Summary: The markets were volatile this week, with a clear character shift after the Fed statements on Wednesday. The meeting and comments from the Fed this week shifted the outlook from analysts and investors in surprising ways. In addition, the quadruple witching day on Friday added extra volatility that helped amplify what we might expect in the coming weeks.
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 14, 2021
Facts: +0.74%, Volume higher, Closing range: 99%, Body: 76%
Good: High closing range, higher volume, large green body
Bad: Advance/decline ratio below 1.0
Highs/Lows: Higher high, lower low
Candle: Short lower wick filled opening gap, thick green body, no upper wick
Advanced/Decline: 0.86, More declining stocks than advancing stocks
Indexes: SPX (+0.18%), DJI (-0.25%), RUT (-0.41%), VIX (+4.73%)
Sectors: Technology (XLK +1.01%) and, Communications (XLC +0.66%) were top. Financials (XLF -1.04%) and Materials (XLB -1.23%) were bottom.
Expectation: Sideways
The Nasdaq continued its march higher while the other major indices paused or pulled back. The gains focused on mid and large-cap growth stocks.
The index closed with a +0.75% gain on higher volume than Friday. The closing range reached 99% in the last 30 minutes of trading, while the 76% green body represents a steady climb throughout the day. The higher high marks the seventh session in a row to reach a higher high. The close is only 0.25% below a new all-time high. However, there were more declining stocks than advancing stocks.
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Tuesday, June 15, 2021
Facts: -0.71%, Volume higher, Closing range: 17%, Body: 79%
Good: Held above 14,000 support area
Bad: Selling most of the day. Lower high and lower low.
Highs/Lows: Lower high, lower low
Candle: Thick red body with small upper and lower wicks.
Advanced/Decline: 0.42, Two declining stocks for every advancing stock
Indexes: SPX (-0.20%), DJI (-0.27%), RUT (-0.26%), VIX (+3.72%)
Sectors: Energy (XLE +1.90%) and Industrials (XLI +0.43%) were top. Technology (XLK -0.61%) and Real Estate (XLRE -0.92%) were bottom.
Expectation: Sideways or Lower
After higher than expected producer price index data this morning, investors prepared themselves for the Fed comments scheduled on Wednesday. Major indices fell on the fear that Fed officials will start to push for earlier interest rate hikes and tapering of asset purchase programs.
The Nasdaq closed with a -0.71% loss for the day, on higher volume. The candle is mostly a red body and represents selling throughout the day as the bears stepped in. The closing range of 17% is above a small lower wick formed from a small rally into close. There were two declining stocks for every advancing stock.
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Wednesday, June 16, 2021
Facts: -0.24%, Volume higher, Closing range: 60%, Body: 20%
Good: Bounce off low in the afternoon to close back above 14,000
Bad: Big dip after fed news
Highs/Lows: Lower high, lower low
Candle: Slim red body in the upper half of a long candle. Long lower wick.
Advanced/Decline: 0.56, Almost two declining stocks for every advancing stock
Indexes: SPX (-0.54%), DJI (-0.77%), RUT (-0.23%), VIX (+6.64%)
Sectors: Consumer Discretionary (XLY +0.05%) and Financials (XLF -0.11%) were top. Consumer Staples (XLP -1.33%) and Utilities (XLU -1.50%) were bottom.
Expectation: Sideways or Lower
The Fed has spoken. The market lit up after the Fed pulled forward projected dates for interest rate hikes into 2023. The US Dollar spiked about 1%, long-term Treasury yields rose, and equities dropped. Equities found support after the initial reaction but couldn't quite recover all the losses.
The Nasdaq closed the day with a -0.24% decline. That was better than the -1.20% intraday dip. Volume was higher than the previous day. The candle has a long lower wick underneath a 20% body in the upper half of the candle. The closing range of 60% provides some positive ending to a day that ended in a loss. There were almost two declining stocks for every advancing stock.
