Market Week in Review - 6/28/2021 - 7/2/2021
Summary: The market added another week of record closes across the major indexes while the Nasdaq continued a power trend which is in its twelfth day. Investors were not without worries this week. Their attention was on the pandemic at the beginning of the week. However, it turned to the employment data at the end of the week.
Notes
The structure is the following:
If you have been following my daily updates, you can skip down to "View on the Week." If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes, and market leaders each day.
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Monday, June 28, 2021
Facts: +0.98%, Volume lower, Closing range: 95%, Body: 94%
Good: Very bullish candle on sets a new all-time high
Bad: Lower volume, low A/D ratio
Highs/Lows: Higher high, higher low
Candle: Mostly green body with no lower wick, small upper wick
Advanced/Decline: 0.59, three declining stocks for every two advancing stocks
Indexes: SPX (+0.23%), DJI (-0.44%), RUT (-0.52%), VIX (+0.90%)
Sectors: Communications (XLC +1.13%) and Technology (XLK +1.05%) at top. Financials (XLF -0.73%) and Energy (XLE -2.28%) were bottom.
Expectation: Sideways or Higher
The S&P 500 and Nasdaq moved higher today, setting more records, while the Dow Jones Industrial Average and Russell 2000 took a step back. New fears of pandemic lockdowns in Asia sent Energy and Industrial stocks lower.
The Nasdaq finished the day with a +0.98% gain, producing a bullish green candle that is primarily green body with no lower wick and a small upper wick. Volume was lower than Friday, but Friday's volume was exceptionally high. The closing range of 95% shows bullish support into the close. Other than a slight dip in the early afternoon, investors were in a buying mood all day. Still, there were three declining stocks for every two advancing stocks.
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Tuesday, June 29, 2021
Facts: +0.19%, Volume higher, Closing range: 88%, Body: 30%
Good: Green candle on higher volume, great closing range
Bad: The low A/D line
Highs/Lows: Higher high, higher low
Candle: Thin green body in the upper half of the candle, longer lower wick
Advanced/Decline: 0.43, two declining stocks for every advancing stock
Indexes: SPX (+0.03%), DJI (+0.03%), RUT (-0.58%), VIX (+1.78%)
Sectors: Technology (XLK +0.73%) and Consumer Discretionary (XLY +0.25%) at the top. Communications (XLC -0.54%) and Utilities (XLU -1.62%) at the bottom.
Expectation: Sideways or Lower
Consumer confidence numbers helped send Apple and Microsoft higher and drive gains in the Nasdaq. The gains were not spread broadly across the index, with more declining stocks than advancing stocks.
The Nasdaq finished with a +0.19% gain after dipping in the morning. The dip created a longer lower wick, under a 30% green body that ended the day with a 88% closing range. The higher volume did not translate into broad gains. There were more than two declining stocks for every advancing stock.
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Wednesday, June 30, 2021
Facts: -0.17%, Volume higher, Closing range: 53%, Body: 12%
Good: Higher low
Bad: Lower high, thin red body, higher volume on decline
Highs/Lows: Lower high, higher low
Candle: Indecisive candle with a thin red body in between two equal wicks
Advanced/Decline: 0.58, more declining stocks than advancing stocks
Indexes: SPX (+0.13%), DJI (+0.61%), RUT (+0.07%), VIX (-1.19%)
Sectors: Energy (XLE +1.24%) and Consumer Staples (XLP +0.78%) at the top. Utilities (XLU -0.19%) and Real Estate (XLRE -0.78%) at the bottom.
Expectation: Sideways
Solid economic recovery data sent the cyclical sectors higher today while other sectors saw modest gains. Data included positive Nonfarm Employment change, Pending Home Sales, and Crude Oil Inventories. After an indecisive candle yesterday, the S&P 500 set a new record to close the quarter.
The Nasdaq finished with a -0.17% decline on higher volume. The closing range of 53% is right at the middle of the candle, with a thin 12% red body in the middle of equal length wicks. The "spinning top" candle signals indecision in the market, where both buyers and sellers are active during the trading session. There were more declining stocks than advancing stocks on the Nasdaq.
