Daily Market Update for 11/10

Original Chart

Notes

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

Wednesday, November 10, 2021

Facts: -1.66%, Volume lower, Closing Range: 24%, Body: 41% Red
Good: Lower volume
Bad: Large red body, low closing range, very low a/d ratio
Highs/Lows: Lower high, Lower low
Candle: Larger upper wick than lower wick, surrounding a thick red body
Advance/Decline: 0.31, three declining stocks for every advancing stock
Indexes:SPX (-0.82%), DJI (-0.66%), RUT (-1.55%), VIX (+5.34%)
Sector List: Utilities ( XLU +0.81%) and Consumer Staples ( XLP +0.30%) at the top. Technology ( XLK -1.65%) and Energy ( XLE -2.64%) at the bottom.
Expectation: Lower

Market Overview

Inflation data caused selling in bond and equity markets while investors kept an eye on a possible default from China’s Evergrande.

The Nasdaq finished the day with a -1.66% decline, the worst day in over a month. The candle has a large red body below an upper wick that is longer than the lower wick, and the closing range is only 24%. There were three declining stocks for every advancing stock. Still, volume was lower than the previous day.

The Russell 2000 (RUT) also had a significant decline, losing -1.55% today. The S&P 500 (SPX) lost -0.82%, and the Dow Jones Industrial Average (DJI) declined -0.66%. The VIXVolatility Index ( VIX ) climbed another +5.34%.

The defensive sectors, Utilities ( XLU +0.81%) and Consumer Staples ( XLP +0.30%) were at the top of the sector list. Health ( XLV +0.29%) was the only other sector to gain for the day. Technology ( XLK -1.65%) and Energy ( XLE -2.64%) were at the bottom of the sector list.

The October Core Consumer Price Index ( CPI ), which excludes food and energy, came in at 0.6% month-over-month, against the forecast of 0.4%. The index rose 4.6% year-over-year, while the expected growth was 4.3%. Initial Jobless Claims was lower than the previous week but slightly higher than the forecast.

The US Dollar strengthened with the index ( DXY ) rising +0.94% to its highest level since July 2020. US 20y, 10y, and 2y yields all rose sharply on the inflation news. The 2y yield is at its highest level since the pandemic began. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bonds both declined.

Gold , an inflation hedge, grew another +0.94%, which is impressive considering the US Dollar strengthened by the same amount. Timber and Copper both declined for the day, while Aluminum gets some support after several weeks of declines.

The put/call ratio ( PCCE ) rose to 0.651. The CNN Fear & Greed index moved closer to the Greed range but remained at the Extreme Greed level.

All four largest mega-caps declined for the day. Apple AAPL ) closed below its 21d EMA but remained above its 50d MA. Alphabet GOOGL ) got support at its 21d EMA despite declining -2.03% for the day. Amazon ( AMZN ) fell -2.63% after several days of gains.

Tesla TSLA ) was the top mega-cap for the day, helped by investors buying the dip after yesterday’s massive decline. The stock is up +4.34% for today. Mastercard (MA) and Pfizer PFE ) also did well today, both gaining more than 3.5%. Nvidia NVDA ) declined -3.91% today, ending up at the bottom of the mega-cap list.

DoorDash (DASH) was the top stock in the Daily Update Growth List, gaining +11.58% after proposing an acquisition of Wolt Delivery for $8 billion. Most stocks in the Growth List declined for the day. Palantir ( PLTR ) was the worst-performing stock on the list, dropping -7.13% as analysts downgraded the stock.

Looking ahead

The OPEC Monthly Report comes in the morning on Thursday. Otherwise, the only interesting news will be out of Europe as GDP data for the UK and an economic forecast for the European Union become available overnight.

Merck (MKKGY), Celsius ( CELH ), Dillards DDS ), Nordstrom JWN ), GrowGeneration GRWG ), Lordstown Motors (RIDE) are some of the notable earnings reports for tomorrow.

Trends, Support, and Resistance

The Nasdaq dropped sharply today but remains above the 21d EMA , and the 21d EMA is above the 15,400 support area .

If the index returns to its trend-line from the 10/4 low, it would mean a +2.95% gain for Thursday. That seems unlikely.

The five-day trend line is in decline, but returning to the trend line would mean a +0.68% gain for the index.

If the one-day trend line continues, that would mean another -2.09% decline for tomorrow. That would require breaking through 21d EMA support and the 15,400 support area .

Wrap-up

The inflation data is causing turmoil in both equity and bond markets. However, we did expect some pullback this week, and we are only down -2.18%. There is another percentage point to go down before hitting the 21d EMA . Keep in mind that the weekly chart is still in an uptrend despite the red candle.

The expectation for tomorrow is Lower.

Stay healthy and trade safe!

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