Trend lines drawn from the 10/30 bottom (55d), 1/13 (5d) and today 1/20 (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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Wednesday, January 20, 2021
Facts:+1.97%, Volume higher, Closing range: 90%, Body: 73%
Good: Gains the whole day and closing near the top of the range
Bad: Gap up
Highs/Lows: Higher high, higher low
Candle: Mostly green body with a tiny lower wick and more visible upper wick from some selling at close
Advance/Decline: 1.29, more advancing stocks than declining stock.
Indexes: SPX (+1.39%), DJI (+0.83%), RUT (+0.44%), VIX (-7.14%)
Sectors: Communications (XLC +3.14%) and Real Estate (XLRE +2.08%) were top. Financials (XLF -0.42%) was the only losing sector.
Expectation: Sideways or Higher
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Market Overview
If the equity market could talk, I think it would say Happy Inauguration Day. Investors breathed a sigh of relief that maybe some of the turmoil is behind us. That sentiment translated into a gap up at open with steady gains throughout the day.
The Nasdaq closed with a big +1.97% gain on higher volume. The candle has a closing ranging of 82%, but including the gap the actual closing range is even better at 90%. The 73% green body and tiny lower wick shows the nearly constant gains that happened throughout the trading session. There were more advancing stocks than declining stocks, but note that the breadth was not as wide as the previous day.
The Russell 2000 (RUT) gained 0.43%, one of the few times in recent months where it has trailed the other indexes in performance. So there was a shift back towards the larger caps, but not enough to call it a rotation. The S&P 500 (SPX) ended with a +1.39% gain while the Dow Jones Industrial (DJI) gained +0.83%.
Communications (XLC +3.14%) was the leading sector by a large margin. Technology (XLK +1.98%) looked like it would keep up with Communications in the morning, but faded behind Real Estate (XLRE +1.98%) by afternoon. Consumer Discretionary (XLY +1.89%) was the other stand-out sector. These four sectors drove the S&P 500 gains. All other sectors under-performed the major index. Only Financials (XLF -0.42%) declined for the day.
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Economic Indicators
The US Dollar (DXY) declined slightly to -0.03%. US 30y treasury bond yields stayed about even while US 10y and US 2y yields dropped. Corporate Bonds (HYG) prices increased for the day and set a recent high.
Silver (SILVER) and Gold (GOLD) both advanced for the day. Crude Oil (CRUDEOIL1!) futures also rose. Timber (WOOD) and Copper (COPPER1!) advanced while Aluminum (ALI1!) declined. These commodity trends have been consistent the past 4-5 days.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose slightly to 0.560. 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 four biggest mega-caps, Apple (AAPL, Microsoft (MSFT), Amazon (AMZN) and Alphabet (GOOGL) decided they finally wanted to join the market rally. All four turned in huge gains for the day. Alphabet was the biggest gain, advancing +5.36%. All four closed well above the key 21d EMA and 50d MA.
Netflix was the top performing mega-cap after surprising investors with a record number of subscribers and the first time over 200m. The fact they did not meet earnings expectations, did not matter. The subscribers plus the announcement of a potential stock buyback program sent the price soaring.
Most mega-caps had gains for the day. The large banks such as Bank of America (BAC) and JP Morgan Chase (JPM) were the worst performers.
There were a lot of exciting moves among growth stocks as well. FUTU (FUTU) had another big advance with a +10.97% gain. Digital Turbine (APPS) also broke into new all-time highs with a +10.85% gain.
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Looking ahead
Tomorrow will kick-off with real estate data before market open. That will include Building Permits and Housing Starts. Also before market open, there will be an update on Initial Jobless Claims and Manufacturing data for January.
Fifth Third (FITB) and KeyCorp (KEY) are among financial companies reporting earnings before market open. Intel (INTC) will IBM (IBM) announce earnings after market close.
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Trends, Support and Resistance
If today's trend line continues tomorrow, it points to a +1.08% gain tomorrow.
The five-day trend line and long-term trend line from the 10/30 bottom point to a small pullback of -0.44%.
If there is a downside move, 13,000 support seems to be holding up well for the index and that's just above the 21d EMA now. The 21d EMA is around 3.8% below the index which should also offer support at the 13,000 level. 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 bold statement made by the markets today as the US transitions to a new administration. Lots of great things happened including the big mega-caps joining the current market rally that started in November.
The Financial sector declining on such a big day was one negative point. The sector is declining as more banks are releasing earnings that beat expectations on earnings but are disappointing on revenue. But keep in mind that the higher treasury bond yields, that are expected to drive more revenue in this sector, only came in the first week of January.
