IXIC trade ideas
Market Week In Review - 2/1/2021 - 2/5/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
A recap of the daily updates that I do here on TradingView.
The Meaning of Life, a view on the past week
What's coming in the next week
The Bullish View, The Bearish View
Key index levels to watch out for
Wrap-up
If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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Monday, February 1, 2021
Facts: +2.55%, Volume lower, Closing range: 91%, Body: 59%
Good: Close back above the 21d EMA, steady climb after morning dip
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Thick green body with longer lower wick
Advance/Decline: 3.19, three advancing stocks for every declining stock
Indexes: SPX (+1.61%), DJI (+0.76%), RUT (+2.53%), VIX (-8.61%)
Sectors: Consumer Discretionary (XLY +2.60%) and Technology (XLK +2.51%) were top. Consumer Staples (XLP +0.09%) and Health Services (XLV +0.38%) were bottom.
Expectation: Sideways or Higher
February kicked off with broad gains across the Nasdaq. The index took a short dip in the morning and then headed upward for the rest of the day. Manufacturing data released after market open was a little lower than analyst expectations, but still high compared to the two-year monthly average.
The Nasdaq closed the day with a +2.55% gain on lower volume. The closing range of 91% and the 59% green body show the strong buying that occurred throughout the day after a morning dip. The index closed above the 21d EMA, a key area of support. Many participants benefited from the gains as there were three advancing stocks for every declining stock.
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Tuesday, February 2, 2021
Facts: +1.56%, Volume higher, Closing range: 82% (with gap), Body: 60%
Good: Solid gains throughout the morning and early afternoon.
Bad: Slight fade in late afternoon
Highs/Lows: Higher high, higher low
Candle: Gap up, thick green body with small upper wick from fade
Advance/Decline: 2.81, almost three advancing stocks for every declining stock
Indexes: SPX (+1.39%), DJI (+1.57%), RUT (+1.19%), VIX (-15.48%)
Sectors: Financials (XLF +2.42%) and Consumer Discretionary (XLY +2.12%) were top. Real Estate (XLRE +0.43%) and Health Services (XLV +0.29%) were bottom.
Expectation: Higher
The market added to Monday's gains with another positive day on Tuesday. Volatility fell back to more stable levels while gains continued to be spread broadly across stocks. The market faded slightly going into close, possibly as investors prepared for earnings reports from Amazon (AMZN) and Alphabet (GOOGL).
The Nasdaq closed the day with a +1.56% gain on higher volume. The closing range with the gap was 82% and a 60% green body sits under a short upper wick created by the late afternoon fade. The rising window candle indicates a bullish continuation, but with some caution given the fade into close. Almost three stocks advanced for each declining stock, the second day of broad advances.
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Wednesday, February 3, 2021
Facts: -0.02%, Volume higher, Closing range: 18%, Body: 78%
Good: Higher high, higher low, held support above morning low
Bad: Sell off late afternoon
Highs/Lows: Higher high, higher low
Candle: Mostly red body formed from morning and afternoon dips
Advance/Decline: 1.65, almost three advancing stocks for every two declining stocks
Indexes: SPX (+0.10%), DJI (+0.12%), RUT (+0.38%), VIX (-10.37%)
Sectors: Energy (XLE +4.27%) and Communications (XLC +1.34%)were top. Consumer Discretionary (XLY -0.56%) and Health Services (XLV +0.29%) were bottom.
Expectation: Sideways or Lower
The Nasdaq paused today after two days of big gains. It made two attempts to have another day of gains, but dipped in morning and late afternoon trading. Still there were advances across a large number of stocks, fueled by great earnings reports from big mega-caps the day before.
The Nasdaq closed with a -0.02% loss, moving sideways after gaining over 4% the past two days. Volume was slightly higher than the previous days. The closing range of 18% and a red body of 78% are the result of the morning and late-afternoon dips. Overall, the candle presents bearish, so expectations are set for sideways or lower. Advancing stocks did outnumber declining stocks on a 3 to 2 ratio.
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Thursday, February 4, 2021
Facts: +1.23%, Volume lower, Closing range: 100%, Body: 71%
Good: Constant gain after morning dip, new all-time high
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Mostly green body with short lower wick, no upper wick
Advance/Decline: 2.70, More than two advancing stocks for every declining stock
Indexes: SPX (+1.09%), DJI (+1.08%), RUT (+1.98%), VIX (-4.98%)
Sectors: Financials (XLF +2.22%) and Technology (XLK +1.60%) were top. Materials (XLB -0.36%) was the only sector to lose for the day.
Expectation: Higher
A positive expectation breaker is always welcome in the Daily Market Update. Despite yesterday's candle showing some bearish indication, today the Nasdaq proved it wasn't ready to move back down. A new all-time high adds to the string of higher highs and higher lows we've had all week.
The index closed with a +1.23% gain. Volume was lower than the previous day but continues to be higher than the 50d moving average volume. The candle has a closing range of 100% created by a spike in prices in the last 10 minutes of trading. The short lower wick was created in a 30 minute window of volatility in the morning. There were more than two advancing stocks for every declining stock.
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Friday, February 5, 2021
Facts: +0.57%, Volume lower, Closing range: 81%, Body: 27%
Good: New all-time high, not overly heated gain
Bad: Some pullback in the afternoon
Highs/Lows: Higher high, higher low
Candle: Thin body in upper half of the candle, longer lower wick from morning dip.
Advance/Decline: 1.95, two advancing stocks for every declining stock
Indexes: SPX (+0.39%), DJI (+0.30%), RUT (+1.40%), VIX (-4.13%)
Sectors: Materials (XLB +1.72%) and Communications (XLC +1.26%) were top. Technology (XLK -0.22%) was the bottom sector for the day.
Expectation: Higher
The markets topped a bullish week with one more gain on Friday. Every day this week produced a higher high and a higher low on the Nasdaq. The broad market rally continued despite disappointing employment data as investors hope the data will accelerate the stimulus bill through congress.
The index closed with a +0.57% gain on lower volume. The closing range was 81%. The long lower wick, created by a morning dip right after open, is below a 27% body. The opening price became support in the afternoon as the index tested the area twice. There were two advancing stocks for every declining stock.
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The Meaning of Life (View on the Week)
This was one of the best weeks since November. The previous was the worst week since October. Déjà vu. You may remember the very short market correction we had back in late October. Within just a few days we had into a new market correction and back to a confirmed uptrend. This past two weeks marks a similar journey, dipping from new all-time highs to below the 21d EMA in a few days, and then back to new all-time highs a few days later.
The Nasdaq finished the week with a +6.01% gain on lower volume. Volume was lower, but still above average. The closing range of 97% and a 85% green body marks a week where every day had a higher low and higher high. The steady climb throughout the week only paused on Wednesday.
The bullish week was shared across segments with the Russell 2000 and S&P 500 reaching new all-time highs and the Dow Jones Industrial approaching a new all-time high. All sectors in the SPDR ETF list had gains for the week.
The rally was fueled by growing investor confidence and optimism for the stimulus. The previous week, investor confidence was shaken by a flurry of retail trading targeted at a few stocks which disrupted hedge funds and trading platforms.
The average closing range for the past 14 weeks has been at 70%, but is 60% over the past six weeks. The closing range for the past six weeks has rotated weekly from the lower half of the weekly candles to the upper half of the weekly candles. One week will be an accelerated gain, followed up by a week to pause or even pullback.
The S&P 500 (SPX) gained +4.65% for the week. The Dow Jones Industrial (DHI) advanced +3.89%. The Russell 2000 (RUT) was the top performer of the major indexes with a +7.70% gain.
Energy ( XLE ) was back on top for the first week of February. The sector benefited from higher than expected demand in oil that also raise crude oil prices throughout the week.
Technology ( XLK ) started the week in the lead, having a strong Monday. The Consumer Discretionary ( XLY ) took the lead on Tuesday. Financials ( XLF ) briefly moved to the top spot on Thursday, but was soon passed by Energy again.
Health Care ( XLV ) was at the bottom of the list for the week.
Materials ( XLB ) was the worst performing sector on Thursday, but led the sectors on Friday.
The US 30y and 10y Treasury Bond yields both rose significantly for the week. The US 2y treasury bond yield dropped. This resulted in a yield curve that is at its steepest since 2015. The steep curve is a result of investors seeing better growth for the economy in the short term, given that some form of stimulus is just around the corner. Economic activity is already recovering and more stimulus will make it stronger.
High Yield Corporate Bonds (HYG) had its highest weekly close since before the March market crash. Investors are preferring the riskier High Yield Corporate bonds to the Investment Grade Corporate bonds (LQD).
The US Dollar (DXY) advanced +0.51% for the week.
Silver (SILVER) had a wild ride this week as it was targeted by retail traders. It ended the week down -0.15%. Gold (GOLD) dropped -1.83%.
Crude Oil Futures (CRUDEOIL1!) gained a massive +8.40% week and drove Energy (XLE) to the top of the sector list.
Timber (WOOD) was up +4.95%. Similar to the indexes, it has been rotating up and down for the past six weeks. Copper (COPPER!1) advanced +2.20%. Aluminum (ALI1!) advanced +1.85%. Much of the advance for these came in the last day of the week when the Materials sector (XLB) also led the sector list for the day.
