Summary: More records were set as the S&P 500 and Dow Jones Industrial average both had record closes while the Nasdaq and Russell 2000 joined the rally, also making gains. Employment data in the morning caused the dollar to fall which can give a boost to mega-caps and growth stocks.
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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Friday, May 7, 2021
Facts: +0.88%, Volume lower, Closing range: 60% (w/gap), Body: 21%
Good: Higher close, higher high, higher low, confirmation of yesterday's hammer
Bad: Lower volume, gap-up may need revisiting
Highs/Lows: Higher high, higher low
Candle: Longer upper wick over a thin green body in lower half of candle, gap-up at open
Advance/Decline: About three gaining stocks for every declining stock
Indexes: SPX (+0.74%), DJI (+0.66%), RUT (+1.35%), VIX (-9.24%)
Sectors: Energy (XLE +1.78%) and Real Estate (XLRE +1.22%) were top. Utilities (XLU +0.30%) and Consumer Staples (+0.00%) were bottom.
Expectation: Sideways or Higher
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Market Overview
More records were set as the S&P 500 and Dow Jones Industrial average both had record closes while the Nasdaq and Russell 2000 joined the rally, also making gains. Employment data in the morning caused the dollar to fall which can give a boost to mega-caps and growth stocks.
The Nasdaq closed with a +0.88% gain. Volume was lower and the morning rally faded through the day, giving the candle a 60% closing range (including the gap) and a thin 21% body under a long upper wick. Nonetheless, the positive gain with a higher high and higher low is a confirmation of the previous day's reversal hammer candle. There were three gaining stocks for every declining stock.
The S&P 500 (SPX) gained +0.75%, while the Dow Jones Industrial average (DJI) advanced +0.66%, both having record closes. The Russell 200 (RUT) gained +1.35% and closed with a 99% closing range.
The VIX volatility index declined -9.24%.
Energy (XLE +1.78%) and Real Estate (XLRE +1.22%) were top. Utilities (XLU +0.30%) and Consumer Staples (+0.00%) were bottom. No sectors declined for the day.
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Economic Indicators
The US Dollar (DXY) declined -0.73% after non-farm employment data was lower than expected.
The US 30y, 10y advanced while the 2y yield declined, widening the spread between long and short term treasury notes.
High Yield Corporate Bond (HYG) prices and Investment Grade Corporate Bond (LQD) prices advanced.
Silver (SILVER) and Gold (GOLD) both advanced. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) advanced. A continuing trend in the commodities resulting from the economic recovery.
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Investor Sentiment
The put/call ratio declined to 0.650. 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 a bit more toward the greed side.
The NAAIM money manager exposure index declined to 87.79, after topping 100 last week.
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Market Leaders
Of the biggest mega-caps, only Amazon (AMZN) declined with a -0.45% loss, closing underneath its 21d EMA. Apple (AAPL) advanced +0.36% but could not quite close above the 21d EMA. Microsoft (MSFT) gapped-up at open and closed with a +1.09% gain, moving above its 21d EMA. Alphabet (GOOGL) has been trading above the 21d EMA and continued its rally with a +0.62% gain today.
Nike (NKE), ASML Holding (ASML), Nvidia (NVDA) and Comcast (CMCSA) topped the mega-caps list. At the bottom of the list were Verizon Communications (VZ), AT&T (T), Salesforce.com (CRM), and Walmart (WMT).
Roku (ROKU) please investors with earnings, sending it to the top of the growth stock list with a 11.55% gain for the day. DataDog (DDOG), Digital Turbine (APPS) and Grow Generation (GRWG) were also near the top of the list with greater than 5% gains.
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Looking ahead
There is not much significant economic news scheduled for Monday.
JD.com (JD), Marriott (MAR), Roblox (RBLX), Trade Desk (TTD), Trex (TREX), Magnite (MGNI) are a few of the interesting earnings reports for Monday.
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Trends, Support and Resistance
The Nasdaq rallied above the 21d EMA briefly before fading and closing below the line, but above the 13,600-13,700 support area.
The trend line from the 3/5 low points to a +3.51% advance.
The one-day trend line points to a -0.03% loss.
The five-day trend line points to a -2.19% decline.
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Wrap-up
Nonfarm employment data that was lower than expected today, sent the US Dollar tumbling. That was a good thing for large mega-caps and growth companies that benefit from a weaker dollar. But it alsos cause indexes to rise, including passive indexed instruments such as ETFs.
There is data that shows a large number of short selling of ETFs from hedgefunds in the past month. No doubt, you probably have some stocks that seemed to never get support and they were likely impacted by the short selling. But when the big indexes start to move, those shorts need to be covered and it can cause the broader rally we saw today.