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Thursday, July 1, 2021
Facts: +0.13%, Volume lower, Closing range: 88%, Body: 30%
Good: High closing range after morning dip, higher high
Bad: Dip below 14,500 creating lower low
Highs/Lows: Higher high, lower low
Candle: Bullish outside day follows an inside day, signals continuation
Advanced/Decline: 0.80, more declining stocks than advancing stocks
Indexes: SPX (+0.52%), DJI (+0.38%), RUT (+0.81%), VIX (-2.34%)
Sectors: Energy (XLE +1.74%) and Utilities (XLU +1.09%) at the top. Technology (XLK +0.17%) and Consumer Staples (XLP -0.30%) were at the bottom.
Expectation: Sideways
While major indexes advanced for the day, there was some caution in the market as investors await the jobs data coming on Friday.
The Nasdaq closed the day with a +0.13% gain after dipping in the morning. The morning dip created a long lower wick for the candle and a lower low for the day compared to the previous day. However, the index recovered and also created a new high. The body is 30% longer than the previous day, creating a bullish outside day. That is typically a continuation pattern in an uptrend but will need to be confirmed tomorrow after the jobs data. There were more declining stocks than advancing stocks.
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Friday, July 2, 2021
Facts: +0.81%, Volume lower, Closing range: 92% (w/gap), Body: 60%
Good: High closing range, large green body, higher high, higher low
Bad: Lower volume, low A/D ratio
Highs/Lows: Higher high, higher low
Candle: Gap up with higher high and higher low
Advanced/Decline: 0.39, five declining stocks for every two advancing stocks
Indexes: SPX (+0.75%), DJI (+0.44%), RUT (-1.01%), VIX (-2.52%)
Sectors: Technology (XLK +1.32) and Health (XLV +0.96) at the top. Financials (XLF -0.11%) and Energy (XLE -0.22%) were at the bottom.
Expectation: Sideways or Higher
The market gave a big yes to the jobs data but focused investors on mega-caps and leaving small-caps behind. Volume was low, and trading was concentrated into big tech, sending the Technology sector higher. Three of the major indexes had record closes.
The Nasdaq closed at another all-time high with a +0.81% advance. The day was dominated by buyers, producing a 60% green body and 92% closing range with the gap at open. However, volume was lower than the previous day, and there were five declining stocks for every two advancing stocks.
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View on the Week
The market added another week of record closes across the major indexes while the Nasdaq continued a power trend which is in its twelfth day. Investors were not without worries this week. Their attention was on the pandemic at the beginning of the week. However, it turned to the employment data at the end of the week.
Monday opened the week with some fear from a resurgence in covid cases in Asia. The Utilities competed with Technology as the top sector in the morning. The contrast between growth and defensive moves showed a mixed attitude toward the rise in cases. Energy sunk as some countries reinstated travel bans. The Utilities sector quickly faded as fears melted away.
On Monday afternoon, a judge threw out an antitrust case brought by regulators against Facebook. That not only sent Facebook and the Communications sector higher, but it was a boon for big tech companies also facing similar scrutiny. The win for big tech helped send the growth sectors higher throughout the week.
Consumer Confidence numbers on Tuesday were another positive for growth stocks. Consumer Confidence is at a post-pandemic high as US citizens see improving conditions heading into the summer months. The numbers surprised wall street and helped further put pandemic worries behind for the week.
The gains on the first two days of the week came with a diverging advance/decline line. The advance/decline line is the ratio of advancing stocks to declining stocks. If the index is moving higher, we will ideally see the ratio near or above 1.0, meaning more advancing stocks than declining stocks. The divergence on Monday and Tuesday, specifically the A/D ratio moving lower, signaled a potential pullback. That happened on Wednesday and continued into Thursday morning.
