Nasdaq Market Update for 10/21

٢١ أكتوبر ٢٠٢٠

Trend lines drawn from 9/3 (34d), 9/24 bottom (20d), 10/12 pivot day (8d), 10/15 (5d), and today 10/21 (1 day).

Wednesday, October 21, 2020
Have you heard about the Lonesome Loser?
He's a loser but he still keeps on trying.

Facts: 0.28% lower, Volume lower, Closing range: 6%, Red Body: 33%
Good: Still holding above 21d EMA
Bad: Another choppy day with selling into close
Highs/Lows: Lower high, Higher low (Inside day)
Candle: Inside day, 33% red body with 6% closing range.
Advance/Decline: 0.61, ratio of 3:2 decliners to advancers
Sectors: Communication Services (XLC) stole the day as the big winner. Energy (XLE) was the worst performing.
Expectation: Sideways or Lower

Wednesday was a continuation of Tuesday with an attempt to make gains that sold off in a choppy fashion throughout the rest of the day. After gaining 0.84%, the Nasdaq dropped to close with a -0.28% loss. The candle has a very tiny lower wick with a 33% red body and 6% closing range. Another inside day (recognized by the price range being within the previous days range) shows little direction in which way the market will go. There were more declining stocks than advancing stocks at a ratio of 3:2. Volume was lower than the previous day and continues to be lower than recent averages. The index is still testing October support area and the 21d EMA. Breaking the 21d EMA would be a negative signal.

The S&P500 lost -0.22%, despite all the efforts of Communication Services (XLC) sector which gained 1.68%. Most of the other sectors incurred losses of around 0.5%. Industrials (XLI) lost -1.01%. Energy (XLE) was the worst performing sector with a loss of -1.91%.

Google (GOOG +2.4%), Facebook (FB +4.17%) and Twitter (TWTR +8.39%) drove huge gains in the Communication Services sector, possibly all helped by the Snap (SNAP +28.30%) earnings beat which earned the social platform a massive gain. Netflix (NFLX -6.92%) retreated on news of lower than expected earnings and slowing subscriber growth. Other mega-caps Apple (AAPL -0.24%), Amazon (AMZN -1.0%) and Microsoft (MSFT -0.09%) did not fair as well with Apple and Amazon closing below 21d EMA and 50d MA lines. Tesla (TSLA +0.17%) announced an earnings beat after market close and is up over 3% in after hours trading. Recent growth favorites Peloton (PTON -5.78%), Fiverr (FVRR -9.30%) and Datadog (DDOG -5.91%) are all losing recent gains.

The trend lines provide a few possibilities, but much still depends on news coming from ongoing stimulus discussions. With some positive news, a gain of +3.70% would rejoin the trend line drawn from the 9/23 bottom. If the mega-caps and a breadth of stocks of regain ground, a more likely result would be a +1.39% gain, rejoining the trend from 9/3.

With all but XLC having a challenging Wednesday, the big test for Thursday will be whether the index can hold above the October support and 21d EMA lines. That support looks in jeopardy at this point given the momentum. A downward move looks like it would be around -0.52% loss, possibly dipping below the 21d EMA and then coming back up to as a resistance line. That would continue today’s trend line and the trend drawn from the pivot on 10/12. If investor sentiment were to worsen, the index could go further below the 21d EMA and then hopefully find support at the 50d MA.

I'm keeping the June Support line in view, but its ~13% below the Wednesday close and there are 4 key support levels that the index would have to break thru. If we have a significant downside that takes the index below 11,300, then I'll add that possibility back to the chart.