Daily Market Update for 2/24
Trend lines drawn from the 2/16 ATH (7d), 2/18 (5d) and today 2/24 (1d).
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Wednesday, February 24, 2021
Facts: +0.99%, Volume lower, Closing range: 97%, Body: 62%
Good: Another quick test at the 50d MA before climbing the rest of the day
Bad: Not much
Highs/Lows: Higher high, higher low
Candle: Thick green body at top of the candle, longer lower wick
Advance/Decline: 1.99, 2 advancing stocks for every declinging stock
Indexes: SPX (+1.14%), DJI (+1.35%), RUT (+2.38%), VIX (-7.66%)
Sectors: Energy (XLE +3.54%) and Financials (XLF +1.94%) were top. Consumer Staples (XLP -0.06%) and Utilities (XLU -1.17%)
Expectation: Higher
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Market Overview
Thank you Jerome Powell. Fears of inflation gave way to more bullish sentiment as investors anticipate a new round of stimulus coming soon. The tech sector stopped it's multiple day decent and all of the major indexes turned in gains for the day.
The Nasdaq ended the day with a +0.99% gain. The confirmation of yesterday's bullish reversal candle resulted in a higher high and a higher low after the index successfully tested the 50d MA in the morning. The 97% closing range and 62% green body sit above a longer lower wick that result from a brief morning dip. Two stocks advanced for every declining stock.
All of the major indexes had gains with very bullish candlesticks. The Russell 2000 (RUT) was the top sector with a +2.38% gain. The S&P 500 gained +1.14% while the Dow Jones Industrial average (DJI) gained +1.35%.
The VIX volatility index declined -7.66%.
The top sectors were Energy (XLE) and Financials (XLF) with +3.54% and +1.94% gains. The welcome change in the sector list is to see Technology (XLK) with a positive day, gaining +1.53% and outperforming the broader SPX index. Also reassuring is to see the defensive play sector Utilities (XLU) move back to the bottom of the list with a -1.17% loss. The only other losing sector was Consumer Staples (XLP) with a -0.06% decline. Industrials (XLI) got a boost from higher than expected New Home sales, advancing +1.89%.
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Economic Indicators
The US Dollar (DXY) declined -0.12%.
Yields on 30y, 20y and 10y treasury bonds all rose for the day. Investors have been negatively reacting to the rising yields because of possible addition of an interest rate hike would depress big tech and growth stocks. However Jerome Powell's comments during congressional testimony have seemed to ease those fears.
Both High Yield (HYG) corporate bonds and Investor Grade (LQD) corporate bonds prices advanced for the day.
Silver (SILVER) advanced while Gold (GOLD) declined. Crude Oil (CRUDEOIL1!) advanced despite Crude Oil inventories being higher than expected. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) both advanced. Bullish!
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio dipped all the way to 0.503, an overly bullish level. 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. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index moved more to the greedy side but still not in the extreme greed range.
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Market Leaders
Microsoft (MSFT) and Alphabet (GOOGL) both advanced for the day while Apple (AAPL) and Amazon (AMZN) declined. Apple and Amazon are both trading below the 21d EMA and 50d MA. Apple's 21d EMA crossed under the 50d MA which is viewed as a downtrend signal. Microsoft is trading under the 21d EMA but above the 50d MA. The continuation of a rally will be much easier of these big four mega-caps are all participating.
Tesla (TSLA) reversed more than two weeks of declines with a +6.18% gain today. Mastercard (MA) and Visa (V) were also top mega-cap gainers with +4.82% and +3.45% gains. The majority of mega-caps ended the day with gains. Retailers Walmart (WMT) and Home Depot (HD) were at the bottom of the mega-cap list with losses.
Growth stocks had a great day. Upwork (UPWK) soared gaining over 20% on smashing earnings expectations, but gave up most of the gain to end the day with a +3.45% advance. Ehang Holdings (EH), SUMO logic (SUMO) and Enphase (ENPH) were big gainers for the day. Not all growth stocks were winners. Digital Turbine (APPS), Chewy (CHWY) and Square (SQ) were at the bottom. Square gave up -7.51% after investors reacted negatively to their cryptocurrency investments and returns for the business only amounting to 2% margins.
