Trend lines drawn from the 10/30 bottom (38d), 12/17 (5d) and today 12/23 (1d).
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or and corrected inline in my blog.
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Wednesday, December 23, 2020
Oh, bring us a figgy pudding.
Facts: -0.29%, Volume higher, Closing range: 15%, Body: 77%
Good: Higher high and Higher low, bulls held the gap
Bad: Bearish candle, Sell-off near close
Highs/Lows: Higher high, higher low
Candle: A full red-body candle with short wicks, closes within the gap from Mon/Tue.
Advance/Decline: 1.72, three advancing for every two declining stock
Sectors: Energy (XLE +2.21%) and Financials (XLF +1.65%) were top. Real Estate (XLRE -0.95) and Technology (XLK -0.76%) worst performing.
Expectation: Sideways
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Market Overview
All things considered, it could have been a lot worse. Trump's threats to veto the stimulus bill seemed to have little impact at open. Initial Jobless Claims came in lower than expected. Despite a dip in personal spending and new home sales, the Nasdaq rose through the morning to make a new all-time high in the afternoon. It then turned and sold off sharply in the final minutes before close.
The index finished down -0.29% on higher volume. The closing range of 15% and 77% red body show a bearish day. On the positive side, bulls held the gap created between Monday and Tuesdays session and there were three advancing stocks for every declining stock.
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Indexes and Sectors
The Russell 2000 (RUT +0.87%) was the leading index again with the S&P 500 (+0.07%) and Dow Jones Industrial (DJI +0.38%) also turning in gains for the day.
Energy (XLE +2.21%) and Financials (XLF +1.65%) were top sectors for the day. Real Estate (XLRE -0.95) and Technology (XLK -0.76%) were worst performing.
The VIX volatility index declined -3.80%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
Yields on US 30y, and 10y treasury bond yields rose for the day while the 2y treasury bond yield dropped. The spreads widened between long term and short term treasury bonds.
Corporate bond prices rose for the day as investors moved back to the riskier instrument while short term treasury bond prices dropped.
The US dollar (DXY -0.36%) dropped for the day.
Silver (SILVER +1.35%) and Gold (GOLD +0.67%) rose for the day. Crude Oil futures (CRUDEOIL1! +2.35%) pivoted back to the upside after two days of losses. Timber (WOOD +0.31%) rose for a second day. Copper (COPPER1! -+0.47%) and (ALI1! +0.76%) both gained after declining two days.
The put/call ratio rose to 0.569, still an overly bullish level. 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
Of the four biggest mega-caps, only Alphabet (GOOGL +0.47%) gained for the day. Apple (AAPL -0.7%), Microsoft (MSFT -1.3%) and Amazon (AMZN -0.66%) all lost for the day. Alphabet tried to move above its 21d EMA line but could not get thru the resistance. The other three are trading above their key 21d EMA and 50d MA lines.
Among other mega-caps, Bank of America (BAC +2.88%) and JP Morgan Chase (JPM +2.79%) led the Financials sector's strong performance. Pfizer (PFE +1.91%) gained for the day, possibly on news of more doses being ordered by the United States. Walt Disney (DIS +1.82%) also had gains for the day. Tesla (TSLA +0.88%) had its first positive day after being added to the S&P 500 on Monday.
Growth stocks did not do as well today with several pulling back in from yesterday's gains. Peloton (PTON +0.96%) continued its gains after acquisition news. Moderna (MRNA +3.54%) and JD.com (JD +3.23%) were among top performers in growth stocks. Zoom Video (ZM -6.14%) and CloudFlare (NET -5.38%) were a few of the losing growth stocks of the day.
Paychex (PAYX -2.31%) released earnings before the open. It beat estimates on strong performance and customer retention, and they improved guidance for FY 2021. Positive news for Paychex and for jobs in the recovering economy. The stock gapped up at open, setting a new all-time high, but then closed with a loss.
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Looking ahead
Tomorrow, markets will close at 1:00p and be closed for the Christmas holiday on Friday. That will make for a very long weekend that may bring some defensive rotation among investors.
Before market open, an update on Durable Goods Orders data will come which indicates on levels of manufacturing activity.
No earnings announcements are scheduled for tomorrow.
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Trends, Support and Resistance
The long trend-line from the 10/30 bottom points to a +1.19% gain. The one-day trend line and five-day trend lines point to a +0.39% gain.
There may be some defensive selling in tomorrow's short session before a long weekend. There seems to be a new support level from 12,450 to 12,550 where the index can pause during a pullback. The previous support level is around 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Yesterday, Technology and Real Estate were top sectors while Energy and Financials were the bottom sectors. Today, Energy and Financials were top while Technology and Real Estate were bottom. That's how rotations go. For a growth investor, it likely made for a mediocre day at best.
Rotations usually rotate back fairly quickly, or at least find a happy median. Overall, the market looks positive. Investors moved out of bonds into riskier corporate bonds and equity assets. Although the Nasdaq was down, it still had a higher high and higher low than yesterday. The broader market is up with more advancing stocks than declining stocks.
