Daily Market Update for 6/1

Original Chart

Notes

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

Wednesday, June 1, 2022

Facts: -0.72%, Volume lower, Closing Range: 28%, Body: 54% Red
Good: Closed above the 21d EMA , lower volume on decline
Bad: Lower low, closing range below 40%
Highs/Lows: Higher high, Lower low
Candle: Medium red body in center of candle, nearly equal upper and lower wicks
Advance/Decline: 0.52, almost two declining stocks for every advancing stock
Indexes:SPX (-0.75%), DJI (-0.54%), RUT (-0.49%), VIX (-1.91%)
Sector List: Energy ( XLE +1.63%) and Utilities ( XLU -0.16%) at the top. Health ( XLV -1.44%) and Financials ( XLF -1.61%) at the bottom.

Market Overview

Positive economic data stoked fears that the Fed needs to be more hawkish to slow down an overheated economy and reduce inflation .

The Nasdaq fell by -0.72%, but on lower volume than the previous day. The 54% red body sits in the middle of the candle resulting in a 28% closing range for the day. The outside day has a higher high and a lower low. There were almost two declining stocks for every advancing stock.

The S&P 500 (SPX) fell a bit more than the Nasdaq, declining by -0.75%. The Russell 2000 (RUT) declined by -0.49%. The Dow Jones Industrial Average (DJI) fell -0.54%. Despite the major indexes declining, the VIXVolatility Index dropped by -1.91%, likely helped by the mid-day market rally from the morning lows.

Only one of the eleven S&P 500 sectors advanced . Energy ( XLE +1.63%) is benefiting from both higher demand and higher energy prices. The worst two sectors for today were Health ( XLV -1.44%) and Financials ( XLF -1.61%).

The ISM Manufacturing PMI for May registered at 56.1 compared to the forecast of 54.5. A seemingly bullish reading only stoked fears that economic growth was still too heated. API Weekly Crude Oil Stock showed more demand than expected with inventories changing by -1.18 million barrels.

The US Dollar Index DXY ) is on the rise again, advancing by +0.75% today. US 30y, 10y, and 2y Treasury Yields all rose with shorter-term yields climbing faster than longer-term yields. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices declined. Brent Oil declined to near $115 a barrel and continued to slide after hours. Aluminum Futures declined by -2.58%, falling to their lowest point this year.

The put/call ratio ( PCCE ) fell to 0.806. The CNN Fear & Greed index moved into the Fear range as it heads back toward neutral.

Three of the big six mega-caps gained today. Amazon ( AMZN ) led the gains with a +1.23% advance. Meta ( FB ) has the biggest loss, declining by -2.58% as Sheryl Sandberg announced her departure from the company.

Exxon Mobil XOM ) led the mega-cap list, rising by +1.92% as one of only nine mega-caps that ended the day with gains. At the bottom of the list was Alibaba (BABA) which declined -2.78% to just barely beat Meta for the bottom slot.

There were only ten advancing stocks in the Daily Update Growth List. Datadog DDOG ) was at the top of the list, gaining +2.21% today. Digital Turbine (APPS) missed earnings estimates and plummeted by -22.61% today, ending up at the bottom of the growth list.

Looking ahead

To start the day tomorrow, we’ll get the ADP Nonfarm Employment for May, the weekly Initial Jobless Claims, and Unit Labor Costs for Q1. Factory Orders for April and the weekly Crude Oil Inventories will arrive after the market opens.

CrowdStrike ( CRWD ) and Lululemon Athletica (LULU) will report earnings on Thursday.

Trends, Support, and Resistance

The Nasdaq dropped slightly below the 21d EMA before recovering and closing above the key moving average today.

If the index returns to the five-day trend line , that will meet up with the trend line from the 5/20 low and result in a +3.32% advance.

A continuation of the one-day trend line points to a -0.57% decline.

Wrap-up

Although last week’s rally attempt looks in danger of turning over, the rally is still alive at this point. There could be some profit-taking and repositioning after three very strong days in the market and investors are uncertain about how the Fed will respond to economic data. Or this could turn into more selling as more fear grips the market.

Stay healthy and trade safe!

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