Daily Market Update for 12/28
Trend lines drawn from the 10/30 bottom (40d), 12/21 (5d) and today 12/28 (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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Monday, December 28, 2020
Oh I bet you think you're John Wayne
Facts: +0.74%, Volume higher, Closing range: 70%, Body: 15%
Good: New all-time high, filled morning gap, closed in upper half
Bad: Could not close above open
Highs/Lows: Higher high, higher low
Candle: Dip in morning caused long lower wick, thin body in upper half
Advance/Decline: 1.08, about even advancing and declining stocks
Sectors: Communications (XLC +1.80%), Consumer Discretionary (XLY +1.14%), Technology (XLK +1.13%) were top. Energy (XLE -0.63%) was the worst performing, the only losing sector.
Expectation: Sideways or Higher
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Market Overview
The Nasdaq came back from a long weekend with a gap-up on stimulus news that quickly sold-off to fill the gap. It then rose into the afternoon to set a new all-time high and then finish with a bit of selling late in the session. The index closed with a +0.74% gain. The closing range was 70% with a thin body of 15% in the upper half of the candle. Volume was higher, but only compared to a short session on Thursday. There were just a bit more advancing stocks than declining stocks.
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Indexes and Sectors
The S&P 500 (SPX +0.87%) and Dow Jones Industrial (+0.68%) both stayed above their open prices, leaving morning gap-ups open. The Russell 2000 (RUT -0.38%) had losses for the day. Perhaps a bit of "sell the news" on the stimulus being signed, which supported small businesses. That support was likely already priced in.
Communications (XLC +1.80%), Consumer Discretionary (XLY +1.14%), and Technology (XLK +1.13%) were the top sectors of the day. Materials (XLB -0.39%) and Energy (XLE -0.63%) were the worst performing, the only losing sector. Energy led in the first 30 minutes of trading but then quickly sold off.
The VIX volatility index rose +0.79%.
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Market Indicators
Yields on the US 30y and 10y treasury bonds dropped for the day while the 2y treasury bond yields rose. The yield spreads tightened slightly between long term and short term bonds
Corporate bond prices rose again with the HYG at its highest point since early March. Corporate bonds rose faster than short term bonds, tightening the yield spread between the two.
The US dollar (DXY +0.08%) dropped for the day.
Silver (SILVER +1.55%) advanced while Gold (GOLD +0.31%) declined for the day. Crude Oil futures (CRUDEOIL1! -0.39%) declined. Timber (WOOD +0.53%) rose and is trending up for four days. Copper (COPPER1! -0.15%) declined and Aluminum (ALI1! +0.0%) stayed even.
The put/call ratio dropped to 0.591. 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
The four largest mega-caps outperformed the index today. Amazon (AMZN +3.51%) and Apple (AAPL +3.58%) were the top performers. Microsoft (MSFT +0.99%) and Alphabet (GOOGL +2.3%) also had gains. Alphabet closed above its 21d EMA, after meeting the line with resistance the last several sessions. Having all four mega-caps performing well and above these key moving averages is good support for the broader market.
Facebook (FB +3.59%) and Walt Disney (DIS +2.95%) were also top performers among mega-caps, which as a group did very well for the day.
Most growth stocks did not have a good day as rotations took money elsewhere. Stocks such as Cloudflare (NET -8.80%), Fiverr (FVRR -8.23%) and Fastly (FSLY -7.46%) were among the worst hit by the rotation. Even Peloton (PTON -6.48%) that has had recent momentum, sold off sharply.
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Looking ahead
Tomorrow's biggest economic news will be the Consumer Confidence number for December. In the afternoon, an update on Crude Oil Stock will provide insight on demand during the holiday season.
No notable earnings announcements are scheduled for Tuesday.
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Trends, Support and Resistance
There are times where all the trend-lines point to the same spot which is about a +0.60% gain.
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 tough day if you were holding any of the popular 2020 growth stocks. Many of them sold off sharply. Rotations usually swing back the other direction in a few days.
