Summary: US Treasury Yields slid after the morning's consumer price index data added more confusion to the economic picture. Is lower than expected inflation a good thing or a bad thing? What does it mean for Fed monetary policy? The unanswered questions equate to risk for investors, sending them to safer bets.
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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Tuesday, September 14, 2021
Facts: -0.45%, Volume lower, Closing Range: 17%, Body: 76% Red
Good: Support above 15,000
Bad: Mostly red body, lower high, lower low. a/d ratio
Highs/Lows: Lower high, Lower low
Candle: Mostly red body with small upper and lower wicks
Advance/Decline: 0.28, more than three declining stocks for every advancing stock
Indexes: SPX (-0.57%), DJI (-0.84%), RUT (-1.37%), VIX (+0.46%)
Sector List: Health (XLV -0.02%) and Technology (XLK -0.13%) at the top. Financials (XLF -1.34%) and Energy (XLE -1.44%) at the bottom.
Expectation: Lower
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Market Overview
US Treasury Yields slid after the morning's consumer price index data added more confusion to the economic picture. Is lower than expected inflation a good thing or a bad thing? What does it mean for Fed monetary policy? The unanswered questions equate to risk for investors, sending them to safer bets.
The Nasdaq closed with a -0.45% decline. Volume was lower than the previous day. The 76% red body represents a bearish day ending with the closing range of 17%. There were more than three declining stocks for every advancing stock.
The Russell 2000 (RUT) declined the most among the major indexes, losing -1.37% today. The Dow Jones Industrial Average (DJI) declined -0.84%. The S&P 500 (SPX) fell -0.57%.
All sectors declined today. The sectors that fell the least were Health (XLV -0.02%) and Technology (XLK -0.13%) at the top. Investors see mega-caps in the Technology sector as resilient in the current uncertain environment. The heaviest falls came at the bottom of the sector list in Financials (XLF -1.34%) and Energy (XLE -1.44%). The Financial sector is impacted by the drop in treasury yields that will lower interest rates on lending instruments.
The consumer price index (CPI) data came in at 5.3% against an expectation of 5.4%. The Core CPI data, which excludes food and energy, showed prices rose only 0.1%, where the expectation was 0.3%.
The US Dollar rose slightly by +0.05%. The US30y, US10y, and US2y treasury yields all declined significantly. High Yields Corporate Bond (HYG) prices declined while Investment Grade Corporate Bond (LQD) prices increased. Gold moved higher. Timber, Copper, and Aluminum all dropped, with Aluminum falling back from recent record highs.
The put/call ratio rose to 0.791. The CNN Fear & Greed index moved closer to Extreme Fear.
Microsoft (MSFT) was the top mega-cap for the day, gaining +0.94%. Comcast (CMCSA) declined -7.30%, putting it at the bottom of the mega-cap list. The stock sold off severely after comments made by the CFO at an investor conference that revealed a grim outlook for the third quarter.
ZoomInfo Technologies (ZI) was the top gaining growth stock for the daily update list, advancing +3.75% today and briefly breaking out from a cup-with-handle. GrowGeneration (GRWG) dropped another -8.99% today and is down over 63$ from its 52w high.
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Looking ahead
Export and Import Price Index data and the NY Empire State Manufacturing Index will be available on Wednesday. Crude Oil Inventories will be available after the market opens.
There are no relevant earnings reports for Wednesday.
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Trends, Support, and Resistance
The Nasdaq closed below its 21d exponential moving average but stayed above 15,000 today, which becomes a critical support area for tomorrow.
The trend line from the 9/7 high and the five-day trend line point to a -0.37% decline for Wednesday.
The one-day trend line ends with a -0.78% loss for tomorrow.
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Wrap-up
It's interesting to see Technology outperform on a bearish day. Investors see it as a relatively safe trade during these times of uncertainty. The sector was resilient during much of the economic disruption in 2020. In addition, the lower Treasury yields and subdued inflation data are favorable for the sector, while the supply constraints impacting much of the economy are less worrisome for big tech.
If the Fed does start tapering, we can expect Treasury yields to rise, potentially a stronger dollar, and Technology becomes less attractive. At that point, we should hope other economic data such as Employment and Services activity show more positive signs for growth. Otherwise, there won't be many safe havens, and a further correction in stock markets is likely.