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Thursday, June 17, 2021
Facts: +0.87%, Volume lower, Closing range: 82%, Body: 82%
Good: High closing range after a dip mid-day. No lower wick.
Bad: Resistance at 14,200, lower volume, A/D below 1.0
Highs/Lows: Higher high, higher low
Candle: Mostly green body with no lower wick, high closing range under small upper wick
Advanced/Decline: 0.57, Almost two declining stocks for every advancing stock
Indexes: SPX (-0.04%), DJI (-0.62%), RUT (-1.18%), VIX (-2.21%)
Sectors: Technology (XLK +1.16%) and Health (XLV +0.76%) were top. Financials (XLF -2.90%) and Energy (XLE -3.40%) were bottom.
Expectation: Higher
Technology stocks moved higher today, helping boost the Nasdaq while the other major indexes retreated. The mix of investments in growth sectors and defensive sectors show some indecision about the new Fed policy. At the same time, there was an apparent sell-off in cyclical sectors.
The Nasdaq advanced +0.87% while volume was lower than the previous day. The gains were steady through the morning before a dip mid-day. However, the index recovered and closed near intraday highs. The closing range of 82% matches an 82% body that left no lower wick. There were almost two declining stocks for every advancing stock.
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Friday, June 18, 2021
Facts: -0.92%, Volume higher, Closing range: 18%, Body: 55%
Good: Held above yesterday's low, and above 14,000.
Bad: Huge volume on move lower, low A/D
Highs/Lows: Lower high, higher low
Candle: Inside day with a thick red body, longer upper wick, low closing range
Advanced/Decline: 0.3, More than three declining stocks for every advancing stock
Indexes: SPX (-1.31%), DJI (-1.58%), RUT (-2.17%), VIX (+16.74%)
Sectors: Consumer Discretionary (XLY -0.53%) and Technology (XLK -0.91%) were top. Utilities (XLU -2.60%) and Energy (XLE -2.96%) were bottom.
Expectation: Sideways
The quadruple witching day amplified some rotations that happened yesterday and brought all the major indices lower. Value stocks sold off far more than growth stocks, while the US Dollar continued to strengthen.
The Nasdaq closed the day with a -0.92% loss. Volume was much higher than the previous day due to the quadruple witching day when index futures, index options, individual stock futures, and stock options all expire on the same day. The closing range of 18% is below a red body with a visible lower wick and longer upper wick. The high is lower than the previous day, while the low is higher than the previous day, marking an inside day.
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View on the Week
The markets were volatile this week, with a clear character shift after the Fed statements on Wednesday. The meeting and comments from the Fed this week shifted the outlook from analysts and investors in surprising ways. In addition, the quadruple witching day on Friday added extra volatility that helped amplify what we might expect in the coming weeks.
The first thing to note this week is that the Nasdaq outperformed the other indexes. The tech-heavy index outperformed in previous weeks, but this week is a down week in the market, which can be more telling. Moreover, the Nasdaq fell less than the other major indexes, which is notable after the Fed's new hawkish policy.
This daily and weekly update is all about learning, and I realized something this week that I wasn't seeing. Heading into Wednesday, I thought investors were worried about the Fed raising interest rates in response to inflation. The reaction to high Producer Price Index data was a pullback in the Nasdaq as it indicated continued inflation. After Wednesday, I realize investors were more worried that the Fed would not raise rates and let inflation run.
It makes sense. Inflation usually is good for value stocks and bad for growth stocks. Higher interest rates are also bad for growth stocks, but multiple years of high inflation is the greater enemy. The Fed's dot plots showed that more members see interest rate hikes coming earlier to keep inflation at the 2% target. Although Jerome Powell still states that inflation is transitory, the increased dot plots show that there will be limits to how much they let it run.
The reaction is best seen in the US dollar. It increased in strength by 2% this week, with the gains all coming after the Fed comments. Again, that makes sense. The Fed's willingness to control inflation makes the US dollar a safer bet for global investors. You can see the subsequent impact in US Treasuries, with a significant tightening of the spread between long-term and short-term yields.