After dipping below 14,500 on Thursday morning, it seemed the market turned toward employment data. Initial Jobless Claims on Thursday looked better than expected. Anticipation of positive news on Friday was enough to bring the Nasdaq back above the 14,500 support area. Still, some investors took defensive positions, sending the Utilities sector higher.
There are some key things to note in the employment data released on Friday that sent all the Dow, S&P 500, and Nasdaq to record closes. First, the Private Nonfarm Payrolls were much higher than expected, meaning businesses are adding jobs faster than previously expected. Second, Average Hourly Earnings was lower than expected. Between the two, we can say that people are starting to go back to work, requiring more minor wage increases to attract people back into the workforce.
Higher wages are a critical factor in making inflation permanent instead of transitory. Seeing that businesses are getting people back to work with less pressure on wages is good news for investors worried about inflation and a possible earlier-than-planned Fed reaction. Not only can you see the investor reaction in the stock indexes, but you can also see it in the lowering yields on longer-term Treasuries.
The Nasdaq advanced +1.94% this week, setting another record high. Volume was much lower than the previous week and lower than average for this year. The low this week is higher than the high of the previous week. The closing range of 96% is excellent.
The Russell 2000 (RUT) lost +1.23% this week after outperforming the other indexes in the previous week. The S&P 500 (SPX) gained +1.67%. The Dow Jones Industrial Average (DJI) advanced +1.02%.
The VIX volatility declined -3.50% for the week and closed the week at a post-pandemic low.
Technology ( XLK ) led the sector list this week, propelled higher by strong economic data and significant gains by big tech. Communications ( XLC ) led briefly on Monday after a judge threw out two cases brought against Facebook. The decision was a blow to regulators and a boon to several tech mega-caps facing similar challenges.
Utilities ( XLU ) also led at the beginning of the week but quickly retreated and ended the week at a loss.
Energy ( XLE ) had a volatile start to the week due to increased pandemic fears. The continued demand for Oil, driving prices higher, eventually brought investors back to the sector. However, it wasn't enough to lift the sector out of the bottom position in the sector list.
The three secular growth sectors outperformed the broader S&P 500 index this week, while cyclical sectors underperformed.
Treasury yields on the 30y, 10y, and 2y all declined for the day. However, the gap between longer-term yields (7y and longer) and shorter-term yields (2y and 3y) continues to tighten. The signal could be that investors see inflationary pressures as short-term. The market agrees with the Fed that inflation is transitory.
The High Yield Corporate Bond (HYG) and Investment Grade Bond (LQD) prices advanced, showing confidence in US businesses.
The US Dollar (DXY) advanced +0.47% for the week.
Silver (SILVER) advanced +1.46%, and Gold (GOLD) advanced +0.39%.
Crude Oil (CRUDEOIL1!) advanced +1.71% and surpassed its 2018 peak.
Timber (WOOD) advanced +1.37%.
Copper (COPPER1!) advanced +0.07%.
Aluminum (ALI1!) advanced +3.34%.
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Big Four Mega-caps
The largest four mega-caps all advanced this week. Apple (AAPL) soared +5.15% higher. Microsoft (MSFT) set another record high with a +4.77% gain. Amazon (AMZN) climbed by +3.22%. Alphabet (GOOGL) gained +2.24%. All four are trading well above their 10-week moving average lines.
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The Four Recovery Stocks
I picked four recovery stocks to track against the indexes and other indicators in this weekly report. Pandemic fears sent the four recovery stocks lower this week. Marriott (MAR) was able to recover and close the week with a +0.80%. Delta (DAL) tested the 40-week moving average line before recovering some losses and ending the week with a -0.63% decline. Exxon Mobile (XOM) lost -2.30% this week. Carnival Cruise Lines (CCL) had the most significant loss among the four, dropping -7.36% for the week. The company launched its first cruise since the pandemic began on Saturday.
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Cryptocurrency
I started tracking four major cryptocurrencies on the week in review. The four are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The latter two are not the largest by market cap but seem to be well-known and are part of the CIX capital.com index, tracking five cryptocurrencies, including these four (Ripple is the fifth).