GameStop (GME) sucked the oxygen out of the room again with a 103.94% gain and continues to move up afterhours, now over 90%. The casino is still open.
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Looking ahead
Durable Goods Orders, GDP for Q4 and Initial Jobless Claims will all be released tomorrow before market open. Pending Home Sales will be released after the opening bell.
Several FOMC Members will speak tomorrow throughout the day. There comments can help reaffirm Jerome Powell's testimony.
Thursday will add to the tsunami of earnings reports this week with Salescore.com (CRM), Anheuser Busch (BUD), MercadoLibre (MELI), Moderna (MRNA), Autodesk (ADSK), Workday (WDAY), DoorDask (DASK), Vmware (VMW), Dell (DELL), Zscaler (ZS), Wayfair (W), Etsy (ETSY), Plug Power (PLUG), Farfetch (FTCH), Vipshop (VIPS), Novocure (NVCR), Beyond Meat (BYND), the list just keeps going.
Be sure to check the companies in your portfolio for upcoming earnings reports.
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Trends, Support and Resistance
I removed the long-term trend line I've been using since the 10/30 bottom. It no longer seems relevant as a regression trend channel. I added a trend line from the 2/16 high. 2/23 will become a low if the index continues higher this week.
The one-day trend line is pointing to a +1.86% gain that would get the index back above the 21d EMA.
The trend from the 2/26 all-time high and the five-day trend line point to a -2.58% decline. That would rest the index just below the 50d moving average.
If there is further downside, the 13,000 level has proven to be a support area. The index held the 12,550 area recently. If it passes that area, the next support area is 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It's good to see the Nasdaq, and the market, have a bullish day after yesterday's dip below the 50d MA and test of the 13,000 support area. With a hammer candlestick yesterday, followed by a positive candle today, we can be optimistic about further upside. However, nothing is guaranteed until it's confirmed by the market.
The expectation for tomorrow is set for higher. If we have an expectation breaker, that will mean a closer look to see what now is bothering investors. Until then, remain cautious but optimistic!
Stay healthy and trade safe!
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=-
Wednesday, February 24, 2021
Facts: +0.99%, Volume lower, Closing range: 97%, Body: 62%
Good: Another quick test at the 50d MA before climbing the rest of the day
Bad: Not much
Highs/Lows: Higher high, higher low
Candle: Thick green body at top of the candle, longer lower wick
Advance/Decline: 1.99, 2 advancing stocks for every declinging stock
Indexes: SPX (+1.14%), DJI (+1.35%), RUT (+2.38%), VIX (-7.66%)
Sectors: Energy (XLE +3.54%) and Financials (XLF +1.94%) were top. Consumer Staples (XLP -0.06%) and Utilities (XLU -1.17%)
Expectation: Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Thank you Jerome Powell. Fears of inflation gave way to more bullish sentiment as investors anticipate a new round of stimulus coming soon. The tech sector stopped it's multiple day decent and all of the major indexes turned in gains for the day.
The Nasdaq ended the day with a +0.99% gain. The confirmation of yesterday's bullish reversal candle resulted in a higher high and a higher low after the index successfully tested the 50d MA in the morning. The 97% closing range and 62% green body sit above a longer lower wick that result from a brief morning dip. Two stocks advanced for every declining stock.
All of the major indexes had gains with very bullish candlesticks. The Russell 2000 (RUT) was the top sector with a +2.38% gain. The S&P 500 gained +1.14% while the Dow Jones Industrial average (DJI) gained +1.35%.
The VIX volatility index declined -7.66%.
The top sectors were Energy (XLE) and Financials (XLF) with +3.54% and +1.94% gains. The welcome change in the sector list is to see Technology (XLK) with a positive day, gaining +1.53% and outperforming the broader SPX index. Also reassuring is to see the defensive play sector Utilities (XLU) move back to the bottom of the list with a -1.17% loss. The only other losing sector was Consumer Staples (XLP) with a -0.06% decline. Industrials (XLI) got a boost from higher than expected New Home sales, advancing +1.89%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.12%.
