This is a first attempt at writing up my weekend homework. I look back over the week and review what happened in the market. What were my expectations each day and then what actually happened? What can I learn from expectation breakers? And then I look at what is coming in the week ahead.
Monday, October 12, 2020
I'm a keep on chillin', refillin' and flyin' high
Facts: 2.56% gain, Higher volume, Closing range: 66%, Green Body: 55%
Good:Follow-through day for the Nasdaq. An FTD is a indicator from the CANSLIM system and Investors Business Daily.
Bad: Not much, except som selling late in the afternoon
Candle: 55% green body with 66% closing range. The almost constant upward movement created a fat green body, but the day finished off with some selling the created a short upper wick.
Advance/Decline: 1.17, a few more advancers then declines but not the same breadth as previous week
Sectors: Technology (XLK) and Communications (XLC) led the day. Materials (XLB) and Industrials (XLI) lagged behind. Energy (XLE) had an afternoon surge.
Expectation: Sideways
It was a magnificent start to the week for the Nasdaq with a gap up and +2.56 gain on higher volume . A confirmed FTD for those who follow CANSLIM and IBD. The candle has a fat green body with a 66% closing range and tiny wicks at the top and bottom. It was upward most of the day with some profit taking in the late afternoon. All of the trend lines are on an upward slope. Continuing today's momentum would result in a +2.30% gain and a new all time high. There is likely to be some resistance as we approach that level. So expect a more modest gain from the 5d trend line which is at +0.65%. A small pullback would not be unwelcome to cool things off just a bit. Meeting back up with the trend from the September bottom would mean a -0.92% loss. The trend line from 9/3 is still -4.52% below the current index price. That big of a drop seems unlikely and would require some significant news. But always have a game plan, anything can happen.
Tuesday, October 13, 2020
Let There Be Rock
Facts: 0.1% Lower, Lower volume, Closing range: 34%, Red Body: 30%
Good: Held at the upper range of the previous days price range.
Bad: Indecisive inside day with a thinner body, lows and highs were traded two times each
Candle: 30% green body, 35% closing range, Inside day
Advance/Decline: 0.53, almost twice as many decliners as advancers
Sectors: Technology (XLK) and Consumer Discretionary (XLC) led the day while Energy (XLE) had a huge advance near close. Financial (XLF) and Real Estate (XLRE) moved lower on earnings expectations.
Expectation: Sideways or Lower
The Nasdaq took a breather from the previous days big gains. The index dropped back -0.1% with an inside day. The 30% red body shows some indecision throughout the day with a lean toward bearish in the 34% closing range. It would be better to have that closing range be at least 40% to show more bullish support. Lower volume on the index is good given the bearishness, but SPX had higher volume with a significantly bearish movement. Declining stocks outnumbered advancing stocks at a ratio of 3:2. Continuing today's sideways move would land the index in nearly the same spot tomorrow and also join up with the longer trend from the the 9/23 bottom. Picking back up the 5 day trend would result in a +2.20% gain and a new all time high. There is likely to be more resistance as we approach that level. So I'd expect any gains to be contained within 1.5%, just under the previous all time high. Given the indecisive Tuesday, a more severe pullback is also a possibility. Meeting back up with the trend from early September would result in a -3.67% loss where the index would find support from October trading ranges.
Wednesday, October 14, 2020
We're running wild and we're restless
Facts: 0.8% Lower, Volume Lower, Closing Range: 24%, Red Body: 53%
Good: Held above Monday's lows, so the FTD is still good
Bad: Tried but could not find higher ground late in day
Candle: 53% red body with 24% closing range, the long red body showed little support for any gains throughout the day.
Advance/Decline: 0.38, much more decliners than advancers
Sectors: Materials (XLB), Industrials (XLI) and Utilities (XLU) all shared the limelight as investors rushed for safer bets.
Expectation: Sideways or lower
The Nasdaq continued to rest from it's recent aggressive gains, dropping -0.8%. It's still trading within the highs and lows of the bullish day on Monday. The candle has a 53% Red body with a bearish 24% closing range on lower volume than the previous two days. Declining stocks outnumbered advancing stocks at a 2:1 ratio. Materials, Industrial and Utilities were the top three sectors of the day. Energy started the day strong but faded significantly as trading progressed. Communications was the worst sector for the day, after having a strong showing earlier in the week. Tomorrow will bring updates on Jobless claims, Manufacturing, and Crude Oil inventories. Several 2020 favorites are down significantly after hours including Datadog ( DDOG ), Cloudflare (NET) and Fastly ( FSLY ). Fastly is down almost 30% in postmarket trading after cutting Q3 guidance. Start with the positive trends. The five day trend points to a +2.79% gain for tomorrow, which would take the index to near all time highs. That will probably meet up with resistance and so expect closer to +2.5% as the upper limit. If the index moves back towards the trend from the bottom, then expect a +1.41% gain. Further pullback is certainly possible. Meeting back up with the trend from early September would result in a -2.03% loss where the index would find support from October support lines. Based on today's trading range, it's plausible the index will go sideways more and stay above Monday's low. That would be a great sign of strength at the current level.