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The Big Four Mega-caps
We've been tracking the breakouts of the four big mega-caps over the past few weeks. Since the September correction, that had all been consolidating. However, the past two weeks brought earnings announcements.
Microsoft (MSFT)'s breakout is going well, gaining 14% over the past three weeks. Alphabet (GOOGL) has advanced over 20% in the same time.
Apple (AAPL) attempted a breakout last week, but the breakout broke down and did not resume this week. However, it is still holding above the 10w MA and is creating higher lows each week. It's reasonable to expect another breakout move in the next week.
Amazon (AMZN) released earnings this past week and although the numbers were great, the market reacted to the news that Jeff Bezos would step aside. Nonetheless, you see a pattern of higher highs and higher lows leading the stock out of the consolidation range.
The action of these mega-caps influences the indexes which influence the market. Keep an eye on them.
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Investor Sentiment
The put/call ratio (PCCE) ended the week at 0.578, back to overly bullish optimism. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction.
The CNN Fear & Greed index moved back to the Greed level, but is not at an extreme level.
Money managers lowered their exposure level for another week according to the NAAIM Exposure Index.
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The Week Ahead
There is no major economic events scheduled for Monday, however keep an eye on the stimulus progress as it moves through congress.
Tuesday will bring the EIA short-term energy outlook and a new JOLTs Job Openings report for December.
Core CPI for January will be released on Wednesday before market open. This is a key indicator to measure inflation and is how the Fed targets the 2% ideal inflation number. Crude Oil Inventories will be updated after the market opens.
Thursday brings the OPEN Monthly Report in the morning. Initial Jobless Claims will be released before market open. And the Fed will release its Monetary Policy Report mid-morning.
On Friday, we'll get an update on Consumer Sentiment for February.
It will be another busy week for earnings reports. Softbank (SFTBF) will announce on Monday. Chegg (CHGG) releases earnings after market close on Monday. Twitter (TWTR) announces on Tuesday. Coca-Cola (KO), Toyota (TM), Uber (UBER), and General Motors (GM) all release earnings on Wednesday. Zillow (Z), Zynga (ZNGA) also on Wednesday. Walt Disney (DIS), Pepsi (PEP), DexCom (DXCM), DataDog (DDOG), Cloudflare (NET), Expedia (EXPE) are all on Thursday.
That is a very abbreviated list of earnings throughout the week. Be sure to check for scheduled earnings reports for stocks in your own portfolio.
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The Bullish Side
After a bearish week last week, the market told us it was not ready to back down yet. This week's strong recovery and steady bullish gains throughout the week are a statement to investors. The rally was driven by confidence in the economic recovery and optimism that a new stimulus bill will make economic recovery even better.
It seems we've cleared past the retail investor craziness of the past few weeks. Although Wall Street Bets will continue to exist, I think a large enough number of those investors got burned by buying near the top that we'll see less commitment to future short squeeze attempts.
Earnings reports have continued to outperform expectations. As you page through the reports for the past two weeks, earnings expectations are being beat in all cap segments and all industry sectors. Those expectations were lowered by analysts worried about the economy, but the results bring more confidence in the strength of the recovery.
The treasury yield curve is a big indicator of what investors are expecting from the economic recovery and impact of further stimulus. Investors are moving away from longer term bonds and into shorter term treasury bonds. They are moving from safe Investment Grade corporate bonds to riskier High Yield corporate bonds.
Energy is back at the lead for the sectors. Energy doesn't have to lead for market rallies, but when it is leading, the market is almost always in a rally.
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The Bearish Side
Investor optimism remains a mix of overly bullish sentiment represented by the put/call ratio, but caution as seen by the CNN Fear & Greed indicators. The mix means investors want to stay in the market and capitalize on gains, but seem to have one foot out the door in case things go bad. That has resulted in this back and forth of up and down weeks the past six weeks.
That back and forth has also resulted in a number of huge spikes in the VIX volatility index over the past 1.5 months. Analysts often see the number of spikes of 20% or more as an indicator of a pending downturn in the market.
The passing of a stimulus seems likely, but is not guaranteed. It also seems certain that the package will change as negotiations continue in congress. The market may be sensitive to those changes and would definitely react negatively of the stimulus talks stall.
There has been great progress in getting vaccines out to the public, but we are not out of the woods yet. Bad news could be new mutations or failure of the supply chain for producing the vaccines.
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Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
Friday's high of 13,878.61 will be the first test. Another weekly high would be a great sign for a continued rally.
The next level will be 14,000 which could be met with round-number resistance. This is the tendency for traders to pick round-numbers for profit taking. Some may view 14,000 as potential top and move to the sidelines for safety.
On the downside, there are several key levels to raise caution flags:
The 21d EMA is at 13,357.48. That is around 3.5% below Friday's close.
The low of the week this past week is 13,132.47. Not creating a new low will be the first test of the downside.
There is support at the 13,000 area, seen in the lows from the first week of 1/11.
The 50d MA is at 12,899.22. A violation of this line will be an added warning side. It has not been tested since 11/4.
Several possible areas of support at 12,550, 12,250, and 12,000.
The 200d MA moved above the lows of October and is now about 20% below the index at 11,170.35.
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Wrap-up
It was a powerful week that many traders and investors saw a tremendous number of gains. That makes it tough to have an expectation for the next week. Will investors want to take some profits and move to the sidelines or will the rally continue, fueled by stimulus and more earnings reports that beat expectations?
The key thing this past two weeks point out is that you can't overreact to market signals. Ending last week, you might have wanted to sell everything and run to safety. However, you would have missed out on a huge week of gains.
So how do you handle the mixed signals? Follow your system. Look at where you're individual stock picks are doing against your buy and sell rules. If the market is signaling caution and fear is creeping in, then reduce position sizes, but avoid panic selling.
Let's hope for another great week of gains!
Good luck, stay healthy and trade safe!
Daily Market Update for 2/5Trend lines drawn from the 10/30 bottom (67d), 2/1 (5d) and today 2/5 (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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Friday, February 5, 2021
Facts: +0.57%, Volume lower, Closing range: 81%, Body: 27%
Good: New all-time high, not overly heated gain
Bad: Some pullback in the afternoon
Highs/Lows: Higher high, higher low
Candle: Thin body in upper half of the candle, longer lower wick from morning dip.
Advance/Decline: 1.95, two advancing stocks for every declining stock
Indexes: SPX (+0.39%), DJI (+0.30%), RUT (+1.40%), VIX (-4.13%)
Sectors: Materials (XLB +1.72%) and Communications (XLC +1.26%) were top. Technology (XLK -0.22%) was the bottom sector for the day.
Expectation: Higher
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Market Overview
The markets topped a bullish week with one more gain on Friday. Every day this week produced a higher high and a higher low on the Nasdaq. The broad market rally continued despite disappointing employment data as investors hope the data will accelerate the stimulus bill through congress.
The index closed with a +0.57% gain on lower volume. The closing range was 81%. The long lower wick, created by a morning dip right after open, is below a 27% body. The opening price became support in the afternoon as the index tested the area twice. There were two advancing stocks for every declining stock.
The S&P 500 (SPX) and Dow Jones Industrial (DJI) gained +0.39% and +0.30%. The Russell 2000 (RUT) formed its second Marubozu White candle in as many days, gaining 1.40%. The bullish candle had no upper or lower wick with the open being the low of the day and the close being the high of the day.
The VIX declined another -4.13%.
Materials (XLB +1.72%) and Communications (XLC +1.26%) were the top sectors of the day. Technology (XLK -0.22%) was the only loosing sector for the day.
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Economic Indicators
The US Dollar (DXY) declined -0.53% for the day, possibly due to the disappointing economic data. The US 30y and 10y treasury bond yields rose while the US 2y declined sharply. The yield curve continues to steepen since the beginning of the year. High Yield Corporate Bond (HYG) prices rose for another day.
Silver (SILVER) and Gold (GOLD) both advanced for the day. Crude Oil (CRUDEOIL1!) futures continued to climb higher. Timber (WOOD), Copper (COPPER1!), and Aluminum (ALI1!) all advanced.
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Investor Sentiment
The put/call ratio declined to 0.578. 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
Alphabet (GOOGL) added to recent gains with a +1.71% advanced. Amazon (AMZN) was up +0.63% as the market moves past this week's news. Microsoft (MSFT) had a small gain of +0.08% as the stock consolidates a bit on lower volume. Apple (AAPL) declined -0.46%. All four are trading above the key moving average lines, but below their all-time highs.
Abbott Laboratories (ABT) was the leading mega-cap of the day with a +3.58% gain. ABT was following by Exxon Mobil (XOM +3.35%), Nike (NIKE +3.19%) and Toyota Motor (TM +1.92%).
Digital Turbine (APPS) added to yesterday's big gain with a 14.11% advance today. SNAP (SNAP) rose +9.14% even after selling off -10% in yesterday's post market reaction to earnings. Magnite (MGNI) rose +26.25%. Peloton (PTON) declined -5.86% on warnings of continued slow delivery to new customers.