Watch out for the gap created today. The index doesn't have to fill the gap, but it often has in the past.
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=-
Wednesday, January 20, 2021
Facts:+1.97%, Volume higher, Closing range: 90%, Body: 73%
Good: Gains the whole day and closing near the top of the range
Bad: Gap up
Highs/Lows: Higher high, higher low
Candle: Mostly green body with a tiny lower wick and more visible upper wick from some selling at close
Advance/Decline: 1.29, more advancing stocks than declining stock.
Indexes: SPX (+1.39%), DJI (+0.83%), RUT (+0.44%), VIX (-7.14%)
Sectors: Communications (XLC +3.14%) and Real Estate (XLRE +2.08%) were top. Financials (XLF -0.42%) was the only losing sector.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
If the equity market could talk, I think it would say Happy Inauguration Day. Investors breathed a sigh of relief that maybe some of the turmoil is behind us. That sentiment translated into a gap up at open with steady gains throughout the day.
The Nasdaq closed with a big +1.97% gain on higher volume. The candle has a closing ranging of 82%, but including the gap the actual closing range is even better at 90%. The 73% green body and tiny lower wick shows the nearly constant gains that happened throughout the trading session. There were more advancing stocks than declining stocks, but note that the breadth was not as wide as the previous day.
The Russell 2000 (RUT) gained 0.43%, one of the few times in recent months where it has trailed the other indexes in performance. So there was a shift back towards the larger caps, but not enough to call it a rotation. The S&P 500 (SPX) ended with a +1.39% gain while the Dow Jones Industrial (DJI) gained +0.83%.
Communications (XLC +3.14%) was the leading sector by a large margin. Technology (XLK +1.98%) looked like it would keep up with Communications in the morning, but faded behind Real Estate (XLRE +1.98%) by afternoon. Consumer Discretionary (XLY +1.89%) was the other stand-out sector. These four sectors drove the S&P 500 gains. All other sectors under-performed the major index. Only Financials (XLF -0.42%) declined for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined slightly to -0.03%. US 30y treasury bond yields stayed about even while US 10y and US 2y yields dropped. Corporate Bonds (HYG) prices increased for the day and set a recent high.
Silver (SILVER) and Gold (GOLD) both advanced for the day. Crude Oil (CRUDEOIL1!) futures also rose. Timber (WOOD) and Copper (COPPER1!) advanced while Aluminum (ALI1!) declined. These commodity trends have been consistent the past 4-5 days.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose slightly to 0.560. 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 four biggest mega-caps, Apple (AAPL, Microsoft (MSFT), Amazon (AMZN) and Alphabet (GOOGL) decided they finally wanted to join the market rally. All four turned in huge gains for the day. Alphabet was the biggest gain, advancing +5.36%. All four closed well above the key 21d EMA and 50d MA.
Netflix was the top performing mega-cap after surprising investors with a record number of subscribers and the first time over 200m. The fact they did not meet earnings expectations, did not matter. The subscribers plus the announcement of a potential stock buyback program sent the price soaring.
Most mega-caps had gains for the day. The large banks such as Bank of America (BAC) and JP Morgan Chase (JPM) were the worst performers.
There were a lot of exciting moves among growth stocks as well. FUTU (FUTU) had another big advance with a +10.97% gain. Digital Turbine (APPS) also broke into new all-time highs with a +10.85% gain.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tomorrow will kick-off with real estate data before market open. That will include Building Permits and Housing Starts. Also before market open, there will be an update on Initial Jobless Claims and Manufacturing data for January.
Fifth Third (FITB) and KeyCorp (KEY) are among financial companies reporting earnings before market open. Intel (INTC) will IBM (IBM) announce earnings after market close.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
If today's trend line continues tomorrow, it points to a +1.08% gain tomorrow.
The five-day trend line and long-term trend line from the 10/30 bottom point to a small pullback of -0.44%.
If there is a downside move, 13,000 support seems to be holding up well for the index and that's just above the 21d EMA now. The 21d EMA is around 3.8% below the index which should also offer support at the 13,000 level. 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 bold statement made by the markets today as the US transitions to a new administration. Lots of great things happened including the big mega-caps joining the current market rally that started in November.
The Financial sector declining on such a big day was one negative point. The sector is declining as more banks are releasing earnings that beat expectations on earnings but are disappointing on revenue. But keep in mind that the higher treasury bond yields, that are expected to drive more revenue in this sector, only came in the first week of January.
Watch out for the gap created today. The index doesn't have to fill the gap, but it often has in the past.
Stay healthy and take care!
