Daily Summary – September 10, 2021 - A Red End To A Mostly Red Week

Daily Summary – September 10, 2021 - A Red End to a Mostly Red Week

Please excuse typos. As a side note, after talking with some followers, I'm going to try to make this a little more digestible for those who are not as familiar with the markets, lingo, etc. Feel free to leave your thoughts in the comments section, they are appreciated.

Will start a small glossary at the start also.

SPX = S&P 500
Naz = Nasdaq Composite
NDX = Nasdaq 100 (100 largest stocks in the Naz)
RUT = Russell 2000 (smaller stocks)
DMA = Daily Moving Average (the moving average over the given time period (20, 50, 100, 200 days normally)).
MACD = Moving Average Convergence Divergence (basically a trend indicator)
RSI = Relative Strength Index (basically what it sounds like)

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U.S. (and European) equity markets capped off a sluggish week with a solidly red day, again reversing from green levels following a court ruling against Apple in its case with Epic Games related to the Apple play store (have something at the end on that). Apple, the largest stock in the indices, finished down over 3%, dragging the indices with it, but it seems that more was at work as the selloff hit the small caps just as badly, and the selloff really didn't hit until the last hour when the indices basically went in a straight line down into the closing bell. Here is the SPX:

Not sure if it was stops getting hit when the index failed at the 20-DMA (the green line) or what, but whatever it is, it doesn't bode well for the opening of futures Sunday and into Monday morning. Seems like all the negative headlines about warnings of equity weakness from Wall Street firms this week maybe finally got to traders. The WH saying it would look into Chinese subsidies probably didn't help matters either.

The end result was RUT down almost one percent, Naz just under nine tenths, and SPX and NDX just under eight tenths. This was the first five-day losing streak for the SPX since February.

Our worst style box of the week today, breaking the string of at least one green box every day. Closest to green was mid-cap growth but even that was down over a half percent. So no havens today.

Major Market Technicals

NDX and Naz both remained above their first major resistance (20-DMA) but both had "sell longs" MACD crossovers as well as RSI negative divergences. SPX also has that (and they're worse on the SPX chart) but also ended up falling below the 20-DMA as noted above. It is now on a trendline dating back to March. Somehow I have a feeling that breaks next week and we get another test of the 50-DMA.

RUT also is about to get a MACD crossover on the daily chart and also has an RSI negative divergence. It also fell below the 20, 50, and 100 DMA's so it's not in great technical shape. Hopefully it can recover without testing the bottom of the channel again.

SPX Sector Flag

SPX sector flag deteriorated further with no winners today, first time in a while, although energy and materials were down only a few basis points. Three sectors down around 1% or more with real estate trailing for a second day.

SPX Sector Technicals Rankings

These are NOT necessarily in the order that I like them for investment but how their underlying technical fundamentals stack up. Going to keep playing with the groupings so bear with me. Started to bold changes.

- Sectors with good/ok technicals not stretched/overbought, above most resistance.

XLY - Discretionary - MACD go long, RSI neutral, above all moving averages. ATH.

XLC - Communications - MACD sell longs, RSI negative, above all moving averages. On watch for downgrade.

XLK - Tech - MACD sell longs, RSI negative. Fell just below 20-DMA, will downgrade on Monday if it can't recover.

- Sectors with mediocre to poor technicals but above all/most resistance.

None.

- Sectors that look to have bottomed with positive technicals but below significant resistance.

None.

- Sectors regrouping (negative technicals, short-term downtrend, long-term still positive/uptrend).

XLU - Utes - MACD sell longs, RSI negative, under 20-DMA. Downgraded today.

XLRE - Real Estate - MACD sell longs, RSI negative, fell below 20-DMA. Downgraded today.

XLP - Staples - MACD sell longs, RSI neutral, back under 20-DMA. Downgraded today.

XLF - Financials - MACD sell longs, RSI negative. Below 20-DMA.

XLB - Materials - MACD sell longs, RSI negative, below multiple MA's.

XLV - Health care - MACD sell longs, RSI negative, fell below 20-DMA. Downgraded today.

XLI - Industrials - MACD sell longs, RSI neutral, below multiple MA's.

XLE - Energy - MACD cover shorts, RSI neutral, under multiple MA's but got over intermediate term trendline and shorter term RSI positive divergence. Will upgrade if it can get over $50 level (around 50 DMA).

- Sectors in poor shape (and in intermediate or long term downtrends (so expect further weakness for a while)).

None.

Quick check of the weekly charts shows only tech, utes, and health care with positive weekly technicals at this point.