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Looking ahead
There is not much economic news scheduled for Monday. However watch for updates on the Stimulus bill over the weekend.
SoftBank Group will announce earnings on Monday. Timing is not listed, but it's likely to be before US markets open. Chegg (CHGG) will release earnings after market close.
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Trends, Support and Resistance
The five-day trend line points to a +1.12% gain for Monday. The one-day trend is a bit under that line and points to a +0.54% gain.
The long-term trend line from the 10/30 bottom points to a small -0.58% pullback.
If there is further downside, the 21d EMA line offers an area of support and is -3.54% below Friday's close. The 13,000 level also seems to be an area of support. The index 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 positive end to a great week. Time to use the weekend to relax and enjoy the gains.
Stay healthy and take care!
Nasdaq/IXICNext round of stimulus promise has pushed this out of it channel. I've circled in yellow the last 2 times the Nasdaq has touched the top of its channel. There is one difference here and it might be important to you if you are an oscillator man; The RSI is actually reasonable this time around at channel top compared to the previous 2 times. Still it made a new high today on lower than average VOLUME for me that's another red flag. Outside of promise for new stimulus today I think the market would've already pullback. My target is the channel bottom which also closes that gap made on Feb2
Daily Market Update for 2/4Trend lines drawn from the 10/30 bottom (66d), 1/29 (5d) and today 2/4 (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, February 4, 2021
Facts: +1.23%, Volume lower, Closing range: 100%, Body: 71%
Good: Constant gain after morning dip, new all-time high
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Mostly green body with short lower wick, no upper wick
Advance/Decline: 2.70, More than two advancing stocks for every declining stock
Indexes: SPX (+1.09%), DJI (+1.08%), RUT (+1.98%), VIX (-4.98%)
Sectors: Financials (XLF +2.22%) and Technology (XLK +1.60%) were top. Materials (XLB -0.36%) was the only sector to lose for the day.
Expectation: Higher
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Market Overview
A positive expectation breaker is always welcome in the Daily Market Update. Despite yesterday's candle showing some bearish indication, today the Nasdaq proved it wasn't ready to move back down. A new all-time high adds to the string of higher highs and higher lows we've had all week.
The index closed with a +1.23% gain. Volume was lower than the previous day but continues to be higher than the 50d moving average volume. The candle has a closing range of 100% created by a spike in prices in the last 10 minutes of trading. The short lower wick was created in a 30 minute window of volatility in the morning. There were more than two advancing stocks for every declining stock.
The S&P 500 (SPX) and Dow Jones Industrial (DJI) advanced +1.09% and +1.08%. The Russell 2000 (RUT) outperformed the other indexes with a +1.98% gain and a Marubozu White candle, represented by no lower or upper wick. It's 100% green body from open to close.
The VIX continued to retreat with a -4.98% decline as volatility returns to lower levels.
Financials (XLF +2.22%) and Technology (XLK +1.60%) were top sectors for the day. Energy (XLE +1.10%) also outperformed the S&P 500. That's significant since usually when Energy performs well, the rest of the market also performs well. Materials (XLB -0.36%) was the only sector to lose for the day.
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Economic Indicators
The US Dollar (DXY) advanced +0.39% for the day and continues to trend upward from the January 5 low. The US 30y treasury bond yield rose slightly while the US 10y and US 2y declined. High Yield Corporate Bond (HYG) prices rose for another day.
Silver (SILVER) and Gold (GOLD) both declined about 2% for the day. Crude Oil (CRUDEOIL1!) futures continued to climb. Timber (WOOD) remained even. Copper (COPPER1!) declined while Aluminum (ALI1!) advanced.
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Investor Sentiment
The put/call ratio declined to 0.587. 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 and the NAAIM exposure index both remain at reasonably cautious levels.
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Market Leaders
Apple (AAPL) and Amazon (AMZN) advanced for the day while Microsoft (MSFT) and Alphabet (GOOGL) declined. These big four mega-caps are all trading above key moving average lines.
PayPal (PYPL) led the mega-caps with a +7.36% gain after beating earnings and revenue expectations in their earnings report. Visa (V), Bank of America (BAC) and Mastercard (M) were also at the top of the mega-cap list, leading the Financials sector for the day.
Among growth stocks, Digital Turbine (APPS) led with a +19.79% gain after crushing their earnings expectations. Chinese fintech company UP Fintech (TIGR) added another day of huge gains with a 15.25% advance.
After hours Pinterest (PINS) was up 9.73% upon beating earnings expectations. SNAP (SNAP) did not fare as well and was down -7.44%. Peloton (PTON) was down -8.14% despite beating expectations. They warned off continued delays in delivery due to a growing backlog.
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Looking ahead
More employment data will be released before market open on Friday. In the afternoon, commodities trading data will be released. Speculative positions on Silver futures might be interesting.
The end of the busy earnings week will bring some reports before market open, but none that are followed by this Daily Market Update. However, check the stocks in your portfolio to make sure you aren't surprised by earnings.
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Trends, Support and Resistance
The five-day trend line points to a +1.45% gain on Friday. The one-day trend is a bit under that line and points to a +0.73% gain.
The long-term trend line from the 10/30 bottom points to a small -0.32% pullback.
If there is further downside, the 21d EMA line offers an area of support and is -3.37% below Thursday's close. The 13,000 level also seems to be an area of support. The index 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 positive expectation breaker was another sign that this market has room to grow. Liquidity is high in the market with above average volume. Investors continue to lack other places to move money, with Treasury Bond yields remaining low and gaining strength against other currencies.
Expectation is for higher tomorrow, but never take that as a prediction. Always manage risk and protect the value you've worked so hard to build.
Stay healthy and take care!
Daily Market Update for 2/3Trend lines drawn from the 10/30 bottom (64d), 1/27 (5d) and today 2/2 (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, February 3, 2021
Facts: -0.02%, Volume higher, Closing range: 18%, Body: 78%
Good: Higher high, higher low, held support above morning low
Bad: Sell off late afternoon
Highs/Lows: Higher high, higher low
Candle: Mostly red body formed from morning and afternoon dips
Advance/Decline: 1.65, almost three advancing stocks for every two declining stocks
Indexes: SPX (+0.10%), DJI (+0.12%), RUT (+0.38%), VIX (-10.37%)
Sectors: Energy (XLE +4.27%) and Communications (XLC +1.34%)were top. Consumer Discretionary (XLY -0.56%) and Health Services (XLV +0.29%) were bottom.
Expectation: Sideways or Lower
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Market Overview
The Nasdaq paused today after two days of big gains. It made an two attempts to have another day of gains, but dipped in morning and late afternoon trading. Still there were advances across a large number of stocks, fueled by great earnings reports from big mega-caps the day before.
The Nasdaq closed with a -0.02% loss, moving sideways after gaining over 4% the past two days. Volume was slightly higher than the previous days. The closing range of 18% and a red body of 78% are the result of the morning and late-afternoon dips. Overall, the candle presents bearish, so expectations are set for sideways or lower. Advancing stocks did outnumber declining stocks on a 3 to 2 ratio.
The S&P 500 (SPX), Dow Jones Industrial (DJI) both advanced for the day, gaining +0.10% and +0.12%. The Russell 2000 (RUT) led the major indexes with a +0.38%. The Russell 2000 presented a much more bullish candle and so we will be watching closely the small caps for the next day or two.
Sectors were mixed for the day. Energy (XLE +4.27%) led the sectors on soaring Crude Oil futures numbers. Communications (XLC +1.34%) was second, gaining momentum from Alphabet (GOOGL) which advanced on a great earnings report. Consumer Discretionary (XLY -0.56%) and Health Services (XLV +0.29%) were bottom.
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Economic Indicators
The US Dollar (DXY) declined -0.11% for the day. US 30y, 10y and 2y treasury bond yields all rose for the day, signaling investors moving to riskier assets. High Yields Corporate bond (HYG) prices advanced.
Silver (SILVER) gained slightly as it resumes a more normalized pattern after volatility earlier in the week. Gold (GOLD) declined slightly for the day. Crude Oil (CRUDEOIL1!) futures continued to climb. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) both advanced.
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Investor Sentiment
The put/call ratio rose to 0.687. 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
Alphabet (GOOGL) ended the day with a +7.28% gain after soaring nearly 10% intraday. Amazon (AMZN) lost -2%. Despite beating expectations on earnings and revenue, the announcement of Jeff Bezos moving from CEO to chairman was enough to pour water on the exciting results. Microsoft (MSFT) gained +1.46% while Apple (AAPL) declined -0.78%.
Exxon Mobil (XOM +3.92%), Alibaba (BABA +3.51%) and Toyota Motor (TM +3.46%) were the other top advancing mega-caps for the day. Tesla (TSLA -2.07%) was the worst performing mega-cap, just behind Amazon.
Chinese fintech company UP Fintech (TIGR) was a top growth stock with a +16.19% gain. GrowGeneration (GRWG) added to recent gains with another 9.15%. Two smaller growth companies that have become popular are Mohawk with a +12.56% gain and HyreCar with a +32.15% gain (almost 60% for the week). Both have been featured in my TradingView ideas.