I've marked an expectation for sideways on Monday, but let's hope for a continued squeeze that could take the major indexes another leg higher. Have a good weekend!
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=-
Friday, May 7, 2021
Facts: +0.88%, Volume lower, Closing range: 60% (w/gap), Body: 21%
Good: Higher close, higher high, higher low, confirmation of yesterday's hammer
Bad: Lower volume, gap-up may need revisiting
Highs/Lows: Higher high, higher low
Candle: Longer upper wick over a thin green body in lower half of candle, gap-up at open
Advance/Decline: About three gaining stocks for every declining stock
Indexes: SPX (+0.74%), DJI (+0.66%), RUT (+1.35%), VIX (-9.24%)
Sectors: Energy (XLE +1.78%) and Real Estate (XLRE +1.22%) were top. Utilities (XLU +0.30%) and Consumer Staples (+0.00%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
More records were set as the S&P 500 and Dow Jones Industrial average both had record closes while the Nasdaq and Russell 2000 joined the rally, also making gains. Employment data in the morning caused the dollar to fall which can give a boost to mega-caps and growth stocks.
The Nasdaq closed with a +0.88% gain. Volume was lower and the morning rally faded through the day, giving the candle a 60% closing range (including the gap) and a thin 21% body under a long upper wick. Nonetheless, the positive gain with a higher high and higher low is a confirmation of the previous day's reversal hammer candle. There were three gaining stocks for every declining stock.
The S&P 500 (SPX) gained +0.75%, while the Dow Jones Industrial average (DJI) advanced +0.66%, both having record closes. The Russell 200 (RUT) gained +1.35% and closed with a 99% closing range.
The VIX volatility index declined -9.24%.
Energy (XLE +1.78%) and Real Estate (XLRE +1.22%) were top. Utilities (XLU +0.30%) and Consumer Staples (+0.00%) were bottom. No sectors declined for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined -0.73% after non-farm employment data was lower than expected.
The US 30y, 10y advanced while the 2y yield declined, widening the spread between long and short term treasury notes.
High Yield Corporate Bond (HYG) prices and Investment Grade Corporate Bond (LQD) prices advanced.
Silver (SILVER) and Gold (GOLD) both advanced. Crude Oil (CRUDEOIL1!) declined. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) advanced. A continuing trend in the commodities resulting from the economic recovery.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio declined to 0.650. 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 a bit more toward the greed side.
The NAAIM money manager exposure index declined to 87.79, after topping 100 last week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Of the biggest mega-caps, only Amazon (AMZN) declined with a -0.45% loss, closing underneath its 21d EMA. Apple (AAPL) advanced +0.36% but could not quite close above the 21d EMA. Microsoft (MSFT) gapped-up at open and closed with a +1.09% gain, moving above its 21d EMA. Alphabet (GOOGL) has been trading above the 21d EMA and continued its rally with a +0.62% gain today.
Nike (NKE), ASML Holding (ASML), Nvidia (NVDA) and Comcast (CMCSA) topped the mega-caps list. At the bottom of the list were Verizon Communications (VZ), AT&T (T), Salesforce.com (CRM), and Walmart (WMT).
Roku (ROKU) please investors with earnings, sending it to the top of the growth stock list with a 11.55% gain for the day. DataDog (DDOG), Digital Turbine (APPS) and Grow Generation (GRWG) were also near the top of the list with greater than 5% gains.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
There is not much significant economic news scheduled for Monday.
JD.com (JD), Marriott (MAR), Roblox (RBLX), Trade Desk (TTD), Trex (TREX), Magnite (MGNI) are a few of the interesting earnings reports for Monday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The Nasdaq rallied above the 21d EMA briefly before fading and closing below the line, but above the 13,600-13,700 support area.
The trend line from the 3/5 low points to a +3.51% advance.
The one-day trend line points to a -0.03% loss.
The five-day trend line points to a -2.19% decline.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Nonfarm employment data that was lower than expected today, sent the US Dollar tumbling. That was a good thing for large mega-caps and growth companies that benefit from a weaker dollar. But it alsos cause indexes to rise, including passive indexed instruments such as ETFs.
There is data that shows a large number of short selling of ETFs from hedgefunds in the past month. No doubt, you probably have some stocks that seemed to never get support and they were likely impacted by the short selling. But when the big indexes start to move, those shorts need to be covered and it can cause the broader rally we saw today.
I've marked an expectation for sideways on Monday, but let's hope for a continued squeeze that could take the major indexes another leg higher. Have a good weekend!
Stay healthy and trade safe!
