Daily Market Update for 9/9

Original Chart

Notes

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

Thursday, September 09, 2021

Facts: -0.25%, Volume lower, Closing Range: 3%, Body: 45% Red
Good: Closed above yesterday’s low
Bad: Long upper wick formed after a failed morning rally
Highs/Lows: Lower high, Higher low
Candle: Inside day, long upper wick with very low closing range
Advance/Decline: 0.83, more declining stocks than advancing stocks
Indexes:SPX (-0.46%), DJI (-0.43%), RUT (-0.03%), VIX (+4.68%)
Sector List: Financials ( XLF +0.29%) and Energy ( XLE +0.21%) at the top. Health ( XLV -1.15%) and Real Estate ( XLRE -2.12%) at the bottom.
Expectation: Lower

Market Overview

Indexes declined today after a volatile day for bonds. Yields were rising in the early morning before a robust 30y Bond auction sent yields lower. Jobless claims data released in the morning hit another pandemic low, boosting the economic outlook but raising expectations for the Fed to start tapering bond repurchasing.

The Nasdaq closed with a -0.25% gain for the day. The index could not hold onto a morning rally that formed a long upper wick. The index faded after the rally to end the day with a 3% closing range and 45% red body. Volume was lower than the previous day, and the trading range was within the high and low of Wednesday. There were more declining stocks than advancing stocks.

The Russell 2000 (RUT) started the day outperforming the other indexes, climbing over 1% in the morning. But two sell-offs, one after the 30y auction and the other later in the afternoon, erased those gains ending the day with a -0.03% decline for the small-cap index. The S&P 500 (SPX) declined -0.46%, dragged down by big tech. The Dow Jones Industrial Average (DJI) lost -0.43%.

Three cyclical sectors, Financials ( XLF +0.29%), Energy ( XLE +0.21%), and Materials ( XLB +0.04%), were the only sectors to end the day with gains. Defensive sectors moved to the bottom of the list, with Health ( XLV -1.15%) and Real Estate ( XLRE -2.12%) having the worst performance.

Initial jobless claims came in better than expected, whereas continuing jobless claims were slightly worse than expected. Crude Oil Inventories showed less demand than forecast. The 30y Bond Auction was the day’s big news, with high demand sending yields across all Treasuries lower. It could be that bond investors are moving to US Treasuries as the ECB begins tapering emergency bond purchases in Europe.

The US Dollar Index DXY ) dropped -0.20% for the day while long- and short-term Treasury yields declined. The US Dollar started the day OK but then weakened throughout the morning. It regained some of the loss after the strong 30y bond auction. Both High Yield ( HYG ) and Investment Grade ( LQD ) bond prices increased for the day.

Aluminum futures continue to soar higher with another +1.62% gain today. Timber is in its third day of decline. Copper has been bouncing up and down in a bound trading range since the end of August.

The put/call ratio declined to 0.597 for the day. The CNN Fear & Greed index moved further into the fear territory. The NAAIM money manager exposure index fell to 84.68 from 93.95 the previous week.

All four of the largest mega-caps declined today. Microsoft MSFT ) closed below its 21d exponential moving average lien for the first time since June. The other three are still trading above their key moving average lines. Nike NKE ) was the top-performing mega-cap for the day. Most mega-caps declined for the day, with health services companies Johnson & Johnson JNJ ) and Eli Lilly ( LLY ) performing the worst.

Growth stocks in the daily update list did reasonably well today. Lululemon (LULU) was a top performer, gaining over 10% after smashing earnings expectations and improving outlook in its earnings call yesterday. Shares of Peloton (PTON) were up almost 10% after announcing its private-label clothing brand.

Looking ahead

We will get a forward-looking update on inflation with the Producer Price Index data in the morning.

Kroger KR ) and UP Fintech ( TIGR ) release earnings on Friday.

Trends, Support, and Resistance

The Nasdaq attempted a rally in the morning before dipping below 15,300 again.

The trend line from the 8/19 low points toward a +2.00% gain for Friday.

The five-day trend line leads to a +0.19% gain.

The one-day trend line points to another -0.45% decline to end the week.

Wrap-up

Treasury yields swung up and down today. They rose slightly before the jobless claims data, then dropped sharply during the 30y bond auction before recovering a bit before the market closed. There will be more volatility as investors change their assessment of when the Fed will begin tapering bond purchasing programs. Once the tapering begins, its expected yields will continue to rise until the end of the year.

Equity markets haven’t reacted well during volatility in bonds and the volatility today reversed the morning rally. With the long upper wick and low closing range, the expectation is for Lower tomorrow.

Stay healthy and trade safe!

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