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Looking ahead
Initial Jobless Claims data will be released in the morning. Hopefully it will add to positive employment news that we received today. Factory Orders data for December will be released after market open.
Additional FOMC members will speak in the afternoon.
Social networking companies SNAP (SNAP) and Pinterest (PINS) will release earnings tomorrow after close. Peloton (PTON), Penn National Gaming (PENN), Unity Software (U), Paylocity (PCTY) are among growth stocks reporting.
There is a long list of earnings reports tomorrow that I won't attempt to include all here. Check the stocks in your portfolio to make sure you aren't surprised by earnings.
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Trends, Support and Resistance
The one-day, five-day and long term trendline from the 10/30 bottom are all pointing to gains for tomorrow. The range is from +0.35% to 1.41%.
Expectation from the candle is sideways or lower, but a positive expectation breaker is always welcome.
The 21d EMA line has provided support before last Friday's close below the line. The 13,000 level also seems to be an area of support. The index 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 sideways move today could be constructive for further gains to come. It allowed the moving average lines to catch a bit. Bullish optimism cooled off as measured by the put/call ratio. It also was a chance for the market to absorb the final two earnings releases from the four big mega-caps.
The candle does indicate further pressure tomorrow, but the market can decide what it wants to do. Another day of mostly positive earnings reports could turn into more optimism and energy tomorrow, leading into another set of reports.
Stay healthy and take care!
Daily Market Update for 2/2Trend lines drawn from the 10/30 bottom (64d), 1/27 (5d) and today 2/2 (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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Tuesday, February 2, 2021
Facts: +1.56%, Volume higher, Closing range: 82% (with gap), Body: 60%
Good: Solid gains throughout the morning and early afternoon.
Bad: Slight fade in late afternoon
Highs/Lows: Higher high, higher low
Candle: Gap up, thick green body with small upper wick from fade
Advance/Decline: 2.81, almost three advancing stocks for every declining stock
Indexes: SPX (+1.39%), DJI (+1.57%), RUT (+1.19%), VIX (-15.48%)
Sectors: Financials (XLF +2.42%) and Consumer Discretionary (XLY +2.12%) were top. Real Estate (XLRE +0.43%) and Health Services (XLV +0.29%) were bottom.
Expectation: Higher
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Market Overview
The market added to Monday's gains with another positive day on Tuesday. Volatility fell back to more stable levels while gains continued to be spread broadly across stocks. The market faded slightly going into close, possibly as investors prepared for earnings reports from Amazon (AMZN) and Alphabet (GOOGL).
The Nasdaq closed the day with a +1.56% gain on higher volume. The closing range with the gap was 82% and a 60% green body sits under a short upper wick created by the late afternoon fade. The rising window candle indicates a bullish continuation, but with some caution given the fade into close. Almost three stocks advanced for each declining stock, the second day of broad advances.
The S&P 500 (SPX) advanced +1.39%. The Dow Jones Industrial (DJI) gained +1.57%. The Russell 2000 (RUT) advanced +1.19%.
All sectors gained for the day. Financials (XLF +2.42%) and Consumer Discretionary (XLY +2.12%) were top. Real Estate (XLRE +0.43%) and Health Services (XLV +0.29%) were bottom.
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Economic Indicators
The US Dollar (DXY) gained +0.24% for the day. US 30y and 10y treasury bond yields continued gains for another day. The US 2y treasury bond yields advanced after three days of declines. High Yields Corporate bond (HYG) prices advanced.
Silver (SILVER) declined sharply after huge gains yesterday fueled by retail investors targeting the commodity. Gold (GOLD) also declined for the day. Crude Oil (CRUDEOIL1!) futures went up on positive inventory data. Timber (WOOD) advanced. Copper (COPPER1!) declined while and Aluminum (ALI1!) both advanced.
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Investor Sentiment
The put/call ratio declined again to 0.545, signaling bullish optimism. 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
Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) all advanced for the day. Microsoft started the day with gains but closed with a light loss of -0.06%. All four are trading above key moving average lines, including Apple which had declined since earnings last week.
Mastercard (MA), Tesla (TSLA), Bank of America (BAC) and Walt Disney (DIS) led the mega-caps with over 3.5% gains each. Alibaba (BABA) declined -3.85% after a premarket earnings report that showed record revenue but forecasted uncertainty for the Ant group as China tightens controls on the company.
Chinese fintech company FUTU Holdings (FUTU) had another big gain of 11.40%. Organic plant and marijuana growing supply company, GrowGeneration (GRWG) gained 10.47% as optimism grows around a bill to legalize marijuana at the federal level. WorkDay (WDAY) and DraftKings (DKNG) also big gains, advancing +8.90% and +8.55%.
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Looking ahead
Purchasing Managers Index data will be released in the morning for Services and Non-Manufacturing sectors which provides a view the level of economic activity. Crude Oil Inventories will be released at 10:30.
Additional FOMC members will speak in the afternoon.
PayPal (PYPL) and Qualcomm (QCOM) are two significant earnings reports to be released after market close. Ebay (EBAY) will also report in the evening. Spotify (SPOT) will release earnings before market open.
There is a long list of earnings reports tomorrow that I won't attempt to include here. Check the stocks in your portfolio to make sure you aren't surprised by earnings.
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Trends, Support and Resistance
If Tuesday's one-day trend line continues into Wednesday, it points to a +0.93% gain. The long-term trend line from the 10/30 bottom points to a +0.40% gain.
The five-day trend line is pointing to a -0.92% loss which would still be well above 21d EMA.
The 21d EMA line has provided support before last Friday's close below the line. The 13,000 level also seems to be an area of support. The index 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 gap-up with solid gains for most of the day was very bullish for the index and broadly shared across the sectors and cap segments. The slight fade late in the day is likely due to the two significant earnings reports from mega-caps Amazon and Google which could influence the market heavily.
So far it seems we are off to a bullish week after last week's selling. However, keep in mind that things can change quickly as stimulus and pandemic news occurs.
Stay healthy and take care!
Daily Market Update for 2/1Trend lines drawn from the 10/30 bottom (63d), 1/26 (5d) and today 2/1 (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, February 1, 2021
Facts: +2.55%, Volume lower, Closing range: 91%, Body: 59%
Good: Close back above the 21d EMA, steady climb after morning dip
Bad: Nothing
Highs/Lows: Higher high, higher low
Candle: Thick green body with longer lower wick
Advance/Decline: 3.19, three advancing stocks for every declining stock
Indexes: SPX (+1.61%), DJI (+0.76%), RUT (+2.53%), VIX (-8.61%)
Sectors: Consumer Discretionary (XLY +2.60%) and Technology (XLK +2.51%) were top. Consumer Staples (XLP +0.09%) and Health Services (XLV +0.38%) were bottom.
Expectation: Sideways or Higher
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Market Overview
February kicked off with broad gains across the Nasdaq. The index took a short dip in the morning and then headed upward for the rest of the day. Manufacturing data released after market open was a little lower than analyst expectations, but still high compared to the two-year monthly average.
The Nasdaq closed the day with a +2.55% gain on lower volume. The closing range of 91% and the 59% green body show the strong buying that occurred throughout the day after a morning dip. The index closed above the 21d EMA, a key area of support. Many participants benefited from the gains as there were three advancing stocks for every declining stock.
The S&P 500 (SPX) advanced +1.61% while the Dow Jones Industrial (DJI) gained +0.76%. The Russell 2000 (RUT) advanced +2.53%.
All sectors gained for the day. Consumer Discretionary (XLY +2.60%) and Technology (XLK +2.51%) were led the sector list. Real Estate (XLRE +2.26%) was also near the top. Consumer Staples (XLP +0.09%), Health Services (XLV +0.38%), and Utilities (XLU +0.48%) were at the bottom.
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Economic Indicators
The US Dollar (DXY) gained +0.44% for the day. US 30y and 10y treasury bond yields gained for the day while the 2y treasury bond yields declined. High Yields Corporate bond (HYG) prices declined.
Silver (SILVER) gained another 7%, fueled by retail investors targeting the commodity. Gold (GOLD) also advanced for the day. Crude Oil (CRUDEOIL1!) futures wend up. Timber (WOOD) advanced. Copper (COPPER1!) and Aluminum (ALI1!) both declined.
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Investor Sentiment
The put/call ratio declined back to 0.567, signaling bullish optimism. 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
All four of the biggest mega-caps gained with Amazon (AMZN) advancing the most with a +4.26% gain. Microsoft (MSFT) and Alphabet (GOOGL) also had big gains with +3.32% and +3.60% respectively. Apple (AAPL) had a smaller gain at +1.65%, which was enough to close above its 21d EMA.
Tesla (TSLA) was the top mega-cap of the day with a +5.83% gain. Very few mega-caps declined for the day.
Growth stocks also did very well. Magnite (MGNI), Fiverr (FVRR) and SNAP (SNAP) were among top gainers with +12.59%, +9.38% and +7.39% advances. Chinese stocks Ehang Holdings (EH), Up Fintech (TIGR) and FUTU Holdings (FUTU) gained +22.81%, +18.50% and +5.62%.
