Daily Market Update for 10/4

Original Chart

Notes

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

Monday, October 04, 2021

Facts: -2.14%, Volume lower, Closing Range: 23%, Body: 75% Red
Good: Nothing
Bad: Large decline, low advance/decline ratio , low closing range
Highs/Lows: Lower high, Lower low
Candle: Mostly red body with tiny upper wick, longer lower wick
Advance/Decline: 0.29, three declining stocks for every advancing stock
Indexes:SPX (-1.30%), DJI (-0.94%), RUT (-1.08%), VIX (+8.82%)
Sector List: Energy ( XLE +1.63%) and Utilities ( XLU +1.38%) at the top. Communications ( XLC -2.16%) and Technology ( XLK -2.32%) at the bottom.
Expectation: Sideways or Lower

Market Overview

Rising Treasury Yields in the morning had investors exiting positions in Big Tech and Growth stocks, sending indexes lower for another day. However, OPEC held its position on a gradual increase in output despite an energy crunch, and they are still predicting higher demand in the coming months.

The Nasdaq closed the day with a -2.14% decline. The selling started right at the market open and continued through the morning, creating a large red body covering 75% of the candle. The lower wick formed from a slight gain in the afternoon. The closing range was 23%. There were more than three declining stocks for every advancing stock.

The Dow Jones Industrial Average (DJI) fared better, only losing -0.94% for the day as the Energy sector helped the index. The S&P 500 (SPX) declined -1.30%. The small-cap Russell 2000 (RUT) lost -1.08%. The VIXVolatility Index rose +8.56% for the day.

Energy ( XLE +1.63%) topped the sector list thanks to Monday morning’s OPEC meeting news. The only other two sectors to gain for the day were Utilities ( XLU +1.38%) and Real Estate ( XLRE +0.11%), both defensive sectors. Two growth sectors, Communications ( XLC -2.16%) and Technology ( XLK -2.32%) were at the bottom of the sector list.

OPEC decided to hold output at current levels, predicting higher demand in the next several months. Factory Orders data released in the morning showed 1.2% month-over-month growth compared to the forecast of 1.0%.

The US dollar index DXY ) declined -0.29%. US Treasury Yields were up for the day but settled back from a morning spike that panicked investors. High Yield ( HYG ) Corporate Bond prices were down sharply. Investment Grade ( LQD ) Corporate Bond prices also fell for the day.

Crude Oil Futures was up +3.72% today. Copper and Aluminum futures also gained on the day, likely because of the higher-than-expected Factory Orders data.

The put/call ratio ( PCCE ) rose to 0.759. The CNN Fear & Greed Index dropped back into Extreme Fear.

All four of the largest mega-caps had significant declines for the day. Microsoft MSFT ) and Alphabet GOOGL ) seem to be getting some support at their current level, while Apple AAPL ) and Amazon ( AMZN ) are still in free-fall. Merck ( MRK ) was the top mega-cap for the day, followed by Exxon Mobil XOM ). At the bottom of the mega-cap list was Facebook FB ), which dealt with a multi-hour outage across its large social platforms.

Only two stocks in the Daily Update Growth List advanced for the day. Tesla TSLA ) and CloudFlare (NET) ended the day with gains. The worst stocks on the list were Ehang Holdings (EH), Fastly FSLY ), and FUTU Holding ( FUTU ), all with more than 7% declines.

Looking ahead

Trade Balance data will be available Tuesday morning before the market opens, and the Non-Manufacturing PMI data will come after the opening bell.

PepsiCo PEP ) releases earnings before the market open.

Trends, Support, and Resistance

The Nasdaq found support at a previous support/resistance level of 14,200.

If the index can regain the trend-line from the 9/7 high, that will be a +1.04% advance for Tuesday.

The five-day trend line points to a -0.26% decline.

A continuation of today’s one-day trend line ends with another -1.23% decline for tomorrow.

Wrap-up

Fear continues to grow over the debt ceiling discussion in Washington while mini-disasters play out worldwide, from the Evergrande challenge in China to the Energy crunch in the UK. Rising yields and higher inflation are bad news for Big Tech and Growth stocks.

The expectation for tomorrow is Sideways or Lower.

Stay healthy and trade safe!

Comments

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