Daily Market Update for 10/5

Original Chart

Notes

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

Tuesday, October 5, 2021

Facts: +1.25%, Volume lower, Closing Range: 64%, Body: 58% Green
Good: Higher high, higher low
Bad: Later afternoon fade from intraday high
Highs/Lows: Higher high, Higher low
Candle: Long upper wick over a green body covering half the candle
Advance/Decline: 1.04, about the same number of advancing and declining stocks
Indexes:SPX (+1.05%), DJI (+0.92%), RUT (+0.49%), VIX (-7.23%)
Sector List: Financials ( XLF +1.96%) and Communications ( XLC +1.49%) at the top. Utilities ( XLU -0.25%) and Real Estate ( XLRE -0.78%) at the bottom.
Expectation: Sideways or Higher

Market Overview

Stocks bounced higher following days of selling in big tech and growth stocks. While economic indicators are looking positive, fears still loom over the debt ceiling debate in Washington.

The Nasdaq advanced +1.25% today. Volume was lower than the previous day. The candle has a green body covering the lower half of the range, leaving a long upper wick formed from selling right before close. The body is 58% of the candle, while the closing range is at 64%. There were about the same number of advancing and declining stocks.

The S&P 500 (SPX) gained +1.05% for the day. The Dow Jones Industrial Average (DJI) climbed by +0.92%. The Russell 2000 (RUT) advanced +0.49%. The VIXVolatility Index declined -7.23% but remained elevated.

Financials ( XLF +1.96%) and Communications ( XLC +1.49%) led the sector list. Only two sectors declined, Utilities ( XLU -0.25%) and Real Estate ( XLRE -0.78%). Energy ( XLE +0.58%) led in the morning, opening with a +2.43% gain before fading to end the day with a +0.58% gain. Technology ( XLK +1.43%) was in close third place for the day.

While Trade Balance data was not super positive, domestic measures of the economy in the form of Services and Non-Manufacturing Purchasing activity were higher than expected.

The US Dollar strengthened, with the index ( DXY ) gaining + 0.19% for the day. US Treasury yields gained for the day but do not seem to be on an out-of-control ascent that we feared late last week. High Yield ( HYG ) and Investment Grade ( LQD ) prices declined. Crude Oil Futures continue to soar higher.

The put/call ratio ( PCCE ) declined to 0.627. The CNN Fear & Greed index moved back into the Fear range after hitting Extreme Fear yesterday.

All four largest mega-caps gained for the day. Microsoft MSFT ) and Alphabet GOOGL ) seem to be forming a base that could take them higher as they attempt to move back above key moving average lines. Netflix NFLX ) was the best mega-cap for the day, gaining over 5% and hitting a new all-time high. Merck ( MRK ) was the worst-performing mega-cap for the day as investors took profits from recent gains.

CloudFlare (NET) and Digital Turbine (APPS) topped the daily update growth list with +8.52% and +6.06% gains. Most of the stocks on the list did well today. The biggest losers at the bottom of the list were Zoom Video (ZM) and Penn National Gaming ( PENN ).

PepsiCo PEP ) gained +0.59% for the day after beating expectations and improving their outlook for the year in a pre-market earnings release.

Looking ahead

ADP Nonfarm Employment Change tomorrow morning will show any progress in the labor market recovery. Crude Oil Inventories will be available after the market opens.

A planned vote for tomorrow on raising the debt ceiling is likely to be rejected by Republicans and could cause more volatility in the market.

Trends, Support, and Resistance

The Nasdaq support at 14,200 in yesterday’s session turned into gains today before the index met resistance at 14,500.

If the one-day trend line continues into tomorrow, we can expect a +1.16% gain and move above the 14,500 support/resistance area.

The trend line from the 9/7 high points to a -0.47% decline for Wednesday.

The five-day trend line ends in a -0.99% decline.

Wrap-up

The debt ceiling vote tomorrow seems already decided, with Republicans publicly rejecting the measure. Nonetheless, the drama playing out in Washington will cause volatility in the market. Based on the chart, the expectation is Sideways or Higher but prepare for a wild ride.

Stay healthy and trade safe!

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