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Looking ahead
FOMC Members Mester and Williams will speak tomorrow afternoon.
API Weekly Crude Oil Stock numbers will be released after market close.
An update on Manufacturing activity for January will be released as the market opens on Monday. The last update showed Manufacturing activity at a record high level.
Alibaba (BABA), Pfizer (PFE), United Parcel Service (UPS) and Exxon Mobil (XOM) will release earnings before market open. Amazon (AMZN) and Alphabet (GOOGL) will release earnings after market close. There are many other earnings releases schedule for tomorrow, so be sure to check your portfolio for earnings events.
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Trends, Support and Resistance
If Monday's one-day trend line continues into Tuesday, it points to a +2.33% gain. The long-term trend line from the 10/30 bottom points to a +1.77% gain.
The five-day trend line is pointing to a -2.32% loss which would be below the 21d EMA again.
The 21d EMA line has provided support before Friday's close below the line. The 13,000 level also seems to be an area of support. The index 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 Nasdaq made a nice recovery on this Monday after a bearish move in the previous week. Another day or two of gains would confirm the reversal and put us back on a path for higher highs.
Stay healthy and take care!
NASDAQ COMPOSITE short-term analysisThe short-term trend chart of IXIC is presented.
The full analysis of DJ, SPY and IXIC follows next. ____
Prompt: New traders should take some time and carefully read the post they will find on my profile entitled 'You can't beat the market'.
Disclaimer
The author of this text is not an investment advisor. The preceding content is intended to be used for informational and educational purposes only.
It is not an advice or inducement for the purchase or sale of the products mentioned. Before making any investment based on your own personal circumstances,
it is very important to do your own research and analysis and also take independent financial advice from a professional to verify any information provided here.
Market Week In Review - 1/25/2021 - 1/29/2021The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
A recap of the daily updates that I do here on TradingView.
The Meaning of Life, a view on the past week
What's coming in the next week
The Bullish View, The Bearish View
Key index levels to watch out for
Wrap-up
If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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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
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. The bears a little late to wake up on a Monday morning, sold-off the index heavily, an hour after opening. 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.
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Tuesday, January 26, 2021
Facts: -0.07%, Volume lower, Closing range: 23%, Body: 56%
Good: Low is well-above last week's highs
Bad: Thich red body relative to rest of candle, closing range
Highs/Lows: Lower high, higher low
Candle: Mostly body with tiny upper and lower wicks, insider day
Advance/Decline: 0.59, more declining stocks than advancing stocks
Indexes: SPX (-0.15%), DJI (-0.07%), RUT (-0.62%), VIX (-0.73%)
Sectors: Communications (XLC +1.36%) and Real Estate (XLRE +1.02%) were top. Materials (XLB -1.38%) and Energy (XLE -2.14%) were bottom.
Expectation: Sideways or Lower
Although some wild happenings continue to occur in the market, the Nasdaq composite index had a rather boring day. And that can be a good thing. Yesterday's big dip and recovery followed a week of huge growth. So a day of mostly sideways action, which held lows well above last week's highs, can be very constructive for the index.
The Nasdaq ended with a -0.07% on lower volume. The closing range of 23% and 56% red body sounds bad, but is within a candle that is only 0.73% from top to bottom. Compare that to the previous days candle that had a 2.70% trading range. There were more declining stocks than advancing stocks.
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Wednesday, January 27, 2021
Facts: -2.61%, Volume higher, Closing range: 22%, Body: 63%
Good: Not much, held support after closing last week's gap.
Bad: Gap down, long red body with late day selling
Highs/Lows: Lower high, lower low
Candle: Mostly body with visible upper and lower wick
Advance/Decline: 0.19, five declining stocks for each advancing stock
Indexes: SPX (-2.57%), DJI (-2.05%), RUT (-1.91%), VIX (61.64%)
Sectors: Real Estate (XLRE -1.28%), Energy (XLE -1.35%) were top. Communications (XLC -3.23%) was bottom.
Expectation: Lower
Today was a little more exciting then yesterday, but not in the way we wanted. The Nasdaq opened with a gap down, chopped back and forth and then sold off after the Fed announcements. The fed will keep current monetary policy and interest rates, but said there are still a lot of headwinds for the economy.
The Nasdaq closed with a -2.61% loss after testing the 21d EMA. Volume was over 60% higher than the previous day. The gap down at open along with the selling during the day resulted in a 19% closing range and a 63% red body. There were five declining stocks for every advancing stock
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Thursday, January 28, 2021
Facts: +0.50%, Volume lower, Closing range: 11%, Body: 7%
Good: Stayed above yesterday's lows
Bad: Selling in the afternoon, could not hold the morning gains
Highs/Lows: Lower high, higher low
Candle: Long upper wick with thin body at bottom of candle
Advance/Decline: 1.29, more advancing than declining stocks
Indexes: SPX (+0.98%), DJI (+0.99%), RUT (-0.10%), VIX (-18.81%)
Sectors: Financial (XLF +1.86%) and Materials (XLB +1.72%) were top. Real Estate (XLRE +0.27%) and Consumer Discretionary (XLY +0.31%) were bottom.
Expectation: Sideways or Lower
The Nasdaq tried to have a bullish day but was turned away by the bears in the afternoon. There was still a gain for the day, but if the market was open another hour, that gain might have been wiped out.
The index closed with a +0.50% for the day. The volume was lower than the previous day, but well above the 50d moving average volume. The closing range of 11% and the 7% body with a long upper shadow, is the result of the morning gains being turned into afternoon selling. Still, at the end of the day there were more advancing stocks than declining stocks.
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Friday, January 29, 2021
Facts: -2.00%, Volume lower, Closing range: 25%, Body: 64%
Good: Closed above 13,000
Bad: Everything else, below 21d EMA, thick red body
Highs/Lows: Lower high, lower low
Candle: Thick red body with visible, but not long, upper and lower wicks.
Advance/Decline: 0.46, two declining for every advancing stock
Indexes: SPX (-1.93%%), DJI (-2.03%), RUT (-1.56%), VIX (+9.53%)
Sectors: Utilities (XLU -0.54%) and Health Services (XLV -0.84%) were top. Energy (XLE -3.32%) and Technology (-2.36%) were bottom.
Expectation: Lower
It was not a great way to end January, which until this week was a rather bullish month for investors. The onslaught of retail traders on hedge funds proved to be too much for the market to handle. Not all of the downside is due to the crazy trading, but some of it is from large hedge investors covering lost short bets by selling long positions. And some of it is likely the added uncertainty that the actions brought to the market. Add to that some mixed vaccine news which has been impacting markets lately.
The index closed with a -2.00% loss to end one of the worst weeks since October. The volume was lower than the previous day, but still above the 50d moving average volume. The closing range of 25% and 64% body shows a decidedly bearish day which brought the index to its first close below the 21d EMA line since early November.
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The Meaning of Life (View on the Week)
There are a number of things to study and learn from this week. Far more than I'll be able to unwrap and understand in this week's market in review. Things like the retail onslaught of hedge funds and free trading platforms will likely be studied in the history books. After an all-time high on Monday morning, things unraveled from there as the week progressed.
As conditions worsened, the put/call ratio got lower, indicating optimism, while the CNN Fear & Greed index moved toward fear. By Wednesday's survey the NAAIM exposure index that tracks money manager's exposure to the market had moved from 112 the previous week to 85 this week.
On Monday's daily update I wrote, "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." The impact that is to come is still unfolding, but a few things started to emerge.
The retail trader attack on hedge funds seemingly worked. As Melvin Capital neared bankruptcy from huge losses on short bets, competitors Citadel and Point72 bailed them out with $2.75 billion of investment. A big question to answer is why they bailed out a competitor with a non-controlling investment. Prehaps they already had investments in Melvin to protect. Whatever it is, likely there would have been harm to Citadel and Point72 if Melvin failed. If it could cascade across competitors, then it can cascade further.
On Thursday, retail traders turned their anger on Robinhood as it needed to stop trading of volatile stocks in order to meet financial demands of their arrangement with clearing houses, including Citadel. Robinhood's investors brought another $1 billion of capital to Robinhood so they could continue to operate and open back some trading of the volatile stocks. That only caused another surge in stock prices on Friday, and an expanding list (up to 50 most recently) of stocks that are being limited on the platform.
The story is not over, and we'll continue to watch and learn from this tipping point of retail casino investing. A question yet to be answered is what if Robinhood fails. How far does the damage extend beyond its own members.
The market came into the week already cautious. Monday morning saw the Utilities sector in the lead even before the mid-morning sell-off began. Utilities and Real Estate would stay near the top of the sector list throughout the week and along with Consumer Staples, make up the top three ad the end of the week. The last time Real Estate and Utilities led for a week was in February 2020. No fear. Just fact.
The index made attempts on Tuesday and Thursday to hold support. On Tuesday, the action was mostly sideways even though a slight decline. Bulls attempted a rally on Thursday, only to see the gains get sold off in the afternoon. The regression trend lines that I use all showed gains for Friday. That wasn't so much a sign of a possible upward reversal, it was screaming that we were at the bottom of all three regression trend channels, and heading farther south.
