Daily Market Update for 12/29
Trend lines drawn from the 10/30 bottom (41d), 12/22 (5d) and today 12/29 (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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Tuesday, December 29, 2020
It's coming down on me
Water like misery
Facts: -0.38%, Volume lower, Closing range: 19%, Body: 76%
Good: New all-time high, held support above 12,800
Bad: Long red body, selling from open to close
Highs/Lows: Higher high, lower low
Candle: Long red body, short upper and lower wick
Advance/Decline: 0.41, more than two declining for every advancing stock
Sectors: Health (XLV +0.47%) and Consumer Discretionary (XLY +0.03%) are top. Real Estate (XLRE -0.77%) was bottom.
Expectation: Lower
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Market Overview
The Nasdaq started the day by setting a new all-time high but quickly reversed downward and sold off the rest of the day. Still, it held above the 12,800 area which seems to be new support. The index closed with a -0.38% loss on lower volume. The closing range of 19% and 76% red body show the high open and intraday move to close near the low. Over two stocks declined for every advancing stock on the Nasdaq.
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Indexes and Sectors
The S&P 500 (SPX -0.22%) and Dow Jones Industrial (DJI -0.22%) also declined while the Russell 2000 (RUT -1.85%) had the biggest decline among the major indexes. There is lots of speculation on the declines with a popular opinion that investors are taking profits in the 2020 tax year vs waiting for the new tax code under Biden's administration, which is expected to be higher.
Health (XLV +0.47%) and Consumer Discretionary (XLY +0.03%) were the only sectors that had gains for the day. All other sectors lost with Real Estate (XLRE -0.77%) and Energy (XLE -0.77%) ending the day with the worst performance.
The VIX volatility index rose +6.36%.
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Market Indicators
Yields rose on US 30y, 10y and 2y treasury bonds. The spread between long term and short term bonds widened slightly.
Corporate bond prices fell slightly, widening the yield spread with short term bonds.
The US dollar (DXY -0.38%) dropped for the day.
Silver (SILVER -0.02%) stayed about even while Gold (GOLD +0.26%) advanced for the day. Crude Oil futures (CRUDEOIL1! -0.37%) declined. Timber (WOOD 0.09%) declined slightly. Copper (COPPER1! -0.60%) and Aluminum (ALI1! -1.01%) both declined.
The put/call ratio rose to 0.629. 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
Only Amazon (AMZN +1.16%) advanced of the four biggest mega-caps. Apple (AAPL -1.33%), Microsoft (MSFT -0.36%) and Alphabet (-0.91%) all declined for the day. It's worth noting that each of these mega-caps put in a higher high and a higher low for the day, continuing uptrends. Alphabet retested its 21d EMA, but closed above the key support line.
Overall, it wasn't a bad day for mega-caps. There were big gains like Alibaba (BABA +6.25%), Intel (INTC +4.93%) and Netflix (NFLX +2.26%). Losses included Salesforce.com (CRM -0.97%), Home Depot (HD -1.14%) and PayPal (PYPL -1.99%).
Growth stocks had another day of selling as a rotation continues from smaller-cap to larger-cap segments. Sumo Logic (SUMO -5.37%), Digital Turbine (APPS -4.98%) and Square (SQ -4.18%) were among the bigger losses. On positive side, SNAP (SNAP +6.15%) rose on a price target increase from Goldman Sachs. Chinese stocks JD.com (JD +5.55%) and NIO (NIO +4.72%) joined Alibaba in good gains for the day.
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Looking ahead
Several releases of economic data will come tomorrow. Goods Trade Balance and Retail Inventories for November will be released ahead of market. Pending Homes Sales for November and Crude Oil Inventories will be released after market open.
No notable earnings announcements are scheduled for Wednesday.
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Trends, Support and Resistance
The long-term trend line from the 10/30 bottom points to a +1.13% gain. The five-day trend is just below that line at a +0.64% gain.
If the market follows the one-day trend it would mean a -0.58% loss.
It seems the market is actually holding up well, despite how it may feel for growth investors. If the index moves down, there seems to be a support level from 12,450 to 12,550 (has not been tested much) 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
It was a second day of selling off stocks that have done exceptionally well in 2020. It could be investors taking profits to be taxed in this year vs waiting for the Biden administration to change the tax code in 2021. It does not seem to be any nervousness of investors, since all indications are that money is staying in equities, but moving between cap segments and industry sectors.