Finally, we can see the reaction in the rotation that was most apparent on Friday's quadruple witching day, which amplified the moves in higher volume. When the equity markets sold off on high volume, growth stocks and tech stocks held up relative to value and cyclical stocks. Some growth stocks even had significant gains.
So should we be worried about the Dow Jones Industrial Average gap-down on Friday and the worst week since October 2020? Maybe. But it also makes sense given the other indicators we see. The strengthening US Dollar can impact valuations on the large stable multinational companies in the Dow Jones, just as it can impact the value of silver and gold. But looking closely at the 30 companies in the index, you can almost line them up from value to growth and see that the farther along the spectrum they are to value, the more significant the losses today.
The Nasdaq closed with a -0.92% decline for the week. Volume was higher, primarily because of the quadruple witching day on Friday that saw volume 30% higher than usual. The index continued an uptrend on the weekly chart with a higher high and higher low than the previous week. The closing range of 43% is not great, but not terrible either.
The S&P 500 (SPX) dropped -1.91% for the week. The Russell 2000 (RUT) was down -4.20%. But it was the Dow Jones Industrial Average (DJI) that made headlines with a -3.45% loss, the worst since October.
The VIX volatility gained +32.35% for the week.
It was a volatile week in the indexes and the sector list as investors rotated on the Fed's new hawkish stance toward inflation. Energy ( XLE ) led early in the week, but Technology ( XLK ) topped the list by the end of the week, ending the week as the only sector to hold onto gains.
In second place was Consumer Discretionary ( XLY ). Growth stocks remained strong compared to Value stocks even in the sell-off that occurred on quadruple witching Friday.
The cyclical sectors were at the bottom of the weekly sector list, with Materials ( XLB ) having the worse performance among a drop in commodity prices.
The US Treasuries were impacted by the Fed decision, along with the US Dollar. Treasury yields on the 30y and 10y dropped as investors moved back to US dollar and US bonds. However, the 2y yields rose this week as they became less attractive to the longer-term bonds.
The High Yield Corporate Bond (HYG) prices declined, Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) advanced +2.0% for the week.
Silver (SILVER) declined -7.57%, and Gold (GOLD) declined -6.04%.
Crude Oil (CRUDEOIL1!) advanced +1.90%.
Timber (WOOD) continues its decline, losing -4.65% this week.
Copper (COPPER1!) declined -7.42%.
Aluminum (ALI1!) declined -3.50%.
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Big Four Mega-caps
The big four mega-caps looked promising last week, and they look even better this week. Apple (AAPL) joined the other three by breaking out above its 10-week moving average line on higher volume. Amazon (AMZN) continued its breakout last week as it heads into the annual Prime Day event next week. Microsoft (MSFT) retested the 10-week moving average line but ended the week with gains. Alphabet (GOOGL) was the only one of the four with a loss but held well above the 10-week moving average.
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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. Unfortunately, things do not look as well for the four recovery stocks. Exxon Mobil (XOM) lost -2.85%. Carnival Cruise Lines (CCL) dropped -5.85%. Both Exxon and Carnival are still above their 10-week moving average. Delta Airlines (DAL) declined -3.31%, and Marriott (MAR) lost -3.24%, remaining below their 10-week moving averages.
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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).
The four cryptocurrencies continue struggling to find lasting gains. Bitcoin (BTCUSD) declined -9.95% this week. Ethereum (ETHUSD) fell -12.64%. Litecoin (LTCUSD) dropped -9.49%. Bitcoin Cash (BCHUSD) declined -9.17%.
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Investor Sentiment
The put/call ratio (PCCE) moved higher, ending the week at 0.716. 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 moved the fear side of the scale.
The NAAIM money manager exposure index rose to 98.52.