Ethereum (ETHUSD) had the best week with a +17.05% gain. It is the only of the four trading above the 40-week moving average. Bitcoin Cash (BCHUSD) closed right at the 40-week line with a +10.30% advance this week. Litecoin (LTCUSD) gained +9.25%. Bitcoin (BTCUSD) continues to underperform with a +1.66% advance this week.
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Investor Sentiment
The put/call ratio (PCCE) moved higher, ending the week at 0.617. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment and could mean an overbought market.
The CNN Fear & Greed Index is on the fear side but moving toward neutral.
The NAAIM money manager exposure index rose to 91.72 this week.
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The Week Ahead
There are no relevant earnings reports for the daily update next week. A quiet period before the Financial sector kicks off earnings season the following week.
Monday
Markets are closed on Monday for the July 4th holiday.
Tuesday
Tuesday will open the trading week with Purchasing Managers Index data for Services and Non-Manufacturing Employment.
There are no relevant earnings reports for the daily update on Tuesday.
Wednesday
The JOLTs Job Openings report for May will be available on Wednesday morning. In the afternoon, the FOMC will release the meeting minutes from last month. Investors will be interested to see what concerns remain around inflation and employment. The API Weekly Crude Oil stock comes after the market close.
There are no relevant earnings reports for the daily update on Wednesday.
Thursday
Initial Jobless Claims and weekly Crude Oil Inventories data will be available on Thursday.
There are no relevant earnings reports for the daily update on Thursday.
Friday
The Fed will release its semi-annual Monetary Policy Report on Friday.
There are no relevant earnings reports for the daily update on Friday.
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The Bullish Side
The same bullish signals from last week continue into this week. Economic data throughout the week only strengthened the bullish outlook and helped the Nasdaq continue its power trend. The S&P 500 is also nearing the criteria for a power trend.
One of the most significant indications that investors are no longer worried about inflation is in the performance of both Corporate and Treasury bonds. Corporate interest rates remain low as investors are confident in the near-term performance of US businesses. Yields on mid-term Treasuries are rising relative to longer-term Treasuries, while overall yields remain low. Bond investors see inflation as only a short-term problem.
The coming week has few influential earnings reports and only a couple of important items on the economic calendar. While investors anticipate a strong earnings season overall, this week will be an excellent time to get positioned for growth.
Clearly from the Growth/Value chart, investors are moving back into Growth.
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The Bearish Side
It's another light week on economic news and earnings, providing very little to be bearish about in the data. Still, after a few weeks of gains into record closes, it would not be a surprise if the market pulls back a bit or pauses.
This past week ended with a lopsided rotation into the largest tech mega-caps that drove indexes higher. Expect some rotation the other way gains spread out across the market before the indexes head much higher.
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Key Nasdaq Levels to Watch
The Nasdaq found support at 14,500 this week, closing at new all-time highs.
On the positive side, the levels are:
On the downside, there are a few key levels:
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Wrap-up
This week confirmed a bullish thesis for growth stocks and the Nasdaq. While valuations remain high, there still seems to be quite a lot of support for US bonds and equities. That's likely coming from a more robust recovery among US businesses than in other countries globally, especially those countries still struggling to reopen after a rise in Delta variant cases.
With the indexes all at record highs, investors will be watching for any signals that the rally is ending. Those aren't likely to come from scheduled events like earnings reports or the economic calendar. Instead, they may come from a surprise turn in the pandemic or another unexpected event. In the meantime, follow price. Trade safe, but don't miss out on the gains.
Good luck, stay healthy, and trade safe!
Notes
- The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week.
- I occasionally have some errors or typos and will correct them in my blog or the comments on TradingView. I do not have an editor and do this in my free time.
- If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
- A recap of the daily updates that I do here on TradingView.
- View on the past week
- What's coming in the next week
- The Bullish View, The Bearish View
- Key index levels to watch out for
- Wrap-up
If you have been following my daily updates, you can skip down to "View on the Week." If not, then this first part is a great play-by-play recap for the week. Click the daily charts for more detail on sectors, indexes, and market leaders each day.
