Trend lines drawn from the 10/30 bottom (52d), 1/8 (5d) and today 1/14 (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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Thursday, January 14, 2021
Facts: -0.12%, Volume lower, Closing range: 12%, Body: 51%
Good: New all-time high, higher low
Bad: Closing range, sell-off to close after morning all-time high
Highs/Lows: Higher high, Higher low
Candle: Thick red body in lower half of the candle, longer upper wick
Advance/Decline: 2.50, five advancing stocks for every two declining stocks.
Indexes: SPX (-0.38%), DJI (-0.22%), RUT (+2.05%), VIX (+4.68%)
Sectors: Energy (XLE +2.96%) and Real Estate (XLRE +0.62%) were top. Consumer Discretionary (XLY -0.64%) and Technology (XLK -0.88%) were bottom.
Expectation: Sideways
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Market Overview
Investors shook off bad employment news in the morning to drive indexes to all-time highs before an afternoon session of selling. There were plenty of gains across a breadth of stocks, but the losses in the mega-caps weighed down the major indexes. The exception was the small-cap Russell 2000 which gained +2.05% in a solidly upwards session.
The Nasdaq closed with a -0.12% loss after setting a new all-time high. The closing range of 12% with a large 51% red body is sign of weakness, but volume was lower so would not count as a distribution day. The losses were focused in the larger caps which is why the overall index is down even though there were far more advancing stocks than declining stocks. As we did yesterday, you can also see the imbalance by looking at the QQQ which is down -0.53% while the equal weight QQQE is up +0.12%.
The S&P 500 (SPX) lost -0.38% while the Dow Jones Industrial average (DJI) lost -0.22%. The VIX Volatility index rose +4.68%.
Energy (XLE +2.96%) was the top sector after OPEC released their monthly report with a mix of messages around oil demand and shale output. Real Estate (XLRE +0.62%) was the second best sector. Consumer Discretionary (XLY -0.64%) and Technology (XLK -0.88%) were the worst performing sectors.
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Economic Indicators
The US Dollar (DXY) dropped for the day. US Treasury 30y (US30Y), 10y (US10Y) and 2y (US02Y) bond yields all rose for the day as investors expect more stimulus from President-elect Biden. Corporate Bonds (HYG) prices remained about even.
Silver (SILVER) and Gold (GOLD) both gained today and seem to have found an area of support. Crude Oil (CRUDEOIL1!) futures advanced. Timber (WOOD) and Copper (COPPER1!) gained while and Aluminum (ALI1!) all declined for the day.
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Investor Sentiment
The put/call ratio took a big dip to 0.474, an extreme level of optimism for investors. 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.
The CNN Fear & Greed index is on the greed side, but still within reasonable range.
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Market Leaders
All four of the biggest mega-caps lost for the day. They have been going back and forth between gains and losses the past several days. Microsoft (MSFT), Amazon (AMZN) and Alphabet (GOOGL) area all trading at or below their 50d MA and 21d EMA. Apple (AAPL) is trading just below the 21d EMA. The question remains on whether the mega-caps will join the market rally on new stimulus, or will they continue to weigh down the major indexes.
Taiwan Semiconductor (TSM) gained 6.06% on strong earnings and the increasing demand coming from the automobile industry. ASML Holding (ASML), Intel (INTC) and Exxon Mobil (XON) were other big mega-cap gainers for the day. Mastercard (M) and Visa (V) were at the bottom of the list losing -5.60% and -3.58% respectively.
Beyond Meat (BYND) was a top growth stock for the day, gaining 13.66%. Fiverr (FVRR), FUTU (FUTU) and SUMO Logic (SUMO) were other big gainers for the day. Twitter (TWTR), SNAP (SNAP) and PINS (PINS) joined other communications sector stocks with losses.
Bed Bath & Beyond (BBBY) joined the short-squeeze mania with a +18.77% gain while Gamespot (GME) continued a second day of short-squeeze gains with a 27.10% gain. That's a 100% gain in two days for the brick-and-mortar game store.
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Looking ahead
Producer Price Index data and Retail Sales data will be release before market open on Wednesday. Industrial Production numbers will add to data highlighting current economic activity.
Consumer Sentiment numbers for January will be release just after the market opens.
JP Morgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) and PNC Financial Services (PNC) will report earnings before market opens on Friday.
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Trends, Support and Resistance
The long trend line from the 10/30 bottom point to a +1.23% gain. The five day trend line points to a more modest gain of +0.28%.
The one-day trend line points to a -0.36% loss.
If there is further downside, 13,000 seems to be holding up well for the index. The 21d EMA is nearly 2% below the index which should be an area of support if there's a further downside move. 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
The last few days makes it seem like investors don't know what they want. Tuesday we saw rotation out of mega-caps. Yesterday, we saw rotation into mega-caps. And today we see rotation out again. Among the rotations, Energy and Financials continue to lead the sector list for the week while Communications has been at the bottom.