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The Week Ahead
Monday
Short-term Treasury Bill auctions are on Monday. Fed John Williams speaks on Monday afternoon.
There are no relevant earnings reports for the daily update on Monday.
Tuesday
Existing Home Sales for May gets released on Tuesday, after the market open. In the afternoon, Jerome Powell testifies before congress. API Weekly Crude Oil Stock is updated after the market close.
There are no relevant earnings reports for the daily update on Tuesday.
Wednesday
Manufacturing and Services purchasing manager index data, released on Wednesday, gives a view on demand for products in services in their sectors. In addition, new Home Sales data will be available after the market open. Crude Oil Inventories data also comes on Wednesday, after the market opens.
There are no relevant earnings reports for the daily update on Wednesday.
Thursday
For Thursday, data will be available for Durable Goods Orders. GDP data for Q1 should not change much over previously released numbers. We will also get the Initial Jobless Claims data before the markets open. Finally, there are Fed Bank Stress Test results to be made available after the market closes.
Earnings reports on Thursday will include Nike (NKE), Accenture (ACN), FedEx (FDX), Blackberry (BB), and Bed Bath & Beyond (BBBY).
The last two have been popular meme stocks.
Friday
More consumer pricing data released on Friday morning will give another boost to inflation worries but may be tempered by the fact that the Fed is now willing to control inflation. Consumer Expectations and Consumer Sentiment are also important data to be available after the market opens.
CarMax (KMX) earnings on Friday may be interesting given the rise in used car prices.
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The Bullish Side
There seems to be an apparent rotation back into growth stocks, which signals bullishness even as some of the contrarian indicators moving to fear. For CANSLIM investors, the Nasdaq moved into a Power Trend this week. The low of the index held above the 21d EMA for over ten days. The 21d EMA is above the 50d MA for over seven days, and the 50d MA is in an uptrend. The positive day on Thursday signals the power trend. There's no telling how long it would last or if it’s a false signal, but right now, the Nasdaq still looks bullish.
It seems investors are balancing fears of inflation with the fact that the Fed recognizes it could be less than transitory and is willing to change policy to control inflation if it continues. Those changes are still far into the future enough to give growth stocks some room to move up. Goldman Sachs declared this past week that Value is winning now but that by the end of the year, Growth stocks would outperform.
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The Bearish Side
It may look great on the Nasdaq, but the Dow Jones Industrial Average just had its worst week since last October. As much as I can write it off about the rotation from value to growth, it still looks like a concerning chart. If the Dow Jones continues to move lower, it will impact the other major indices and the rest of the market.
Although the Fed is overall hawkish on inflation now, Employment data was worse than expected this week. That could put the Fed in a situation where it has to balance inflation worries against concerns of a faltered employment recovery. Likely it will work itself out, but a shaky recovery amidst short-term inflation worries could cause more volatility.
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Key Nasdaq Levels to Watch
The Nasdaq dipped below but closed above the 14,000 area. It nearly reached a new all-time high but met resistance. It did set a record close on this past Monday.
On the positive side, the levels are:
On the downside, there are a few key levels:
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Wrap-up
It was an interesting week to observe the indexes and indicators I use in the daily update and week in review. The Nasdaq looks bullish, but the Dow Jones Industrial seems bearish. There is a shift in sentiment toward the US Dollar that could be the best indicator to watch. It will impact how much money flows into other US dollar-based investments, including Bonds and Equities. It could also shift investors from Value back to Growth.
Looking at another view of what's going on, we can again visit the growth vs. value chart. The market could quickly reverse the move, but for now, growth is getting investors' intention again.
If Nasdaq's Power Trend plays out, we can expect more gains and new highs. If it's a false positive, then perhaps it's time to go to the sidelines and wait for better conditions. The stocks in your portfolio will be the ultimate decision-maker for you.
