Daily Market Update for 9/27

Original Chart

Notes

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

Monday, September 27, 2021

Facts: -0.52%, Volume higher, Closing Range: 76%, Body: 11% Green
Good: Rebound off the intraday low at the 50d MA
Bad: Close below the 21d EMA , decline on higher volume
Highs/Lows: Lower high, Lower low
Candle: Thin green body in upper half of the candle
Advance/Decline: 1.26, more advancing than declining stocks
Indexes:SPX (-0.28%), DJI (+0.21%), RUT (+1.46%), VIX (+5.69%)
Sector List: Energy ( XLE +3.56%) and Financials ( XLF +1.36%) at the top. Health ( XLV -1.42%) and Real Estate ( XLRE -1.66%) at the bottom.
Expectation: Sideways

Market Overview

Despite gains in the broader market, the technology sector weighed down the Nasdaq as Treasury yields increased. Core Durable Goods orders exceeded pre-pandemic levels and showed high demand for transportation items such as airplanes.

The Nasdaq closed the day with a -0.52% decline after dipping more than one percent in the morning. Volume was higher than the previous day. After the morning dip, the index trended up for the rest of the day before pulling back from the late-afternoon intraday high. The thin green body in the upper half of the candle shows an indecisive day for the Nasdaq while the broader stock market rose. There were more advancing stocks than declining stocks.

The Russell 2000 (RUT) rallied in the morning as investors rotated into small caps. The index rose +1.46% for the day. The Dow Jones Industrial Average (DJI) also gained for the day, advancing +0.21%. The S&P 500 (SPX) declined -0.28%, weighed down by Technology mega-caps.

Cyclical sectors dominated the top of the sector list, with Energy ( XLE +3.56%) and Financials ( XLF +1.36%) leading the way. Consumer Discretionary ( XLY +0.54%) was the only non-cyclical sector to gain for the day. Defensive sectors were at the bottom of the list, with Health ( XLV -1.42%) and Real Estate ( XLRE -1.66%) having the most significant losses.

Durable Goods Orders rose 1.8% in August compared to the forecast of 0.7%. However, Core Durable Goods Orders, which excludes transportation items, rose only 0.2% compared to a forecast of 0.5%. Demand for transportation items rebounded to exceed pre-pandemic levels.

The US Dollar index DXY ) rose by +0.14%. Treasury Yields on both long-term and short-term notes rose while the gap tightened. Both High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices fell. Crude Oil Futures headed higher for the day, while aluminum futures fell back from record highs.

The put/call ratio declined to 0.518, a very bullish level. The CNN Fear & Greed index is in the center of the Fear range.

All four largest mega-caps declined for the day, moving back below critical moving average lines. Of the four, Microsoft MSFT ) had the most significant decline, losing -1.73%. Alibaba (BABA) was at the top of the mega-cap list with a +3.52% gain, followed by Energy and Financial mega-caps that gained over 2%. At the bottom of the list was Adobe, with a -3.06% decline.

The daily update growth list had mixed results. The best performer for the day was GrowGeneration GRWG ), which gained +4.77%. CloudFlare (NET) was the biggest loser, declining -5.79%.

Looking ahead

Consumer Confidence data will be in the spotlight tomorrow after the market opens. Other data released in the morning includes Goods Trade Balance and Retail Inventories. The API Weekly Crude Oil Stock numbers will be available after the market closes.

The Fed’s Jerome Powell will update Congress on the economic recovery and Fed monetary policy .

There are no relevant earnings reports for the daily update for Tuesday.

Trends, Support, and Resistance

The Nasdaq tested the 50d MA and closed below the 21d EMA .

After the morning dip, the index trended up for the rest of the day. If the one-day trend were to continue, it would lead to a +0.58% gain for tomorrow.

The five-day trend line and the trend line from the 9/20 low point to a +0.97% gain for Tuesday.

Wrap-up

Higher yields and a strengthening USD are both going to place downward pressure on Technology stocks. The economic context that’s creating the rising yields and dollar is supportive to small-caps and cyclicals.

Based on the indecisive candle with a small green body, the expectation for tomorrow is Sideways.

Stay healthy and trade safe!

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