Daily Market Update for 7/6
Summary: It was a roller-coaster day for the market as prices dipped in the morning and recovered in the afternoon. Investors reacted to the Purchasing Managers index data that indicates the economic recovery may be slowing. Although the Nasdaq could finish the day with a small gain, most stocks across the index declined for the day.
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Tuesday, July 6, 2021
Facts: +0.17%, Volume higher, Closing range: 85%, Body: 1%
Good: High closing range, long lower wick shows recovery from dip
Bad: Volatile outside day with doji star candle, bearish pattern
Highs/Lows: Higher high, lower low
Candle: Doji star candle with longer lower wick, outside day
Advanced/Decline: 0.3, more than three declining stocks for every advancing stock
Indexes: SPX (-0.20%), DJI (-0.60%), RUT (-1.36%), VIX (+9.08%)
Sectors: Real Estate (XLRE +0.89%) and Utilities (XLU +0.42%) at the top. Financials (XLF -1.75%) and Energy (XLE -3.25%) were at the bottom.
Expectation: Sideways or Lower
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Market Overview
It was a roller-coaster day for the market as prices dipped in the morning and recovered in the afternoon. Investors reacted to the Purchasing Managers index data that indicates the economic recovery may be slowing. Although the Nasdaq could finish the day with a small gain, most stocks across the index declined for the day.
The Nasdaq closed with a +0.17% gain, beginning the day with a gap at open but quickly selling off in the morning. Eventually, the bulls came in and brought the index back just above where it opened. The volume was higher than the previous day, and the mid-day reversal ended with a high 85% closing range. The close, being just above the open, created a slim 1% body. The outside day, doji star candle signals a bearish reversal pattern. Despite the gain in the index, there were more than three declining stocks for every advancing stock.
The S&P 500 (SPX) closed the day with a -0.20% loss. The Dow Jones Industrial Average (DJI) retreated -0.60%. The small-cap Russell 2000 (RUT) fell -1.36%.
The VIX volatility index rose +9.08% for the day. It was up almost 20% intraday.
Real Estate (XLRE +0.89%) and Utilities (XLU +0.42%) were the top sectors, signaling a defensive stance from investors. Interestingly, the growth sectors of Technology (XLK +0.38%) and Consumer Discretionary (XLY +0.12%) were the only other two sectors to gain for the day, helping the Nasdaq finish higher. Financials (XLF -1.57%) and Energy (XLE -3.25%) were the only two declining sectors.
The Financial sector is down as yields on the 10y Treasury Note continue to drop, bringing interest rates down and taking away revenue potential for big banks. The Energy sector dropped as OPEC was unable to get agreement from Saudi Arabia and U.A.E. on output. The disagreement is bringing volatility to the sector that investors likely want to avoid.
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Economic Indicators
The US Dollar (DXY) advanced -0.34% for the day.
The US 30y and 10y Treasury yields dropped to their lowest point since February. The 2y Treasury yield also declined today, but not as much as longer-term yields, tightening the gap.
High Yield Corporate Bond (HYG) prices rose while Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) declined, Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) declined.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) rose +1.16%. Ethereum (ETHUSD) advanced +5.27%.
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Investor Sentiment
The put/call ratio rose to 0.694. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. Below that level is overly bullish.
The CNN Fear & Greed index is on the fear side, moving further from neutral.
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Market Leaders
To find out what made the index move up, look no further than the four largest mega-caps. Amazon (AMZN) had a massive gain of +4.69% after the Pentagon decided to cancel the exclusive 110B cloud contract with Microsoft and split it across major cloud providers, including Amazon. It wasn't great news for Microsoft (MSFT), but the tech giant avoided a significant loss, closing with a 0% daily move. Apple (AAPL) gained +1.47% for the day. Alphabet (GOOGL) gained +0.74%.
Amazon (AMZN) topped the mega-cap list, followed by Oracle (ORCL), which also stands to benefit from the new opportunities in government cloud contracts. Apple (AAPL) and Netflix (NFLX) were third and fourth best performers on the list.