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 14, 2021
Facts: +0.74%, Volume higher, Closing range: 99%, Body: 76%
Good: High closing range, higher volume, large green body
Bad: Advance/decline ratio below 1.0
Highs/Lows: Higher high, lower low
Candle: Short lower wick filled opening gap, thick green body, no upper wick
Advanced/Decline: 0.86, More declining stocks than advancing stocks
Indexes: SPX (+0.18%), DJI (-0.25%), RUT (-0.41%), VIX (+4.73%)
Sectors: Technology (XLK +1.01%) and, Communications (XLC +0.66%) were top. Financials (XLF -1.04%) and Materials (XLB -1.23%) were bottom.
Expectation: Sideways
The Nasdaq continued its march higher while the other major indices paused or pulled back. The gains focused on mid and large-cap growth stocks.
The index closed with a +0.75% gain on higher volume than Friday. The closing range reached 99% in the last 30 minutes of trading, while the 76% green body represents a steady climb throughout the day. The higher high marks the seventh session in a row to reach a higher high. The close is only 0.25% below a new all-time high. However, there were more declining stocks than advancing stocks.
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Tuesday, June 15, 2021
Facts: -0.71%, Volume higher, Closing range: 17%, Body: 79%
Good: Held above 14,000 support area
Bad: Selling most of the day. Lower high and lower low.
Highs/Lows: Lower high, lower low
Candle: Thick red body with small upper and lower wicks.
Advanced/Decline: 0.42, Two declining stocks for every advancing stock
Indexes: SPX (-0.20%), DJI (-0.27%), RUT (-0.26%), VIX (+3.72%)
Sectors: Energy (XLE +1.90%) and Industrials (XLI +0.43%) were top. Technology (XLK -0.61%) and Real Estate (XLRE -0.92%) were bottom.
Expectation: Sideways or Lower
After higher than expected producer price index data this morning, investors prepared themselves for the Fed comments scheduled on Wednesday. Major indices fell on the fear that Fed officials will start to push for earlier interest rate hikes and tapering of asset purchase programs.
The Nasdaq closed with a -0.71% loss for the day, on higher volume. The candle is mostly a red body and represents selling throughout the day as the bears stepped in. The closing range of 17% is above a small lower wick formed from a small rally into close. There were two declining stocks for every advancing stock.
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Wednesday, June 16, 2021
Facts: -0.24%, Volume higher, Closing range: 60%, Body: 20%
Good: Bounce off low in the afternoon to close back above 14,000
Bad: Big dip after fed news
Highs/Lows: Lower high, lower low
Candle: Slim red body in the upper half of a long candle. Long lower wick.
Advanced/Decline: 0.56, Almost two declining stocks for every advancing stock
Indexes: SPX (-0.54%), DJI (-0.77%), RUT (-0.23%), VIX (+6.64%)
Sectors: Consumer Discretionary (XLY +0.05%) and Financials (XLF -0.11%) were top. Consumer Staples (XLP -1.33%) and Utilities (XLU -1.50%) were bottom.
Expectation: Sideways or Lower
The Fed has spoken. The market lit up after the Fed pulled forward projected dates for interest rate hikes into 2023. The US Dollar spiked about 1%, long-term Treasury yields rose, and equities dropped. Equities found support after the initial reaction but couldn't quite recover all the losses.
The Nasdaq closed the day with a -0.24% decline. That was better than the -1.20% intraday dip. Volume was higher than the previous day. The candle has a long lower wick underneath a 20% body in the upper half of the candle. The closing range of 60% provides some positive ending to a day that ended in a loss. There were almost two declining stocks for every advancing stock.
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Thursday, June 17, 2021
Facts: +0.87%, Volume lower, Closing range: 82%, Body: 82%
Good: High closing range after a dip mid-day. No lower wick.
