Daily Market Update for 10/20

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 20, 2021

Facts: -0.05%, Volume lower, Closing Range: 47%, Body: 36% Red
Good: Higher high, higher low, pause within a uptrend
Bad: Lower close, otherwise nothing alarming
Highs/Lows: Higher high, Higher low
Candle: Thin body in upper half of red candle, longer lower wick
Advance/Decline: 0.99, about equal advancing and declining stocks
Indexes:SPX (+0.37%), DJI (+0.43%), RUT (+0.61%), VIX (-1.34%)
Sector List: Utilities ( XLU +1.58%) and Real Estate ( XLRE +1.53%) at the top. Consumer Discretionary ( XLY -0.07%) and Technology ( XLK -0.28%) at the bottom.
Expectation: Sideways or Higher

Market Overview

Positive earnings reports continue to move markets higher while big tech stocks took a breather for the day.

The tech-heavy Nasdaq declined -0.05%, a lateral move after several days of gains. Volume was lower than the previous day as the uptrend in the index remained intact with a higher high and a higher low. The 36% red body is in the upper half of the candle above a longer lower wick and a 47% closing range. There was about an equal number of advancing stocks and declining stocks.

Small-caps led the day with a +0.61% gain for the Russell 2000 (RUT). The S&P 500 (SPX) advanced +0.37%, while the Dow Jones Industrial Average (DJI) gained +0.43%. The VIXVolatility Index dropped -1.34% today.

Utilities ( XLU +1.58%) and Real Estate ( XLRE +1.53%) were at the top of the sector list. The defensive sectors still have some catchup to do after lagging in the recent rally. Consumer Discretionary ( XLY -0.07%) and Technology ( XLK -0.28%) were the only losing sectors. The action among big tech companies seemed profit-taking rather than concern from investors.

Crude Oil Inventories surprised with higher demand than expected. Inventories showed a -0.431 million barrel shortage vs. an expected 1.857 million barrel surplus. This afternoon, the Federal Reserve Governor Randal Quarles said that economic tests were met, and tapering could begin next month. He also said that inflation should recede into next year, and pulling forward interest rate hikes was unnecessary.

The US Dollar Index DXY ) dropped by -0.20%. The US 30y and 10y Treasury Yields rose, likely on Quarles confirmation that bond purchase tapering would begin soon. The 2y Treasury Yield declined. High Yield ( HYG ) Corporate Bond prices moved higher while Investment Grade ( LQD ) corporate bond prices dropped. Silver and Gold rose on the weaker dollar. Aluminum Futures are falling back from recent record highs.

The put/call ratio ( PCCE ) rose slightly to 0.550. The CNN Fear & Greed Index continues to move further into the Greed range.
Of the four largest mega-caps, only Apple AAPL ) gained for the day. However, the charts for all four still look good after some profit-taking today. Abbott Labs ABT ) and UnitedHealth ( UNH ) were the top mega-caps of the day, leading the Health Sector ( XLV ) higher. Abbott Labs released earnings , beating expectations on the top and bottom line and improving guidance for 2021. PayPal ( PYPL ) declined -4.91% after rumors stated the company is in talks to acquire Pinterest (PINS).

Pinterest (PINS) topped the Daily Update Growth List with a 12.77% gain on the PayPal acquisition rumors. Penn National Gaming ( PENN ) joined PayPal at the bottom of the growth list. More than half of the growth list declined for the day.

Looking ahead

Initial Jobless Claims and the Philadelphia Fed Manufacturing Index will be available in the morning before the market opens. After the market opens, Existing Home Sales data will be released.

PayPal ( PYPL ), Intel INTC ), AT&T (T), SAP (SAP), Snap (SNAP), Southwest Airlines (LUV), KeyCorp (KEY), American Airlines (AAL), Snap-on ( SNA ), Crocs CROX ), AutoNation (AN), Alaska Air ( ALK ), and Mattel (MAT) are some of the interesting earnings reports in a long list scheduled for Thursday.

Trends, Support, and Resistance

The Nasdaq paused after several days of gains, staying well above the 15,000 support area .

The five-day trend line points to a +1.06% gain for tomorrow.

The line from the 10/4 low points to a +0.24% gain for Thursday.

The one-day trend line would result in a -0.42% decline.

Wrap-up

The Nasdaq paused after several days of gains while the rest of the market took a step higher to catch up. Small-caps and defensive stocks, in particular, were lagging.

There is some room for the index to retest the 15,000 area. However, the uptrend is intact, and so I’m expecting either a Sideways or Higher move without some catalyst to cause a pullback.

Stay healthy and trade safe!

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