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Monday, June 28, 2021
Facts: +0.98%, Volume lower, Closing range: 95%, Body: 94%
Good: Very bullish candle on sets a new all-time high
Bad: Lower volume, low A/D ratio
Highs/Lows: Higher high, higher low
Candle: Mostly green body with no lower wick, small upper wick
Advanced/Decline: 0.59, three declining stocks for every two advancing stocks
Indexes: SPX (+0.23%), DJI (-0.44%), RUT (-0.52%), VIX (+0.90%)
Sectors: Communications (XLC +1.13%) and Technology (XLK +1.05%) at top. Financials (XLF -0.73%) and Energy (XLE -2.28%) were bottom.
Expectation: Sideways or Higher
The S&P 500 and Nasdaq moved higher today, setting more records, while the Dow Jones Industrial Average and Russell 2000 took a step back. New fears of pandemic lockdowns in Asia sent Energy and Industrial stocks lower.
The Nasdaq finished the day with a +0.98% gain, producing a bullish green candle that is primarily green body with no lower wick and a small upper wick. Volume was lower than Friday, but Friday's volume was exceptionally high. The closing range of 95% shows bullish support into the close. Other than a slight dip in the early afternoon, investors were in a buying mood all day. Still, there were three declining stocks for every two advancing stocks.
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Tuesday, June 29, 2021
Facts: +0.19%, Volume higher, Closing range: 88%, Body: 30%
Good: Green candle on higher volume, great closing range
Bad: The low A/D line
Highs/Lows: Higher high, higher low
Candle: Thin green body in the upper half of the candle, longer lower wick
Advanced/Decline: 0.43, two declining stocks for every advancing stock
Indexes: SPX (+0.03%), DJI (+0.03%), RUT (-0.58%), VIX (+1.78%)
Sectors: Technology (XLK +0.73%) and Consumer Discretionary (XLY +0.25%) at the top. Communications (XLC -0.54%) and Utilities (XLU -1.62%) at the bottom.
Expectation: Sideways or Lower
Consumer confidence numbers helped send Apple and Microsoft higher and drive gains in the Nasdaq. The gains were not spread broadly across the index, with more declining stocks than advancing stocks.
The Nasdaq finished with a +0.19% gain after dipping in the morning. The dip created a longer lower wick, under a 30% green body that ended the day with a 88% closing range. The higher volume did not translate into broad gains. There were more than two declining stocks for every advancing stock.
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Wednesday, June 30, 2021
Facts: -0.17%, Volume higher, Closing range: 53%, Body: 12%
Good: Higher low
Bad: Lower high, thin red body, higher volume on decline
Highs/Lows: Lower high, higher low
Candle: Indecisive candle with a thin red body in between two equal wicks
Advanced/Decline: 0.58, more declining stocks than advancing stocks
Indexes: SPX (+0.13%), DJI (+0.61%), RUT (+0.07%), VIX (-1.19%)
Sectors: Energy (XLE +1.24%) and Consumer Staples (XLP +0.78%) at the top. Utilities (XLU -0.19%) and Real Estate (XLRE -0.78%) at the bottom.
Expectation: Sideways
Solid economic recovery data sent the cyclical sectors higher today while other sectors saw modest gains. Data included positive Nonfarm Employment change, Pending Home Sales, and Crude Oil Inventories. After an indecisive candle yesterday, the S&P 500 set a new record to close the quarter.
The Nasdaq finished with a -0.17% decline on higher volume. The closing range of 53% is right at the middle of the candle, with a thin 12% red body in the middle of equal length wicks. The "spinning top" candle signals indecision in the market, where both buyers and sellers are active during the trading session. There were more declining stocks than advancing stocks on the Nasdaq.