Bad: Resistance at 14,200, lower volume, A/D below 1.0
Highs/Lows: Higher high, higher low
Candle: Mostly green body with no lower wick, high closing range under small upper wick
Advanced/Decline: 0.57, Almost two declining stocks for every advancing stock
Indexes: SPX (-0.04%), DJI (-0.62%), RUT (-1.18%), VIX (-2.21%)
Sectors: Technology (XLK +1.16%) and Health (XLV +0.76%) were top. Financials (XLF -2.90%) and Energy (XLE -3.40%) were bottom.
Expectation: Higher
Technology stocks moved higher today, helping boost the Nasdaq while the other major indexes retreated. The mix of investments in growth sectors and defensive sectors show some indecision about the new Fed policy. At the same time, there was an apparent sell-off in cyclical sectors.
The Nasdaq advanced +0.87% while volume was lower than the previous day. The gains were steady through the morning before a dip mid-day. However, the index recovered and closed near intraday highs. The closing range of 82% matches an 82% body that left no lower wick. There were almost two declining stocks for every advancing stock.
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Friday, June 18, 2021
Facts: -0.92%, Volume higher, Closing range: 18%, Body: 55%
Good: Held above yesterday's low, and above 14,000.
Bad: Huge volume on move lower, low A/D
Highs/Lows: Lower high, higher low
Candle: Inside day with a thick red body, longer upper wick, low closing range
Advanced/Decline: 0.3, More than three declining stocks for every advancing stock
Indexes: SPX (-1.31%), DJI (-1.58%), RUT (-2.17%), VIX (+16.74%)
Sectors: Consumer Discretionary (XLY -0.53%) and Technology (XLK -0.91%) were top. Utilities (XLU -2.60%) and Energy (XLE -2.96%) were bottom.
Expectation: Sideways
The quadruple witching day amplified some rotations that happened yesterday and brought all the major indices lower. Value stocks sold off far more than growth stocks, while the US Dollar continued to strengthen.
The Nasdaq closed the day with a -0.92% loss. Volume was much higher than the previous day due to the quadruple witching day when index futures, index options, individual stock futures, and stock options all expire on the same day. The closing range of 18% is below a red body with a visible lower wick and longer upper wick. The high is lower than the previous day, while the low is higher than the previous day, marking an inside day.
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View on the Week
The markets were volatile this week, with a clear character shift after the Fed statements on Wednesday. The meeting and comments from the Fed this week shifted the outlook from analysts and investors in surprising ways. In addition, the quadruple witching day on Friday added extra volatility that helped amplify what we might expect in the coming weeks.
The first thing to note this week is that the Nasdaq outperformed the other indexes. The tech-heavy index outperformed in previous weeks, but this week is a down week in the market, which can be more telling. Moreover, the Nasdaq fell less than the other major indexes, which is notable after the Fed's new hawkish policy.
This daily and weekly update is all about learning, and I realized something this week that I wasn't seeing. Heading into Wednesday, I thought investors were worried about the Fed raising interest rates in response to inflation. The reaction to high Producer Price Index data was a pullback in the Nasdaq as it indicated continued inflation. After Wednesday, I realize investors were more worried that the Fed would not raise rates and let inflation run.
It makes sense. Inflation usually is good for value stocks and bad for growth stocks. Higher interest rates are also bad for growth stocks, but multiple years of high inflation is the greater enemy. The Fed's dot plots showed that more members see interest rate hikes coming earlier to keep inflation at the 2% target. Although Jerome Powell still states that inflation is transitory, the increased dot plots show that there will be limits to how much they let it run.
The reaction is best seen in the US dollar. It increased in strength by 2% this week, with the gains all coming after the Fed comments. Again, that makes sense. The Fed's willingness to control inflation makes the US dollar a safer bet for global investors. You can see the subsequent impact in US Treasuries, with a significant tightening of the spread between long-term and short-term yields.
Finally, we can see the reaction in the rotation that was most apparent on Friday's quadruple witching day, which amplified the moves in higher volume. When the equity markets sold off on high volume, growth stocks and tech stocks held up relative to value and cyclical stocks. Some growth stocks even had significant gains.
