Daily Market Update for 9/8Summary: Investors were cautious on Wednesday, sending indexes lower over fears of a slowing economy. Defensive sectors led the day.
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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Wednesday, September 08, 2021
Facts: -0.57%, Volume higher, Closing Range: 52%, Body: 48% Red
Good: Climb back to 52% closing range after morning selling
Bad: Red body, lower high and close on higher volume
Highs/Lows: Lower high, Lower low
Candle: No upper wick, half red body and half lower wick
Advance/Decline: 0.31, more than three declining
Indexes: SPX (-0.13%), DJI (-0.20%), RUT (-1.14%), VIX (-0.99%)
Sector List: Utilities (XLU +1.79%) and Consumer Staples (XLP +0.86%) at the top. Materials (XLB -0.96%) and Energy (XLE -1.28%) at the bottom.
Expectation: Sideways or Lower
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Market Overview
Investors were cautious on Wednesday, sending indexes lower over fears of a slowing economy. Defensive sectors led the day.
The Nasdaq closed with a -0.57% loss for the day. Volume was higher than the previous day. The closing range of 52% comes below a 48% red body that occupies the upper half of the candle. There is a long lower wick and no upper wick. More than three stocks declined for every advancing stock.
The Russell 2000 (RUT) continues to underperform this week with a -1.14% decline today. The S&P 500 (SPX) declined -0.13%. The Dow Jones Industrial Average (DJI) fell -0.20% and closed just above its 50d moving average line. The VIX Volatility Index declined -0.99% after rising 10% yesterday and another 8% intraday today.
Defensive sectors led today, with Utilities (XLU +1.79%) topping the sector list and Consumer Staples (XLP +0.86%) in second place. Materials (XLB -0.96%) and Energy (XLE -1.28%) were at the bottom of the list. Of the growth sectors, only Consumer Discretionary (XLY +0.11%) ended the day in the positive. Industrials (XLI +0.14%) gained today after a considerable selloff yesterday.
It was not much of a surprise, but the JOLTS Job Openings data came in higher than expected. Given the slowing growth in payrolls revealed last week, it's becoming clear that there is a supply issue in the labor force, not a demand issue. That may change this week with Federal Unemployment Benefits ending, but there are no guarantees there.
The US Dollar strengthened today with a +0.19% gain in the currency index (DXY). The US Treasury 10y note auction passed without any surprises. Yields on long-term and short-term Treasuries declined after spiking yesterday. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices both increased. Aluminum futures continue to soar, with companies reporting the high cost of acquiring the metal needed in the manufacturing and packaging of consumer goods.
The put/call ratio (PCCE) rose slightly to 0.610. The CNN Fear & Greed index moved into Fear but remained near Neutral.
Apple (AAPL) declined after hitting a record close yesterday. Microsoft (MSFT) continues to test its 21d exponential moving average line but closed with a slight gain today. Mastercard (MA) was the top mega-cap of the day. PayPal (PYPL) was at the bottom of the mega-cap list. The company announced an acquisition of Japanese buy-now, pay-later company Paidy. Alibaba (BABA) was also at the bottom of the list after topping the list yesterday.
Not many stocks in the daily update growth list gained today. DoorDash (DASH) was at the top of the list with a 1.93% gain. Sumo Logic (SUMO) declined -8.29% to end up at the bottom of the growth list. Lululemon (LULU) was up nearly 14% in after-market trading on a huge earnings beat and improved outlook.
The Fed's John Williams said the economy was still on track for the Fed to begin bond tapering this year. However, he acknowledged that additional hurdles need to pass before they commit to tapering.
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Looking ahead
The weekly Initial and Continuing Jobless Claims report come on Thursday. Crude Oil Inventories will get an update after the market opens. The Fed's Mary Daly speaks in the morning, and John Williams speaks in the afternoon.
Zscaler (ZS) will report earnings.
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Trends, Support, and Resistance
The index fell back from a new all-time high yesterday before getting support around 15,200 and climbing back to the 15,300 support/resistance area.
The trend line from the 8/19 low points to a +1.79% gain for Thursday.
The five-day trend line ends with a +0.10% gain.
The one-day trend line points to a -0.17% decline.
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Wrap-up
Investors are spooked about the slowing economic growth. While demand remains high for everything from manufacturing goods to the labor market, supply is holding back growth while also adding inflation pressures into the mix. At the same time, the Fed remains confident it will start bond tapering this year and could pull closer interest rate hikes if inflation doesn't prove transitory.
The long lower wick could turn into a further rally at open tomorrow. However, the waning rally and low advance/decline ratio tell me to expect Sideways or Lower.
Stay healthy and trade safe!
