DailyPlay Market Outlook – Oct 13th, 2021

Equity Market Analysis

Nasdaq-100 – Bearish Bias

Apple Poised to Slash iPhone Production Goals Due to Chip Crunch

Equities have continued to weaken despite a rally in bonds yesterday and the Nasdaq and S&P weakened into the close again after early strength. Price action while not overly bearish, continues to weaken each day. Our Chart of the Day is the Nasdaq-100 Index, which had its 20D MA cross below its 50D MA. This is the first time since April 27, 2020 (530 days ago) where the short-term moving average has traded below the longer-term moving average. A break below $352 or rejection at these moving averages over the next few days or weeks would be considerably more bearish for equities. We maintain a bearish view of the markets and will maintain more short exposure. 

Chart of the Day – QQQ Moving Average Crossover

The Relative Rotation Graph (RRG) for sector rotation indicates that there are 7 sectors in the Improving and Leading categories, and 4 sectors in the Weakening and Lagging categories

Leading (positive relative trend and positive relative momentum): Industrial and Energy and Staples are joined by Financials. Industrial and Staples showing improving momentum. Weakening momentum in Energy and Financials.

Weakening (positive relative strength and negative relative momentum): Discretionary is showing slowing momentum. 

Lagging (negative relative trend and negative relative momentum): 4 sectors are in the lagging category – Technology, Real Estate, Healthcare, and Communications paring back into weak momentum in all three sectors and possible recovery in Real Estate.

Improving (negative relative trend and positive relative momentum): 2 sectors are now in the Improving category – Utilities and Materials. All sectors showing good momentum and improving relative strength.

Market Observations

• CCL – Travel stocks and cruise operators showing some strength in yesterday’s weakness and holds a bullish trendline. 
• SCHW – Break above its $76 resistance level suggests further upside in a rising interest rate environment. 
• XLC – Break below a key $79 support level suggests further downside from communication stocks.