So should we be worried about the Dow Jones Industrial Average gap-down on Friday and the worst week since October 2020? Maybe. But it also makes sense given the other indicators we see. The strengthening US Dollar can impact valuations on the large stable multinational companies in the Dow Jones, just as it can impact the value of silver and gold. But looking closely at the 30 companies in the index, you can almost line them up from value to growth and see that the farther along the spectrum they are to value, the more significant the losses today.
The Nasdaq closed with a -0.92% decline for the week. Volume was higher, primarily because of the quadruple witching day on Friday that saw volume 30% higher than usual. The index continued an uptrend on the weekly chart with a higher high and higher low than the previous week. The closing range of 43% is not great, but not terrible either.
The S&P 500 (SPX) dropped -1.91% for the week. The Russell 2000 (RUT) was down -4.20%. But it was the Dow Jones Industrial Average (DJI) that made headlines with a -3.45% loss, the worst since October.
The VIX volatility gained +32.35% for the week.
It was a volatile week in the indexes and the sector list as investors rotated on the Fed's new hawkish stance toward inflation. Energy ( XLE ) led early in the week, but Technology ( XLK ) topped the list by the end of the week, ending the week as the only sector to hold onto gains.
In second place was Consumer Discretionary ( XLY ). Growth stocks remained strong compared to Value stocks even in the sell-off that occurred on quadruple witching Friday.
The cyclical sectors were at the bottom of the weekly sector list, with Materials ( XLB ) having the worse performance among a drop in commodity prices.
The US Treasuries were impacted by the Fed decision, along with the US Dollar. Treasury yields on the 30y and 10y dropped as investors moved back to US dollar and US bonds. However, the 2y yields rose this week as they became less attractive to the longer-term bonds.
The High Yield Corporate Bond (HYG) prices declined, Investment Grade Bond (LQD) prices advanced.
The US Dollar (DXY) advanced +2.0% for the week.
Silver (SILVER) declined -7.57%, and Gold (GOLD) declined -6.04%.
Crude Oil (CRUDEOIL1!) advanced +1.90%.
Timber (WOOD) continues its decline, losing -4.65% this week.
Copper (COPPER1!) declined -7.42%.
Aluminum (ALI1!) declined -3.50%.
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Big Four Mega-caps
The big four mega-caps looked promising last week, and they look even better this week. Apple (AAPL) joined the other three by breaking out above its 10-week moving average line on higher volume. Amazon (AMZN) continued its breakout last week as it heads into the annual Prime Day event next week. Microsoft (MSFT) retested the 10-week moving average line but ended the week with gains. Alphabet (GOOGL) was the only one of the four with a loss but held well above the 10-week moving average.
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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. Unfortunately, things do not look as well for the four recovery stocks. Exxon Mobil (XOM) lost -2.85%. Carnival Cruise Lines (CCL) dropped -5.85%. Both Exxon and Carnival are still above their 10-week moving average. Delta Airlines (DAL) declined -3.31%, and Marriott (MAR) lost -3.24%, remaining below their 10-week moving averages.
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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).
The four cryptocurrencies continue struggling to find lasting gains. Bitcoin (BTCUSD) declined -9.95% this week. Ethereum (ETHUSD) fell -12.64%. Litecoin (LTCUSD) dropped -9.49%. Bitcoin Cash (BCHUSD) declined -9.17%.
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Investor Sentiment
The put/call ratio (PCCE) moved higher, ending the week at 0.716. 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 moved the fear side of the scale.
The NAAIM money manager exposure index rose to 98.52.
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The Week Ahead
Monday
Short-term Treasury Bill auctions are on Monday. Fed John Williams speaks on Monday afternoon.
There are no relevant earnings reports for the daily update on Monday.
Tuesday
Existing Home Sales for May gets released on Tuesday, after the market open. In the afternoon, Jerome Powell testifies before congress. API Weekly Crude Oil Stock is updated after the market close.