Thursday, October 15, 2020
Baby come back, you can blame it all on me
Facts: 0.47% Lower, Lower volume, Closing Range: 85%, Green Body: 85%
Good: Gains through out the day, looks like investors are back in the game after the gap down and previous two day sell off
Bad: Undercut the low of Monday Follow-thru day, making that a failed FTD
Candle: 85% green body with 85% closing range. Gapped down on open but gains throughout the day.
Advance/Decline: 0.99, about as many advancers as decliners
Sectors: Energy (XLE) was far out in front for the day, likely on oil supply being lower than expected (leading to higher oil prices)
Expectation: Higher
The Nasdaq took another small step back having dropped -0.47% but recovering from a much lower morning. It did undermine the low from Monday's follow-thru day. The bullish candle has a 85% green body with a strong 85% closing range after falling off a bit late in the day. Volume was lower than the previous three days (my indicator shows higher volume from QQQ , IXIC volume was lower). There were about the same amount of Advancing stocks as there were Declining stocks. Energy was the leading sector of the day with XLE gaining 1.21% from yesterdays close and gained 3.6% from today's open. Compare that to the SPX which dropped -0.15%. Other sectors that did well included Financials, Industrials and the Consumer Discretionary/Staples sectors. Although the day started with a gap down, it trended upward the entire day. A continuation of that 1d trend would result in a 0.77% gain tomorrow, meeting up with the 5d trend line . The trend from the 9/23 bottom points to a 2.06% gain which would be right under expected resistance near the all time highs. Further pullback is certainly possible. The trend from Monday's pivot (including morning gains) would result in a -1.70% loss where the index would meet up with the September correction trend line and find support from October trading.
Friday, October 16, 2020
You took my money, you took my time
Made me think everything was fine
Facts: 0.36% Lower, Lower volume, Closing Range: 13%, Red Body: 50%
Good: The morning seemed to continue previous days strength
Bad: Double expectation buster from previous day green, and morning gains, resulting in afternoon disappointment
Candle: 50% red body with 13% closing range. Upper wick and lower body represent the disappointing end to the week.
Advance/Decline: 0.70, more decliners than advancers
Sectors: Investors escaped other sectors to the warm safe comfort of Utilities . Consumer Discretionary (XLY), Technology (XLK) and Energy (XLE) lead the afternoon sell-off.
Expectation: Lower
The Nasdaq index action today gave us a great summary of the entire week. An amazing start, and a very disappointing end. Just as Monday was an amazing start to the week, today's morning saw gains of over 1% only to disappoint with -0.36% loss by the end of the day. The candle shows it all with an long upper wick, 50% red body, and a dismal 13% closing range. The only positive is that volume continues to be lower indicating shakeout, but not huge institutional selling. Advancing and Declining stocks remained about equal. Utilities ( XLU ) sector was the leading sector of the day. Utilities is the best safe haven for risk-adverse investors who want to stay in equities vs moving to other currency and bond markets for protection. The alternatives just aren't good. Health ( XLV ) also performed well, supported by the increase in COVID19 cases worldwide. The only positive trend line right now is the one drawn from the 9/24 bottom. If the index were to regain that momentum, it would mean a +2.56% gain on Monday. That would also be approaching all time highs and be over the highs from the prior Monday. Let's hope this Monday will be a typical Monday in this environment.
The Big Picture
The week brought some mixed signals. There were positives. Although it was disappointing to pull back from Monday's highs, the market needed to settle back down from the accelerated gains of the last few weeks. There are some positive signs. The week was still up with a 0.79 gain for the index. The 11671.56 close is still above the 21d EMA and the 21d EMA is still above the 50d MA, but signs of an upward trend. The highest volume day was Monday and the remainder of the week saw continuously lower volume. That indicates there isn't a mass exit of large institutional investors. Low yields on long term bonds and the performance of other typical safe havens is keeping investors in the stock market. The alternative is that there is a lot of money moving to Utilities, Materials and other safer bets vs what drove the big increases over the several months before September.