Many of the growth stocks that are seen as COVID stocks (benefited from the pandemic) have businesses that will continue to grow beyond the pandemic. But sometimes the market needs a little proof before it trusts that will happen.
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=-
Monday, December 28, 2020
Oh I bet you think you're John Wayne
Facts: +0.74%, Volume higher, Closing range: 70%, Body: 15%
Good: New all-time high, filled morning gap, closed in upper half
Bad: Could not close above open
Highs/Lows: Higher high, higher low
Candle: Dip in morning caused long lower wick, thin body in upper half
Advance/Decline: 1.08, about even advancing and declining stocks
Sectors: Communications (XLC +1.80%), Consumer Discretionary (XLY +1.14%), Technology (XLK +1.13%) were top. Energy (XLE -0.63%) was the worst performing, the only losing sector.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The Nasdaq came back from a long weekend with a gap-up on stimulus news that quickly sold-off to fill the gap. It then rose into the afternoon to set a new all-time high and then finish with a bit of selling late in the session. The index closed with a +0.74% gain. The closing range was 70% with a thin body of 15% in the upper half of the candle. Volume was higher, but only compared to a short session on Thursday. There were just a bit more advancing stocks than declining stocks.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The S&P 500 (SPX +0.87%) and Dow Jones Industrial (+0.68%) both stayed above their open prices, leaving morning gap-ups open. The Russell 2000 (RUT -0.38%) had losses for the day. Perhaps a bit of "sell the news" on the stimulus being signed, which supported small businesses. That support was likely already priced in.
Communications (XLC +1.80%), Consumer Discretionary (XLY +1.14%), and Technology (XLK +1.13%) were the top sectors of the day. Materials (XLB -0.39%) and Energy (XLE -0.63%) were the worst performing, the only losing sector. Energy led in the first 30 minutes of trading but then quickly sold off.
The VIX volatility index rose +0.79%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
Yields on the US 30y and 10y treasury bonds dropped for the day while the 2y treasury bond yields rose. The yield spreads tightened slightly between long term and short term bonds
Corporate bond prices rose again with the HYG at its highest point since early March. Corporate bonds rose faster than short term bonds, tightening the yield spread between the two.
The US dollar (DXY +0.08%) dropped for the day.
Silver (SILVER +1.55%) advanced while Gold (GOLD +0.31%) declined for the day. Crude Oil futures (CRUDEOIL1! -0.39%) declined. Timber (WOOD +0.53%) rose and is trending up for four days. Copper (COPPER1! -0.15%) declined and Aluminum (ALI1! +0.0%) stayed even.
The put/call ratio dropped to 0.591. 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 four largest mega-caps outperformed the index today. Amazon (AMZN +3.51%) and Apple (AAPL +3.58%) were the top performers. Microsoft (MSFT +0.99%) and Alphabet (GOOGL +2.3%) also had gains. Alphabet closed above its 21d EMA, after meeting the line with resistance the last several sessions. Having all four mega-caps performing well and above these key moving averages is good support for the broader market.
Facebook (FB +3.59%) and Walt Disney (DIS +2.95%) were also top performers among mega-caps, which as a group did very well for the day.
Most growth stocks did not have a good day as rotations took money elsewhere. Stocks such as Cloudflare (NET -8.80%), Fiverr (FVRR -8.23%) and Fastly (FSLY -7.46%) were among the worst hit by the rotation. Even Peloton (PTON -6.48%) that has had recent momentum, sold off sharply.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tomorrow's biggest economic news will be the Consumer Confidence number for December. In the afternoon, an update on Crude Oil Stock will provide insight on demand during the holiday season.
No notable earnings announcements are scheduled for Tuesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
There are times where all the trend-lines point to the same spot which is about a +0.60% gain.
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 tough day if you were holding any of the popular 2020 growth stocks. Many of them sold off sharply. Rotations usually swing back the other direction in a few days.
Many of the growth stocks that are seen as COVID stocks (benefited from the pandemic) have businesses that will continue to grow beyond the pandemic. But sometimes the market needs a little proof before it trusts that will happen.
Stay healthy and take care!
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