Daily Market Update for 5/5

Original Chart

Notes

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

Thursday, May 5, 2022

Facts: -4.99%, Volume lower, Closing Range: 22%, Body: 78% Red
Good: Lower volume
Bad: Big decline, lower high, lower low, advance/decline ratio
Highs/Lows: Lower high, Lower low
Candle: Mostly red body, short lower wick from late dip buying
Advance/Decline: 0.15, more than six declining stocks for every advancing
Indexes:SPX (-3.56%), DJI (-3.12%), RUT (-4.04%), VIX (+22.74%)
Sector List: Utilities ( XLU -1.02%) and Energy ( XLE -1.50%) at the top. Technology ( XLK -4.81%) and Consumer Discretionary ( XLY -5.60%) at the bottom.

Market Overview

The Wednesday rally did not last and in a whiplash move markets sold off on Thursday, with some of the worst single-day losses since 2020.

The Nasdaq plummeted by -4.99%. Volume was lower than the previous day. The candle has no upper wick, a 78% red body, and a 22% closing range. There were over 6 declining stocks for every advancing stock.

The Russell 2000 (RUT) fell by -4.04%. The S&P 500 (SPX) declined by -3.56%. The Dow Jones Industrial Average (DJI) declined by -3.12%. The VIXVolatility Index shot up by +22.74%.

All eleven S&P 500 sectors declined. Utilities ( XLU -1.02%) and Energy ( XLE -1.50%) were at the top of the list. Technology ( XLK -4.81%) and Consumer Discretionary ( XLY -5.60%) had the worst declines.

The weekly Initial Jobless Claims rose to 200,000 this week, topping the forecast of 182,000. Nonfarm Productivity for Q1 dropped more than expected, receding by -7.5%. Unit Labor Costs for Q1 rose more than expected, rising by 11.6% instead of the 9.9% forecast.

After dipping yesterday, the US Dollar Index DXY ) jumped back to recent highs, gaining +1.01% today. US 30y, 10y, and 2y Treasury Yields all rose. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices declined. Brent Oil reached again $110 a barrel.

The put/call ratio ( PCCE ) rose to 0.881. The CNN Fear & Greed index moved back toward Extreme Fear but is still in the Fear range. The NAAIM Money Manager Exposure Index rose to 57.18 from 46.25 the previous week.

All of the big six mega-caps had huge losses. Tesla TSLA ) led the declines with a -8.33% drop today. Only Meta ( FB ) held above the 21d EMA and 50d MA lines, despite a -6.77% decline today.

Only one stock in the Daily Update Growth List gained. Twitter TWTR ) rose by +2.65% as more financial support came for Elon Musk’s purchase of the company. More than ten stocks on the list declined by more than 10%. Fastly FSLY ) ended up at the bottom of the list with a -18.09% decline.

Looking ahead

Tomorrow is Jobs Data Friday. Nonfarm Payrolls, the Unemployment Rate, and other jobs-related metrics will be released prior to the market opening. Four Fed officials are scheduled to speak throughout the day.

Trends, Support, and Resistance

The Nasdaq reached the 13,000 support/resistance area yesterday but was rejected and sent tumbling today.

If the index returns to the five-day trend line , that would mean a +0.88% gain for tomorrow.

The trend line from the 3/29 high points to a -1.45% decline for tomorrow.

If the one-day trend line continues into Friday, that would mean a -3.62% decline.

Wrap-up

What a wild ride from yesterday’s late afternoon rally to today’s dramatic sell-off. It’s unclear what drove yesterday’s rally vs today’s reposition. Could it be yesterday’s relief over a 50 basis point increase vs the fear 75 basis point increase that drove the rally? And then as the additional two increases announced for June and July sank in, that drove today’s decline?

I don’t know. Someone much smarter than me is making those decisions somewhere. Let’s see if we get a rebound on Friday or if the pain continues.

Stay healthy and trade safe!

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