Expect tomorrow to be a mixed day with some defensive moves heading into a long weekend.
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.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wednesday, December 23, 2020
Oh, bring us a figgy pudding.
Facts: -0.29%, Volume higher, Closing range: 15%, Body: 77%
Good: Higher high and Higher low, bulls held the gap
Bad: Bearish candle, Sell-off near close
Highs/Lows: Higher high, higher low
Candle: A full red-body candle with short wicks, closes within the gap from Mon/Tue.
Advance/Decline: 1.72, three advancing for every two declining stock
Sectors: Energy (XLE +2.21%) and Financials (XLF +1.65%) were top. Real Estate (XLRE -0.95) and Technology (XLK -0.76%) worst performing.
Expectation: Sideways
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
All things considered, it could have been a lot worse. Trump's threats to veto the stimulus bill seemed to have little impact at open. Initial Jobless Claims came in lower than expected. Despite a dip in personal spending and new home sales, the Nasdaq rose through the morning to make a new all-time high in the afternoon. It then turned and sold off sharply in the final minutes before close.
The index finished down -0.29% on higher volume. The closing range of 15% and 77% red body show a bearish day. On the positive side, bulls held the gap created between Monday and Tuesdays session and there were three advancing stocks for every declining stock.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The Russell 2000 (RUT +0.87%) was the leading index again with the S&P 500 (+0.07%) and Dow Jones Industrial (DJI +0.38%) also turning in gains for the day.
Energy (XLE +2.21%) and Financials (XLF +1.65%) were top sectors for the day. Real Estate (XLRE -0.95) and Technology (XLK -0.76%) were worst performing.
The VIX volatility index declined -3.80%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
Yields on US 30y, and 10y treasury bond yields rose for the day while the 2y treasury bond yield dropped. The spreads widened between long term and short term treasury bonds.
Corporate bond prices rose for the day as investors moved back to the riskier instrument while short term treasury bond prices dropped.
The US dollar (DXY -0.36%) dropped for the day.
Silver (SILVER +1.35%) and Gold (GOLD +0.67%) rose for the day. Crude Oil futures (CRUDEOIL1! +2.35%) pivoted back to the upside after two days of losses. Timber (WOOD +0.31%) rose for a second day. Copper (COPPER1! -+0.47%) and (ALI1! +0.76%) both gained after declining two days.
The put/call ratio rose to 0.569, still an overly bullish level. 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
Of the four biggest mega-caps, only Alphabet (GOOGL +0.47%) gained for the day. Apple (AAPL -0.7%), Microsoft (MSFT -1.3%) and Amazon (AMZN -0.66%) all lost for the day. Alphabet tried to move above its 21d EMA line but could not get thru the resistance. The other three are trading above their key 21d EMA and 50d MA lines.
Among other mega-caps, Bank of America (BAC +2.88%) and JP Morgan Chase (JPM +2.79%) led the Financials sector's strong performance. Pfizer (PFE +1.91%) gained for the day, possibly on news of more doses being ordered by the United States. Walt Disney (DIS +1.82%) also had gains for the day. Tesla (TSLA +0.88%) had its first positive day after being added to the S&P 500 on Monday.
Growth stocks did not do as well today with several pulling back in from yesterday's gains. Peloton (PTON +0.96%) continued its gains after acquisition news. Moderna (MRNA +3.54%) and JD.com (JD +3.23%) were among top performers in growth stocks. Zoom Video (ZM -6.14%) and CloudFlare (NET -5.38%) were a few of the losing growth stocks of the day.
Paychex (PAYX -2.31%) released earnings before the open. It beat estimates on strong performance and customer retention, and they improved guidance for FY 2021. Positive news for Paychex and for jobs in the recovering economy. The stock gapped up at open, setting a new all-time high, but then closed with a loss.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tomorrow, markets will close at 1:00p and be closed for the Christmas holiday on Friday. That will make for a very long weekend that may bring some defensive rotation among investors.
Before market open, an update on Durable Goods Orders data will come which indicates on levels of manufacturing activity.
No earnings announcements are scheduled for tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The long trend-line from the 10/30 bottom points to a +1.19% gain. The one-day trend line and five-day trend lines point to a +0.39% gain.
There may be some defensive selling in tomorrow's short session before a long weekend. There seems to be a new support level from 12,450 to 12,550 where the index can pause during a pullback. The previous support level is around 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Yesterday, Technology and Real Estate were top sectors while Energy and Financials were the bottom sectors. Today, Energy and Financials were top while Technology and Real Estate were bottom. That's how rotations go. For a growth investor, it likely made for a mediocre day at best.
Rotations usually rotate back fairly quickly, or at least find a happy median. Overall, the market looks positive. Investors moved out of bonds into riskier corporate bonds and equity assets. Although the Nasdaq was down, it still had a higher high and higher low than yesterday. The broader market is up with more advancing stocks than declining stocks.
Expect tomorrow to be a mixed day with some defensive moves heading into a long weekend.
Stay healthy and take care!