Yields on 30y, 20y and 10y treasury bonds all rose for the day. Investors have been negatively reacting to the rising yields because of possible addition of an interest rate hike would depress big tech and growth stocks. However Jerome Powell's comments during congressional testimony have seemed to ease those fears.
Both High Yield (HYG) corporate bonds and Investor Grade (LQD) corporate bonds prices advanced for the day.
Silver (SILVER) advanced while Gold (GOLD) declined. Crude Oil (CRUDEOIL1!) advanced despite Crude Oil inventories being higher than expected. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) both advanced. Bullish!
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio dipped all the way to 0.503, an overly bullish level. 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. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
The CNN Fear & Greed index moved more to the greedy side but still not in the extreme greed range.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Microsoft (MSFT) and Alphabet (GOOGL) both advanced for the day while Apple (AAPL) and Amazon (AMZN) declined. Apple and Amazon are both trading below the 21d EMA and 50d MA. Apple's 21d EMA crossed under the 50d MA which is viewed as a downtrend signal. Microsoft is trading under the 21d EMA but above the 50d MA. The continuation of a rally will be much easier of these big four mega-caps are all participating.
Tesla (TSLA) reversed more than two weeks of declines with a +6.18% gain today. Mastercard (MA) and Visa (V) were also top mega-cap gainers with +4.82% and +3.45% gains. The majority of mega-caps ended the day with gains. Retailers Walmart (WMT) and Home Depot (HD) were at the bottom of the mega-cap list with losses.
Growth stocks had a great day. Upwork (UPWK) soared gaining over 20% on smashing earnings expectations, but gave up most of the gain to end the day with a +3.45% advance. Ehang Holdings (EH), SUMO logic (SUMO) and Enphase (ENPH) were big gainers for the day. Not all growth stocks were winners. Digital Turbine (APPS), Chewy (CHWY) and Square (SQ) were at the bottom. Square gave up -7.51% after investors reacted negatively to their cryptocurrency investments and returns for the business only amounting to 2% margins.
GameStop (GME) sucked the oxygen out of the room again with a 103.94% gain and continues to move up afterhours, now over 90%. The casino is still open.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Durable Goods Orders, GDP for Q4 and Initial Jobless Claims will all be released tomorrow before market open. Pending Home Sales will be released after the opening bell.
Several FOMC Members will speak tomorrow throughout the day. There comments can help reaffirm Jerome Powell's testimony.
Thursday will add to the tsunami of earnings reports this week with Salescore.com (CRM), Anheuser Busch (BUD), MercadoLibre (MELI), Moderna (MRNA), Autodesk (ADSK), Workday (WDAY), DoorDask (DASK), Vmware (VMW), Dell (DELL), Zscaler (ZS), Wayfair (W), Etsy (ETSY), Plug Power (PLUG), Farfetch (FTCH), Vipshop (VIPS), Novocure (NVCR), Beyond Meat (BYND), the list just keeps going.
Be sure to check the companies in your portfolio for upcoming earnings reports.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
I removed the long-term trend line I've been using since the 10/30 bottom. It no longer seems relevant as a regression trend channel. I added a trend line from the 2/16 high. 2/23 will become a low if the index continues higher this week.
The one-day trend line is pointing to a +1.86% gain that would get the index back above the 21d EMA.
The trend from the 2/26 all-time high and the five-day trend line point to a -2.58% decline. That would rest the index just below the 50d moving average.
If there is further downside, the 13,000 level has proven to be a support area. The index held the 12,550 area recently. If it passes that area, the next support area is 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It's good to see the Nasdaq, and the market, have a bullish day after yesterday's dip below the 50d MA and test of the 13,000 support area. With a hammer candlestick yesterday, followed by a positive candle today, we can be optimistic about further upside. However, nothing is guaranteed until it's confirmed by the market.
The expectation for tomorrow is set for higher. If we have an expectation breaker, that will mean a closer look to see what now is bothering investors. Until then, remain cautious but optimistic!
Stay healthy and trade safe!
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