On the other hand, the way Thursday set expectations for Friday and then broke them heading into the afternoon was a red flag. It could be investors just wanted to put money into safe bets like utilities over the weekend, driving down the price of the market leaders. Or it could be a sign of a faltered rally attempt and more downside to come. It will be important to watch for key support levels in both the index as well as the leading stocks.
The big four AAPL, MSFT, AMZN and GOOG all ended the week with gains and above 50d moving averages. GOOG was below this key indicator last week and so was a great showing to see it rise above. AMZN had a bit of a tough week, including Friday where it dove below the 50d MA, but the bulls came in and got it above the key line. Several growth favorites (DDOG, VEEV, ZM to name just a few) had dips, but ended the week with solid gains. On the other hand, the revenue forecast from FSLY, which was forced to be disclosed by acquisition activity, felt a bit like a canary in the coal mine. Is there more negative surprises to come?
Looking at the sectors, the continued strength of Utilities (XLU) is showing that investors want a safe bet that keeps them in equities. But there is clearly rotations happening throughout each week as opportunities arise for growth in the Technology (XLK), Communications (XLC) and Consumer (XLY/XLP) sectors. Once those growth opportunities stall, everything goes back to Utilities. Energy (XLE) continues to be interesting to watch. Crude Oil prices have stabilized quite a bit from the downward pressures in 2020. As Crude Oil has had gains, the gains have not yet reflected in the Energy sector. So this is a good one to keep watching. Often Energy will lead the sectors as we head out of a bottom.
Key Levels for next Week
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First two on the positive side:
On the downside, there are several key levels to raise red flags:
Wrap-up
It will be a week to watch closely which way the market decides to go. We can't fight the market. All we can do is build some expectations, watch for signs of where it will move and then size positions and limit risks as necessary to maximize profits or minimize losses. Good luck and I hope you all have a great week!
Did you find this interesting or helpful? Would be great to hear your feedback in the comments. What would you like to be added/removed/changed? I do this primarily for my own education and preparation, but would happy to look at other perspectives and/or data.
Monday, October 12, 2020
I'm a keep on chillin', refillin' and flyin' high
Facts: 2.56% gain, Higher volume, Closing range: 66%, Green Body: 55%
Good:Follow-through day for the Nasdaq. An FTD is a indicator from the CANSLIM system and Investors Business Daily.
Bad: Not much, except som selling late in the afternoon
Candle: 55% green body with 66% closing range. The almost constant upward movement created a fat green body, but the day finished off with some selling the created a short upper wick.
Advance/Decline: 1.17, a few more advancers then declines but not the same breadth as previous week
Sectors: Technology (XLK) and Communications (XLC) led the day. Materials (XLB) and Industrials (XLI) lagged behind. Energy (XLE) had an afternoon surge.
Expectation: Sideways
It was a magnificent start to the week for the Nasdaq with a gap up and +2.56 gain on higher volume . A confirmed FTD for those who follow CANSLIM and IBD. The candle has a fat green body with a 66% closing range and tiny wicks at the top and bottom. It was upward most of the day with some profit taking in the late afternoon. All of the trend lines are on an upward slope. Continuing today's momentum would result in a +2.30% gain and a new all time high. There is likely to be some resistance as we approach that level. So expect a more modest gain from the 5d trend line which is at +0.65%. A small pullback would not be unwelcome to cool things off just a bit. Meeting back up with the trend from the September bottom would mean a -0.92% loss. The trend line from 9/3 is still -4.52% below the current index price. That big of a drop seems unlikely and would require some significant news. But always have a game plan, anything can happen.
Tuesday, October 13, 2020
Let There Be Rock
Facts: 0.1% Lower, Lower volume, Closing range: 34%, Red Body: 30%
Good: Held at the upper range of the previous days price range.
Bad: Indecisive inside day with a thinner body, lows and highs were traded two times each
Candle: 30% green body, 35% closing range, Inside day
Advance/Decline: 0.53, almost twice as many decliners as advancers
Sectors: Technology (XLK) and Consumer Discretionary (XLC) led the day while Energy (XLE) had a huge advance near close. Financial (XLF) and Real Estate (XLRE) moved lower on earnings expectations.
Expectation: Sideways or Lower
The Nasdaq took a breather from the previous days big gains. The index dropped back -0.1% with an inside day. The 30% red body shows some indecision throughout the day with a lean toward bearish in the 34% closing range. It would be better to have that closing range be at least 40% to show more bullish support. Lower volume on the index is good given the bearishness, but SPX had higher volume with a significantly bearish movement. Declining stocks outnumbered advancing stocks at a ratio of 3:2. Continuing today's sideways move would land the index in nearly the same spot tomorrow and also join up with the longer trend from the the 9/23 bottom. Picking back up the 5 day trend would result in a +2.20% gain and a new all time high. There is likely to be more resistance as we approach that level. So I'd expect any gains to be contained within 1.5%, just under the previous all time high. Given the indecisive Tuesday, a more severe pullback is also a possibility. Meeting back up with the trend from early September would result in a -3.67% loss where the index would find support from October trading ranges.