Friday would confirm that direction with another big sell-off. Many will point to the fact that hedge funds needed to sell long positions to cover their short positions. However, that's a small part of the selling. More likely nervousness was ripping through the market as retail traders expand the huge lists of targeted stocks.
The Nasdaq declined -3.49% for the week on the highest weekly volume in its history. The S&P 500 (SPX) declined -1.93%. The Dow Jones Industrial (DHI) declined -2.03%. The Russell 2000 (RUT) declined -1.56%.
The closing range for the week was 12% and the red body covered 82% of the candle. We did get a higher high on Monday. We also got a lower low than the previous week. The open and close are also entirely outside last week's range. That's a solid bearish engulfing candle. The huge gain last week and reversal this week has the appearance of a climax top.
Real Estate ( XLRE ) and Utilities ( XLU ) are the top sectors for the week. Ouch!
None of the sectors ended the week with gains as the S&P 500 pulled back -3.31%.
Utilities led as the market opened on Monday morning. Communications ( XLC ) took a very brief lead on Tuesday, but the Real Estate took the top spot.
Consumer Staples ( XLP ) attempted to take the lead on Wednesday, but couldn't hold the lead and ended in third place.
Energy ( XLE ) was the worst performing sector of the week.
The chart clearly shows the wild ride for the sectors on the last three days of the week. Wednesday had all sectors losing for the day. On Thursday, all sectors advanced . On Friday all sectors declined again.
The relatively smooth ride for Real Estate, Utilities and Consumer Staples represents their position as defense moves for investors. All three sectors represent parts of the economy that must continue, even if other parts are recovering slowly or even failing.
US 10y, 20y and 2y Treasury Bond Yields all declined for the week. However, note that on Friday the 10y and 20y yields rose 1.38% and 1.97% respectively while the 2y yield dropped by -9.44%. Keep in mind that yields go higher when investors are selling and yields go lower when investors are buying. Longer term bonds carry higher risk than shorter term bonds, so this was a quick turn on Friday to reduce risk.
High Yield Corporate Bonds (HYG) prices dropped for the week, which would be expected given the other signs that investors are reducing risk. The more significant sign of investors nervousness is that the Investment Grade Bonds (LQD) prices also dropped.
The US Dollar (DXY) advanced +0.38% for the week.
Silver (SILVER) was up +5.76% while Gold (GOLD) dropped -0.44% for the week.
Crude Oil futures (CRUDEOIL1!) dropped back slightly with a -0.39% loss.
Timber (WOOD) is down -4.31%. Copper (COPPER!1) is down -1.46%. Aluminum (ALI1!) is down +1.03%.
In the previous week, the big four mega-caps drove the rally as they all seemed to break out of price and volume consolidation patterns. However, this week would disappoint investors as three of the four gave back those gains. Apple (AAPL) underperformed the market despite releasing a quarterly update that beat expectations on earnings and revenues.
Microsoft (MSFT) was the only bright spot among these four, outperforming the market and remaining above the breakout from the previous week. Their earnings release was well received among investors with strength across multiple parts of the business. However, it did not escape the selling on Friday and ends the week with a long upper shadow.
Amazon (AMZN) and Alphabet (GOOGL) will report on 2/2.
www.tradingview.com
The put/call ratio (PCCE) ended the week at 0.782, a much better value than previous weeks. However, within the week the PCCE remained very low despite the several signs of trouble in the market. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction.
The CNN Fear & Greed index moved into the fear level and has been there for most of the week, despite the put/call ratio indicating optimism most of the week.
Money managers lowered their market exposure from the past week. Last week, exposure was at 112 as measured by the NAAIM exposure index, which is one of the highest leveraged levels since 2017. This week it is down to 85.
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The Week Ahead
The week will kick-off with Manufacturing PMI data for January. The purchasing managers index data jumped in January to its highest point in 14 years as the sector catches up from shutdowns and supply chain issues during the pandemic. That data along with positive manufacturing employment data could provide optimism for investors and bullishness for the US dollar.
Non-manufacturing PMI data will be released on Wednesday. Non-manufacturing has not shown quite as much recovery as the Manufacturing sector.
Additional employment data will be made available on Wednesday, Thursday and Friday.
It will be another busy week of earnings reports from large-cap companies. Thermo Fisher Scientific (TMO) will kick-off the week with earnings before market open on Monday. Tuesday morning will bring earnings updates from Pfizer (PFE), Exxon Mobil (XOM) and United Parcel Service (UPS). Amazon (AMZN) and Alphabet (GOOGL) will release earnings on Tuesday evening. PayPal (PYPL), (Qualcomm (QCOM), and Ebay (EBAY) release earnings on Wednesday. Peloton (PTON) and Fortinet (FTNT) will announce on Thursday.
That is a very abbreviated list of earnings throughout the week. Be sure to check for scheduled earnings reports for stocks in your own portfolio.
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The Bullish Side
The market set another all-time high this past week. That is 10 weeks in a row. The pullback later in the week is expected after such a long run of gains. Although some stocks dropped despite great earnings reports, there are some that were rewarded, such as Microsoft.
The pullbacks achieved what is needed to bring some stability to the market as it continues a bullish run. Investor sentiment was brought back from the high levels of previous weeks and the added caution to the market can help make gains on more solid ground.
The Fed this past week announced a continuation of monetary policy. They will continue purchasing mortgage back securities to keep liquidity in the market. They also will continue the low interest rates that have kept investors out of bonds and into equities and other higher risk/reward assets. The intended impact of higher inflation seemed to begin showing up in the Core PCE data this week, while not so high to cause a change in policy.
The government is still pending additional stimulus. That stimulus when released will inject even more liquidity into the economy and raise confidence for investors. Stimulus checks may just start to unlock consumer spending that has been held back by fears. Help with rent and employment will increase consumer confidence. The record consumer savings accumulated over the past year might just get unleashed into the economy as well.
Great earnings reports from the big mega-caps could bring some new support and even momentum upward to the market…
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The Bearish Side
…Disappointing earnings reports from the big mega-caps could be too much for markets to handle right now.
There is a lot to support the bearish side this week and I covered much of it in "The Meaning of Life" section. The retail traders of WSB did more than just cause damage to a hedge fund. They revealed some fairly big shortcomings in how the market operates, especially when it comes to supporting a massive rush of retail traders. Those cracks in the system are no doubt under deep scrutiny right now by market makers, regulators and legislators. The changes that come may be a shock to the system.
It's clear that investors were moving from riskier assets to safe investments at the end of the week. Sell-off of equities on Friday, as well as corporate high yield and investment grade bonds. Move from long-term to short-term treasury bonds. The put/call ratio moved significantly upward as investors hedged against losses.
Despite Democrats controlling both sides of congress, the stimulus, or parts of it, may never get passed. Some are seeing that stimulus checks are not having the intended impact and want to reduce the amount, or the thresholds of income for people who receive them. Other rescue packages might feel too big or too broad and get nay votes even from Democrats.
The charts surely warn of a breakdown in the index. It market doesn't have to continue downward, but that's the direction the bearish engulfing candle is telling us now.
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Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
The 21d EMA turned from a support line to a resistance line during the week. You can see this from intraday charts. It is at 13,165.22. Getting past this resistance is the first step.
The next challenge is getting back through the gap created the previous week and into the overhead supply resistance. That is right around the 10d MA at 13,366.74.
If the index can move into the overhead supply, it may be a bit choppy, but it can start to head toward a new all-time high at 13,728.98.
On the downside, there are several key levels to raise caution flags:
The low of the week this past week is 12,985.05. Not creating a new low will be the first test of the downside.
There is support at the 13,000 area, seen in the lows from the first week of 1/11.
The 50d MA is at 12,720.83. A violation of this line will be an added warning side. It has not been tested since 11/4.
Several possible areas of support at 12,550, 12,250, and 12,000.
The 200d MA moved above the lows of October and is now about 15% below the index at 11,041.56.
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Wrap-up
There are some things to be nervous about this week. Signs have shown since Monday that the market is not just pulling back but reversing downward. However, that direction is not written in stone. The market can decide when it wants to go up and when it wants to go down.
It's a good time to rank the investments you have and decide which ones require some reduction in exposure. However, keep an open mind to the ones still showing strength.
Finally, pullbacks are the best time to watch for relative strength of stocks in the market. Look for those stocks that are not dropping as fast or far as the index. These stocks will likely do the best when an upside reversal comes.
Good luck, stay healthy and trade safe!
Daily Market Update for 1/29Trend lines drawn from the 10/30 bottom (62d), 1/25 (5d) and today 1/29 (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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Friday, January 29, 2021
Facts: -2.00%, Volume lower, Closing range: 25%, Body: 64%
Good: Closed above 13,000
Bad: Everything else, below 21d EMA, thick red body
Highs/Lows: Lower high, lower low
Candle: Thick red body with visible, but not long, upper and lower wicks.
Advance/Decline: 0.46, two declining for every advancing stock
Indexes: SPX (-1.93%%), DJI (-2.03%), RUT (-1.56%), VIX (+9.53%)
Sectors: Utilities (XLU -0.54%) and Health Services (XLV -0.84%) were top. Energy (XLE -3.32%) and Technology (-2.36%) were bottom.