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Thursday, July 1, 2021
Facts: +0.13%, Volume lower, Closing range: 88%, Body: 30%
Good: High closing range after morning dip, higher high
Bad: Dip below 14,500 creating lower low
Highs/Lows: Higher high, lower low
Candle: Bullish outside day follows an inside day, signals continuation
Advanced/Decline: 0.80, more declining stocks than advancing stocks
Indexes: SPX (+0.52%), DJI (+0.38%), RUT (+0.81%), VIX (-2.34%)
Sectors: Energy (XLE +1.74%) and Utilities (XLU +1.09%) at the top. Technology (XLK +0.17%) and Consumer Staples (XLP -0.30%) were at the bottom.
Expectation: Sideways
While major indexes advanced for the day, there was some caution in the market as investors await the jobs data coming on Friday.
The Nasdaq closed the day with a +0.13% gain after dipping in the morning. The morning dip created a long lower wick for the candle and a lower low for the day compared to the previous day. However, the index recovered and also created a new high. The body is 30% longer than the previous day, creating a bullish outside day. That is typically a continuation pattern in an uptrend but will need to be confirmed tomorrow after the jobs data. There were more declining stocks than advancing stocks.
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Friday, July 2, 2021
Facts: +0.81%, Volume lower, Closing range: 92% (w/gap), Body: 60%
Good: High closing range, large green body, higher high, higher low
Bad: Lower volume, low A/D ratio
Highs/Lows: Higher high, higher low
Candle: Gap up with higher high and higher low
Advanced/Decline: 0.39, five declining stocks for every two advancing stocks
Indexes: SPX (+0.75%), DJI (+0.44%), RUT (-1.01%), VIX (-2.52%)
Sectors: Technology (XLK +1.32) and Health (XLV +0.96) at the top. Financials (XLF -0.11%) and Energy (XLE -0.22%) were at the bottom.
Expectation: Sideways or Higher
The market gave a big yes to the jobs data but focused investors on mega-caps and leaving small-caps behind. Volume was low, and trading was concentrated into big tech, sending the Technology sector higher. Three of the major indexes had record closes.
The Nasdaq closed at another all-time high with a +0.81% advance. The day was dominated by buyers, producing a 60% green body and 92% closing range with the gap at open. However, volume was lower than the previous day, and there were five declining stocks for every two advancing stocks.
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View on the Week
The market added another week of record closes across the major indexes while the Nasdaq continued a power trend which is in its twelfth day. Investors were not without worries this week. Their attention was on the pandemic at the beginning of the week. However, it turned to the employment data at the end of the week.
Monday opened the week with some fear from a resurgence in covid cases in Asia. The Utilities competed with Technology as the top sector in the morning. The contrast between growth and defensive moves showed a mixed attitude toward the rise in cases. Energy sunk as some countries reinstated travel bans. The Utilities sector quickly faded as fears melted away.
On Monday afternoon, a judge threw out an antitrust case brought by regulators against Facebook. That not only sent Facebook and the Communications sector higher, but it was a boon for big tech companies also facing similar scrutiny. The win for big tech helped send the growth sectors higher throughout the week.
Consumer Confidence numbers on Tuesday were another positive for growth stocks. Consumer Confidence is at a post-pandemic high as US citizens see improving conditions heading into the summer months. The numbers surprised wall street and helped further put pandemic worries behind for the week.
The gains on the first two days of the week came with a diverging advance/decline line. The advance/decline line is the ratio of advancing stocks to declining stocks. If the index is moving higher, we will ideally see the ratio near or above 1.0, meaning more advancing stocks than declining stocks. The divergence on Monday and Tuesday, specifically the A/D ratio moving lower, signaled a potential pullback. That happened on Wednesday and continued into Thursday morning.
After dipping below 14,500 on Thursday morning, it seemed the market turned toward employment data. Initial Jobless Claims on Thursday looked better than expected. Anticipation of positive news on Friday was enough to bring the Nasdaq back above the 14,500 support area. Still, some investors took defensive positions, sending the Utilities sector higher.
