Trend lines drawn from the 10/30 bottom (58d), 1/19 (5d) and today 1/25 (1d).
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or and corrected inline in my blog.
I'm working to condense this daily update over the next few weeks. I need to reduce it for both brevity and preparation time.
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Monday, January 25, 2021
Facts:+0.69%, Volume higher, Closing range: 74%, Body: 13%
Good: Stayed above the gap from last Wed, bulls fought back in afternoon
Bad: Long sudden trip to the days low, volume heavy on the way down
Highs/Lows: Higher high, lower low
Candle:Similar to bearish doji star, but body a little thick
Advance/Decline: 0.91, more declining than advancing stocks
Indexes: SPX (+0.36%), DJI (-0.12%), RUT (-0.25%), VIX (+5.84%)
Sectors: Utilities (XLU +2.01%) and Consumer Staples (XLP +1.00%) were top. Finance (XLF -0.73%) and Energy (XLE -1.02%) were bottom.
Expectation: Sideways or Lower
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Market Overview
There was expectation coming into the week that it would be choppy, but we didn't expect that chop to all happen within 30 minutes. But that's how it goes sometimes. Investors were already playing defense in the opening minutes of the day, despite the index setting a new all-time high. But the bulls caught the downward action mid-morning and brought the Nasdaq back to gains in the afternoon.
The Nasdaq closed with a +0.69% gain on higher volume. The closing range of 74% is typically good, but the 13% red body that is entirely above last week's bullish range is a possible reversal pattern. There were less advancing stocks than declining stocks as many stocks did not move back to positive territory after the morning sell-off.
The S&P 500 (SPX +0.36%), Dow Jones Industrial (DJI -0.12%) and Russell 2000 (RUT -0.25%) all have their own candle patterns to represent the day. Each has a long lower wick, but only the RUT set a new all-time high, creating a long upper wick. The Dow Jones Industrial average is in a third day of a downward move.
As investors came into the day defensive, Utilities (XLU +2.01%) and Real Estate (XLRE +0.90%) moved to the top of the sector list even before everything turned downward around 10:30. At the end of the day, Utilities and Consumer Staples (XLP +1.00%) were at the top, with Real Estate at the bottom. Finance (XLF -0.73%) and Energy (XLE -1.02%) were at the bottom.
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Economic Indicators
The US Dollar (DXY) gained +0.12% for the day. US 30y, 20y and 2y treasury bond yields all dropped for the day. Those moves were also happening as the market opened, well before the 10:30a dip. Corporate Bonds (HYG) prices increased slightly for the day, but did dip while the equity markets dipped in the morning.
Silver (SILVER) and Gold (GOLD) declined for the day. Crude Oil (CRUDEOIL1!) futures advanced slightly. Timber (WOOD) declined for the day. Copper (COPPER1!) and Aluminum (ALI1!) both advanced.
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Investor Sentiment
The put/call ratio rose slightly to 0.534. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
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Market Leaders
The big four mega-caps all ended the day with gains, although have the same long lower shadows as the index. Apple (AAPL) and Microsoft (MSFT) faired the best with a +2.77% and +1.58% gain, respectively. Amazon (AMZN) and Alphabet (GOOGL) both had gains less than 0.1%.
Tesla (TSLA) was the top mega-cap of the day with a +4.03% gain. Most mega-caps did ok. Intel (INTC) added to losses with a -2.15% decline. Paypal (PYPL), JPMorgan Chase (JPM) and Banc of America (BAC) led the Financial mega-cap losses with more than 1% declines.
Some mega-caps did very well despite the big swings of the day. Beyond Meat (BYND) has no lower wick and a very high closing range with a 12.81% gain. Moderna (MRNS) gained +12.20% after announcing their vaccines will work with new strains of the COVID virus. Palantir (PLTR) had a huge intraday swing but ended the day with a 11.20% gain.
