October 6, 2021

This week's technical action in the averages resembles a tug-of-war with a slight upward bias to the S&P 500, as buyers and sellers appear equally matched. The action comes ahead of Friday's non-farm payrolls report.

S&P pokes its head above the 9 ema.

The Nasdaq has lagged the S&P over the past two weeks as growth tries to dig itself out of an oversold condition.

But there are a few bright spots, some of which emerged beginning with today's session. None are buyable.

Affirm Holdings (AFRM) vaulted out of a seven-day pattern, +20% on +378% volume.

Cloudflare (NET) is moving straight up the right side of its two-week miniature cup on volume.

Netflix (NFLX) hit a new high two weeks ahead of its earnings report.

Marvell Technology (MRVL)

Other better actors include Asana (ASAN), Atlassian (TEAM), Beauty Health (SKIN), Celsius Holdings (CELH), Digitalocean (DOCN), Fortinet (FTNT), Grid Dynamics (GDYN), Paycor HCM (PYCR), Sea Limited (SE), Silvergate Capital (SI), Upstart (UPST), Ziprecruiter (ZIP), and Zscaler (ZS).

As noted, none of these are considered buyable at the moment.

Historical precedent shows a substantial propensity for the market to weaken in the August-October period, followed by a buying opportunity, also during this period. Thus, precedent suggests a fair chance of a bottom this month.

Risks include an inability of Congress to pass a spending bill triggering a U.S. debt default, a China-Taiwan war which could severely hobble the technology industry and the global supply chain, and a swift backup in the yield on 10s.

On the flip side, the market has discounted the November beginning of the Fed's taper of its bond buying program, and even then, monetary conditions would generally remain accommodative. As well, it is to be remembered that market bottoms often form amid a formidable wall of worry.

In summation, this week has seen an improvement in certain growth issues, but the breadth of this improvement is narrowly confined to a handful of names. Let's continue to cool our heels until we see some pattern setups emerge. NET and NFLX are of interest from a sentiment standpoint.

Kevin Marder

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