Daily Market Update for 5/31

Original Chart

Notes

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

Tuesday, May 31, 2022

Facts: -0.41%, Volume higher, Closing Range: 56%, Body: 23% Red
Good: Higher high, higher low
Bad: Couldn’t hold onto gain, decline on higher volume
Highs/Lows: Higher high, Higher low
Candle: Thin red body in top half of candle
Advance/Decline: 0.55, almost two declining for every advancing stock
Indexes:SPX (-0.63%), DJI (-0.67%), RUT (-1.26%), VIX (+1.83%)
Sector List: Consumer Discretionary ( XLY +0.51%) and Communications ( XLC -0.07%) at the top. Energy ( XLE -1.50%) and Materials ( XLB -1.52%) at the bottom.
Expectation:

Market Overview

The sentiment was mixed on the last day of trading for the month of May with some warning that the current rally will be short-lived. The shifting sentiment caused indexes to chop up and down throughout the day.

The Nasdaq ended the day with a -0.41% decline. A dip in the opening minutes created a long lower wick, after which the index rallied to find a higher high than the previous day. Three late afternoon reversals resulted in a short upper wick and a thin red body in the upper half of the candle. The closing range of 56% isn’t bad but nearly two stocks declined for every advancing stock and volume was much higher than the previous day.

Small caps were the most volatile today, with the Russell 2000 (RUT) declining by -1.26%. The S&P 500 (SPX) declined by -0.63% and the Dow Jones Industrial Average (DJI) declined by -0.67%. The VIXVolatility Index gained by +1.83%.

Only one of the eleven S&P 500 sectors gained. Consumer Discretionary ( XLY +0.51%) was helped higher by better than expected Consumer Confidence. At the bottom of the sector list were Energy ( XLE -1.50%) and Materials ( XLB -1.52%).

Consumer Confidence was lower than the previous month but higher than the forecast. It came in at 106.4 compared to an expectation of 103.9. The Chicago Purchasing Managers Index for May was also higher than expected at 60.3 compared to the forecast of 55.0.

The US Dollar Index DXY ) rose by +0.41%. The 30y and 10y Treasury Yields rose while the 2y Treasury Yield declined. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices declined after sharply rising for several days. Brent Oil topped 115 again over the weekend, ending today at 115.74.

The put/call ratio ( PCCE ) rose to 0.816. The CNN Fear & Greed index remained in Extreme Fear but is moving toward Neutral.

Of the big six mega-caps, Amazon ( AMZN ) and Alphabet GOOGL ) ended the day with gains, holding onto a +4.40% and +1.10% advanced , respectively. Apple AAPL ) had the biggest decline of the six, losing -0.53% today.

Amazon was the top overall mega-cap as well, followed by Alibaba (BABA) which gained +2.83%. At the bottom of the mega-cap list was Eli Lilly which fell by -3.10%.

The top seven stocks in the Daily Update Growth List were all Chinese companies. Ehang Holdings (EH) led the gains with a +5.44% advance, getting a boost from their earnings release in the morning. At the bottom of the list was Snap Inc. (SNAP), which declined by -9.44%.

Looking ahead

The ISM Manufacturing Employment and Purchasing Manager Index data for May will be delivered tomorrow after the market opens. We will also get the JOLTs Job Openings report for April.

Two FOMC Members (Williams and Bullard) are scheduled to speak ahead of Beige Books being published in the afternoon. Williams tends to be on the more dovish side of the group while Bullard tends to be on the hawkish side.

Hewlett Packard ( HPE ), MongoDB MDB ), NetApp NTAP ), Chewy CHWY ), and GameStop ( GME ) are among the earnings reports for Wednesday.

Trends, Support, and Resistance

In the morning dip, the index did get support at the 21d EMA .

If the index returns to the five-day trend line , that would mean a big +3.68% gain for Wednesday.

A more likely advance would be the one-day trend line which meets up with the trend line from the 5/20 low. That would result in a +1.70% gain.

Wrap-up

We have a mix of sentiment in the market right now with some seeing a bullish turn for the better while others remain bearish and see a very short timeline for the current rally. The key will be whether the indexes can hold support levels and whether leading stocks can break out and hold onto gains.

Stay healthy and trade safe!

Comments

If you find this helpful or have comments, please reply and like at

https://www.tradingview.com/chart/IXIC/38DIY0NI-Daily-Market-Update-for-5-31/