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=-
Thursday, January 14, 2021
Facts: -0.12%, Volume lower, Closing range: 12%, Body: 51%
Good: New all-time high, higher low
Bad: Closing range, sell-off to close after morning all-time high
Highs/Lows: Higher high, Higher low
Candle: Thick red body in lower half of the candle, longer upper wick
Advance/Decline: 2.50, five advancing stocks for every two declining stocks.
Indexes: SPX (-0.38%), DJI (-0.22%), RUT (+2.05%), VIX (+4.68%)
Sectors: Energy (XLE +2.96%) and Real Estate (XLRE +0.62%) were top. Consumer Discretionary (XLY -0.64%) and Technology (XLK -0.88%) were bottom.
Expectation: Sideways
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Investors shook off bad employment news in the morning to drive indexes to all-time highs before an afternoon session of selling. There were plenty of gains across a breadth of stocks, but the losses in the mega-caps weighed down the major indexes. The exception was the small-cap Russell 2000 which gained +2.05% in a solidly upwards session.
The Nasdaq closed with a -0.12% loss after setting a new all-time high. The closing range of 12% with a large 51% red body is sign of weakness, but volume was lower so would not count as a distribution day. The losses were focused in the larger caps which is why the overall index is down even though there were far more advancing stocks than declining stocks. As we did yesterday, you can also see the imbalance by looking at the QQQ which is down -0.53% while the equal weight QQQE is up +0.12%.
The S&P 500 (SPX) lost -0.38% while the Dow Jones Industrial average (DJI) lost -0.22%. The VIX Volatility index rose +4.68%.
Energy (XLE +2.96%) was the top sector after OPEC released their monthly report with a mix of messages around oil demand and shale output. Real Estate (XLRE +0.62%) was the second best sector. Consumer Discretionary (XLY -0.64%) and Technology (XLK -0.88%) were the worst performing sectors.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) dropped for the day. US Treasury 30y (US30Y), 10y (US10Y) and 2y (US02Y) bond yields all rose for the day as investors expect more stimulus from President-elect Biden. Corporate Bonds (HYG) prices remained about even.
Silver (SILVER) and Gold (GOLD) both gained today and seem to have found an area of support. Crude Oil (CRUDEOIL1!) futures advanced. Timber (WOOD) and Copper (COPPER1!) gained while and Aluminum (ALI1!) all declined for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio took a big dip to 0.474, an extreme level of optimism for investors. 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.
The CNN Fear & Greed index is on the greed side, but still within reasonable range.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All four of the biggest mega-caps lost for the day. They have been going back and forth between gains and losses the past several days. Microsoft (MSFT), Amazon (AMZN) and Alphabet (GOOGL) area all trading at or below their 50d MA and 21d EMA. Apple (AAPL) is trading just below the 21d EMA. The question remains on whether the mega-caps will join the market rally on new stimulus, or will they continue to weigh down the major indexes.
Taiwan Semiconductor (TSM) gained 6.06% on strong earnings and the increasing demand coming from the automobile industry. ASML Holding (ASML), Intel (INTC) and Exxon Mobil (XON) were other big mega-cap gainers for the day. Mastercard (M) and Visa (V) were at the bottom of the list losing -5.60% and -3.58% respectively.
Beyond Meat (BYND) was a top growth stock for the day, gaining 13.66%. Fiverr (FVRR), FUTU (FUTU) and SUMO Logic (SUMO) were other big gainers for the day. Twitter (TWTR), SNAP (SNAP) and PINS (PINS) joined other communications sector stocks with losses.
Bed Bath & Beyond (BBBY) joined the short-squeeze mania with a +18.77% gain while Gamespot (GME) continued a second day of short-squeeze gains with a 27.10% gain. That's a 100% gain in two days for the brick-and-mortar game store.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Producer Price Index data and Retail Sales data will be release before market open on Wednesday. Industrial Production numbers will add to data highlighting current economic activity.
Consumer Sentiment numbers for January will be release just after the market opens.
JP Morgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) and PNC Financial Services (PNC) will report earnings before market opens on Friday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The long trend line from the 10/30 bottom point to a +1.23% gain. The five day trend line points to a more modest gain of +0.28%.
The one-day trend line points to a -0.36% loss.
If there is further downside, 13,000 seems to be holding up well for the index. The 21d EMA is nearly 2% below the index which should be an area of support if there's a further downside move. 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
The last few days makes it seem like investors don't know what they want. Tuesday we saw rotation out of mega-caps. Yesterday, we saw rotation into mega-caps. And today we see rotation out again. Among the rotations, Energy and Financials continue to lead the sector list for the week while Communications has been at the bottom.
Stay healthy and take care!
