Nasdaq Market Update for 11/5
Trend lines drawn from the 10/12 pivot day (19d), 10/30 (5d), and today 11/5 (1d).
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Wednesday, November 5, 2020
I need a shot again, that sweet adrenaline
Facts: +2.59% higher, Volume higher, Closing range: 76%, Body: 53%
Good: Third day of big gains, no looking back
Bad: Another gap up, may need to fill
Highs/Lows: Higher high, higher low
Candle: Bullish thick body candle after a gap up
Advance/Decline: 3.25, three advancing stocks for every declining stock
Sectors: Materials (XLB +4.08%) and Technology (XLK +3.11%) were top. Health (XLV +0.22%) and Energy (XLE 0.00%) were bottom.
Expectation: Sideways or Lower
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Market Overview
The Nasdaq continued an energetic rally with another gap up day and big gains on Thursday. The fed left interest rates alone. Although it did not meet expectations, Jobless Claims continued to decline and seemed acceptable in the current context. The election still does not have a definitive winner. Although Biden is in the lead, there is still a chance for the count to turn Trump’s way, or for legal victories in court. The Senate still seems to be going to the Republicans, holding back a “blue wave”.
The index closed up +2.59% on higher volume, a follow-thru day for investors who track Investors Business Daily’s market reports. Many people considered yesterday an in-spirit follow-through day that confirmed the market uptrend, so today is just further evidence. The candle is almost identical to the past two days with a thick green 53% green body and 76% closing range. For the past three days, the average body is around 55% and average closing range around 75%, representative of the energy at the beginning of this rally. Advancing stocks outnumbered declining stocks at a 3 to 1 ratio, an improvement over yesterday.
-=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 S&P 500 (SPX +1.95%), Dow Jones Industrial (DJI +1.95%) turned in identical percentage gains while the Russell 2000 (RUT +2.78%) led the day, after being left behind yesterday. All indexes are above their 21d EMA and 50d MA lines.
Materials (XLB +4.08%) was the leading sector as commodities prices are on the increase and some inflation seems inevitable, both benefiting this sector. Technology (XLK +3.11) followed up in second place continuing the gains that came after election outlooks changed. All sectors ended the day with some gains, except Energy (XLE 0.00%) was flat after giving up modest gains in intraday trading.
The VIX volatility index decreased -6.73% and continued to trade in the late September and October range.
-=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
Treasury Bond yields decreased on the day, as investors bought up the bonds in wake of changed expectations. The 30Y-10Y spread has tightened since late October and something to continue to watch. The spreads are still above any range that would be considered a signal.
-=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
The big four had another day of significant gains. Apple (AAPL +3.55%), Microsoft (MSFT +3.19%) and Amazon (AMZN +2.49%) led the market. Google (GOOG +0.81%) ended in positive territory but did not perform as well as the market. That is understandable, given its recent gains. The rest of the mega-caps fared well, consistently turning in gains for the day.
Growth stocks also did well. Solar Edge (SEDG +13.11%) reversed recent losses to turn in a solid growth day, joined by Canadian Solar (CSIQ +11.96%) and SunPower (SPWR +17.02%) in solar energy. There is no identifiable reason for the spike in solar energy stocks. In addition, recent favorites such as Fiverr (FVRR +10.13%), PayPal (PYPL +5.29%), Cloudflare (NET +3.35%), Peloton (PTON +6.77%) and Etsy (ETSY +5.46%) ended the day with gains.
Cloudflare beat expectations and is up over 10% after hours. Peloton also beat expectations, but it was not quite enough to keep investors interested and the stock was down -7% after hours.
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Looking ahead
Tomorrow we will get Nonfarm Payrolls and the Unemployment Rate which may not meet forecasts but would be in line with employment data from earlier this week. Do not expect much reaction unless a bigger surprise happens. The uncertain results for the election will continue to be a factor, with the Senate race possibly stretching into January before we know which party wins majority.
There are not a lot of earnings reports tomorrow compared to the numerous releases earlier this week, and almost all are ahead of market open. It will be interesting to see the results for Marriott (MAR +2.93%) and see if it confirms the start of recovery in room occupancy that was seen in the earnings report for Hilton (HLT +1.06%) released yesterday.
-=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 short term and long-term trend lines continue to diverge, due to the big days on top of gap ups that we had recently. If the five-day trend were to continue, it would mean a +2.09% gain and a new all time high for the index. There are two likely points of resistance. First, the 10/12 pivot was likely putting downward pressure on today’s highs. The second line of resistance will be the all-time high mark. The one-day trend points to a +0.51% gain that puts the index just under the 10/12 pivot line.
The trend draw from the 10/12 pivot is still steeply below the current index price. That would be a -6.39% decline. It would require a significant event to break current momentum and drop through two areas of support and the key moving average lines. I put another possibility on the chart which is a pullback that would land above the October support area and result in a -3.35% loss. There is no trend line for this one, but the point of this exercise is expecting possible outcomes and preparing for them.
It seems we are clear of the July support area for the time being. 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. That area is now well below today’s close and as we approach new highs, I will remove it from the daily notes.
