Daily Market Update for 12/21
Trend lines drawn from the 10/30 bottom (36d), 12/15 (5d) and today 12/21 (1d).
If you have ideas to make the daily update better, please let me know in the comments.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
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Monday, December 21, 2020
You better watch out. You better not cry.
Facts: -0.10%, Volume lower, Closing range: 96%, Body: 65%
Good: Support at 12,500, close near highs
Bad: Gap down at open, LH/LL
Highs/Lows: Lower high, Lower low
Candle: Gap down to upside reversal, tiny upper wick
Advance/Decline: 0.80, more declining stocks than advancing stocks
Sectors: Financials (XLF +0.81%). All other sectors lost. Energy (XLE -3.22%) worst performing.
Expectation: Sideways or Higher
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Market Overview
The Nasdaq opened with a gap down as investors looked nervously upon a new mutant COVID virus in the UK that shut down travel and crushed European indexes. The lows of the day were short lived and the Nasdaq climbed to afternoon highs that almost went above Friday's close. Stock prices recovered on enthusiasm for a stimulus bill passing in congress. The Nasdaq closed with a -0.10% loss, a sideways move compared to the morning lows. Volume was lower than Friday's huge volume, but still above average volume. The closing range of 96% and a 65% green body make it a bullish day despite the small loss. There were more declining stocks than advancing stocks, something that we'll watch for change later this week.
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Indexes and Sectors
The Dow Jones Industrial average (DJI +0.12%) and Russell 2000 (RUT +0.02%) had small gains for the day after big dips in the morning. The S&P 500 (SPX -0.39%) lost for the day, possibly held down by Tesla's drop after being added to the index today.
Financials (XLF +0.81%) was the top performing sector for the day with banks rallying after the Fed allowed them to resume stock buyback programs. All other sectors lost for the day. Energy (XLE -3.22%) was the worst performing as outlook dimmed after fresh travel bans for flights within and out of Europe.
The VIX volatility index soared +46% in the morning before settling down to a 16.64% gain for the day.
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Market Indicators
Yields on US 30y, 10y, and 2y treasury bonds all dropped for the day. Spreads tightened between long term and short term treasury bonds.
Corporate bonds were sold off, dropping the price of the HYG ETF. The yield spread between short-term bonds and corporate bonds widened as investors became nervous about the outlook for the economy with new lockdown fears.
The US dollar (DXY -0.10%) declined for the day. It is right at a support/resistance area from the first quarter of 2018.
Silver (SILVER +1.37%) advanced and Gold (GOLD -0.23%) declined. Crude Oil futures (CRUDEOIL1! -1.86%) dropped for the day. Timber (WOOD -1.53%) pulled back for a second day. Copper (COPPER1! -1.09%) and (ALI1! -1.74%) both dropped for the day. All of these indicate a turn in sentiment from investors. We will look for this to change in the next few days if investor sentiment turns optimistic again.
The put/call ratio rose to 0.677. 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 biggest four mega-caps all finished the day with positive gains. Apple (AAPL +1.24%), Microsoft (MSFT +1.83%), Amazon (AMZN +0.14%) are trading above their 21d EMA and 50d MA lines. Alphabet (GOOGL +0.48%) is trading above its 50d MA, but below its 21d EMA. The performance of these four mega-caps does influence the rest of the market as investors monitor the overall indexes for market health.
Nike (NKE +4.91%) was up after beating expectations in a late Friday earnings release. JP Morgan Chase (JPM +3.75%) and Bank of America (BAC +3.73%) both benefited from the Fed allowing banks to resume stock buyback programs.
Growth stocks Sumo Logic Inc (SUMO +11.70%), Chewy (CHWY +7.35%), Fiverr (FVRR +6.01%), and NIO (NIO +4.77%) were among top performers. Beyond Meat (BYND -4.26%) continues to consolidate in the upper 130s price range.
Peloton (PTON +3.25%) was up 8% in post market trading after announcing the acquisition of Precor which should help accelerate the delivery of exercise bikes in their long backlog of orders. Apple rose 2% after hours when patent filings showed plans for a an electric vehicle that some believe will be delivered in 2024.
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Looking ahead
Tomorrow will bring an update on Q3 GDP numbers and Consumer Confidence for December. Both can positively/negatively impact the US dollar, bond and equity markets. Existing Home Sales will also offer a view into economic activity as the end of the pandemic seems in sight.
Cintas (CTAS -2.23%) will announce earnings before market open. The uniform company can be a barometer for how small and medium size businesses are doing. More than the earnings, investors will look to their outlook for the next quarter.
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Trends, Support and Resistance
The one-day trend line points to a +1.68% gain for Tuesday. The five-day trend line points to a +0.39% gain. The longer trend-line from the 9/30 bottom is pointing to the middle point of the other trend lines.
It's nearly a safe assumption that the stimulus bill will pass through congress and will be signed into law. Good news is assumed to already be priced in while bad news could cause a significant pullback. 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
It was not the way we all thought the week would start. We were supposed to have a pop on positive news of an agreed stimulus in congress. Instead, we got a new virus mutation and fresh travel lockdowns across Europe. Thankfully, the former balanced the latter and it gave investors another day to absorb the news, before making more drastic moves.
Although treasury bond yields dropped as some investors moved to the safe-haven investment, there is not a mass exodus of equity markets. That makes sense since bonds do not look to be keeping up even with inflation. Even within the equity markets, the top sectors were Financials and Technology instead of the typical defensive play of Utilities.
