Daily Market Update for 6/10

Original Chart

Notes

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

Friday, June 10, 2022

Facts: -3.52%, Volume lower, Closing Range: 5%, Body: 85% Red
Good: Lower volume on decline
Bad: Gap down, low closing range, advance/decline ratio
Highs/Lows: Lower high, Lower low
Candle: Gap down at open, mostly red body
Advance/Decline: 0.18, more than five declining stocks for every advancing stock
Indexes:SPX (-2.91%), DJI (-2.73%), RUT (-2.73%), VIX (+6.36%)
Sector List: Consumer Staples ( XLP -0.43%) and Utilities ( XLU -0.77%) at the top. Technology ( XLK -3.84%) and Consumer Discretionary ( XLY -3.99%) at the bottom.

Market Overview

Inflation data came in worse than expected sending stock and bond prices falling.

The Nasdaq lost -3.52%. Volume was lower than the previous day, but the gap-down and low closing range of 5% represented a broad sell-off where five stocks declined for every advancing stock. The 85% red body left behind a small upper and lower wick.

The tech-heavy Nasdaq was hit the worst. The S&P 500 (SPX) fell by -2.91%, also weighed down by the tech mega-caps. The Dow Jones Industrial Average (DJI) and Russell 2000 (RUT) both declined by -2.73%. The VIXVolatility index rose by +6.36%.

All eleven S&P 500 sectors declined. The defensive sectors of ] Consumer Staples ( XLP -0.43%) and Utilities ( XLU -0.77%) held up the best. The growth sectors of Technology ( XLK -3.84%) and Consumer Discretionary ( XLY -3.99%) had the worst declines.

The Core Consumer Price Index, which excludes food and gas, rose by 6.0% year-over-year. The expectation was 5.9%. Adding back in food and gas and the CPI rose 8.6% year-over-year compared to the expectation of 8.3%. Michigan Consumer Sentiment fell to 50.2, from the previous level of 58.4. The expectation was 58.0. Consumer Expectations also fell more than expected, coming in at 46.8 compared to the expectation of 54.5.

The US Dollar Index DXY ) rose by +0.85%. US 30y, 10y, and 2y Treasury Yields all rose. The gap between long-term and short-term yields narrowed sharply. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices both declined, giving back all the gains over the past few weeks. Brent Oil fell to $120 a barrel. Timber (WOOD) fell to its lowest point since the end of 2020. Copper and Aluminum Futures were also sharply lower.

The put/call ratio ended the day at 1.13, a bearish reading. The CNN Fear & Greed Index fell back toward Extreme Fear but ended the day in the Fear range.

All big six mega-caps declined. Amazon ( AMZN ) had the biggest loss, declining by -5.60%. Alphabet GOOG ) had the smallest loss of the six but still declined by -3.04%.

Only one mega-cap in the broader list advanced today. Walmart ( WMT ) closed the day with a +0.56% gain. The biggest loser on the list was Nvidia NVDA ) which declined by 5.95%.

JD.com JD ) was the only stock in the Daily Update Growth List that gained on Friday. DocuSign DOCU ) fell by -24.53% after missing earnings .

Looking ahead

There is not much economic news scheduled for Monday. Investors will be awaiting the Fed’s interest rate decision on Wednesday which is expected to by a 50 basis point increase.

Oracle ORCL ) will release earnings on Monday after the closing bell.

Trends, Support, and Resistance

The Nasdaq gapped down and then hit the daily low in the morning. A rally in the afternoon failed, resulting in a low closing range.

If the index returns to the trend line from the 6/3 high, that would mean a +1.83% gain for Monday.

The five-day and one-day trend lines both point to a +0.26% gain to start the week.

Wrap-up

Ouch. Inflation data was worse than expected and the worst year-over-year price increases since the early 1980s. Produce Price Index data comes out on Tuesday and that may help ease some fears if it’s better than expected. But don’t get your hopes up. The real influence will come on Wednesday when the Fed will need to explain how it can control inflation without putting the economy in recession.

Stay healthy and trade safe!

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