Daily Summary – September 16, 2021 - Another Day In The Range

Daily Summary – September 16, 2021 - Another Day In the Range

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. Also, don't discuss crypto much as I'm still not that familiar with it.

Also starting a small glossary to help.

SPX = S&P 500 Naz = Nasdaq CompositeNDX = 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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So I noted yesterday that while yesterday's action made to me the chances of getting a break of the 50-DMA less likely, we weren't "out of the woods" yet as we remained in what has been of late a dicey options expiration week, and the SPX was not able to clear the 20-DMA. And that caution was warranted as an early test at the open of that resistance failed, and the index fell until just before 11 am pushing down towards to the 50-DMA. It was able to stay above that as well as yesterday's low, though, before rallying to flat levels (although it did sell off a bit the last hour). So it was basically a big "U" shape today, leaving the index around where it started. I think this slightly increases the potential for us to get that break of the 50-DMA but only slightly. But we should remain on alert for now I think. We'll go over that more at the end.

Small edge to growth stocks with SPX and RUT finishing slightly red and NDX and Naz slightly green.

Style box shows the relative weakness of value.

Major Market Technicals

As noted, SPX remains just under the 20-DMA. Until it gets above that, I'm not counting out a "real" break of the 50-DMA. RUT also remains just below the 100-DMA. NDX and Naz remained above all major resistance other than old highs.

SPX Sector Flag

SPX sector flag looked a lot worse than a down -0.16% day with just three green sectors (eleven yesterday) and none up over a half percent (a half dozen were yesterday) with our core cyclicals all red today and energy returning to last place. It is reprising its Ricky Bobby ("If you're not first, you're last") act from last year this week as it's been first or last every day. While every energy company in the SPX was up yesterday, every one was down today even though crude battled back from early losses to end around flat levels (although nat gas did end up down over 3%).

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. I do often buy calls though when I upgrade. 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.

- 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).

XLK - Tech - MACD sell longs, RSI negative, above all moving averages. On watch for upgrade.

XLC - Communications - MACD sell longs, RSI negative, under 20-DMA. On watch for upgrade.

XLRE - Real Estate - MACD sell longs, RSI negative, below 20-DMA. On watch for upgrade.

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

XLE - Energy - MACD cover shorts, RSI neutral, under just 100-DMA. On watch for upgrade.

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

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

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

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

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

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

None.

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

All green here today with bios and retail leading up over 1%. The rest were up a half to eight tenths of a percent.

Breadth

Breadth went from ok to poor on NYSE and remained ok on Naz. Only 40% positive volume and 44% positive issues NYSE. That's poor. It was 55% positive volume, 49% issues Naz. Volume is a about what it should have been, issues under, so it's barely ok. So we continue to be unable to maintain any momentum with breadth.

Commodities/Currencies/Bonds

Bonds - Yields ticked a little higher today but remained firmly in range of last couple of weeks with 10-year yields moving up by around three basis points to 1.34%, 5-year also up three basis points to 0.84%, 2-year up two basis points to 0.23%. Interestingly, 30-year was only up one basis point to 1.88%.

Dollar (DXY) - A little surprisingly (to me) yields pushed to a new closing high for September at $92.88, now over the major MA's I track. This also was enough to turn the technicals positive so it might run a bit.

VIX - Up a bit today to 18.69.

Crude (/CL) - After four day win streak wasn't able to make further progress today, pulling back before recovering to finish just under flat levels at $72.35 (following AH session). Technicals remain firmly positive on daily chart. Next real resistance is August highs at around $74.25. Support is back around the $71 level.

Also, Dec to Dec timespreads (so how much more it costs for oil in Dec versus what's priced for 12 months from Dec) have started to widen again, indicating further bullishness on prices in the near term.

As Gulf production is up to 72%. It might be slow progress from here, though, as what's left are platforms and rigs which suffered more severe damage and could be out for extended periods.

As WH will be "taking a close look" at gas prices which "should be falling". I'll leave this there.

Nat Gas (/NG) - We mentioned the yesterday the very large "wick" and "hammer candle" which can be the sign of a reversal (as higher prices didn't stick), and we got another one today with a red candle instead of a green one (so closing below the open). This is setting up as a textbook reversal, but these are generally three day patterns so tomorrow will confirm that we will be getting some digestion of the gains so far, but it's clearly setting up that way now. Finished down -3.5% at $5.268. Technicals remain positive but very overbought.

And haven't been updating Gulf nat gas production, but as noted in the text above, there's still almost 40% of nat gas production from the Gulf still shut in which isn't helping the supply situation.

Gold (/GC) - Moved solidly down today over -2% to $1753 after it just couldn't break the 50-DMA and 1800 level for any sustained period. Not a good looking chart right now. Technicals are now firmly negative.

Copper (/HG) - Pulled back again today down over 2% as well, breaking through a couple of MA's as well as the short-term trendline it's been able to stay over. Technicals are also starting to roll over, so could see it going either way.

Iron Ore - While steel prices are red hot, iron ore has seen a huge correction, halving from its highs.

Although it just goes to show you what you see sometimes when you zoom out, as these are prices they would have loved to get three years ago.

U.S. Data

Did reports on weekly jobless claims, August Retail Sales (the big report of the day), and Philly Fed Manufacturing. Links below.

Initial Jobless Claims week ending Sep 11th seasonally adjusted: +20K to 332K vs. 315K consensus, 312K prior (revised from 310K) - Seasonally adjusted claims up but all due to seasonals as non-adjusted claims fall further - details

Initial Jobless Claims Week Ending Sep 11th Seasonally Adjusted: +20K To 332K Vs. 315K Consensus, 312K Prior (Revised From 310K) - Seasonally Adjusted Claims Up But All Due To Seasonals As Non-Adjusted Claims Fall Further - Details

US Philadelphia Fed Business Outlook Sep: 30.7 (est 19.0; prev 19.4) - Philly Fed Mfg bounces back but much due to inventories as future expectations soften further but remain positive - details

US Philadelphia Fed Business Outlook Sep: 30.7 (Est 19.0; Prev 19.4) - Philly Fed Mfg Bounces Back But Much Due To Inventories As Future Expectations Soften Further But Remain Positive - Details

US Retail Sales Advance (M/M) Aug: 0.7% (est -0.7%; prev -1.1%) - Retail sales bounces back well above expectations, core even better - details

US Retail Sales Advance (M/M) Aug: 0.7% (Est -0.7%; Prev -1.1%) - Retail Sales Bounces Back Well Above Expectations, Core Even Better - Details

Next 24

Big (and only) report tomorrow in the US will be the preliminary University of Michigan Index of Consumer Sentiment for September.

Internationally, not a lot but do get UK retail sales and EU CPI.

Overall

We noted the relatively negative FinTwit sentiment on Monday. That was matched today by AAII which saw a huge drop in bulls which fell to lowest level since June 2020. Bears increased by double digits as well to the highest levels of the year. This is a survey through yesterday, so that's definitely a change from what we've seen previously.

Also a little different is that unlike the past dips to the 50-DMA this year, we're probing it for a much longer period (every day this week has probed that area). I'm not sure we break it, but with sentiment already cautious a solid break would likely see some mild panic. I normally like those set-ups, but I'd prefer to avoid it tomorrow as with options expiration a lot of gamma will be "freed" so a big down Friday could lead to a bit of a mess next week.

Misc.

Some other random stuff.

American Institute of Certified Public Accountants had their quarterly survey release showing optimism falling 3 points overall to 75.

And somehow I don't think you'll be shocked by their "top concerns".

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.