Continue to be prepared for unexpected moves over the next few days as the election unknowns are resolved. The last few days have been wildly outside any expectations I have had in this section. For tomorrow, I anticipate things landing somewhere in the wide range of my top and bottom outcomes, but even with that wide range, I am prepared for positive and negative surprises.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wednesday, November 5, 2020
I need a shot again, that sweet adrenaline
Facts: +2.59% higher, Volume higher, Closing range: 76%, Body: 53%
Good: Third day of big gains, no looking back
Bad: Another gap up, may need to fill
Highs/Lows: Higher high, higher low
Candle: Bullish thick body candle after a gap up
Advance/Decline: 3.25, three advancing stocks for every declining stock
Sectors: Materials (XLB +4.08%) and Technology (XLK +3.11%) were top. Health (XLV +0.22%) and Energy (XLE 0.00%) were 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 Nasdaq continued an energetic rally with another gap up day and big gains on Thursday. The fed left interest rates alone. Although it did not meet expectations, Jobless Claims continued to decline and seemed acceptable in the current context. The election still does not have a definitive winner. Although Biden is in the lead, there is still a chance for the count to turn Trump’s way, or for legal victories in court. The Senate still seems to be going to the Republicans, holding back a “blue wave”.
The index closed up +2.59% on higher volume, a follow-thru day for investors who track Investors Business Daily’s market reports. Many people considered yesterday an in-spirit follow-through day that confirmed the market uptrend, so today is just further evidence. The candle is almost identical to the past two days with a thick green 53% green body and 76% closing range. For the past three days, the average body is around 55% and average closing range around 75%, representative of the energy at the beginning of this rally. Advancing stocks outnumbered declining stocks at a 3 to 1 ratio, an improvement over yesterday.
-=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 S&P 500 (SPX +1.95%), Dow Jones Industrial (DJI +1.95%) turned in identical percentage gains while the Russell 2000 (RUT +2.78%) led the day, after being left behind yesterday. All indexes are above their 21d EMA and 50d MA lines.
Materials (XLB +4.08%) was the leading sector as commodities prices are on the increase and some inflation seems inevitable, both benefiting this sector. Technology (XLK +3.11) followed up in second place continuing the gains that came after election outlooks changed. All sectors ended the day with some gains, except Energy (XLE 0.00%) was flat after giving up modest gains in intraday trading.
The VIX volatility index decreased -6.73% and continued to trade in the late September and October range.
-=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
Treasury Bond yields decreased on the day, as investors bought up the bonds in wake of changed expectations. The 30Y-10Y spread has tightened since late October and something to continue to watch. The spreads are still above any range that would be considered a signal.
-=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
The big four had another day of significant gains. Apple (AAPL +3.55%), Microsoft (MSFT +3.19%) and Amazon (AMZN +2.49%) led the market. Google (GOOG +0.81%) ended in positive territory but did not perform as well as the market. That is understandable, given its recent gains. The rest of the mega-caps fared well, consistently turning in gains for the day.
Growth stocks also did well. Solar Edge (SEDG +13.11%) reversed recent losses to turn in a solid growth day, joined by Canadian Solar (CSIQ +11.96%) and SunPower (SPWR +17.02%) in solar energy. There is no identifiable reason for the spike in solar energy stocks. In addition, recent favorites such as Fiverr (FVRR +10.13%), PayPal (PYPL +5.29%), Cloudflare (NET +3.35%), Peloton (PTON +6.77%) and Etsy (ETSY +5.46%) ended the day with gains.
Cloudflare beat expectations and is up over 10% after hours. Peloton also beat expectations, but it was not quite enough to keep investors interested and the stock was down -7% after hours.
-=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
Tomorrow we will get Nonfarm Payrolls and the Unemployment Rate which may not meet forecasts but would be in line with employment data from earlier this week. Do not expect much reaction unless a bigger surprise happens. The uncertain results for the election will continue to be a factor, with the Senate race possibly stretching into January before we know which party wins majority.
There are not a lot of earnings reports tomorrow compared to the numerous releases earlier this week, and almost all are ahead of market open. It will be interesting to see the results for Marriott (MAR +2.93%) and see if it confirms the start of recovery in room occupancy that was seen in the earnings report for Hilton (HLT +1.06%) released yesterday.
-=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 short term and long-term trend lines continue to diverge, due to the big days on top of gap ups that we had recently. If the five-day trend were to continue, it would mean a +2.09% gain and a new all time high for the index. There are two likely points of resistance. First, the 10/12 pivot was likely putting downward pressure on today’s highs. The second line of resistance will be the all-time high mark. The one-day trend points to a +0.51% gain that puts the index just under the 10/12 pivot line.
The trend draw from the 10/12 pivot is still steeply below the current index price. That would be a -6.39% decline. It would require a significant event to break current momentum and drop through two areas of support and the key moving average lines. I put another possibility on the chart which is a pullback that would land above the October support area and result in a -3.35% loss. There is no trend line for this one, but the point of this exercise is expecting possible outcomes and preparing for them.
It seems we are clear of the July support area for the time being. 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. That area is now well below today’s close and as we approach new highs, I will remove it from the daily notes.
Continue to be prepared for unexpected moves over the next few days as the election unknowns are resolved. The last few days have been wildly outside any expectations I have had in this section. For tomorrow, I anticipate things landing somewhere in the wide range of my top and bottom outcomes, but even with that wide range, I am prepared for positive and negative surprises.
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