Expectation: Lower
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Market Overview
It was not a great way to end January, which until this week was a rather bullish month for investors. The onslaught of retail traders on hedge funds proved to be too much for the market to handle. Not all of the downside is due to the crazy trading, but some of it is from large hedge investors covering lost short bets by selling long positions. And some of it is likely the added uncertainty that the actions brought to the market. Add to that some mixed vaccine news which has been impacting markets lately.
The index closed with a -2.00% loss to end one of the worst weeks since October. The volume was lower than the previous day, but still above the 50d moving average volume. The closing range of 25% and 64% body shows a decidedly bearish day which brought the index to its first close below the 21d EMA line since early November.
The S&P 500 (SPX) declined -1.93% while the Dow Jones Industrial (DJI) lost -2.03%. The Russell 2000 (RUT) did a little better with a -1.56% loss.
All sectors lost for the day with Utilities (XLU -0.54%), Health Services (XLV -0.84%) and Real Estate (XLRE -1.05%) having the smallest declines. Technology (XLK -2.36%) and Energy (XLE -3.32%) declined the most.
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Economic Indicators
The US Dollar (DXY) gained +0.14% for the day. US 30y and 10y treasury bond yields gained for the day while the 2y treasury bond yields declined. High Yields Corporate bond (HYG) prices declined.
Silver (SILVER) continued its rapid gain. Gold (GOLD) also advanced for the day. Crude Oil (CRUDEOIL1!) futures declined. Timber (WOOD) declined. Copper (COPPER1!) and Aluminum (ALI1!) bot declined.
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Investor Sentiment
The put/call ratio declined to 0.782. 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
All four of the biggest mega-caps declined for the day. Amazon (AMZN) and Apple (AAPL) closed below their 21d EMA. Amazon tested the 50d MA but bounced and closed higher. Alphabet (GOOGL) dipped below the 21d EMA but closed above the line. Microsoft (MSFT) is still trading well above the moving average lines, despite a -2.29% pullback from yesterday's all-time high. Only Microsoft ended the week with a weekly gain.
Thermo Fisher Scientific (TMO) and Abbot Laboratories (ABT) were among only a handful of mega-cap stocks with gains. Tesla (TSLA) had its third day of losses as it dropped another -5.02%
Not many growth stocks found gains for the day. Moderna (MRNA) seemed to benefit from news that the vaccine from Johnson & Johnson (JNJ) is only 66% effective. Moderna gained +8.53% for the day. DataDog (DDOG) and CrowdStrike (CRWD) both held up nicely with good gains.
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Looking ahead
An update on Manufacturing activity for January will be released as the market opens on Monday. The last update showed Manufacturing activity at a record high level.
Thermo Fisher Scientific (TMO) will release quarterly earnings before market opens on Monday.
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Trends, Support and Resistance
The trend lines moved significantly with this week's close. The long-term trend line from the 10/30 bottom is point at +4.19%. That does not seem possible for Monday, but shows how far we've regressed from that trend midline.
The five-day trend line points to a -0.07% loss. The one-day trend line points to a -1.59% loss.
The 21d EMA line provided support early in today's session and then became resistance in the afternoon. The 13,000 level does seem to be holding for now. 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
If you had your trader eyes shut, its ok to open them now. It really wasn't that bad. The weekend is here and it's time to take a breather.
Take a step back and look at the weekly progress of the stocks in your portfolio. After a few days of declines it's important to assess the bigger picture.
Stay healthy and take care!
Strategy: Nasdaq Composite (IXIC) – Exercising Caution 13337Technology sector earnings remain fairly strong and there’s ample liquidity being provided by the US Federal Reserve, however it may be worth noting that the index trades 62% above it’s 200-week SMA. Prior extensions: +42% (Feb 2020) & 39% (Oct 2018). Should the index close at current levels or lower, the candle structure would be a ‘dark cloud cover’ as per the weekly chart. In addition, the weekly chart RSI has developed lower highs (negative divergence). While it may drift a few points higher, the risk to reward does not appear attractive from a buy/long perspective. Caution to those who are overly optimistic on US Technology shares. Last Close: 13337
Daily Market Update for 1/28Trend lines drawn from the 10/30 bottom (61d), 1/22 (5d) and today 1/28 (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 28, 2021
Facts: +0.50%, Volume lower, Closing range: 11%, Body: 7%
Good: Stayed above yesterday's lows
Bad: Selling in the afternoon, could not hold the morning gains
Highs/Lows: Lower high, higher low
Candle: Long upper wick with thin body at bottom of candle
Advance/Decline: 1.29, more advancing than declining stocks
Indexes: SPX (+0.98%), DJI (+0.99%), RUT (-0.10%), VIX (-18.81%)
Sectors: Financial (XLF +1.86%) and Materials (XLB +1.72%) were top. Real Estate (XLRE +0.27%) and Consumer Discretionary (XLY +0.31%) were bottom.
Expectation: Sideways or Lower
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Market Overview
The Nasdaq tried to have a bullish day but was turned away by the bears in the afternoon. There was still a gain for the day, but if the market was open another hour, that gain might have been wiped out.
The index closed with a +0.50% for the day. The volume was lower than the previous day, but well above the 50d moving average volume. The closing range of 11% and the 7% body with a long upper shadow, is the result of the morning gains being turned into afternoon selling. Still, at the end of the day there were more advancing stocks than declining stocks.
The S&P 500 (SPX) and Dow Jones Industrial (DJI) both gained about 1% but also had long upper shadows. The Russell 2000 (RUT) declined -0.10%.
All sectors had gains for the day. Financial (XLF +1.86%) and Materials (XLB +1.72%) were top. Real Estate (XLRE +0.27%) and Consumer Discretionary (XLY +0.31%) were bottom.
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Economic Indicators
The US Dollar (DXY) declined -0.21% for the day. US 30y, 10y and 2y treasury bond yields all gained for the day. High Yields Corporate bond (HYG) prices recovered from yesterday's dip.
Silver (SILVER) had a huge 4.99% gain while Gold (GOLD) moved sideways. Crude Oil (CRUDEOIL1!) futures declined. Timber (WOOD) advanced. Copper (COPPER1!) also advanced while Aluminum (ALI1!) declined.
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Investor Sentiment
The put/call ratio declined to 0.561. 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 NAAIM exposure index dropped back to 83.51 from the very high level of 112.93 last week.
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Market Leaders
Microsoft led the four biggest mega-caps with a +2.59% gain and a new all-time high. Alphabet (GOOGL) ended the day with a +1.88% gain. Amazon (AMZN) gained +0.16%. Apple (AAPL) was the only loser of the four with a decline of -3.50%.
Comcast (CMCSA) gained +6.57% after beating expectations in their pre-market earnings announcement. and Walt Disney (DIS +5.43%) led the for mega-caps. Tesla (TSLA -3.32%) joined Apple at the bottom of the mega-cap list.
Many growth stocks did well for the day. Penn National Gaming (PENN) was a big winner with a +9.55% gain. Square (SQ) had a +8.62% gain as it tries to reverse a recent downtrend. SNAP (SNAP +8.54%) also had a big gain. Beyond Meat (BYND), Sumo Logic (SUMO) and Palantir (PLTR) gave up some of the recent gains with losses from 6-9%.
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Looking ahead
Before market open tomorrow, updates for consumer price index data, personal spending and employment cost will be released. The data can be important to understanding the degree of inflation, but also whether there will be more or less pressures on consumers in the near term. For example, higher price index data with lower employment cost would show more pressure and maybe confirmed in the personal spending data and the consumer sentiment data to be release after market open.
Pending Homes Sales will also be released after market open.
Eli Lilly (LLY), Chevron (CVX) and Honeywell (HON) top the list of large companies releasing earnings before market open tomorrow.
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Trends, Support and Resistance
All three trend lines are pointing to a gain tomorrow. The long-term trend from the 10/30 bottom points toa +2.32% gain. The one-day trend points to a +1.25% while the five-day trend is pointing to a +0.44% gain.
On the downside, the 21d EMA is right under yesterday's low and could offer support for tomorrow. That's around a -1.10% decline.
In addition to the 21d EMA, the previous two week's highs around 13,200 acted as support after the index closed last week's gap up. Beyond that, 13,000 support seemed to hold 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 seemed a bit of a stalling day for the index as it made gains through the morning and early afternoon only to give up those gains in the late afternoon. It was good to stay above yesterday's lows, but the index was not able to make a new high today.
The inside day with the long-upper wick sets and expectation for another sideways or lower move tomorrow. However, the index could also find support at the 21d EMA and bounce the other direction. The regression trend-lines that I use all point to gains.
Stay healthy and take care!
Daily Market Update for 1/27Trend lines drawn from the 10/30 bottom (60d), 1/21 (5d) and today 1/26 (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 27, 2021
Facts: -2.61%, Volume higher, Closing range: 22%, Body: 63%
Good: Not much, held support after closing last week's gap.
