Summary: Small caps ended several days of losing to lead stocks higher today as investors snapped out of the pandemic fears that caused Monday's selling. Investors are warming back up to small caps as the US Dollar strengthens and yields in bonds are beginning to stabilize.
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 20, 2021
Facts: +1.57%, Volume higher, Closing range: 80%, Body: 59%
Good: Broad gains on higher volume to move back above 21d EMA
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Bullish green body with higher low and higher high, medium size upper and lower wicks
Advanced/Decline: 2.69, more than five advancing stocks for every two declining stocks
Indexes: SPX (+1.52%), DJI (+1.62%), RUT (+2.99%), VIX (-12.32%)
Sectors: Industrials (XLI +2.80%) and Financials (XLF +2.48%) at the top. Utilities (XLU +0.43%) and Consumer Staples (XLP +0.03%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Small caps ended several days of losing to lead stocks higher today as investors snapped out of the pandemic fears that caused Monday's selling. Investors are warming back up to small caps as the US Dollar strengthens and yields in bonds are beginning to stabilize.
The Nasdaq finished with a +1.57% gain on higher volume than the previous day. The 59% green body and 80% closing range represent a day of constant buying that ended with some profit-taking in the last few minutes before the market close. The index closed yesterday's gap down and regained the 21d exponential moving average, closing at the 14,500 support area. There were more than five advancing stocks for every declining stock.
The Russell 2000 (RUT) soared back into action with a +2.99% gain today. The Dow Jones Industrial Average (DJI) also gained a significant +1.62%, helped by industrials and recovery stocks. The S&P 500 (SPX) closed with a +1.52% gain for the day.
The VIX volatility index declined -12.32%.
In a reversal from yesterday, all sectors gained for the day. Industrials (XLI +2.80%) and Financials (XLF +2.48%) led the sector list. Utilities (XLU +0.43%) and Consumer Staples (XLP +0.03%) were at the bottom.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
Building Permits data released this morning was lower than expected, but Housing Starts was higher than expected.
The US Dollar (DXY) advanced +0.15% for the day.
The US 30y and 10y Treasury Yields rose while the 2y Treasury Yield dropped.
High Yield Corporate Bond (HYG) prices bounced back from a sharp decline yesterday. Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) declined.
Crude Oil (CRUDEOIL1!) prices recovered some from the sharp decline on Monday. The drop on Monday was a result of OPEC's decision to increase output.
Timber (Wood) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) advanced.
Bitcoin (BTCUSD) declined -3.99%. Ethereum (ETHUSD) declined -2.21%. (Time of writing)
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio dropped to 0.592. 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 still in Extreme Fear but moving back toward Neutral.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All big four mega-caps bounced back from yesterday's losses. Apple (AAPL) gained +2.60%, closing the gap from yesterday. Alphabet (GOOGL) gained +1.31%. Microsoft (MSFT) advanced +0.83%. Amazon (AMZN) rose -+0.66% to close back above its 21d exponential moving average.
Apple was the top-performing mega-cap for the day, followed by Mastercard (MA), Pfizer (PFE), and Tesla (TSLA). There were only a handful of mega-caps losing for the day, with Novo Nordisk (NVO), Nvidia (NVDA), Procter & Gamble (PG), and Verizon (VZ) at the bottom of the list.
Growth stocks in the daily update list did very well today. Top performers included Upwork (UPWK), Peloton (PTON), Square (SQ), and SNAP (SNAP).
The worst performers were Zoom (ZM), Pinterest (PINS), JD.com (JD), and Nvidia.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Crude Oil Inventories are the primary economic data for Wednesday, although some may be interested in Mortgage data released before the market opens.
Johnson & Johnson (JNJ), ASML Holding (ASML), Coca-Cola (KO), Verizon (VZ), and Fidelity Financial (FNF) are some of the interesting reports for Wednesday. Analysts will listen closely to Coca-Cola statements around supply chain costs and whether they are transferring increased costs along to consumers.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq moved back above the 21d EMA and closed right at the 14,500 support area.
If momentum carries through to tomorrow, the one-day trend line points to a +1.98% gain.
The five-day trend line and trend line from the 7/13 high points to a ~1.90% decline for Wednesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Fears melted away today as investors pivoted back into growth stocks and small caps. The Russell 2000 rebounded sharply with investors moving out of bonds and betting on the lower valuations of small caps compared to the mega-caps.
We had a positive expectation breaker today, which is always welcome. The expectation for tomorrow is sideways or higher for tomorrow, although watch for any indication that today was just a technical bounce before moving lower. If we do move higher, the Russell 2000 is likely to outperform for the next leg up. Let's see.
