Daily Market Update for 9/30

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 30, 2021

Facts: -0.44%, Volume higher, Closing Range: 2%, Body: 71% Red
Good: Nothing
Bad: Lost support at 14,500, failed after rally precedes new intraday low
Highs/Lows: Lower high, Lower low
Candle: Thick red body at bottom of the candle, longer upper wick
Advance/Decline: 0.71, more declining than advancing stocks
Indexes:SPX (-1.19%), DJI (-1.59%), RUT (-0.94%), VIX (+2.57%)
Sector List: Communications ( XLC -0.31%) and Technology ( XLK -0.72%) at the top. Consumer Staples ( XLP -1.80%) and Industrials XLI -2.05%) at the bottom.
Expectation: Sideways or Lower

Market Overview

The market ended a red month with another red day while investors await action in congress on government funding, the debt ceiling, and the infrastructure bill. September is the first monthly decline for the S&P 500 since January.

The Nasdaq closed the day with a -0.44% decline. An afternoon rally failed, and the index set a new intraday low in the last hour of trading, ending the day with a 2% closing range. The 71% red body sits at the bottom of the candle with a long upper wick formed in the morning. Volume was higher than the previous day, marking the third day of distribution for the index. There were more declining than advancing stocks.

The Dow Jones Industrial Average (DJI) fell -1.59% today. The S&P 500 (SPX) ended a red month with a -1.19% decline. The Russell 2000 (RUT) lost -0.94%. The VIXVolatility Index remains high with a +2.57% gain today.

All sectors declined today. Communications ( XLC -0.31%) and Technology ( XLK -0.72%) were the best sectors for the day and were in positive territory before the late afternoon selling. Investors see opportunities to buy growth stocks at a discount . Consumer Staples ( XLP -1.80%) and Industrials XLI -2.05%) were at the bottom of the sector list.

Revised GDP data for Q2 came in slightly higher than expected at 6.7% quarter-over-quarter. Initial Jobless Claims were worse than expected for another week and are trending higher.

The US Dollar index DXY ) fell slightly for the day after hitting a 52 week high yesterday. US Treasury Yields fell back from their recent gains. Both High Yield ( HYG ) and Investment Grade ( LQD ) corporate bond prices declined for the day. Silver and Gold climbed +3.03% and +1.82% as alternative safe-haven investments. Timber, Copper , and Aluminum all fell sharply for the day.

The put/call ratio rose to 0.870 as investors grew more bearish . The CNN Fear & Greed Index dropped into the Extreme Fear area. The NAAIM money manager exposure index declined to 55.02 from 77.7 the previous week.

All four largest mega-caps ( AAPL MSFT AMZN GOOGL ) declined for the day and traded below their key moving average lines. Only a handful of stocks in the mega-cap list gained today. Netflix NFLX ) topped the list with a +1.88% gain. At the bottom of the list was Oracle ORCL ), with a -4.52% decline.

The stocks in the Daily Update Growth List did not do too bad considering the index performance, with most of the stocks in the list gaining for the day. Roku (ROKU) was at the top of the list with a +3.44% gain. RH RH ) declined sharply after topping the list yesterday, losing -4.04% today. The losses may be related to the ominous message in Bed Bath & Beyond’s ( BBBY ) outlook for the holiday season. During its earnings call, the company gave a bleak message, sending the stock tumbling by over 20%.

Looking ahead

The biggest news will come overnight as Congress votes on key legislation to fund the government, raise the debt ceiling, and pass the infrastructure bill.

In the morning, inflation data will be made available for August. The PCE Price Index data comes before the market opens. After the market opens, we’ll have a new ISM Manufacturing PMI, which shows activity in the manufacturing sector.

Trends, Support, and Resistance

The Nasdaq dropped below the 14,500 support area . The 21d EMA crossed below the 50d MA.

If the index can return to the trend line from the 9/7 high, it would result in a +0.87% gain for tomorrow.

The one-day trend line points to a -0.15% decline.

The five-day trend line ends with a -1.08% decline for Friday.

Wrap-up

There shouldn’t be any surprises here if you’ve been following the updates. The indexes chopped up and down the past few days without any progress in Washington over funding the government and raising the debt ceiling. The sell-off in the last hour today was investors protecting against bad news tonight. At the same time, growth sectors led the day as some investors took the opportunity to buy positions at a discount .

Now we wait. Based on the chart and three days of distribution, the expectation is for Sideways or Lower tomorrow.

Stay healthy and trade safe!

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