It was a day for big tech, while most mega-caps gained for the day. Only Oracle (ORCL) topped the four largest mega-caps in daily gains, advancing +2.87%. Alibaba (BABA), Bank of America (BAC), JP Morgan (JPM), and Berkshire Hathaway (NRK) were at the bottom of the mega-cap list. At the bottom of the list were Bank of America (BAC), Alibaba (BABA), Tesla (TSLA), and Exxon Mobil (XOM).
Despite the low advance/decline ratio, the daily update growth list had plenty of winners. At the top of the list are GrowGeneration (GRWG), CrowdStrike (CRWD), Chewy (CHWY), and Zscaler (ZS), all with greater than 4% gains. Chinese stocks dominated the bottom of the list as the Chinese government cracks down on Didi and has its eyes on more regulation of Internet companies. JD.com (JD), Ehang Holdings (EH), FUTU Holdings (FUTU), and UP Fintech (TIGR) all lost more than 5% for the day.
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Looking ahead
The JOLTs Job Openings report for May will be available on Wednesday morning. In the afternoon, the FOMC will release the meeting minutes from last month. Investors will be interested to see what concerns remain around inflation and employment. The API Weekly Crude Oil stock comes after the market close.
There are no relevant earnings reports for the daily update on Wednesday.
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Trends, Support, and Resistance
The Nasdaq set a new all-time high before dipping in the morning. The mid-day upside reversal came above the 14,500 support area.
All three trend lines point to nearly the same place, with a decline between -0.03% and -0.22%.
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Wrap-up
The ISM purchasing managers index data released today showed that the economic recovery might be slowing. That is a bad sign for cyclicals. But is it a good sign for big tech and growth stocks? It could be. If the recovery is slowing but still progressing, that will take some inflationary pressures out of the picture. It will also keep interest rates lower in the near term. Inflation and high-interest rates are the biggest evil for technology and growth stocks.
The ISM reading today was at 60.1 compared to an expectation of 63.5. The lower-than-expected reading is indicating a more slowly expanding economy. But the reading above 50 indicates the economy is still expanding. If you disregard the last three exceptional months, the last time the indicator was above 60 was in 2018.
Still, it does not mean these sectors shield investors from a slowdown in the recovery. Investors will be looking at the Fed meeting minutes released tomorrow for any clues on monetary policy changes. Those hints of changes amid a shift in the economic picture could spread the worries further into the market.
Based on the candle, the expectation is for sideways or lower tomorrow.
Stay healthy and trade safe!
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Tuesday, July 6, 2021
Facts: +0.17%, Volume higher, Closing range: 85%, Body: 1%
Good: High closing range, long lower wick shows recovery from dip
Bad: Volatile outside day with doji star candle, bearish pattern
Highs/Lows: Higher high, lower low
Candle: Doji star candle with longer lower wick, outside day
Advanced/Decline: 0.3, more than three declining stocks for every advancing stock
Indexes: SPX (-0.20%), DJI (-0.60%), RUT (-1.36%), VIX (+9.08%)
Sectors: Real Estate (XLRE +0.89%) and Utilities (XLU +0.42%) at the top. Financials (XLF -1.75%) and Energy (XLE -3.25%) were at the bottom.
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
It was a roller-coaster day for the market as prices dipped in the morning and recovered in the afternoon. Investors reacted to the Purchasing Managers index data that indicates the economic recovery may be slowing. Although the Nasdaq could finish the day with a small gain, most stocks across the index declined for the day.
The Nasdaq closed with a +0.17% gain, beginning the day with a gap at open but quickly selling off in the morning. Eventually, the bulls came in and brought the index back just above where it opened. The volume was higher than the previous day, and the mid-day reversal ended with a high 85% closing range. The close, being just above the open, created a slim 1% body. The outside day, doji star candle signals a bearish reversal pattern. Despite the gain in the index, there were more than three declining stocks for every advancing stock.
The S&P 500 (SPX) closed the day with a -0.20% loss. The Dow Jones Industrial Average (DJI) retreated -0.60%. The small-cap Russell 2000 (RUT) fell -1.36%.
The VIX volatility index rose +9.08% for the day. It was up almost 20% intraday.
Real Estate (XLRE +0.89%) and Utilities (XLU +0.42%) were the top sectors, signaling a defensive stance from investors. Interestingly, the growth sectors of Technology (XLK +0.38%) and Consumer Discretionary (XLY +0.12%) were the only other two sectors to gain for the day, helping the Nasdaq finish higher. Financials (XLF -1.57%) and Energy (XLE -3.25%) were the only two declining sectors.