Wednesday, October 14, 2020
We're running wild and we're restless
Facts: 0.8% Lower, Volume Lower, Closing Range: 24%, Red Body: 53%
Good: Held above Monday's lows, so the FTD is still good
Bad: Tried but could not find higher ground late in day
Candle: 53% red body with 24% closing range, the long red body showed little support for any gains throughout the day.
Advance/Decline: 0.38, much more decliners than advancers
Sectors: Materials (XLB), Industrials (XLI) and Utilities (XLU) all shared the limelight as investors rushed for safer bets.
Expectation: Sideways or lower
The Nasdaq continued to rest from it's recent aggressive gains, dropping -0.8%. It's still trading within the highs and lows of the bullish day on Monday. The candle has a 53% Red body with a bearish 24% closing range on lower volume than the previous two days. Declining stocks outnumbered advancing stocks at a 2:1 ratio. Materials, Industrial and Utilities were the top three sectors of the day. Energy started the day strong but faded significantly as trading progressed. Communications was the worst sector for the day, after having a strong showing earlier in the week. Tomorrow will bring updates on Jobless claims, Manufacturing, and Crude Oil inventories. Several 2020 favorites are down significantly after hours including Datadog ( DDOG ), Cloudflare (NET) and Fastly ( FSLY ). Fastly is down almost 30% in postmarket trading after cutting Q3 guidance. Start with the positive trends. The five day trend points to a +2.79% gain for tomorrow, which would take the index to near all time highs. That will probably meet up with resistance and so expect closer to +2.5% as the upper limit. If the index moves back towards the trend from the bottom, then expect a +1.41% gain. Further pullback is certainly possible. Meeting back up with the trend from early September would result in a -2.03% loss where the index would find support from October support lines. Based on today's trading range, it's plausible the index will go sideways more and stay above Monday's low. That would be a great sign of strength at the current level.
Thursday, October 15, 2020
Baby come back, you can blame it all on me
Facts: 0.47% Lower, Lower volume, Closing Range: 85%, Green Body: 85%
Good: Gains through out the day, looks like investors are back in the game after the gap down and previous two day sell off
Bad: Undercut the low of Monday Follow-thru day, making that a failed FTD
Candle: 85% green body with 85% closing range. Gapped down on open but gains throughout the day.
Advance/Decline: 0.99, about as many advancers as decliners
Sectors: Energy (XLE) was far out in front for the day, likely on oil supply being lower than expected (leading to higher oil prices)
Expectation: Higher
The Nasdaq took another small step back having dropped -0.47% but recovering from a much lower morning. It did undermine the low from Monday's follow-thru day. The bullish candle has a 85% green body with a strong 85% closing range after falling off a bit late in the day. Volume was lower than the previous three days (my indicator shows higher volume from QQQ , IXIC volume was lower). There were about the same amount of Advancing stocks as there were Declining stocks. Energy was the leading sector of the day with XLE gaining 1.21% from yesterdays close and gained 3.6% from today's open. Compare that to the SPX which dropped -0.15%. Other sectors that did well included Financials, Industrials and the Consumer Discretionary/Staples sectors. Although the day started with a gap down, it trended upward the entire day. A continuation of that 1d trend would result in a 0.77% gain tomorrow, meeting up with the 5d trend line . The trend from the 9/23 bottom points to a 2.06% gain which would be right under expected resistance near the all time highs. Further pullback is certainly possible. The trend from Monday's pivot (including morning gains) would result in a -1.70% loss where the index would meet up with the September correction trend line and find support from October trading.
Friday, October 16, 2020
You took my money, you took my time
Made me think everything was fine
Facts: 0.36% Lower, Lower volume, Closing Range: 13%, Red Body: 50%
Good: The morning seemed to continue previous days strength
Bad: Double expectation buster from previous day green, and morning gains, resulting in afternoon disappointment
Candle: 50% red body with 13% closing range. Upper wick and lower body represent the disappointing end to the week.
Advance/Decline: 0.70, more decliners than advancers
Sectors: Investors escaped other sectors to the warm safe comfort of Utilities . Consumer Discretionary (XLY), Technology (XLK) and Energy (XLE) lead the afternoon sell-off.