For tomorrow, the chart isn't showing any strength so expect a Lower move unless something changes the outlook.
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, September 14, 2021
Facts: -0.45%, Volume lower, Closing Range: 17%, Body: 76% Red
Good: Support above 15,000
Bad: Mostly red body, lower high, lower low. a/d ratio
Highs/Lows: Lower high, Lower low
Candle: Mostly red body with small upper and lower wicks
Advance/Decline: 0.28, more than three declining stocks for every advancing stock
Indexes: SPX (-0.57%), DJI (-0.84%), RUT (-1.37%), VIX (+0.46%)
Sector List: Health (XLV -0.02%) and Technology (XLK -0.13%) at the top. Financials (XLF -1.34%) and Energy (XLE -1.44%) at the bottom.
Expectation: Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
US Treasury Yields slid after the morning's consumer price index data added more confusion to the economic picture. Is lower than expected inflation a good thing or a bad thing? What does it mean for Fed monetary policy? The unanswered questions equate to risk for investors, sending them to safer bets.
The Nasdaq closed with a -0.45% decline. Volume was lower than the previous day. The 76% red body represents a bearish day ending with the closing range of 17%. There were more than three declining stocks for every advancing stock.
The Russell 2000 (RUT) declined the most among the major indexes, losing -1.37% today. The Dow Jones Industrial Average (DJI) declined -0.84%. The S&P 500 (SPX) fell -0.57%.
All sectors declined today. The sectors that fell the least were Health (XLV -0.02%) and Technology (XLK -0.13%) at the top. Investors see mega-caps in the Technology sector as resilient in the current uncertain environment. The heaviest falls came at the bottom of the sector list in Financials (XLF -1.34%) and Energy (XLE -1.44%). The Financial sector is impacted by the drop in treasury yields that will lower interest rates on lending instruments.
The consumer price index (CPI) data came in at 5.3% against an expectation of 5.4%. The Core CPI data, which excludes food and energy, showed prices rose only 0.1%, where the expectation was 0.3%.
The US Dollar rose slightly by +0.05%. The US30y, US10y, and US2y treasury yields all declined significantly. High Yields Corporate Bond (HYG) prices declined while Investment Grade Corporate Bond (LQD) prices increased. Gold moved higher. Timber, Copper, and Aluminum all dropped, with Aluminum falling back from recent record highs.
The put/call ratio rose to 0.791. The CNN Fear & Greed index moved closer to Extreme Fear.
Microsoft (MSFT) was the top mega-cap for the day, gaining +0.94%. Comcast (CMCSA) declined -7.30%, putting it at the bottom of the mega-cap list. The stock sold off severely after comments made by the CFO at an investor conference that revealed a grim outlook for the third quarter.
ZoomInfo Technologies (ZI) was the top gaining growth stock for the daily update list, advancing +3.75% today and briefly breaking out from a cup-with-handle. GrowGeneration (GRWG) dropped another -8.99% today and is down over 63$ from its 52w high.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Export and Import Price Index data and the NY Empire State Manufacturing Index will be available on Wednesday. Crude Oil Inventories will be available after the market opens.
There are no relevant earnings reports for Wednesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq closed below its 21d exponential moving average but stayed above 15,000 today, which becomes a critical support area for tomorrow.
The trend line from the 9/7 high and the five-day trend line point to a -0.37% decline for Wednesday.
The one-day trend line ends with a -0.78% loss for tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It's interesting to see Technology outperform on a bearish day. Investors see it as a relatively safe trade during these times of uncertainty. The sector was resilient during much of the economic disruption in 2020. In addition, the lower Treasury yields and subdued inflation data are favorable for the sector, while the supply constraints impacting much of the economy are less worrisome for big tech.
If the Fed does start tapering, we can expect Treasury yields to rise, potentially a stronger dollar, and Technology becomes less attractive. At that point, we should hope other economic data such as Employment and Services activity show more positive signs for growth. Otherwise, there won't be many safe havens, and a further correction in stock markets is likely.
For tomorrow, the chart isn't showing any strength so expect a Lower move unless something changes the outlook.
Stay healthy and trade safe!
