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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.
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.
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.
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.
Trends, Support, and Resistance
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 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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