Daily Market Update for 10/6

Original Chart

Notes

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

Wednesday, October 06, 2021

Facts: +0.47%, Volume higher, Closing Range: 97%, Body: 85% Green
Good: Higher high, thick green body, high closing range
Bad: Lower low, advance/decline ratio
Highs/Lows: Higher high, Lower low
Candle:Bullish engulfing candle, Mostly green body with a small lower wick
Advance/Decline: 0.46, two declining stocks for every advancing stock
Indexes:SPX (+0.41%), DJI (+0.30%), RUT (-0.60%), VIX (-1.41%)
Sector List: Utilities ( XLU +1.55%) and Consumer Staples ( XLP +0.97%) at the top. Materials ( XLB -0.19%) and Energy ( XLE -1.05%) at the bottom.
Expectation:

Market Overview

Markets rebounded from early morning losses after a deal to lift the debt ceiling until December made investors more optimistic. Defensive sectors led the day, indicating some nervousness still exists in the market.

The Nasdaq ended the day with a +0.47% gain. Volume was higher than the previous day. The 97% closing range came at the end of a bullish afternoon, creating a candle with an 85% green body. The lower wick is short, while the upper wick is almost invisible. There were two declining stocks for every advancing stock.

The S&P 500 (SPX) gained +0.41%, and the Dow Jones Industrial Average (DJI) gained +0.30%. Small-caps could not fully recover from the morning losses, and the Russell 2000 (RUT) closed with a -0.60% decline. The VIXVolatility Index ( VIX ) remained elevated despite a -1.41% decline today.

Defensive sectors topped the sector list with Utilities ( XLU +1.55%) and Consumer Staples ( XLP +0.97%) leading the way up. Eight of the eleven SPDR sectors gained for the day. Materials ( XLB -0.19%) and Energy ( XLE -1.05%) are at the bottom of the list.

ADP Nonfarm Employment Change came in higher than expected, providing a positive outlook for the labor market. Crude Oil Inventories showed less demand than forecast. Today, US Republican Senator Mitch McConnell revealed that Republicans could agree to a short-term lifting of the debt ceiling until December.

The US Dollar Index DXY advanced by +0.27% for the day. US 30y and 10y yields started the day with a sharp rise but ended with a slight decline while the 2y yield rose steadily throughout the day. High Yield ( HYG ) Corporate Bond prices continue to fall. Investment Grade ( LQD ) Corporate Bond prices advanced slightly for the day.

Crude Oil Futures pulled back from record highs after inventories were higher than expected. Timber, Copper , Aluminum all declined.

The put/call ratio soared to its highest intraday level in a year but came back down to end the day at 0.919. The high ratio shows a bearish sentiment in investors. The CNN Fear & Greed index moved further into the Fear range from Extreme Fear earlier this week.

All four largest mega-caps gained today. Microsoft MSFT ) overtook its 21d EMA again with a +1.51% gain. PepsiCo PEP ) was the best mega-cap of the day after pleasing investors with an earnings beat and improved outlook for this year. Toyota Motor TM ) was at the bottom of the mega-cap list with a -3% decline.

The stocks in the Daily Update Growth List had another positive day. CloudFlare (NET) topped the list for a second day, gaining 15% over the two days. Ehang Holdings (EH) was at the bottom of the list.

https://www.tradingview.com/watchlists/3…

Looking ahead

Initial Jobless Claims data will be available before the market opens on Thursday.

Trends, Support, and Resistance

The Nasdaq closed at the 14,500 resistance area after the morning dip turned into an afternoon rally.

The one-day trend line points to a +1.01% gain for Thursday.

The trend line from the 9/7 high and the five-day trend line end with a -1.16% gain.

Wrap-up

The willingness of Republicans to temporarily extend the debt ceiling until December is a positive for wary investors who were positioning for the worst. It’s still not a done deal and also just pushes the deadline out for two months. But in the meantime, it shows the Republicans don’t want to force the issue to catastrophe.

Based on the bullish engulfing candle and the move higher on higher volume , the expectation is for Sideways or Higher. There would be more conviction in a move higher if the advance/decline ratio showed more gains broadly across the market.

Stay healthy and trade safe!

Comments

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