The US Dollar strengthened, and US Treasury Yields rose after the data became available mid-morning. High Yield Corporate Bond ( HYG ) prices rose for the day while Investment Grade Corporate Bond ( LQD ) prices dropped. Aluminum rose another +2.47% today, driven by demand for the metal in Manufacturing. That’s consistent with the PMI subcomponent showing backlogs are high because of material shortages.

The put/call ratio rose to 0.667. The CNN Fear & Greed index moved back to neutral after climbing into the Greed area on Monday.

Amazon ( AMZN ) rose another +1.44% today, closing back above the 50d moving average. It had been trading below the key moving average line since the beginning of August, even dipping below the 200d moving average for several days. Alibaba (BABA) was the top mega-cap for the day. The mega-cap list is about half gainers and half losers. Novo Nordisk NVO ) was the biggest loser of the day.

Digital Turbine (APPS) was the top gainer in the daily update growth list, advancing %14.07. The company will be added to the S&P MidCap 400 on September 7th. Zoom Video (ZM) declined 16.69%, putting it at the bottom of the list. Investors were not happy about slowing growth and the announcement that they will acquire Five9 FIVN ).

Looking ahead

Manufacturing Purchasing Managers Index data will be available on Wednesday. Crude Oil Inventories gets a weekly update after the market opens.

Okta OKTA ), Chewy CHWY ), and Five Below (FIVE) will release earnings on Wednesday.

Trends, Support, and Resistance

The Nasdaq hovered below yesterday’s new all-time high, building support and giving moving average lines a chance to catch up.

The trend line from the 8/19 low points to a +1.09% gain for Wednesday.

The five-day trend line ends with a +0.69% gain.

The one-day trend line shows a +0.35% gain for tomorrow.

Wrap-up

I mentioned yesterday that a Sideways move or even a pullback would be constructive to build support and allow the moving average lines to catch up. Another day or two of the same would still be good, so the Nasdaq doesn’t become overextended.

The inside day candle with a thin red body shows some indecision. The expectation for tomorrow is set for Sideways, and we’ll watch closely to see which direction the market decides to go heading into September.

Stay healthy and trade safe!

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