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 20, 2021
Facts: +1.57%, Volume higher, Closing range: 80%, Body: 59%
Good: Broad gains on higher volume to move back above 21d EMA
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Bullish green body with higher low and higher high, medium size upper and lower wicks
Advanced/Decline: 2.69, more than five advancing stocks for every two declining stocks
Indexes: SPX (+1.52%), DJI (+1.62%), RUT (+2.99%), VIX (-12.32%)
Sectors: Industrials (XLI +2.80%) and Financials (XLF +2.48%) at the top. Utilities (XLU +0.43%) and Consumer Staples (XLP +0.03%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Small caps ended several days of losing to lead stocks higher today as investors snapped out of the pandemic fears that caused Monday's selling. Investors are warming back up to small caps as the US Dollar strengthens and yields in bonds are beginning to stabilize.
The Nasdaq finished with a +1.57% gain on higher volume than the previous day. The 59% green body and 80% closing range represent a day of constant buying that ended with some profit-taking in the last few minutes before the market close. The index closed yesterday's gap down and regained the 21d exponential moving average, closing at the 14,500 support area. There were more than five advancing stocks for every declining stock.
The Russell 2000 (RUT) soared back into action with a +2.99% gain today. The Dow Jones Industrial Average (DJI) also gained a significant +1.62%, helped by industrials and recovery stocks. The S&P 500 (SPX) closed with a +1.52% gain for the day.
The VIX volatility index declined -12.32%.
In a reversal from yesterday, all sectors gained for the day. Industrials (XLI +2.80%) and Financials (XLF +2.48%) led the sector list. Utilities (XLU +0.43%) and Consumer Staples (XLP +0.03%) were at the bottom.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
Building Permits data released this morning was lower than expected, but Housing Starts was higher than expected.
The US Dollar (DXY) advanced +0.15% for the day.
The US 30y and 10y Treasury Yields rose while the 2y Treasury Yield dropped.
High Yield Corporate Bond (HYG) prices bounced back from a sharp decline yesterday. Investment Grade Corporate Bond (LQD) prices declined.
Silver (SILVER) and Gold (GOLD) declined.
Crude Oil (CRUDEOIL1!) prices recovered some from the sharp decline on Monday. The drop on Monday was a result of OPEC's decision to increase output.
Timber (Wood) advanced.
Copper (COPPER1!) and Aluminum (ALI1!) advanced.
Bitcoin (BTCUSD) declined -3.99%. Ethereum (ETHUSD) declined -2.21%. (Time of writing)
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio dropped to 0.592. 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 still in Extreme Fear but moving back toward Neutral.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All big four mega-caps bounced back from yesterday's losses. Apple (AAPL) gained +2.60%, closing the gap from yesterday. Alphabet (GOOGL) gained +1.31%. Microsoft (MSFT) advanced +0.83%. Amazon (AMZN) rose -+0.66% to close back above its 21d exponential moving average.
Apple was the top-performing mega-cap for the day, followed by Mastercard (MA), Pfizer (PFE), and Tesla (TSLA). There were only a handful of mega-caps losing for the day, with Novo Nordisk (NVO), Nvidia (NVDA), Procter & Gamble (PG), and Verizon (VZ) at the bottom of the list.
Growth stocks in the daily update list did very well today. Top performers included Upwork (UPWK), Peloton (PTON), Square (SQ), and SNAP (SNAP).
The worst performers were Zoom (ZM), Pinterest (PINS), JD.com (JD), and Nvidia.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Crude Oil Inventories are the primary economic data for Wednesday, although some may be interested in Mortgage data released before the market opens.
Johnson & Johnson (JNJ), ASML Holding (ASML), Coca-Cola (KO), Verizon (VZ), and Fidelity Financial (FNF) are some of the interesting reports for Wednesday. Analysts will listen closely to Coca-Cola statements around supply chain costs and whether they are transferring increased costs along to consumers.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq moved back above the 21d EMA and closed right at the 14,500 support area.
If momentum carries through to tomorrow, the one-day trend line points to a +1.98% gain.
The five-day trend line and trend line from the 7/13 high points to a ~1.90% decline for Wednesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Fears melted away today as investors pivoted back into growth stocks and small caps. The Russell 2000 rebounded sharply with investors moving out of bonds and betting on the lower valuations of small caps compared to the mega-caps.
We had a positive expectation breaker today, which is always welcome. The expectation for tomorrow is sideways or higher for tomorrow, although watch for any indication that today was just a technical bounce before moving lower. If we do move higher, the Russell 2000 is likely to outperform for the next leg up. Let's see.
Stay healthy and trade safe!
