Daily Market Update for 10/7

Original Chart

Notes

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

Thursday, October 7, 2021

Facts: +1.05%, Volume lower, Closing Range: 59% (w/gap), Body: 16% Green
Good: Gap up at open and rally in morning, high advance/decline ratio
Bad: Resistance at 21d EMA , lost momentum in afternoon
Highs/Lows: Higher high, Higher low
Candle: Thin green body at bottom of the candle after a gap up
Advance/Decline: 1.8, almost two advancing for every declining stock
Indexes:SPX (+0.83%), DJI (+0.98%), RUT (+1.59%), VIX (-6.95%)
Sector List: Consumer Discretionary ( XLY +1.56%) and Health ( XLV +1.33%) at the top. Real Estate ( XLRE +0.11%) and Utilities ( XLU -0.53%) at the bottom.
Expectation: Sideways or Higher

Market Overview

A deal over raising the debt-ceiling eased investor worries and sent markets higher on Thursday. The rally included broad gains across the market, with small caps and growth stocks leading the way.

The Nasdaq ended the day with a +1.05%. After a gap-up at open, the morning rally led to a +1.75% advance. The advance met resistance at the 21d EMA and fell back from the intraday high. The candle has a thin 16% green body resting under a long upper wick. The closing range is 59%, including the gap at open. Almost two stocks advanced for every declining stock.

Small-caps did very well, advancing the Russell 2000 (RUT) +1.59% for the day. The Dow Jones Industrial Average (DJI) gained +0.98%, and the S&P 500 (SPX) was up +0.83%. The VIXVolatility Index ( VIX ) declined -6.95%.

Ten of the eleven SPDR sectors advanced today. Consumer Discretionary ( XLY +1.56%) and Health ( XLV +1.33%) were at the top. The defensive sectors of Real Estate ( XLRE +0.11%) and Utilities ( XLU -0.53%) were at the bottom of the sector list.

Initial Jobless Claims came in at 326,000 against an expectation of 348,000. The recovery for the labor market seems to be back on track.

The US Dollar index DXY ) rose +0.27%. Treasury Yields rose as well, climbing in the afternoon, which may explain the fallback from intraday highs in the Nasdaq. High Yield ( HYG ) Corporate Bond prices ticked slightly higher while Investment Grade ( LQD ) Corporate Bond prices moved lower. Timber, Copper , and Aluminum all rose or the day.

The put/call ratio dropped to 0.739 after hitting its highest point in a year yesterday. The CNN Fear & Greed index is still in Fear but moved further toward Neutral. The NAAIM money manager exposure index climbed to 68.6 after declining to 55.02 the previous week.

All four largest mega-caps gained for the day. Alphabet GOOGL ) joined Microsoft MSFT ) in moving above its 21d EMA , and Microsoft MSFT ) closed above its 50d MA. Alibaba (BABA) topped the mega-cap list with a +8.26% gain. Investors are hoping a meeting between Biden and Xi will ease US-China tensions. Only a handful of mega-caps declined today, with Facebook FB ) sitting at the bottom of the list.

Chinese stocks dominated the top of the Daily Update Growth List. Alibaba (BABA), NIO NIO ), UP Fintech ( TIGR ), and JD .com ( JD ) were the top four. Like the mega-cap list, only five stocks declined for the day, with Facebook FB ) being the worst performer.

Looking ahead

Additional employment data will be available on Friday. The data will include Hourly Earnings , Nonfarm Payrolls, Employment Change, and the Unemployment rate.

Trends, Support, and Resistance

The Nasdaq blasted through the 14,500 resistance area and climbed to meet resistance at its 21d EMA line.

The one-day and five-day trend lines are moving in opposite directions but meet up at a +0.10% gain for Friday.

If the rally loses steam and the index returns to the trend line from the 9/7 top, that would mean a -2.11% gain for tomorrow.

Wrap-up

This year, we’ve endured multiple cases of pending doom turned into optimistic rallies when the worries ease. Supply chain woes, Inflation , Interest Rates, Employment, the Debt-ceiling are just a few of the big ones that we’ve pushed through.

Given the resistance at the 21d EMA , perhaps tomorrow will be Sideways. Otherwise, I’d expect Higher unless something looks wrong in the employment data.

Stay healthy and trade safe!

Comments

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