There are some key things to note in the employment data released on Friday that sent all the Dow, S&P 500, and Nasdaq to record closes. First, the Private Nonfarm Payrolls were much higher than expected, meaning businesses are adding jobs faster than previously expected. Second, Average Hourly Earnings was lower than expected. Between the two, we can say that people are starting to go back to work, requiring more minor wage increases to attract people back into the workforce.
Higher wages are a critical factor in making inflation permanent instead of transitory. Seeing that businesses are getting people back to work with less pressure on wages is good news for investors worried about inflation and a possible earlier-than-planned Fed reaction. Not only can you see the investor reaction in the stock indexes, but you can also see it in the lowering yields on longer-term Treasuries.
The Nasdaq advanced +1.94% this week, setting another record high. Volume was much lower than the previous week and lower than average for this year. The low this week is higher than the high of the previous week. The closing range of 96% is excellent.
The Russell 2000 (RUT) lost +1.23% this week after outperforming the other indexes in the previous week. The S&P 500 (SPX) gained +1.67%. The Dow Jones Industrial Average (DJI) advanced +1.02%.
The VIX volatility declined -3.50% for the week and closed the week at a post-pandemic low.
Technology ( XLK ) led the sector list this week, propelled higher by strong economic data and significant gains by big tech. Communications ( XLC ) led briefly on Monday after a judge threw out two cases brought against Facebook. The decision was a blow to regulators and a boon to several tech mega-caps facing similar challenges.
Utilities ( XLU ) also led at the beginning of the week but quickly retreated and ended the week at a loss.
Energy ( XLE ) had a volatile start to the week due to increased pandemic fears. The continued demand for Oil, driving prices higher, eventually brought investors back to the sector. However, it wasn't enough to lift the sector out of the bottom position in the sector list.
The three secular growth sectors outperformed the broader S&P 500 index this week, while cyclical sectors underperformed.
Treasury yields on the 30y, 10y, and 2y all declined for the day. However, the gap between longer-term yields (7y and longer) and shorter-term yields (2y and 3y) continues to tighten. The signal could be that investors see inflationary pressures as short-term. The market agrees with the Fed that inflation is transitory.
The High Yield Corporate Bond (HYG) and Investment Grade Bond (LQD) prices advanced, showing confidence in US businesses.
The US Dollar (DXY) advanced +0.47% for the week.
Silver (SILVER) advanced +1.46%, and Gold (GOLD) advanced +0.39%.
Crude Oil (CRUDEOIL1!) advanced +1.71% and surpassed its 2018 peak.
Timber (WOOD) advanced +1.37%.
Copper (COPPER1!) advanced +0.07%.
Aluminum (ALI1!) advanced +3.34%.
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Big Four Mega-caps
The largest four mega-caps all advanced this week. Apple (AAPL) soared +5.15% higher. Microsoft (MSFT) set another record high with a +4.77% gain. Amazon (AMZN) climbed by +3.22%. Alphabet (GOOGL) gained +2.24%. All four are trading well above their 10-week moving average lines.
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The Four Recovery Stocks
I picked four recovery stocks to track against the indexes and other indicators in this weekly report. Pandemic fears sent the four recovery stocks lower this week. Marriott (MAR) was able to recover and close the week with a +0.80%. Delta (DAL) tested the 40-week moving average line before recovering some losses and ending the week with a -0.63% decline. Exxon Mobile (XOM) lost -2.30% this week. Carnival Cruise Lines (CCL) had the most significant loss among the four, dropping -7.36% for the week. The company launched its first cruise since the pandemic began on Saturday.
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Cryptocurrency
I started tracking four major cryptocurrencies on the week in review. The four are Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. The latter two are not the largest by market cap but seem to be well-known and are part of the CIX capital.com index, tracking five cryptocurrencies, including these four (Ripple is the fifth).
Ethereum (ETHUSD) had the best week with a +17.05% gain. It is the only of the four trading above the 40-week moving average. Bitcoin Cash (BCHUSD) closed right at the 40-week line with a +10.30% advance this week. Litecoin (LTCUSD) gained +9.25%. Bitcoin (BTCUSD) continues to underperform with a +1.66% advance this week.
