Trend lines drawn from the 10/30 bottom (44d), 12/28 (5d) and today 1/4 (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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Monday, January 4, 2021
Lately things, they don't seem the same
Facts: -1.47%, Volume higher, Closing range: 37%, Body: 63%
Good: Held support around 12,550, some recovery off lows
Bad: Thick red body, no upper wick
Highs/Lows: Higher high, lower low
Candle: Bearish engulfing candle with thick body over long lower wick
Advance/Decline: 0.84, more declining than advancing stocks
Indexes: SPX (-1.48%), DJI (-1.25%), RUT (-1.47%), VIX (+18.55%)
Sectors: Energy (XLE +0.16%) was the only gaining sector. Utilities (XLU -2.52%) and Real Estate (XLRE -3.23%) were worst performing
Expectation: Sideways or Lower
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Market Overview
It was not a great start to 2021 with the equity markets selling off significantly throughout the day after making morning highs. The Nasdaq nearly reach its all-time high before selling off sharply in the morning. Recovery in the afternoon was not nearly enough to be seen as a positive. The index closed down -1.45% with a closing range of 37% and a thick red body of 63%. The higher high and lower low than the previous day represents a bearish engulfing candle that can indicate bearish sentiment in the market. There were more declining stocks than advancing stocks.
All major indexes had similar bearish days. Each took a trip below the 21d EMA line but all were able to close above the key support line. Closing above the 21d EMA is a positive. However, the VIX spiked over 28% before settling down to an 18.55% gain for the day. That is the second such spike over 20% in the last 9 trading sessions. Those spikes are not a good sign for the markets health.
The VIX closed at this same level on September 2nd, just before a big correction. It stayed around this level throughout September and October, before finally coming down in November and December.
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Economic Indicators
The US Dollar (DXY) declined into the new year. US Treasury 30y (US30Y) Bond yields rose while the shorter term 10y (US10Y)and 2y (US02Y) bond yields dropped. Corporate Bonds (HYG) prices declined as investors sold the riskier bonds for safer bets in short term treasury bonds (IEI).
Silver (SILVER) and Gold (GOLD) both increased significantly for the day. Crude Oil (CRUDEOIL1!) futures declined. Timber (WOOD) is moving sideways. Copper (COPPER1!) and Aluminum (ALI1!) advanced.
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Investor Sentiment
Despite a drop in market prices, the put/call ratio dropped to 0.659. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
The biggest for mega-caps all declined for the day. Apple (AAPL) was the only to close above its 21d EMA. Microsoft (MSFT) and Amazon (AMZN) dipped below both the 21d EMA and 50d MA but closed above the 50d MA. Alphabet (GOOGL) closed below its 21d EMA and 50d MA. This action signals weakness in the mega-caps that have a huge influence over the rest of the market.
Tesla (TSLA) had a positive day gaining 3.42%. Taiwan Semiconductor (TSM) and Nvidia (NVDA) also had gains for the days. AT&T (T) and Walmart (WMT) were other mega-caps that did well.
Electric Vehicle stock NIO (NIO) gained +9.75%. Zoom Video (ZM) had a huge gain on fears of new lock downs in the US and Europe. Pinterest (PINS) also did well. Many other growth stocks did not fare well for the day. Digital Turbine (APPS), DataDog (DDOG) and Sumo Logic (SUMO) all lost over 7%.
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Looking ahead
Tuesday will bring Manufacturing PMI data for December mid-morning. FOMC Member Williams will speak in the afternoon. However, all eyes will be on election news in Georgia as voters will determine which party controls the Senate.
No notable earnings announcements are scheduled for Tuesday.
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Trends, Support and Resistance
The long-term trend line from the 10/30 bottom points to a +2.90% gain.
The five-day trend points to a sideways move with no gain/loss.
The one-day line points to a -2.13% loss.
The index held the 12,550 area today. If it passes that area, the next support area is 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It was not a great start to the year. However, it's no abnormal for some price discovery in the first week of January. Things could be turned upside down based on the election results in Georgia. We then have another day of tension to get past the certification of the electoral votes in Congress. On top of all that is new pandemic lockdowns in Europe and the possibility for new lockdowns in the US.
