Trend lines drawn from the 10/12 pivot day (22d), 10/30 bottom (8d), 11/4 (5d), and today 11/10 (1d).
I am making some changes to the chart presentation and renaming the series to reflect the other data points I'm including. Still based out of the Nasdaq composite.
I do occasionally have some errors or typos and will correct them in my blog or check the comments on TradingView. I don’t have editor and do this in my free time.
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Tuesday, November 10, 2020
Change don't come at once
It's a wave building before it breaks
Facts: -1.37% lower, Volume lower, Closing range: 54%, Body: 28%
Good: Successful test of 21d EMA
Bad: Choppy back and forth day after dip at open
Highs/Lows: Lower high, lower low, continuation candle
Candle: Thin body, closes in middle of candle, with longer bottom wick
Advance/Decline: 1.49, three advancing stocks for every two declining stocks
Sectors: Energy (+3.24%), Consumer Staples (XLP +1.97%), Industrials (XLI +1.76%) were top. Technology (XLK -1.86%) was at the bottom.
Expectation: Sideways or Lower
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Market Overview
The market on Tuesday continued its rotation from big Technology and Communications stocks into small-cap and energy stocks. Initiated by the news on Monday of a vaccine for Coronavirus and hopes the economy could recover sooner than expected. The Nasdaq, heavy on technology stocks, has taken the brunt of the sell-off of stocks that have done well thus far in 2020. The index finished down -1.37% on lower volume than Monday, but higher than average volume for recent weeks. The candle has the properties of a continuation candle with a small 28% red body and a 54% closing range. It leaves me wondering if the index will move sideways from here or have further losses.
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Indexes and Sectors
The Russell 2000 (RUT +1.88%) was the outperforming index for a second day in a row as investors put money into small-cap stocks. Yesterday’s high was higher, but the index ended the day with an all-time closing high and is up over 14% from a 10/30 bottom. The Dow Jones Industrial (DJI +0.90%) also had gains on the day while the S&P 500 (SPX -0.14%) had a small loss on Tuesday.
Energy (XLE +3.24%) led the sectors for the second day in a row. Consumer Staples (XLP +1.97%), Industrials (XLI +1.76%), Utilities (XLU +1.44%) and Materials (XLB +1.18%) all closed with greater than one percent gains. On the other end Technology (XLK -1.86%) was the worst performing sector. Communications (XLC -0.32%) and Consumer Discretionary (XLY -0.35%) also had losses for the day.
The VIX volatility index increased -3.69% for the day and had the lowest close since early September.
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Bonds, Forex and Commodities
Treasury Bond yields increased for another day. The 10Y-2Y spread also increased, signaling confidence from investors in the economy after the vaccine news.
The US dollar remained about the same on Tuesday after Monday’s increase in value.
Gold and Silver regained some of the losses from the previous day while other commodities saw price increases. Crude Oil futures is up over 15% in the past week.
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Market Leaders
All the big four mega-caps had losses today with Amazon (AMZN -3.46%) and Microsoft (MSFT -3.38%) having the biggest losses. Both closed below their 50d MA. After making a new all-time high yesterday, Google (GOOG -1.28%) pulled back to its previous high from September, finding support just above that point. Apple (AAPL -0.30%) faired a little better but took a trip below it’s 21d EMA before settling just above the 50d MA (inverted in downtrend right now). Apple opened and closed better than the index.
The mega-caps in financial sector continued to do well on Tuesday. In addition, consumer staples companies such as Walmart (WMT +1.41%), Johnson & Johnson (JNJ +1.51%) and Home Depot (HD +2.07%) found favor with investors.
A few growth stocks found some traction today after losses yesterday. D.R. Horton (DHI +9.13%) rose after earnings beat expectations. That followed a loss -8.02% yesterday. Peloton (PTON +5.20%) had gains after announcing a collaboration with Beyonce. That’s a small recovery compared to a 20.29% loss yesterday. Fastly (FSLY +2.61%) was bought up after morning losses to end the day with gains, no particular reason in the media. Many other growth stocks continued their second day of big losses.
After hours, Datadog (DDOG -2.41%) was down over 7% after beating expectations but not impressing investors enough to stick with the stock that’s up over 150% since the beginning of the year.
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Looking ahead
The OPEC Monthly Report will come out tomorrow but will likely just confirm what we’ve already seen in other oil price indicators.
There are not a lot of notable earnings reports for tomorrow, at least not from my watchlists.
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Trends, Support and Resistance
The trend from the 10/30 bottom is still pointing at new all-time highs with a +5.53% gain from today’s close. That would require a significant sentiment change in technology stocks, especially the big mega-caps to help drive a rally for the Nasdaq. The next best trend line is the five-day trend which points to a +4.03% gain, also requiring a significant change in the current market character. A much more modest gain of +0.50% would be a continuation of today’s trend line which is largely formed from the range-bound moves in afternoon trading.
The long trend line from the 10/12 pivot day is pointing at a -1.55% loss which would put the index back in the area between two support and resistance lines and the key moving average lines. The index has paused there briefly in up and down moves over the past few months.
The July support area is about 8% below today’s close. Breaking through that support area would be dangerous as there is not much trading activity in the second half of the year in between that line and the June support area of 10,000.
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Wrap-up
These are tough days for growth investors who have been focused on stocks that accelerated during the pandemic. Not only have we had to find the right places to exit, hopefully through some steadfast rules in our trading system. We have also had to build new watchlists and somehow find a place in a market that is shifting to small-caps and value stocks.