GameStop (GME) continued the squeeze, or whatever we are calling it now. At one point it was up over 100%, but ended the day with an 18.12% gain. The stock has gained over 300% since the beginning of the year. Blackberry (BB) issued a public statement that there is no material difference in their business results that would drive a +28.42% gain in their stock price.
I believe eventually the stock manipulation, whether by a few individuals or a mass community of investors, will cause reaction from market makers, regulators, and lawmakers and have a negative impact on retail investors. It's something to keep monitoring.
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Looking ahead
Consumer Confidence numbers for January will be released in the morning after market open. API Weekly Crude Oil Stock numbers, which negatively surprised investors last week, will be updated in the afternoon.
Tomorrow will kick-off the huge wave of earnings reports from big tech and other meg-caps. American Express (AXP) will announce earnings before market open. Consumer Staples company Johnson & Johnson (JNJ) and home builder DR Horton (DHI) will also announce before market open. Microsoft (MSFT), AMD (AMD), Texas Instruments (TXN) will kick-off big tech after hours. There are a bunch more I won't list here, but do check your portfolio and plan accordingly for this week's earnings releases.
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Trends, Support and Resistance
The five-day trend line points to a +1.14%.
The one-day trend line and the long trend line from the 10/30 bottom points to a -1.05% loss.
If there is a further downside move, its notable that the index held support today above last Wednesday's gap up. The low was 13,329.77, and would hopefully continue to hold support above that gap. If the index would fill the gap, the other side is around 13,220. That's around a 3.0% decline.
The 21d EMA is at 13,099.32 which could offer an area of support at 3.9% below today's close. 13,000 support seems to be holding up well. The index also held the 12,550 area recently. If it passes that area, the next support area is 12,250.
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Wrap-up
It was a crazy day for many investors. I've heard numerous stories of portfolio's starting the day with record gains, but those gains were wiped out in 20-30 minutes. Still, the indexes and many stocks recovered from the sudden sell-off and ended the day with gains. On the weekly chart, we have a higher high and lower low.
We can likely expect more choppiness this week as the indexes pause, move sideways or even pullback a bit and let moving averages catch up while heated gains cool off a bit.
Stay healthy and take care!
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or and corrected inline in my blog.
I'm working to condense this daily update over the next few weeks. I need to reduce it for both brevity and preparation time.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Monday, January 25, 2021
Facts:+0.69%, Volume higher, Closing range: 74%, Body: 13%
Good: Stayed above the gap from last Wed, bulls fought back in afternoon
Bad: Long sudden trip to the days low, volume heavy on the way down
Highs/Lows: Higher high, lower low
Candle:Similar to bearish doji star, but body a little thick
Advance/Decline: 0.91, more declining than advancing stocks
Indexes: SPX (+0.36%), DJI (-0.12%), RUT (-0.25%), VIX (+5.84%)
Sectors: Utilities (XLU +2.01%) and Consumer Staples (XLP +1.00%) were top. Finance (XLF -0.73%) and Energy (XLE -1.02%) were bottom.
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
There was expectation coming into the week that it would be choppy, but we didn't expect that chop to all happen within 30 minutes. But that's how it goes sometimes. Investors were already playing defense in the opening minutes of the day, despite the index setting a new all-time high. But the bulls caught the downward action mid-morning and brought the Nasdaq back to gains in the afternoon.
The Nasdaq closed with a +0.69% gain on higher volume. The closing range of 74% is typically good, but the 13% red body that is entirely above last week's bullish range is a possible reversal pattern. There were less advancing stocks than declining stocks as many stocks did not move back to positive territory after the morning sell-off.
The S&P 500 (SPX +0.36%), Dow Jones Industrial (DJI -0.12%) and Russell 2000 (RUT -0.25%) all have their own candle patterns to represent the day. Each has a long lower wick, but only the RUT set a new all-time high, creating a long upper wick. The Dow Jones Industrial average is in a third day of a downward move.