Expectation: Lower
The Nasdaq index action today gave us a great summary of the entire week. An amazing start, and a very disappointing end. Just as Monday was an amazing start to the week, today's morning saw gains of over 1% only to disappoint with -0.36% loss by the end of the day. The candle shows it all with an long upper wick, 50% red body, and a dismal 13% closing range. The only positive is that volume continues to be lower indicating shakeout, but not huge institutional selling. Advancing and Declining stocks remained about equal. Utilities ( XLU ) sector was the leading sector of the day. Utilities is the best safe haven for risk-adverse investors who want to stay in equities vs moving to other currency and bond markets for protection. The alternatives just aren't good. Health ( XLV ) also performed well, supported by the increase in COVID19 cases worldwide. The only positive trend line right now is the one drawn from the 9/24 bottom. If the index were to regain that momentum, it would mean a +2.56% gain on Monday. That would also be approaching all time highs and be over the highs from the prior Monday. Let's hope this Monday will be a typical Monday in this environment.
The Big Picture
The week brought some mixed signals. There were positives. Although it was disappointing to pull back from Monday's highs, the market needed to settle back down from the accelerated gains of the last few weeks. There are some positive signs. The week was still up with a 0.79 gain for the index. The 11671.56 close is still above the 21d EMA and the 21d EMA is still above the 50d MA, but signs of an upward trend. The highest volume day was Monday and the remainder of the week saw continuously lower volume. That indicates there isn't a mass exit of large institutional investors. Low yields on long term bonds and the performance of other typical safe havens is keeping investors in the stock market. The alternative is that there is a lot of money moving to Utilities, Materials and other safer bets vs what drove the big increases over the several months before September.
On the other hand, the way Thursday set expectations for Friday and then broke them heading into the afternoon was a red flag. It could be investors just wanted to put money into safe bets like utilities over the weekend, driving down the price of the market leaders. Or it could be a sign of a faltered rally attempt and more downside to come. It will be important to watch for key support levels in both the index as well as the leading stocks.
The big four AAPL, MSFT, AMZN and GOOG all ended the week with gains and above 50d moving averages. GOOG was below this key indicator last week and so was a great showing to see it rise above. AMZN had a bit of a tough week, including Friday where it dove below the 50d MA, but the bulls came in and got it above the key line. Several growth favorites (DDOG, VEEV, ZM to name just a few) had dips, but ended the week with solid gains. On the other hand, the revenue forecast from FSLY, which was forced to be disclosed by acquisition activity, felt a bit like a canary in the coal mine. Is there more negative surprises to come?
Looking at the sectors, the continued strength of Utilities (XLU) is showing that investors want a safe bet that keeps them in equities. But there is clearly rotations happening throughout each week as opportunities arise for growth in the Technology (XLK), Communications (XLC) and Consumer (XLY/XLP) sectors. Once those growth opportunities stall, everything goes back to Utilities. Energy (XLE) continues to be interesting to watch. Crude Oil prices have stabilized quite a bit from the downward pressures in 2020. As Crude Oil has had gains, the gains have not yet reflected in the Energy sector. So this is a good one to keep watching. Often Energy will lead the sectors as we head out of a bottom.
Key Levels for next Week
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First two on the positive side:
- Going above Monday's high of 11965.54 would be a great way to start the week. Let's hope Monday will be the typical Monday we've seen recently. Give 10/19 a new name!
- Passing 12074.06 would be a new all time high and a clear sign that the bull market is intact and the short September correction is over.
On the downside, there are several key levels to raise red flags:
- 11,400 is the October support/resistance area. We did no spend a lot of time in that area so it would not be a huge problem to break below it. This is where the 21d EMA is at now.
- This would get more serious if we went below the 11,300 September support area. A lot of time was spent at this level going back and forth before finally breaking back above. This is where the 50d MA is at now.
- The next area to watch would be the July support area at 10,600. If we were to see a significant pullback this week, then the hope is we'd at least stop at this level. If we break through here, there is danger of a much more damaging decline.
- Beyond the July area, there is not much to hold back the index from dropping to the June support area of 10,000. There were only 2-3 days in early July that we were trading between these two levels. At the 10,000 level, there would be a lot of support from the round number psychology as well as the 200d MA.
Wrap-up
It will be a week to watch closely which way the market decides to go. We can't fight the market. All we can do is build some expectations, watch for signs of where it will move and then size positions and limit risks as necessary to maximize profits or minimize losses. Good luck and I hope you all have a great week!
Did you find this interesting or helpful? Would be great to hear your feedback in the comments. What would you like to be added/removed/changed? I do this primarily for my own education and preparation, but would happy to look at other perspectives and/or data.