Keep in mind, that sentiment could swing back the other way just as fast as it has swung away from the Technology sector. Have a plan for multiple outcomes and trade with your system, not with your emotions. I write that as a reminder for me.
Take care!
I am making some changes to the chart presentation and renaming the series to reflect the other data points I'm including. Still based out of the Nasdaq composite.
I do occasionally have some errors or typos and will correct them in my blog or check the comments on TradingView. I don’t have editor and do this in my free time.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Tuesday, November 10, 2020
Change don't come at once
It's a wave building before it breaks
Facts: -1.37% lower, Volume lower, Closing range: 54%, Body: 28%
Good: Successful test of 21d EMA
Bad: Choppy back and forth day after dip at open
Highs/Lows: Lower high, lower low, continuation candle
Candle: Thin body, closes in middle of candle, with longer bottom wick
Advance/Decline: 1.49, three advancing stocks for every two declining stocks
Sectors: Energy (+3.24%), Consumer Staples (XLP +1.97%), Industrials (XLI +1.76%) were top. Technology (XLK -1.86%) was at the bottom.
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The market on Tuesday continued its rotation from big Technology and Communications stocks into small-cap and energy stocks. Initiated by the news on Monday of a vaccine for Coronavirus and hopes the economy could recover sooner than expected. The Nasdaq, heavy on technology stocks, has taken the brunt of the sell-off of stocks that have done well thus far in 2020. The index finished down -1.37% on lower volume than Monday, but higher than average volume for recent weeks. The candle has the properties of a continuation candle with a small 28% red body and a 54% closing range. It leaves me wondering if the index will move sideways from here or have further losses.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The Russell 2000 (RUT +1.88%) was the outperforming index for a second day in a row as investors put money into small-cap stocks. Yesterday’s high was higher, but the index ended the day with an all-time closing high and is up over 14% from a 10/30 bottom. The Dow Jones Industrial (DJI +0.90%) also had gains on the day while the S&P 500 (SPX -0.14%) had a small loss on Tuesday.
Energy (XLE +3.24%) led the sectors for the second day in a row. Consumer Staples (XLP +1.97%), Industrials (XLI +1.76%), Utilities (XLU +1.44%) and Materials (XLB +1.18%) all closed with greater than one percent gains. On the other end Technology (XLK -1.86%) was the worst performing sector. Communications (XLC -0.32%) and Consumer Discretionary (XLY -0.35%) also had losses for the day.
The VIX volatility index increased -3.69% for the day and had the lowest close since early September.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Bonds, Forex and Commodities
Treasury Bond yields increased for another day. The 10Y-2Y spread also increased, signaling confidence from investors in the economy after the vaccine news.
The US dollar remained about the same on Tuesday after Monday’s increase in value.
Gold and Silver regained some of the losses from the previous day while other commodities saw price increases. Crude Oil futures is up over 15% in the past week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All the big four mega-caps had losses today with Amazon (AMZN -3.46%) and Microsoft (MSFT -3.38%) having the biggest losses. Both closed below their 50d MA. After making a new all-time high yesterday, Google (GOOG -1.28%) pulled back to its previous high from September, finding support just above that point. Apple (AAPL -0.30%) faired a little better but took a trip below it’s 21d EMA before settling just above the 50d MA (inverted in downtrend right now). Apple opened and closed better than the index.
The mega-caps in financial sector continued to do well on Tuesday. In addition, consumer staples companies such as Walmart (WMT +1.41%), Johnson & Johnson (JNJ +1.51%) and Home Depot (HD +2.07%) found favor with investors.
A few growth stocks found some traction today after losses yesterday. D.R. Horton (DHI +9.13%) rose after earnings beat expectations. That followed a loss -8.02% yesterday. Peloton (PTON +5.20%) had gains after announcing a collaboration with Beyonce. That’s a small recovery compared to a 20.29% loss yesterday. Fastly (FSLY +2.61%) was bought up after morning losses to end the day with gains, no particular reason in the media. Many other growth stocks continued their second day of big losses.
After hours, Datadog (DDOG -2.41%) was down over 7% after beating expectations but not impressing investors enough to stick with the stock that’s up over 150% since the beginning of the year.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
The OPEC Monthly Report will come out tomorrow but will likely just confirm what we’ve already seen in other oil price indicators.
There are not a lot of notable earnings reports for tomorrow, at least not from my watchlists.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The trend from the 10/30 bottom is still pointing at new all-time highs with a +5.53% gain from today’s close. That would require a significant sentiment change in technology stocks, especially the big mega-caps to help drive a rally for the Nasdaq. The next best trend line is the five-day trend which points to a +4.03% gain, also requiring a significant change in the current market character. A much more modest gain of +0.50% would be a continuation of today’s trend line which is largely formed from the range-bound moves in afternoon trading.
The long trend line from the 10/12 pivot day is pointing at a -1.55% loss which would put the index back in the area between two support and resistance lines and the key moving average lines. The index has paused there briefly in up and down moves over the past few months.
The July support area is about 8% below today’s close. Breaking through that support area would be dangerous as there is not much trading activity in the second half of the year in between that line and the June support area of 10,000.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
These are tough days for growth investors who have been focused on stocks that accelerated during the pandemic. Not only have we had to find the right places to exit, hopefully through some steadfast rules in our trading system. We have also had to build new watchlists and somehow find a place in a market that is shifting to small-caps and value stocks.
Keep in mind, that sentiment could swing back the other way just as fast as it has swung away from the Technology sector. Have a plan for multiple outcomes and trade with your system, not with your emotions. I write that as a reminder for me.
Take care!