The Financial sector is down as yields on the 10y Treasury Note continue to drop, bringing interest rates down and taking away revenue potential for big banks. The Energy sector dropped as OPEC was unable to get agreement from Saudi Arabia and U.A.E. on output. The disagreement is bringing volatility to the sector that investors likely want to avoid.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) advanced -0.34% for the day.
The US 30y and 10y Treasury yields dropped to their lowest point since February. The 2y Treasury yield also declined today, but not as much as longer-term yields, tightening the gap.
High Yield Corporate Bond (HYG) prices rose while Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) declined, Gold (GOLD) advanced.
Crude Oil (CRUDEOIL1!) declined.
Timber (Wood) declined.
Copper (COPPER1!) and Aluminum (ALI1!) declined.
Bitcoin (BTCUSD) rose +1.16%. Ethereum (ETHUSD) advanced +5.27%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose to 0.694. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. Below that level is overly bullish.
The CNN Fear & Greed index is on the fear side, moving further from neutral.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
To find out what made the index move up, look no further than the four largest mega-caps. Amazon (AMZN) had a massive gain of +4.69% after the Pentagon decided to cancel the exclusive 110B cloud contract with Microsoft and split it across major cloud providers, including Amazon. It wasn't great news for Microsoft (MSFT), but the tech giant avoided a significant loss, closing with a 0% daily move. Apple (AAPL) gained +1.47% for the day. Alphabet (GOOGL) gained +0.74%.
Amazon (AMZN) topped the mega-cap list, followed by Oracle (ORCL), which also stands to benefit from the new opportunities in government cloud contracts. Apple (AAPL) and Netflix (NFLX) were third and fourth best performers on the list.
It was a day for big tech, while most mega-caps gained for the day. Only Oracle (ORCL) topped the four largest mega-caps in daily gains, advancing +2.87%. Alibaba (BABA), Bank of America (BAC), JP Morgan (JPM), and Berkshire Hathaway (NRK) were at the bottom of the mega-cap list. At the bottom of the list were Bank of America (BAC), Alibaba (BABA), Tesla (TSLA), and Exxon Mobil (XOM).
Despite the low advance/decline ratio, the daily update growth list had plenty of winners. At the top of the list are GrowGeneration (GRWG), CrowdStrike (CRWD), Chewy (CHWY), and Zscaler (ZS), all with greater than 4% gains. Chinese stocks dominated the bottom of the list as the Chinese government cracks down on Didi and has its eyes on more regulation of Internet companies. JD.com (JD), Ehang Holdings (EH), FUTU Holdings (FUTU), and UP Fintech (TIGR) all lost more than 5% for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
The JOLTs Job Openings report for May will be available on Wednesday morning. In the afternoon, the FOMC will release the meeting minutes from last month. Investors will be interested to see what concerns remain around inflation and employment. The API Weekly Crude Oil stock comes after the market close.
There are no relevant earnings reports for the daily update on Wednesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq set a new all-time high before dipping in the morning. The mid-day upside reversal came above the 14,500 support area.
All three trend lines point to nearly the same place, with a decline between -0.03% and -0.22%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The ISM purchasing managers index data released today showed that the economic recovery might be slowing. That is a bad sign for cyclicals. But is it a good sign for big tech and growth stocks? It could be. If the recovery is slowing but still progressing, that will take some inflationary pressures out of the picture. It will also keep interest rates lower in the near term. Inflation and high-interest rates are the biggest evil for technology and growth stocks.
The ISM reading today was at 60.1 compared to an expectation of 63.5. The lower-than-expected reading is indicating a more slowly expanding economy. But the reading above 50 indicates the economy is still expanding. If you disregard the last three exceptional months, the last time the indicator was above 60 was in 2018.
Still, it does not mean these sectors shield investors from a slowdown in the recovery. Investors will be looking at the Fed meeting minutes released tomorrow for any clues on monetary policy changes. Those hints of changes amid a shift in the economic picture could spread the worries further into the market.
Based on the candle, the expectation is for sideways or lower tomorrow.
Stay healthy and trade safe!
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