Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
Friday, June 3, 2022
Facts: -2.47%, Volume lower, Closing Range: 23%, Body: 42% Red
Good: Support at 21d EMA , lower volume on decline
Bad: Closing Range, A/D ratio
Highs/Lows: Lower high, Higher low
Candle: Inside day, short body in lower half of candle
Advance/Decline: 0.46, more than two declining stocks for every advancing stock
Indexes:SPX (-1.63%), DJI (-1.05%), RUT (-0.77%), VIX (+2.50%)
Sector List: Energy ( XLE +1.32%) and Industrials ( XLI -0.39%) at the top. Technology ( XLK -2.39%) and Consumer Discretionary ( XLY -2.92%) at the bottom.
An ominous mail from Elon Musk to Tesla management topped the headlines on Friday and certainly dragged down the Nasdaq. However, it was likely the stronger-than-expected Nonfarm Payrolls that caused wider spread declines.
The Nasdaq declined -2.47% on lower volume than the previous day. The 23% closing range comes above a tiny lower wick that kept the index above the 21d EMA for the close. The longer upper wick is above a 42% red body. The lower high and higher low mark an inside day. There were more than two declining stocks for every advancing stock.
The S&P 500 (SPX) declined by -1.63%, also impacted by the Tesla turmoil. The Dow Jones Industrial Average (DJI) declined by -1.05%. The Russell 2000 (RUT) held up well relative to the other indexes, declining only -0.77%. The VIXVolatility Index rose by +2.50%.
Nonfarm Payrolls rose by 390,000 in May compared to the forecast of 325,000. The strong performance in the labor market means the Fed needs to worry less about higher interest rates impacting employment. Or at least that’s the theory. Services PM and ISM Non-Manufacturing PMI came in lower than expected for the month of May.
The US Dollar index ( DXY ) rose by +0.41%. 30y, 10, and 2y Treasury Yields all rose. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices fell. Brent Oil reached $120 per barrel by the end of Friday.
All big six mega-caps declined. Tesla ( TSLA ) led the declines with a -9.22% loss after Elon Musk’s leaked emails. The CEO of Tesla said he had a “super bad feeling” about the economy and would need to cut 10% of the workforce.
Only three stocks in the Daily Update Growth list advanced . Okta ( OKTA ) was the top gainer after a strong earnings report. Draft Kings ( DKNG ) fell by -10.80%, landing it at the bottom of the growth list for Friday.
Trends, Support, and Resistance
The Nasdaq held above the 21d EMA on an inside day.
If the index returns to the trend line from the 5/20 low, that would mean a +3.47% gain on Monday.
The five-day trend line points to a +0.82% gain.
If the one-day trend continues, we can expect a -0.68% decline.
Bad news was supposed to be good news on Friday. However, the bad news was supposed to be a weak jobs report, not a panicking CEO. Instead, we go a strong jobs report that means the Fed has more freedom to be hawkish in the second half of the year.
Stay healthy and trade safe!
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