Daily Market Update for 7/5

Original Chart

Notes

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

Tuesday, July 5, 2022

Facts: +1.75%, Volume higher, Closing Range: 100%, Body: 87% Green
Good: Closing range, big green candle on higher volume
Bad: Lower low, close below 21d EMA
Highs/Lows: Higher high, Lower low
Candle: Mostly green body with a small lower wick
Advance/Decline: 1.15, more advancing stocks than declining stocks
Indexes:SPX (+0.16%), DJI (-0.42%), RUT (+0.79%), VIX (+3.15%)
Sector List: Communications ( XLC +2.32%) and Consumer Discretionary ( XLY +2.24%) at the top. Utilities ( XLU -3.41%) and Energy ( XLE -3.97%) at the bottom.

Market Overview

The Euro fell sharply and Oil plunged to nearly $100 a barrel on fears of recession. Growth stocks rose as investors price in a possible reaction from the Fed to soften the landing for the economy.

The Nasdaq rose by +1.75% with volume higher than the previous day. The closing range of 100% comes above a thick green body covering 87% of the candle. The small lower wick, formed in a dip just after open that set the daily low lower than the previous day. There were more advancing stocks than declining stocks.

The results weren’t as great for the other indexes. The Dow Jones Industrial Average (DJI) declined by -0.42% as defensive and cyclical stocks took a hit on the recession fears. The S&P 500 (SPX) held onto a gain of +0.16% thanks to the big six mega-caps. The Russell 2000 (RUT) rose by +0.79%. The VIXVolatility Index increased by +3.15%.

Only the three growth sectors gained while the other eight S&P sectors declined. Communications ( XLC +2.32%) and Consumer Discretionary ( XLY +2.24%) were the top two sectors. Utilities ( XLU -3.41%) and Energy ( XLE -3.97%) had the worst declines.

Factory Orders for May grew more than expected. Orders for the month grew by 1.6% over the previous month compared to the expectation of 0.5%. June PMI data in Europe was also higher than expected.

The US Dollar Index DXY ) rose by +1.28%, mostly impacted by the Euro dropping in value. US 30Y, 10Y, and 2Y Treasury Yields declined with the 10Y yield dipping below the 2Y yield again. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices fell. Brent Oil dipped to $100 a barrel before closing the day at $101.70. Both Silver and Gold as well as the commodities all fell sharply.

The put/call ratio fell to 0.766. The CNN Fear & Greed index is in Extreme Fear.

All of the big six mega-caps gained today. Meta ( FB ) rose by +5.10%, topping the list of six, but failing to rally above its 21d EMA . Apple AAPL ), Microsoft MSFT ), Amazon ( AMZN ), and Alphabet GOOGL ) all rose above their 21d EMA lines.

Meta, Alphabet , and Amazon were the top three in the broader mega-cap list. Chevron CVX ) and Exxon Mobile ( XOM ) were at the bottom of the list, losing -2.63% and -3.13% in their value as the price of Oil plunged.

The Daily Update Growth List was mostly green today. Peloton (PTON) had the biggest gain, rising by +14.02%. There were ten stocks on the list that rose by more than 10%. Only four stocks declined. Niu Technologies NIU ) had the worst decline, falling by -4.92%.

Looking ahead

The Services PMI and ISM Non-Manufacturing PMI data for June will be published in the morning after the market opens. We will also get the JOLTs Job Openings for May.

Those together with the Fed Meeting minutes in the afternoon will fuel more speculation on possible Fed moves beyond this month’s expected 75-basis point rate hike.

After the market closes, we will get the weekly APICrude Oil Stock numbers.

Trends, Support, and Resistance

The Nasdaq started the day with a decline, but then rose throughout the day to finish just below the 21d EMA .

If the one-day trend line continues into tomorrow, that would mean a +3.46% advance.

The trend line from the 6/16 low points to a -0.56% decline for Wednesday.

If the index returns to the 5-day trend line , that would mean a -3.04% decline.

Wrap-up

It was a nice start to the short week for the Nasdaq. However, the gains in growth stocks among losses everywhere else are all based on anticipation of a more dovish Fed facing a potential recession. Meeting minutes from the last Fed meeting will be available on Wednesday which will drive more speculation in either direction.

Stay healthy and trade safe!

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