Daily Market Update for 3/2

٣ مارس ٢٠٢١

Trend lines drawn from the 2/16 ATH (11d), 2/24 (5d) and today 3/2 (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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Tuesday, March 2, 2021

Facts: -1.69%, Volume lower, Closing range: 3%, Body: 97%
Good: Stayed above 50d MA
Bad: All red body, no visible upper/lower wicks, back below 21d EMA
Highs/Lows: Higher high, lower low
Candle: Marubozu black candle with no wicks, all red body, outside day
Advance/Decline: More than three declining stocks for every advancing stock
Indexes: SPX (-0.81%), DJI (-0.46%), RUT (-1.93%), VIX (+3.21%)
Sectors: Materials (XLB +0.56%) only gaining sector. Consumer Discretionary (XLY -1.15%) and Technology (XLK -1.59%) were bottom.
Expectation: Sideways or Lower

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Market Overview

The market gave up half of yesterday's gains in a continuation of two weeks of choppiness as investors await a stimulus bill that will have both positive and negative impacts on equities. Today's expectation breaker after yesterday's session requires a deeper look to understand. Investment has been rotating in and out of Consumer Discretionary and Technology for the past two weeks.

The Nasdaq closed the day with a -1.69% decline on lower volume. The 97% red body with no visible upper and lower wick forms a Marubozu (shaven head) candlestick. The 3% of lower wick was formed in just the last few minutes of trading as most of the day was dominated by selling. There were three declining stocks for every advancing stock.

The S&P 500 (SPX) and Dow Jones Industrial average (DJI) lost -0.81% and -0.46%. The Russell 2000 (RUT) turned in the worst performance of the day with a -1.93% decline.

The VIX volatility index advanced +3.21%

Materials (XLB) was the only gaining sector with a +0.56% advance. Also near the top of the sector list, but with a small loss, was Industrials (XLI) which declined -0.29%. Both sectors are likely to benefit from infrastructure projects planned to boost economic recovery. The bottom two sectors were also the only two to underperform the SPX. They were Consumer Discretionary (XLY -1.15%) and Technology (XLK -1.59%).

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Economic Indicators

The US Dollar (DXY) declined -0.25%.

Yields on the 30y treasury bonds remained about the same while the 10y yields dropped. The 2y treasury bond yields remained flat.

High Yield Corporate Bonds (HYG) and Investment Grade Corporate Bond (LQD) prices both dropped for the day.

Silver (SILVER) and Gold (GOLD) both advanced for the day. Crude Oil (CRUDEOIL1!) advanced slightly after declining yesterday. Timber (WOOD) declined. Copper (COPPER1!) and Aluminum (ALI1!) both advanced considerably, moving up alongside the performance in the Materials sector.

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Investor Sentiment

The put/call ratio dropped slightly to 0.578 as investors moved back to a 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 is lower than the previous day, but still in the greed range.

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Market Leaders

All of the big four mega-caps had losses for the day. Alphabet (GOOGL) is the only of the four trading above the 21d EMA. Microsoft (MSFT) closed below the 21d EMA, but is still trading above the 50d MA. Apple (AAPL) and Amazon (AMZN) are trading below both lines and their 21d EMA is below the 50d MA as they continue to look bearish.

AT&T (T), Coca-Cola (KO) were among a short list of mega-caps that had gains for the day. Tesla (TSLA) was at the bottom of the list -4.45%, down 20% from yesterday's intraday high.

Square (SQ) and Dr Horton (DHI) were the only two growth stocks for the daily update with gains, advancing +4.65% and 1.47%. NIO (NIO) dropped -13.0% after a disappointing earnings release. Zoom Video (ZM) dropped -9.00% after gapping up and then giving up 15% in intraday selling.

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Looking ahead

There is an OPEC Meeting scheduled for tomorrow that will impact crude oil prices and likewise the energy sector. Crude Oil Inventories will also be released later in the day. The weekly stock numbers released today were higher than expected.

Non-farm Employment data before market open will give an update on the labor market.

Just after the market opens, Services and Non-Manufacturing purchasing data will give a heads up on activity levels for the two sectors.

Wednesday's earnings reports include Snowflake (SNOW), Okta (OKTA), Marvell (MRVL), Splunk (SPLK), and Dollar Tree (DLTR). Check the companies in your portfolio for earnings reports so you are not surprised.

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Trends, Support and Resistance

The five-day trend line is pointing to a +0.65% gain for tomorrow.

The one-day trend line points toa -0.39% while the trend-line from the 2/16 ATH is pointing to a -1.52% loss. Both of those moves would put the index back below the 50d MA.

If there is further downside, the index held the 13,000 area as support in the previous two weeks. The 12,550 area also held in an early January dip. If it passes that area, the next support area is 12,250.

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Wrap-up

Looking at Monday and Tuesday, it seems like another choppy week is ahead. Today was dominated by selling, and with a thick red bodied candle, the expectation tomorrow has to be for Lower. Since there is support at the 50d MA, we can also expect a Sideways move.

If there is a positive expectation breaker, then a gain on higher volume that takes the index back above the 21d EMA would provide confidence in a rally attempt.

Stay healthy and trade safe!