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Thursday, May 26, 2022
Facts: +2.68%, Volume lower, Closing Range: 86%, Body: 85% Green
Good: Higher high, low and close on better volume . Strong A/D ratio.
Highs/Lows: Higher high, Higher low
Candle: Mostly green body with a small upper wick
Advance/Decline: 2.07, two advancing for every declining stock
Indexes:SPX (+1.99%), DJI (+1.61%), RUT (+2.17%), VIX (-3.07%)
Sector List: Consumer Discretionary ( XLY +4.90%) and Communications ( XLC +2.43%) at the top. Utilities ( XLU +0.28%) and Real Estate ( XLRE -0.11%) at the bottom.
Indexes rose higher on Thursday, led by retail after several companies rose their guidance for the near. That came on top of easing concerns over an over-aggressive Fed.
The Nasdaq closed up by +2.68% on higher volume than the previous day. The 85% green body sits above a barely visible lower wick, resulting in an 86% closing range. The small upper wick formed as a flurry of buying subsided mid-day. Still, bulls held prices higher thru the rest of the day and there were two advancing stocks for every declining stock.
The Russell 2000 (RUT) was the next best index, advancing by +2.17% today. The S&P 500 (SPX) gained +1.99% and the Dow Jones Industrial Average (DJI) climbed +1.61%. The VIXVolatility index fell by -3.07%.
Ten of the eleven S&P 500 sectors gained today. Consumer Discretionary ( XLY +4.90%) led thanks to the positive news from retail giants. Communications ( XLC +2.43%) was the second-best, followed by Technology ( XLK +2.40%). Utilities ( XLU +0.28%) and Real Estate ( XLRE -0.11%) were at the bottom of the list.
Initial Jobless Claims were lower than expected, coming in at 210,000 compared to a forecast of 215,000. That was a positive, but Pending Home Sales for April were lower than the forecast, dropping by -3.9% month-over-month compared to the forecast of -2.0%.
The big news was upgraded annual guidance from Macy’s, Dollar General, and Dollar Tree during their earnings reports in the morning. That sent consumer discretionary stocks soaring. The positive sentiment came on top of relief that the Fed would front-load interest rate hikes in summer and cool off in fall.
The US Dollar Index ( DXY ) fell by -0.31%. US 30y and 10y Treasury Yields were higher while the 2y yield was lower. High Yield ( HYG ) Corporate Bond prices have increased sharply over the last three days. Investment Grade ( LQD ) Corporate Bond prices rose slightly today after a sharp increase yesterday. The spread between corporate junk bonds and short-term treasuries tightened significantly.
The put/call ratio ( PCCE ) rose to 0.818. The CNN Fear & Greed index moved toward Neutral but remained well in the Extreme Fear zone. The NAAIM Money Manager Exposure index rose to 33.19 after dipping to 19.51 last week. A value lower than 20 often signals at least a short-term bottom in the market.
Alibaba (BABA) was the top mega-cap for the day, soaring by +14.79% today. Only six mega-caps declined. Merck ( MRK ) was at the bottom of the mega-cap list with a -1.54% decline.
Tomorrow will bring the PCE Price Index data, another measure of inflation . Investors will be looking for any signal of a top for inflation . We will also get Person Spending and Retail Inventories for April. After the market opens, the Michigan Consumer Sentiment and Expectations data for May will be released.
Trends, Support, and Resistance
The index made a move back toward the 21d EMA but fell short of crossing the line.
If the one-day trend continues, that could mean a +1.96% gain for Friday and a move back above the key moving average line.
Today’s move was very positive for investors. We had a solid move higher on better volume than the previous day. The gains were shared broadly across the market. The next test is for the index to close above the 21d EMA , followed by taking out a few support/resistance areas. Caution is still warranted until more charts of our favorite stocks begin to show health signals.
Stay healthy and trade safe!
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