It could be a another rough week, keep an eye on your stop loss orders and look for more stability later in January.
Stay healthy and take care!
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or and corrected inline in my blog.
I'm working to condense this daily update over the next few weeks. I need to reduce it for both brevity and preparation time.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Monday, January 4, 2021
Lately things, they don't seem the same
Facts: -1.47%, Volume higher, Closing range: 37%, Body: 63%
Good: Held support around 12,550, some recovery off lows
Bad: Thick red body, no upper wick
Highs/Lows: Higher high, lower low
Candle: Bearish engulfing candle with thick body over long lower wick
Advance/Decline: 0.84, more declining than advancing stocks
Indexes: SPX (-1.48%), DJI (-1.25%), RUT (-1.47%), VIX (+18.55%)
Sectors: Energy (XLE +0.16%) was the only gaining sector. Utilities (XLU -2.52%) and Real Estate (XLRE -3.23%) were worst performing
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
It was not a great start to 2021 with the equity markets selling off significantly throughout the day after making morning highs. The Nasdaq nearly reach its all-time high before selling off sharply in the morning. Recovery in the afternoon was not nearly enough to be seen as a positive. The index closed down -1.45% with a closing range of 37% and a thick red body of 63%. The higher high and lower low than the previous day represents a bearish engulfing candle that can indicate bearish sentiment in the market. There were more declining stocks than advancing stocks.
All major indexes had similar bearish days. Each took a trip below the 21d EMA line but all were able to close above the key support line. Closing above the 21d EMA is a positive. However, the VIX spiked over 28% before settling down to an 18.55% gain for the day. That is the second such spike over 20% in the last 9 trading sessions. Those spikes are not a good sign for the markets health.
The VIX closed at this same level on September 2nd, just before a big correction. It stayed around this level throughout September and October, before finally coming down in November and December.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) declined into the new year. US Treasury 30y (US30Y) Bond yields rose while the shorter term 10y (US10Y)and 2y (US02Y) bond yields dropped. Corporate Bonds (HYG) prices declined as investors sold the riskier bonds for safer bets in short term treasury bonds (IEI).
Silver (SILVER) and Gold (GOLD) both increased significantly for the day. Crude Oil (CRUDEOIL1!) futures declined. Timber (WOOD) is moving sideways. Copper (COPPER1!) and Aluminum (ALI1!) advanced.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
Despite a drop in market prices, the put/call ratio dropped to 0.659. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
The biggest for mega-caps all declined for the day. Apple (AAPL) was the only to close above its 21d EMA. Microsoft (MSFT) and Amazon (AMZN) dipped below both the 21d EMA and 50d MA but closed above the 50d MA. Alphabet (GOOGL) closed below its 21d EMA and 50d MA. This action signals weakness in the mega-caps that have a huge influence over the rest of the market.
Tesla (TSLA) had a positive day gaining 3.42%. Taiwan Semiconductor (TSM) and Nvidia (NVDA) also had gains for the days. AT&T (T) and Walmart (WMT) were other mega-caps that did well.
Electric Vehicle stock NIO (NIO) gained +9.75%. Zoom Video (ZM) had a huge gain on fears of new lock downs in the US and Europe. Pinterest (PINS) also did well. Many other growth stocks did not fare well for the day. Digital Turbine (APPS), DataDog (DDOG) and Sumo Logic (SUMO) all lost over 7%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tuesday will bring Manufacturing PMI data for December mid-morning. FOMC Member Williams will speak in the afternoon. However, all eyes will be on election news in Georgia as voters will determine which party controls the Senate.
No notable earnings announcements are scheduled for Tuesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The long-term trend line from the 10/30 bottom points to a +2.90% gain.
The five-day trend points to a sideways move with no gain/loss.
The one-day line points to a -2.13% loss.
The index held the 12,550 area today. If it passes that area, the next support area is 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It was not a great start to the year. However, it's no abnormal for some price discovery in the first week of January. Things could be turned upside down based on the election results in Georgia. We then have another day of tension to get past the certification of the electoral votes in Congress. On top of all that is new pandemic lockdowns in Europe and the possibility for new lockdowns in the US.
It could be a another rough week, keep an eye on your stop loss orders and look for more stability later in January.
Stay healthy and take care!
