Daily Market Update for 6/7

Original Chart

Notes

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

Tuesday, June 7, 2022

Facts: +0.94%, Volume lower, Closing Range: 94%, Body: 81% Green
Good: High closing range, close above 21d EMA
Bad: Dip below 21d EMA on lower low, volume down on gain
Highs/Lows: Lower high, Lower low
Candle: Large green body, slightly longer lower wick
Advance/Decline: 0.91, more declining than advancing stocks
Indexes:SPX (+0.95%), DJI (+0.80%), RUT (+1.57%), VIX (-4.19%)
Sector List: Energy ( XLE +2.99%) and Industrials XLI +1.34%) at the top. Consumer Staples ( XLP +0.53%) and Consumer Discretionary ( XLY -0.25%) at the bottom.

Market Overview

Stocks advanced on Tuesday while more analysts continue to emerge with conflicting messages over the economy. Some say a recession is already here. Others say it’s yet to come. Will it be big or small?

The Nasdaq rose by +0.94% today. Volume was lower than the previous day. The candle has an 81% green body with a 94% closing range. The lower wick is short but formed in a morning dip after a gap-down open. The index rallied most of the day from that point, closing with the gain. There were more declining stocks than advancing stocks.

Small-caps outperformed today, with the Russell 2000 (RUT) gaining +1.57%. The S&P 500 (SPX) rose by +0.95% while the Dow Jones Industrial Average (DJI) advanced by +0.80%. The VIXVolatility Index fell by -4.19%.

Ten of the eleven S&P 500 sectors gained, led by Energy ( XLE +2.99%) and Industrials XLI +1.34%). Consumer Discretionary ( XLY -0.25%) was the only declining sector, led lower by Target which warned of tighter margins due to the need to clear inventories.

The Trade Balance for April was at -87.01b, a bit better than the forecast of 89.50b. The API Weekly Crude Oil Stock rose by 1.845m barrels. The stock was expected to dip by -1.800m barrels.

The US Dollar Index DXY ) declined by -0.08%. US 30y and 10y Treasury Yields declined while the 2y Treasury Yield was flat for the day. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices rose. Brent Oil remained near, but below $120 a barrel.

The put/call ratio ( PCCE ) fell to 0.782. The CNN Fear & Greed index is in the Fear range but moved toward Neutral.

Five of the big six mega-caps gained. Amazon ( AMZN ) was the only one that declined, falling by -1.43% after Target’s message to the market. The biggest gainer was Apple AAPL ) which rose +1.76% after yesterday’s announcement of new products to hit the market.

Alibaba (BABA) was the top mega-cap of the day, gaining +5.36% to end up at the top of the list. Amazon was at the bottom of the list along with only three other mega-caps that declined. All retail: Costco (COST), Home Depot (HD), and Walmart ( WMT ).

Chinese stocks topped the Daily Update Growth list after the Chinese government removed restrictions on some games in the market. Ehang Holdings (EH) was the biggest gainer, rising by +12.18%. The biggest loser on the list was Robinhood (HOOD), which declined by -4.28%.

Looking ahead

Crude Oil Inventors will be available in the morning after the market opens. There will be a 10y Note Auction in the afternoon.

Campbell Soup CPB ), Five Below (FIVE), and Lovesac (LOVE) are some of the earnings reports for Wednesday.

Trends, Support, and Resistance

The Nasdaq briefly dipped below the 21d EMA after the market opened. It quickly recovered and moved back above the key moving average, rallying more in the afternoon to end the day with gains.

If the index returns to the trend line from the 5/20 low, that would mean a +2.11% gain for tomorrow.

The one-day trend line leads to a +1.14% advance.

If the index returns to the five-day trend line , that points to a -0.51% for Wednesday.

Wrap-up

It seems every day we are getting a new message from corporate America that has a different signal about the market. Today, the message came from Target. They stated that due to an excess of inventory, they will need to increase discounts (lower prices) in order to clear shelves which will reduce margins in the coming quarter(s). Wait, reduce prices? What happened to runaway inflation?

There have been plenty of analysts that predicted higher demand was driven by an increase in household inventories during the pandemic, which in turn has caused retailers to increase inventories as to not miss out on sales. That’s turning out to be fairly accurate for Target and some other retailers. Demand for these products have dropped since households are no longer purchasing them and now prices need to come down to empty shelves.

Of course, that’s not all products and services everywhere. Oil will continue to drive transportation costs higher, which will impact prices of consumer products as well. There are still shortages such as the baby formula shortage and some staple foods .

But maybe inflation is turning the corner. All eyes will be on the inflation data Friday (In yesterday’s update, I incorrectly stated it would be Wednesday).

Stay healthy and trade safe!

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