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Investor Sentiment
The put/call ratio (PCCE) moved higher, ending the week at 0.617. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment and could mean an overbought market.
The CNN Fear & Greed Index is on the fear side but moving toward neutral.
The NAAIM money manager exposure index rose to 91.72 this week.
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The Week Ahead
There are no relevant earnings reports for the daily update next week. A quiet period before the Financial sector kicks off earnings season the following week.
Monday
Markets are closed on Monday for the July 4th holiday.
Tuesday
Tuesday will open the trading week with Purchasing Managers Index data for Services and Non-Manufacturing Employment.
There are no relevant earnings reports for the daily update on Tuesday.
Wednesday
The JOLTs Job Openings report for May will be available on Wednesday morning. In the afternoon, the FOMC will release the meeting minutes from last month. Investors will be interested to see what concerns remain around inflation and employment. The API Weekly Crude Oil stock comes after the market close.
There are no relevant earnings reports for the daily update on Wednesday.
Thursday
Initial Jobless Claims and weekly Crude Oil Inventories data will be available on Thursday.
There are no relevant earnings reports for the daily update on Thursday.
Friday
The Fed will release its semi-annual Monetary Policy Report on Friday.
There are no relevant earnings reports for the daily update on Friday.
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The Bullish Side
The same bullish signals from last week continue into this week. Economic data throughout the week only strengthened the bullish outlook and helped the Nasdaq continue its power trend. The S&P 500 is also nearing the criteria for a power trend.
One of the most significant indications that investors are no longer worried about inflation is in the performance of both Corporate and Treasury bonds. Corporate interest rates remain low as investors are confident in the near-term performance of US businesses. Yields on mid-term Treasuries are rising relative to longer-term Treasuries, while overall yields remain low. Bond investors see inflation as only a short-term problem.
The coming week has few influential earnings reports and only a couple of important items on the economic calendar. While investors anticipate a strong earnings season overall, this week will be an excellent time to get positioned for growth.
Clearly from the Growth/Value chart, investors are moving back into Growth.
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The Bearish Side
It's another light week on economic news and earnings, providing very little to be bearish about in the data. Still, after a few weeks of gains into record closes, it would not be a surprise if the market pulls back a bit or pauses.
This past week ended with a lopsided rotation into the largest tech mega-caps that drove indexes higher. Expect some rotation the other way gains spread out across the market before the indexes head much higher.
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Key Nasdaq Levels to Watch
The Nasdaq found support at 14,500 this week, closing at new all-time highs.
On the positive side, the levels are:
- The high of this past week was a new all-time high at 14,649.11.
- The mid-point of the regression trend from the 5/12 low points to 14,724 by the end of the week.
On the downside, there are a few key levels:
- 14,500 is a support area developed from three days of sideways trading this week.
- The 10d MA is at 14,409.11.
- The low of this past week is 14,417.20.
- The 21d EMA is at 14,231.69.
- 14,000 has been a key area of support/resistance.
- The 50d MA is at 13,880.92.
- There is a pivot at 13,548.93. This is a "higher low" in the current uptrend.
- There is a support area at 13,000. 13,002.54 is a pivot from May. Below this level is a correction.
- 12950.85 is the 200d MA. This could be a support point if the index falls below 13,000.
- 12,397.05 is a low pivot point from the early March dip.
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Wrap-up
This week confirmed a bullish thesis for growth stocks and the Nasdaq. While valuations remain high, there still seems to be quite a lot of support for US bonds and equities. That's likely coming from a more robust recovery among US businesses than in other countries globally, especially those countries still struggling to reopen after a rise in Delta variant cases.
With the indexes all at record highs, investors will be watching for any signals that the rally is ending. Those aren't likely to come from scheduled events like earnings reports or the economic calendar. Instead, they may come from a surprise turn in the pandemic or another unexpected event. In the meantime, follow price. Trade safe, but don't miss out on the gains.
Good luck, stay healthy, and trade safe!
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