The result is a rather bullish day if you discount the morning gap down from the news in Europe. Several growth stocks turned in big gains and the biggest mega-caps showed strength. Despite the lower low on the daily, we are starting the weekly chart with a higher low. Here's hoping for a higher high too!
Stay healthy and take care!
If you have ideas to make the daily update better, please let me know in the comments.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Monday, December 21, 2020
You better watch out. You better not cry.
Facts: -0.10%, Volume lower, Closing range: 96%, Body: 65%
Good: Support at 12,500, close near highs
Bad: Gap down at open, LH/LL
Highs/Lows: Lower high, Lower low
Candle: Gap down to upside reversal, tiny upper wick
Advance/Decline: 0.80, more declining stocks than advancing stocks
Sectors: Financials (XLF +0.81%). All other sectors lost. Energy (XLE -3.22%) worst performing.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The Nasdaq opened with a gap down as investors looked nervously upon a new mutant COVID virus in the UK that shut down travel and crushed European indexes. The lows of the day were short lived and the Nasdaq climbed to afternoon highs that almost went above Friday's close. Stock prices recovered on enthusiasm for a stimulus bill passing in congress. The Nasdaq closed with a -0.10% loss, a sideways move compared to the morning lows. Volume was lower than Friday's huge volume, but still above average volume. The closing range of 96% and a 65% green body make it a bullish day despite the small loss. There were more declining stocks than advancing stocks, something that we'll watch for change later this week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The Dow Jones Industrial average (DJI +0.12%) and Russell 2000 (RUT +0.02%) had small gains for the day after big dips in the morning. The S&P 500 (SPX -0.39%) lost for the day, possibly held down by Tesla's drop after being added to the index today.
Financials (XLF +0.81%) was the top performing sector for the day with banks rallying after the Fed allowed them to resume stock buyback programs. All other sectors lost for the day. Energy (XLE -3.22%) was the worst performing as outlook dimmed after fresh travel bans for flights within and out of Europe.
The VIX volatility index soared +46% in the morning before settling down to a 16.64% gain for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
Yields on US 30y, 10y, and 2y treasury bonds all dropped for the day. Spreads tightened between long term and short term treasury bonds.
Corporate bonds were sold off, dropping the price of the HYG ETF. The yield spread between short-term bonds and corporate bonds widened as investors became nervous about the outlook for the economy with new lockdown fears.
The US dollar (DXY -0.10%) declined for the day. It is right at a support/resistance area from the first quarter of 2018.
Silver (SILVER +1.37%) advanced and Gold (GOLD -0.23%) declined. Crude Oil futures (CRUDEOIL1! -1.86%) dropped for the day. Timber (WOOD -1.53%) pulled back for a second day. Copper (COPPER1! -1.09%) and (ALI1! -1.74%) both dropped for the day. All of these indicate a turn in sentiment from investors. We will look for this to change in the next few days if investor sentiment turns optimistic again.
The put/call ratio rose to 0.677. 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 four mega-caps all finished the day with positive gains. Apple (AAPL +1.24%), Microsoft (MSFT +1.83%), Amazon (AMZN +0.14%) are trading above their 21d EMA and 50d MA lines. Alphabet (GOOGL +0.48%) is trading above its 50d MA, but below its 21d EMA. The performance of these four mega-caps does influence the rest of the market as investors monitor the overall indexes for market health.
Nike (NKE +4.91%) was up after beating expectations in a late Friday earnings release. JP Morgan Chase (JPM +3.75%) and Bank of America (BAC +3.73%) both benefited from the Fed allowing banks to resume stock buyback programs.
Growth stocks Sumo Logic Inc (SUMO +11.70%), Chewy (CHWY +7.35%), Fiverr (FVRR +6.01%), and NIO (NIO +4.77%) were among top performers. Beyond Meat (BYND -4.26%) continues to consolidate in the upper 130s price range.
Peloton (PTON +3.25%) was up 8% in post market trading after announcing the acquisition of Precor which should help accelerate the delivery of exercise bikes in their long backlog of orders. Apple rose 2% after hours when patent filings showed plans for a an electric vehicle that some believe will be delivered in 2024.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tomorrow will bring an update on Q3 GDP numbers and Consumer Confidence for December. Both can positively/negatively impact the US dollar, bond and equity markets. Existing Home Sales will also offer a view into economic activity as the end of the pandemic seems in sight.
Cintas (CTAS -2.23%) will announce earnings before market open. The uniform company can be a barometer for how small and medium size businesses are doing. More than the earnings, investors will look to their outlook for the next quarter.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The one-day trend line points to a +1.68% gain for Tuesday. The five-day trend line points to a +0.39% gain. The longer trend-line from the 9/30 bottom is pointing to the middle point of the other trend lines.
It's nearly a safe assumption that the stimulus bill will pass through congress and will be signed into law. Good news is assumed to already be priced in while bad news could cause a significant pullback. 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
It was not the way we all thought the week would start. We were supposed to have a pop on positive news of an agreed stimulus in congress. Instead, we got a new virus mutation and fresh travel lockdowns across Europe. Thankfully, the former balanced the latter and it gave investors another day to absorb the news, before making more drastic moves.
Although treasury bond yields dropped as some investors moved to the safe-haven investment, there is not a mass exodus of equity markets. That makes sense since bonds do not look to be keeping up even with inflation. Even within the equity markets, the top sectors were Financials and Technology instead of the typical defensive play of Utilities.
The result is a rather bullish day if you discount the morning gap down from the news in Europe. Several growth stocks turned in big gains and the biggest mega-caps showed strength. Despite the lower low on the daily, we are starting the weekly chart with a higher low. Here's hoping for a higher high too!
Stay healthy and take care!
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