Key Subsectors - SOX (semis), IYT (transp), XBI/IBB (bios), XHB (homebuilders), XRT (retail)

Semi's bucked the selling today finishing up three quarters of a percent. Otherwise the rest were all down led by retaidl down almost 2%. The rest were down less than 1%.

Breadth

Our one day of breadth was like an oasis in the desert as it returned to poor today with the silver lining being Naz volume. On the NYSE though only 29% positive volume and 35% of issues. Not good. Naz was 44% positive volume, 33% of issues. The volume number isn't terrible for a down nine tenths day but I can't really call it good. So breadth overall for the week stunk.

Commodities/Currencies/Bonds

Bonds - Yields bounced back today with the 10-year rising by four basis points to 1.341% now back to the 200-DMA. 2-year yield finished around flat levels at 0.215%. So some curve steepening.

Dollar (DXY) - Got some yield support today finishing mildly green but still in a downtrend and below resistance at $92.646. Technicals continue to turn more favorable but remain negative for now.

VIX - After starting off weak found its footing and moved strongly higher pushing over 20 for the first time in a few weeks ending at 20.95. I think it may very well take a run at the downtrend line next week.

Crude (/CL) - Ended a back and forth week in appropriate fashion reversing yesterday's -2% decline and finishing up a little over 2% as it traded in the same approximately 2% band all week but by finishing at the top was able to finish the week positive for the third consecutive time at $69.65 WTI. Today the growing loss of barrels from the Gulf outweighed the Chinese SPR news of yesterday. Technicals are mixed (on daily chart weekly remains negative). I'd like to see RSI break that downtrend. There's an awful lot of support and even more resistance built up so when it breaks out of this channel it could move a lot quickly.

As oil rig count creeps higher (but gas falls again this week).

Now down to 66% of oil (but still 76% of nat gas) shut in. Looks like we're going to easily surpass the estimates from Monday of a 25mb loss of oil production.

And just a reminder on why it's important to keep an SPR reserve.

And I've mentioned before that there's more than a few questions about what OPEC+ true productive capacity is. More evidence of that in August as production increased by only 100kbd, 300kbd below what was scheduled and 890kbd below its ceiling, making compliance 117%. Argus.

Nat Gas (/NG) - Did end up consolidating today down 1.5% to $4.958. Been quite a run. Will be interesting to see where it goes from here. Technicals remain very positive but also very overbought.

Gold (/GC) - Fell again today down two thirds of a percent to $1788. I continue to not like it from a technical perspective but it refuses to break down. We'll see what happens.

Copper (/HG) - Big day up over 3% and at one point clearing strong resistance but falling back under. This was enough to repair the technicals which were turning now back to solidly positive. A green day on Monday could see it really start to run.

Crops - Several crops fell substantially today on the back of a higher than expected yield forecast from the WASDE.

U.S. Data

Did reports on PPI today. Link below.

US PPI Final Demand (M/M) Aug: 0.7% (est 0.6%; prev 1.0%) - PPI stays hot but decelerates m/m (y/y remains at record levels)

US PPI Final Demand (M/M) Aug: 0.7% (Est 0.6%; Prev 1.0%) - PPI Stays Hot But Decelerates M/M (Y/Y Remains At Record Levels)

As Visa seems some pullback in card spending in August.

Next Week

Next week a heavier week (hard to be too much lighter than this week). Highlights will be CPI, Industrial Production, and Retail Sales. NFIB and consumer sentiment will be interesting also

We'll also get the OPEC+ monthly report where it's expected that they will revise down 2021 demand due to Covid similar to the EIA's doing the same this week. And of course there will be lots of international reports including lots of CPI data.

And earnings season continues to wind down. Less than 100 reports next week. Monday we do get ORCL.

Overall

The market has a lot of issues. Technicals are bad, breadth is bad, sector ratings are the worst in a long time (this might be the most "regrouping" sectors we've had this year), news flow is bad, volatility is uptrending. Makes me feel like we very well might be in for a rocky week, or at least start of the week. My guess would be we get closer to the the 50-DMA again on the SPX. I suspect it holds, but I could see a break and us finally getting that 5%+ selloff. If there wasn't so much liquidity and ingrained "buy the dip" mentality I'd be more confident in a break, but I still think we're not quite ready for anything bigger than 5-7% quite yet. I think we need something from Congress or the Fed to make that happen, or black swan type of thing, and it's too early for the first two and by definition you don't know when the last will happen.

Misc.

Some other random stuff.

As repos fall back to just under $1.1T.

And more on that Apple decision. BBG.

As port congestion continues to be a problem. BBG.

As a "super-typhoon" heads towards key Chinese ports.

To see more content, including summaries of most major U.S. economic reports and my morning and nightly updates go to Cbus Neil's Blog Posts for more recent or Sethi Associates for the full history.