Bad: Gap down, long red body with late day selling
Highs/Lows: Lower high, lower low
Candle: Mostly body with visible upper and lower wick
Advance/Decline: 0.19, five declining stocks for each advancing stock
Indexes: SPX (-2.57%), DJI (-2.05%), RUT (-1.91%), VIX (61.64%)
Sectors: Real Estate (XLRE -1.28%), Energy (XLE -1.35%) were top. Communications (XLC -3.23%) was bottom.
Expectation: Lower
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Market Overview
Today was a little more exciting then yesterday, but not in the way we wanted. The Nasdaq opened with a gap down, chopped back and forth and then sold off after the Fed announcements. The fed will keep current monetary policy and interest rates, but said there are still a lot of headwinds for the economy.
The Nasdaq closed with a -2.61% loss after testing the 21d EMA. Volume was over 60% higher than the previous day. The gap down at open along with the selling during the day resulted in a 19% closing range and a 63% red body. There were five declining stocks for every advancing stock
The S&P 500 (SPX), Dow Jones Industrial (DJI) and Russell 2000 (RUT) all closed with losses. The RUT had the smallest loss at -1.91%, but still a big pullback. The VIX gained 61.64% for the day and ended with a 100% closing range. It is at the highest point since the beginning of November.
All sectors lost for the day. Real Estate (XLRE -1.28%) and Energy (XLE -1.35%) were the smallest losses. Communications (XLC -3.23%) had the biggest loss. Energy was in positive territory at mid-day before the late afternoon sell-off.
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Economic Indicators
The US Dollar (DXY) gained +0.53% for the day. US 30y and 10y treasury bond yields declined for the day. US 2y treasury yields gained for the day. High Yields Corporate bond (HYG) prices declined.
Silver (SILVER) and Gold (GOLD) both declined for the day. Crude Oil (CRUDEOIL1!) gained as inventory data showed a better outlook on demand than the previous week. Timber (WOOD) declined -3.59% for the day. Copper (COPPER1!) and Aluminum (ALI1!) both declined.
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Investor Sentiment
The put/call ratio rose for the day, but remained at a low level of 0.588. 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
Three of the four largest mega-caps all declined for the day. Alphabet (GOOGL) had the biggest loss at -4.67%. Apple (AAPL) had the smallest loss at -0.77%, but declined another -3.23% after hours despite beating earnings and revenue expectations. Amazon (AMZN) lost -2.81%. Microsoft (MSFT) closed the session with a +0.25% advance, but at one point was up +3.5% after pleasing investors with yesterday's earnings release.
Microsoft was the only mega-cap with a gain. Netflix lost nearly all of its post-earnings gap with a -6.88% loss today.
A few growth stocks still did OK today. Palantir (PLTR) ended the day with a +10.26% gain, although was much higher mid-day. Beyond Meat (BYND) added to yesterday's big gains with a +2.81% gain.
Tesla (TSLA) is down -5% in post-market trading after missing earnings expectations. Facebook (FB) is down -2.07% after hours, despite beating earnings and revenue expectations.
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Looking ahead
Tomorrow's economic news will include Q4 GDP data and Initial Jobless claims before market open.
After the market opens, New Home Sales data for December will be released.
Earnings tomorrow will include Mastercard (MA) before market open and Visa (V) after market close. Comcast (CMCSA) and McDonalds (MCD) will also announce earnings before market open. Atlassian (TEAM) will release earnings after market close. Several airlines including Southwest (LUV), American Airlines (AAL) and JetBlue (JBLU) will also release earnings tomorrow.
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Trends, Support and Resistance
The index moved back below the long-term trend line from the 10/30 bottom. Returning to that line would be a +2.36% gain. The five-day trend line is under that point with a +1.74%.
Continuing the one-day trend points to a -1.22% loss. That would be below the 21d EMA which provided support today.
In addition to the 21d EMA, the previous two week's highs around 13,200 acted as support after the index closed last week's gap up. Beyond that, 13,000 support seemed to hold 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 distribution day for the major indexes today. Certainly a character change in the market. The gap up from last Wednesday's open was filled and the index seemed to pause at that point. As a defense to the selling, there was some purchasing of bonds but not a huge amount. The more alarming signal is the negative after hours reactions to fairly positive earnings reports from Apple and Facebook.
Some extra caution is required heading into tomorrow's session. The market can choose which direction it wants to go, and that could be a reversal off the 21d EMA for gains tomorrow. Or it could be further downside.
Take a look at your portfolio and have a plan based on your trading style and risk comfort level.
Stay healthy and take care!
Daily Market Update for 1/26Trend lines drawn from the 10/30 bottom (59d), 1/20 (5d) and today 1/26 (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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Tuesday, January 26, 2021
Facts: -0.07%, Volume lower, Closing range: 23%, Body: 56%
Good: Low is well-above last week's highs
Bad: Thich red body relative to rest of candle, closing range
Highs/Lows: Lower high, higher low
Candle: Mostly body with tiny upper and lower wicks, insider day
Advance/Decline: 0.59, more declining stocks than advancing stocks
Indexes: SPX (-0.15%), DJI (-0.07%), RUT (-0.62%), VIX (-0.73%)
Sectors: Communications (XLC +1.36%) and Real Estate (XLRE +1.02%) were top. Materials (XLB -1.38%) and Energy (XLE -2.14%) were bottom.
Expectation: Sideways or Lower
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Market Overview
Although some wild happenings continue to occur in the market, the Nasdaq composite index had a rather boring day. And that can be a good thing. Yesterday's big dip and recovery followed a week of huge growth. So a day of mostly sideways action, which held lows well above last week's highs, can be very constructive for the index.
The Nasdaq ended with a -0.07% on lower volume. The closing range of 23% and 56% red body sounds bad, but is within a candle that is only 0.73% from top to bottom. Compare that to the previous days candle that had a 2.70% trading range. There were more declining stocks than advancing stocks.
The S&P 500 (SPX), Dow Jones Industrial (DJI) and Russell 2000 (RUT) all closed with losses. The RUT had the biggest loss at -0.62%. The S&P 500 set a new all-time high before pulling back a bit.
Communications (XLC +1.36%) and Real Estate (XLRE +1.02%) were at the top of the sector list. Consumer Staples (XLP +0.90%) and Technology (XLK +0.07%) were the only other sectors to end the day with gains. Materials (XLB -1.38%) and Energy (XLE -2.14%) were bottom. Energy was up 1.48% at open but quickly sold off to end the day in last place.
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Economic Indicators
The US Dollar (DXY) declined -0.24% for the day. US 30y treasury bond yields were flat while 10y yields rose slightly. 2y yields dropped as investors purchased the bonds.
High Yields Corporate bond (HYG) prices declined.
Silver (SILVER) advanced while Gold (GOLD) declined for the day. Crude Oil (CRUDEOIL1!) remained flat. Timber (WOOD) advanced for the day. Copper (COPPER1!) remained flat while Aluminum (ALI1!) advanced.
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Investor Sentiment
The put/call ratio dropped slightly to 0.524. 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
All four of the largest mega-caps ended the day with gains. Microsoft (MSFT) had the biggest gain of +1.22% and continued to advance after hours with a beat on earnings and revenue expectations. Amazon (AMZN) and Alphabet (GOOGL) had gains of +0.98% and +0.72% respectively. Apple (AAPL) had the smallest gain of the four.
Johnson & Johnson (JNJ) led the mega-caps with a 2.71% gain after releasing pre-market earnings that beat expectations and gave positive guidance. Comcast (CMCSA) and AT&T (T) also had gains exceeding 2%, helping Communications to lead the sector list.
Growth stocks had a mixed day. One of the big winners was Beyond Meat (BYND) which followed yesterday's 13% gain with a 17.7% gain today. The stock soared 40% after Beyond Meat revealed a partnership with Pepsi to make products from plant-based proteins.
GameStop (GME) continued to…. nah, let's move on.
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Looking ahead
Core Durable Goods Orders data will be released before market open. Crude Oil Inventories will be released after market open. Today's API Weekly Crude number was lower than expected, a good sign for crude prices.
The big economic news tomorrow will be from the meeting of the Federal Open Market Committee. Out of the meeting, we will hear about changes in outlook on the economy and whether the Fed plans any changes to interest rates or monetary policy.
Tomorrow will be another big day for earnings releases. Apple (AAPL), Tesla (TSLA) and Facebook (FB) will all report earnings after market close. There are numerous other reports before and after the market, so be sure to check your portfolio for any companies that announce earnings tomorrow.
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Trends, Support and Resistance
The five-day trend line points to a +0.68% gain. The one-day trend line points to another sideways day, slightly to the positive.
The long trend line from the 10/30 bottom points to a -0.55% loss.
If there is a further downside move, its notable that the index held support today above last week's highs. The low was 13,567.14, and would hopefully continue to hold support above that area.
The 21d EMA is at 13,146.21 which could offer an area of support at 3.44% 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
The indexes are doing what would be expected after last week's gains and Monday's big swings. Pausing for a day or two and allowing enthusiasm to cool off a bit will be good for the market. However, wild moves of stocks being manipulated by large groups of retail traders continues underneath the surface.
Nothing is fundamentally broken, but continue to be cautious as always.
Stay healthy and take care!