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=-
Tuesday, December 29, 2020
It's coming down on me
Water like misery
Facts: -0.38%, Volume lower, Closing range: 19%, Body: 76%
Good: New all-time high, held support above 12,800
Bad: Long red body, selling from open to close
Highs/Lows: Higher high, lower low
Candle: Long red body, short upper and lower wick
Advance/Decline: 0.41, more than two declining for every advancing stock
Sectors: Health (XLV +0.47%) and Consumer Discretionary (XLY +0.03%) are top. Real Estate (XLRE -0.77%) was bottom.
Expectation: Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The Nasdaq started the day by setting a new all-time high but quickly reversed downward and sold off the rest of the day. Still, it held above the 12,800 area which seems to be new support. The index closed with a -0.38% loss on lower volume. The closing range of 19% and 76% red body show the high open and intraday move to close near the low. Over two stocks declined for every advancing stock on the Nasdaq.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The S&P 500 (SPX -0.22%) and Dow Jones Industrial (DJI -0.22%) also declined while the Russell 2000 (RUT -1.85%) had the biggest decline among the major indexes. There is lots of speculation on the declines with a popular opinion that investors are taking profits in the 2020 tax year vs waiting for the new tax code under Biden's administration, which is expected to be higher.
Health (XLV +0.47%) and Consumer Discretionary (XLY +0.03%) were the only sectors that had gains for the day. All other sectors lost with Real Estate (XLRE -0.77%) and Energy (XLE -0.77%) ending the day with the worst performance.
The VIX volatility index rose +6.36%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
Yields rose on US 30y, 10y and 2y treasury bonds. The spread between long term and short term bonds widened slightly.
Corporate bond prices fell slightly, widening the yield spread with short term bonds.
The US dollar (DXY -0.38%) dropped for the day.
Silver (SILVER -0.02%) stayed about even while Gold (GOLD +0.26%) advanced for the day. Crude Oil futures (CRUDEOIL1! -0.37%) declined. Timber (WOOD 0.09%) declined slightly. Copper (COPPER1! -0.60%) and Aluminum (ALI1! -1.01%) both declined.
The put/call ratio rose to 0.629. 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
Only Amazon (AMZN +1.16%) advanced of the four biggest mega-caps. Apple (AAPL -1.33%), Microsoft (MSFT -0.36%) and Alphabet (-0.91%) all declined for the day. It's worth noting that each of these mega-caps put in a higher high and a higher low for the day, continuing uptrends. Alphabet retested its 21d EMA, but closed above the key support line.
Overall, it wasn't a bad day for mega-caps. There were big gains like Alibaba (BABA +6.25%), Intel (INTC +4.93%) and Netflix (NFLX +2.26%). Losses included Salesforce.com (CRM -0.97%), Home Depot (HD -1.14%) and PayPal (PYPL -1.99%).
Growth stocks had another day of selling as a rotation continues from smaller-cap to larger-cap segments. Sumo Logic (SUMO -5.37%), Digital Turbine (APPS -4.98%) and Square (SQ -4.18%) were among the bigger losses. On positive side, SNAP (SNAP +6.15%) rose on a price target increase from Goldman Sachs. Chinese stocks JD.com (JD +5.55%) and NIO (NIO +4.72%) joined Alibaba in good gains for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Several releases of economic data will come tomorrow. Goods Trade Balance and Retail Inventories for November will be released ahead of market. Pending Homes Sales for November and Crude Oil Inventories will be released after market open.
No notable earnings announcements are scheduled for Wednesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The long-term trend line from the 10/30 bottom points to a +1.13% gain. The five-day trend is just below that line at a +0.64% gain.
If the market follows the one-day trend it would mean a -0.58% loss.
It seems the market is actually holding up well, despite how it may feel for growth investors. If the index moves down, there seems to be a support level from 12,450 to 12,550 (has not been tested much) 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
It was a second day of selling off stocks that have done exceptionally well in 2020. It could be investors taking profits to be taxed in this year vs waiting for the Biden administration to change the tax code in 2021. It does not seem to be any nervousness of investors, since all indications are that money is staying in equities, but moving between cap segments and industry sectors.
Stay healthy and take care!
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