Trend 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!
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=-
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
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
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!