There are no relevant earnings reports for the daily update on Tuesday.
Wednesday
Manufacturing and Services purchasing manager index data, released on Wednesday, gives a view on demand for products in services in their sectors. In addition, new Home Sales data will be available after the market open. Crude Oil Inventories data also comes on Wednesday, after the market opens.
There are no relevant earnings reports for the daily update on Wednesday.
Thursday
For Thursday, data will be available for Durable Goods Orders. GDP data for Q1 should not change much over previously released numbers. We will also get the Initial Jobless Claims data before the markets open. Finally, there are Fed Bank Stress Test results to be made available after the market closes.
Earnings reports on Thursday will include Nike (NKE), Accenture (ACN), FedEx (FDX), Blackberry (BB), and Bed Bath & Beyond (BBBY).
The last two have been popular meme stocks.
Friday
More consumer pricing data released on Friday morning will give another boost to inflation worries but may be tempered by the fact that the Fed is now willing to control inflation. Consumer Expectations and Consumer Sentiment are also important data to be available after the market opens.
CarMax (KMX) earnings on Friday may be interesting given the rise in used car prices.
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The Bullish Side
There seems to be an apparent rotation back into growth stocks, which signals bullishness even as some of the contrarian indicators moving to fear. For CANSLIM investors, the Nasdaq moved into a Power Trend this week. The low of the index held above the 21d EMA for over ten days. The 21d EMA is above the 50d MA for over seven days, and the 50d MA is in an uptrend. The positive day on Thursday signals the power trend. There's no telling how long it would last or if it’s a false signal, but right now, the Nasdaq still looks bullish.
It seems investors are balancing fears of inflation with the fact that the Fed recognizes it could be less than transitory and is willing to change policy to control inflation if it continues. Those changes are still far into the future enough to give growth stocks some room to move up. Goldman Sachs declared this past week that Value is winning now but that by the end of the year, Growth stocks would outperform.
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The Bearish Side
It may look great on the Nasdaq, but the Dow Jones Industrial Average just had its worst week since last October. As much as I can write it off about the rotation from value to growth, it still looks like a concerning chart. If the Dow Jones continues to move lower, it will impact the other major indices and the rest of the market.
Although the Fed is overall hawkish on inflation now, Employment data was worse than expected this week. That could put the Fed in a situation where it has to balance inflation worries against concerns of a faltered employment recovery. Likely it will work itself out, but a shaky recovery amidst short-term inflation worries could cause more volatility.
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Key Nasdaq Levels to Watch
The Nasdaq dipped below but closed above the 14,000 area. It nearly reached a new all-time high but met resistance. It did set a record close on this past Monday.
On the positive side, the levels are:
- The high of this past week was 14,196.21.
- The all-time high is at 14,211.57.
- The mid-point of the regression trend from the 5/12 low points to 14,390 by the end of the week.
On the downside, there are a few key levels:
- 14,000 has been a key area of support/resistance.
- The 10d MA is at 14,028.65.
- The low of this past week is 13,903.73.
- The 21d EMA is at 13,888.95.
- The 50d MA is at 13,782.40.
- 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.
- 12,789.84 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
It was an interesting week to observe the indexes and indicators I use in the daily update and week in review. The Nasdaq looks bullish, but the Dow Jones Industrial seems bearish. There is a shift in sentiment toward the US Dollar that could be the best indicator to watch. It will impact how much money flows into other US dollar-based investments, including Bonds and Equities. It could also shift investors from Value back to Growth.
Looking at another view of what's going on, we can again visit the growth vs. value chart. The market could quickly reverse the move, but for now, growth is getting investors' intention again.
If Nasdaq's Power Trend plays out, we can expect more gains and new highs. If it's a false positive, then perhaps it's time to go to the sidelines and wait for better conditions. The stocks in your portfolio will be the ultimate decision-maker for you.
Good luck, stay healthy, and trade safe!
