Daily Market Update for 3/7Summary: Investors continued to dump risky equities as the price of oil seems to have no ceiling. The Nasdaq closed more than 20% below its all-time high as it enters a bear market status.
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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Monday, March 7, 2022
Facts: -3.62%, Volume higher, Closing Range: 1%, Body: 95% Red
Good: Nothing
Bad: Huge decline on high volume
Highs/Lows: Lower high, Lower low
Candle: Tiny upper wick over huge red body, no lower wick
Advance/Decline: 0.33, three declining stocks for every one advancing
Indexes: SPX (-2.95%), DJI (-2.37%), RUT (-2.48%), VIX (+13.98%)
Sector List: Energy (XLE +1.48%) and Utilities (XLU +1.30%) at the top. Technology (XLK -3.66%) and Consumer Discretionary (XLY -4.90%) at the bottom.
Expectation: Lower
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Market Overview
Investors continued to dump risky equities as the price of oil seems to have no ceiling. The Nasdaq closed more than 20% below its all-time high as it enters a bear market status.
The Nasdaq dropped another -0.362% as it approaches the low of 2/24. Volume was higher than the previous day to mark another big distribution day for the index. The candle is 95% red body under a tiny upper wick. The closing range of 1% marks an intraday that was in nearly constant decline. There were three declining stocks for every advancing stock.
The S&P 500 (SPX) declined -2.95%. The Dow Jones Industrial Average (DJI) fell -2.37%. The Russell 2000 (RUT) lost -2.48%. The VIX Volatility Index soared +13.98% to close again at its highest point since February 2021.
Only two of the eleven S&P 500 sectors avoided losses for the day. Energy (XLE +1.48%) continued to climb and Utilities (XLU +1.30%) benefited from its defensive status when equities our out of favor. Growth sectors of Technology (XLK -3.66%) and Consumer Discretionary (XLY -4.90%) were again at the bottom of the sector list.
The US Dollar index (DXY) rose by +0.74%. 30y, 10y, and 2y Treasury Yields all rose, but the gap between long-term and short-term yields tightened, meaning the short-term outlook is still lower. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices fell sharply. Brent Oil rose above 120, its highest level in 10 years. The safe-haven of Gold reached $2000, its highest level since August 2020.
The put/call ratio (PCCE) declined to 0.751. The CNN Fear & Greed index is well in the Extreme Fear area.
All big six mega-caps declined for the day. Nvidia (NVDA) had the most significant decline, losing -6.91% and switching positions again with Taiwan Semiconductor in the mega-cap list.
Exxon Mobile (XOM) and Chevron (CVX) were the top mega-caps for today, gaining +3.60% and +2.14%. Nvidia was the worst in the mega-cap list.
There were only a handful of stocks in the Daily Update Growth List that gained today. Robinhood (HOOD) topped the list with a +4.20% advance. Six stocks in the list dropped more than 10%. Niu Technologies (NIU) dropped by -16.86% on investors' concerns over margin contraction due to higher material costs.
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Looking ahead
Trade Balance data for January comes in the morning. API Weekly Crude Oil Stock updates arrive after the market closes.
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Trends, Support, and Resistance
The Nasdaq dropped below the 13,000 support area, only pausing at that level briefly. Zooming out much longer term for the Nasdaq, the 40 month EMA tends to be a bottom, except in extreme corrections like the 2000 tech bubble and 2008 financial crisis. The index dipped just below the 40m EMA in 2020. On the current course, we would meet up with the 40d EMA at around 12,000.
If the index returns to the trend line from the 2/10 high, that would mean a +2.56% advance for Tuesday.
The five-day trend line points to a +0.60% gain.
If the one-day trend continues, expect another -2.21% decline.
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Wrap-up
The Nasdaq enters a bear market. How long will this one last? Much still depends on what's happening in Ukraine. But other factors including the Fed interest rate hikes and possible solutions for soaring oil prices may have a positive or negative impact as well.
For tomorrow, the expectation is Lower.
Stay healthy and trade safe!
