Daily Market Update for 10/26

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 26, 2021

Facts: +0.06%, Volume higher, Closing Range: 20%, Body: 44% Red
Good: Higher high, higher low, support at 15,200
Bad: Couldn’t hold morning rally, rejected at 15,400
Highs/Lows: Higher high, Higher low
Candle: Long upper wick over a thick red body.
Advance/Decline: 0.54, almost two declining stocks for every advancing stock
Indexes:SPX (+0.18%), DJI (+0.04%), RUT (-0.72%), VIX (+4.86%)
Sector List: Energy ( XLE +0.58%) and Utilities ( XLU +0.54%) at the top. Industrials XLI -0.62%) and Communications ( XLC -0.89%) at the bottom.
Expectation: Sideways or Higher

Market Overview

Markets opened with a rally on higher than expected Consumer Confidence and New Home Sales data. The rally faded late in the morning, weighed down by Facebook and worries over inflation .

The Nasdaq held onto a +0.06% gain for the day, after rising 1% in the morning and getting rejected at 15,400. Volume was higher than the previous day, and the higher high and higher low is bullish . On the other hand, the long upper wick and low closing range of 20% represent almost two stocks declining for every advancing stock.

The S&P 500 (SPX) and Dow Jones Industrial Average (DJI) lost morning rallies but set new all-time highs and had record closes. They gained +0.18% and +0.04%, respectively. The Russell 2000 (RUT) fell -0.72% after hitting its highest intraday since the beginning of July. The VIXVolatility Index ( VIX ) rose +4.72%.

The sector list scrambled quite a bit during the day, with Consumer Discretionary ( XLY ), Technology ( XLK ), and Utilities ( XLU ) all leading at one point. Energy ( XLE +0.58%) ended the day at the top of the list with Utilities ( XLU +0.54%) in second. Industrials XLI -0.62%) and Communications ( XLC -0.89%) were at the bottom. Communications was weighed down by Facebook FB ).

CB Consumer Confidence came in at 113.8, higher than 109.8 for the previous month and higher than the 108.3 forecast. New Home Sales for September also came in higher than expected, registering 800k against the forecast of 760k. Inflation fears reemerged as investors responded to comments about hyperinflation from Jack Dorsey of Twitter .

The US Dollar index DXY ) gained +0.15% for the day. The US 30y and 10y Treasury yields declined while the 2y yield gained. The 2y yield seems to be tracking the level of worry about inflation . Worries go up, and the 2y yield goes up. Worries go down, and the 2y yield goes down. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond Prices rose for the day.

Silver and Gold dropped back from the previous day’s sharp increase. Copper and Aluminum Futures continue to fall. Crude Oil prices continued to rise, but Inventories data that came after market close shows a slowing in demand.

The put/call ratio ( PCCE ) climbed to 0.591. The CNN Fear & Greed index is still in Fear but hovering close to the Extreme Fear area.

All four largest mega-caps gained for the day. Amazon ( AMZN ) rose back above its 21d EMA and 50d MA, following the Consumer Discretionary sector higher. Microsoft MSFT ) beat earnings expectations, turning in a record quarter. The stock rose 2% after hours. Alphabet’s ( GOOGL earnings exceeded expectations, but the company warned that supply shortages might negatively impact the ad business in the fourth quarter. The stock declined -1% after hours.

Nvidia NVDA ) was the top mega-cap gainer of the day. After remarks by Facebook on future capital expenditures, investors see high demand for Nvidia’s GPU hardware to support artificial intelligence in the cloud and the metaverse for users. However, Facebook FB ) was at the bottom of the mega-cap list as more internal documents became available about the companies practices and knowledge of its impact on younger audiences.

DraftKings DKNG ) and CrowdStrike ( CRWD ) joined Nvidia at the top of the Daily Update Growth List. The list, a sampling of popular growth stocks, had many more losers than gainers today. FUTU Holdings ( FUTU ) and Ehang Holdings (EH) were the worst-performing stocks on the list.

Looking ahead

Data to be available in the morning includes Durable Goods Orders, Goods Trade Balance, and Retail Inventories. Later in the morning, Crude Oil Inventories will be available.

Thermo Fisher Scientific TMO ), McDonald’s ( MCD ), Sony SONY ), ServiceNow (NOW), Boeing (BA), GlaxoSmithKline ( GSK ), ADP (ADP), General Motors ( GM ), Fiserv FISV ), Ford (F), Twilio TWLO ), eBay EBAY ), Southern Copper SCCO ), Spotify (SPOT), Teladoc ( TDOC ), and Dynatrace (DT) are some of the earnings reports for tomorrow.

Be sure to check your portfolio for earnings reports. There are too many to list here.

Trends, Support, and Resistance

The Nasdaq gained in the morning but hit resistance at 15,400. After topping out, it declined until getting support around 15,200.

The trend line from the 10/4 low points to a +0.94% gain for tomorrow.

The five-day trend line results in a +0.34% gain.

If the one-day trend continues, expect a -1.02% decline for Wednesday.

Wrap-up

The morning started so great, but the optimism was overwhelmed by inflation fears. The Nasdaq couldn’t quite hit a new all-time high. However, support at 15,200 is positive, and we could see a nice bounce tomorrow that takes the index higher.

The expectation is for Sideways or Higher.

Stay healthy and trade safe!

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