Daily Market Update for 9/21

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Notes

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

Tuesday, September 21, 2021

Facts: +0.22%, Volume lower, Closing Range: 33%, Body: 38% Red
Good: Higher high, higher low
Bad: Choppy day, faded into close
Highs/Lows: Higher high, Higher low
Candle: Small body in between two equal size wicks
Advance/Decline: 0.94, more declining stocks than advancing stocks.
Indexes:SPX (-0.08%), DJI (-0.15%), RUT (+0.18%), VIX (-5.25%)
Sector List: Energy ( XLE +0.23%) and Health ( XLV +0.15%) at the top. Communications ( XLC -0.42%) and Industrials XLI -0.53%) at the bottom.
Expectation: Sideways

Market Overview

Equity markets chopped up and down to end sideways while Treasury yields rose as investors remained cautious ahead of the Fed announcements on Wednesday.

The Nasdaq closed the day with a +0.22% gain. Volume was lower than the previous day. The 38% red body sits in the middle of the candle with equal-sized upper and lower wicks. The closing range is 33%. There were more declining stocks than advancing stocks.

The Russell 2000 (RUT) ended the day with an advance, gaining +0.18%. The S&P 500 (SPX) declined -0.08%, and the Dow Jones Industrial Average (DJI) was off -0.15%. The VIXVolatility Index fell -5.25%.

Five sectors ended the day with gains. Energy ( XLE +0.23%) and Health ( XLV +0.15%) were at the top of the sector list. Communications ( XLC -0.42%) and Industrials XLI -0.53%) at the bottom.

Building Permits and Housing Starts showed a more bullish outlook for the economy, with both exceeding forecast. API Weekly Crude Oil Stock also showed higher demand than expected.

The US Dollar weakened slightly, with the index declining -0.02%. The US 30y and 10y Treasury Yields rose for the day while the 2y remained flat. High Yield ( HYG ) Corporate Bond prices rose for the day while Investment Grade ( LQD ) Corporate Bond prices remained the same.

Gold and Silver both rose for the day. Copper and Aluminum futures continue to drop. Timber prices rose, likely on the positive Building Permits data. Bitcoin BTCUSD ) and Ethereum ETHUSD ) declined the last two days sharply, likely from investors positioning for a strengthening US Dollar .

The put/call ( PCCE ) ratio dropped to 0.604. The CNN Fear & Greed index remained in the Extreme Fear area.

Looking ahead

US Existing Home Sales data and Crude Oil Inventories updates come in the morning. The Bank of Japan will make a Monetary Policy Statement overnight.

This week, nothing is more significant than the Fed meeting and the statements coming at 2p on economic projects and interest rate decisions. Investors are looking for comments on when bond tapering will begin.

General Mills will release earnings on Wednesday.

Trends, Support, and Resistance

The Nasdaq chopped up and down in today’s session, showing indecision in the market ahead of the Fed announcements.

The one-day trend line points to another gain of +0.20% tomorrow.

The trend line from the 9/7 high ends with a -0.19% decline.

The five-day trend line shows a -1.06% decline.

Wrap-up

Tomorrow is the big day. The Fed will likely make a firm announcement around bond tapering, and we’ll get an update on when Fed officials see interest rate hikes happening. But just as important will be the Economic Projections and the Fed’s view on inflation which some experts see as easing for the remainder of the year.

What should happen after that is the US Dollar strengthening and Treasury Yields rising. Those two moves will put downward pressure on mega-caps and growth stocks. We’ll likely get another 2-3% decline in the indexes over the subsequent two trading sessions. If the reaction is worse, we could see the Nasdaq visit the 200-day moving average, which it has not touched since April 2020.

There is the possibility that investors already priced in some of this news. It shouldn’t come as a surprise to them that bond tapering will begin, and interest rate timing estimates will likely be pulled forward. If the Fed is more dovish than expected, we could have an opposite reaction and see a rally through the end of the week.

That leads to the chart and the indecision in today’s candle. The indecision in the candle and big economic event tomorrow leads to an expectation for Sideways, only because I don’t allow myself to put an “I don’t know.” 🙂

Stay healthy and trade safe!

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