Daily Market Update for 10/13

2021년 10월 14일

Summary: Investors moved past inflation data to mark a day of gains in the market, but caution was present with defensive sectors outperforming. There were no surprises in the Fed's meeting minutes that confirmed a start to bond purchase tapering in November.

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=-
Wednesday, October 13, 2021

Facts: +0.73%, Volume lower, Closing Range: 85%, Body: 29% Green
Good: Green body almost entire above previous candle body, long lower wick
Bad: Nothing
Highs/Lows: Higher high, Higher low
Candle: Long lower wick under a short Green body
Advance/Decline: 1.01, one advancing stock for every declining stock
Indexes: SPX (+0.30%), DJI (-0.00%), RUT (+0.34%), VIX (-6.10%)
Sector List: Utilities (XLU +1.17%) and Materials (XLB +0.75%) at the top. Energy (XLE -0.09%) and Financials (XLF -0.57%) at the bottom.
Expectation: Sideways or Higher

-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview

Investors moved past inflation data to mark a day of gains in the market, but caution was present with defensive sectors outperforming. There were no surprises in the Fed's meeting minutes that confirmed a start to bond purchase tapering in November.

The Nasdaq closed the day with a +0.73% gain. Volume was slightly lower than the previous day. The 29% green body sits in the upper half of the candle, above a long lower wick formed in the first hour of trading. The index rebounded from the morning decline to end the day with an 85% closing range. There was an equal number of advancing and declining stocks.

The Russell 2000 (RUT) advanced +0.34%. The S&P 500 (SPX) rose +0.30%. The Dow Jones Industrial Average (DJI) remained flat for the day but regained losses from the morning. The VIX Volatility Index (VIX) declined -6.10%.

Utilities (XLU +1.17%) led the sector list, signaling caution among investors. Materials (XLB +0.75%) was in the second spot at the top of the sector list. Financials (XLF -0.57%) was the worst sector for the day despite several positive earnings reports in the morning. Although JP Morgan (JPM) beat predictions on revenues and earnings, they missed Net Interest Margin, a key indicator of business performance in big banks.

Core CPI came in at 4.0% year-over-year and 0.2% month-over-month as expected by analysts. However, the total CPI, which includes food and energy, rose 0.4% month-over-month compared to an expectation of 0.3%. API Weekly Crude Oil Stock was higher than expected, signaling less demand.

The US Dollar Index (DXY) declined -0.54%. The yield gap tightened more with 30y and 10y Treasury Yields dropping while the 2y Treasury yield rose. Both High Yield (HYG) and Investment Grade (LQD) Corporate Bond Prices moved higher. Silver and Gold both rose sharply. Timber and Copper also had significant gains for the day while Aluminum pulled back from record highs.

The put/call ratio (PCCE) climbed to 0.669. The CNN Fear & Greed index remained in the Fear range.

Apple (AAPL) was the only of the largest four mega-caps to decline for the day after news broke yesterday of iPhone 13 orders being reduced due to the chip shortage. Microsoft (MSFT) gained +1.17%, moving above its 21d exponential and 50d moving average line.

Novo Nordisk (NVO) was the top mega-cap for the day. Nobo, Alibaba (BABA), and ASML Holding (ASML) all had gains of over 2.5%. At the bottom of the mega-cap list was JP Morgan Chase (JPM), declining -2.64%.

Sea Limited (SE), DataDog (DDOG), and Crowdstrike (CRWD) topped the Daily Update Growth List, each gaining over 7% today. GrowGeneration (GRWG) declined -11.92% after canceling an acquisition, putting the stock at the bottom of the list.

-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead

Tomorrow's economic calendar includes the Producer Price Index data and Initial Jobless Claims. Crude Oil Inventories comes later in the morning. In the afternoon, the Federal Budget Balance will be available.

Important earnings reports for tomorrow include Taiwan Semiconductor (TSM), United Health (UNG), Bank of America (BAC), Wells Fargo (WFC), Morgan Stanley (MS), Citigroup (C ), US Bancorp (USB), Walgreens Boots (WBA), and Domino's Pizza (DPZ).

-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance

The Nasdaq moved back above the 14,500 support area but remained below its 50 moving average and 21d exponential moving average lines.

The continuation of the one-day trend line would result in a +0.34% gain for tomorrow.

The five-day trend line points to a -1.05% decline.

If the index returns to the trend line from the 9/7 high, that will result in a -1.73% decline for Thursday.

-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up

Investors seemed to grow a bit more comfortable with inflation numbers today. Although there is plenty of caution in the market, there were no severe reactions to today's higher-than-expected price data. The worry remains that inflation is not transitory as the Fed has stated in the past and that the stalling labor market will lead to a case of stagflation.

On the chart, there was good support above yesterday's close, and the green body is almost entirely above the red body of yesterday. Overall, a bullish day for the index. Tomorrow, we'll look for more volume with continued breadth (high advance/decline ratio). The expectation is for sideways or higher.

Stay healthy and trade safe!