As investors came into the day defensive, Utilities (XLU +2.01%) and Real Estate (XLRE +0.90%) moved to the top of the sector list even before everything turned downward around 10:30. At the end of the day, Utilities and Consumer Staples (XLP +1.00%) were at the top, with Real Estate at the bottom. Finance (XLF -0.73%) and Energy (XLE -1.02%) were at the bottom.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) gained +0.12% for the day. US 30y, 20y and 2y treasury bond yields all dropped for the day. Those moves were also happening as the market opened, well before the 10:30a dip. Corporate Bonds (HYG) prices increased slightly for the day, but did dip while the equity markets dipped in the morning.
Silver (SILVER) and Gold (GOLD) declined for the day. Crude Oil (CRUDEOIL1!) futures advanced slightly. Timber (WOOD) declined for the day. Copper (COPPER1!) and Aluminum (ALI1!) both advanced.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose slightly to 0.534. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
The big four mega-caps all ended the day with gains, although have the same long lower shadows as the index. Apple (AAPL) and Microsoft (MSFT) faired the best with a +2.77% and +1.58% gain, respectively. Amazon (AMZN) and Alphabet (GOOGL) both had gains less than 0.1%.
Tesla (TSLA) was the top mega-cap of the day with a +4.03% gain. Most mega-caps did ok. Intel (INTC) added to losses with a -2.15% decline. Paypal (PYPL), JPMorgan Chase (JPM) and Banc of America (BAC) led the Financial mega-cap losses with more than 1% declines.
Some mega-caps did very well despite the big swings of the day. Beyond Meat (BYND) has no lower wick and a very high closing range with a 12.81% gain. Moderna (MRNS) gained +12.20% after announcing their vaccines will work with new strains of the COVID virus. Palantir (PLTR) had a huge intraday swing but ended the day with a 11.20% gain.
GameStop (GME) continued the squeeze, or whatever we are calling it now. At one point it was up over 100%, but ended the day with an 18.12% gain. The stock has gained over 300% since the beginning of the year. Blackberry (BB) issued a public statement that there is no material difference in their business results that would drive a +28.42% gain in their stock price.
I believe eventually the stock manipulation, whether by a few individuals or a mass community of investors, will cause reaction from market makers, regulators, and lawmakers and have a negative impact on retail investors. It's something to keep monitoring.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Consumer Confidence numbers for January will be released in the morning after market open. API Weekly Crude Oil Stock numbers, which negatively surprised investors last week, will be updated in the afternoon.
Tomorrow will kick-off the huge wave of earnings reports from big tech and other meg-caps. American Express (AXP) will announce earnings before market open. Consumer Staples company Johnson & Johnson (JNJ) and home builder DR Horton (DHI) will also announce before market open. Microsoft (MSFT), AMD (AMD), Texas Instruments (TXN) will kick-off big tech after hours. There are a bunch more I won't list here, but do check your portfolio and plan accordingly for this week's earnings releases.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The five-day trend line points to a +1.14%.
The one-day trend line and the long trend line from the 10/30 bottom points to a -1.05% loss.
If there is a further downside move, its notable that the index held support today above last Wednesday's gap up. The low was 13,329.77, and would hopefully continue to hold support above that gap. If the index would fill the gap, the other side is around 13,220. That's around a 3.0% decline.
The 21d EMA is at 13,099.32 which could offer an area of support at 3.9% below today's close. 13,000 support seems to be holding up well. The index also held the 12,550 area recently. If it passes that area, the next support area is 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It was a crazy day for many investors. I've heard numerous stories of portfolio's starting the day with record gains, but those gains were wiped out in 20-30 minutes. Still, the indexes and many stocks recovered from the sudden sell-off and ended the day with gains. On the weekly chart, we have a higher high and lower low.
We can likely expect more choppiness this week as the indexes pause, move sideways or even pullback a bit and let moving averages catch up while heated gains cool off a bit.
Stay healthy and take care!
