Trend lines drawn from the 10/30 bottom (60d), 1/21 (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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Wednesday, January 27, 2021
Facts: -2.61%, Volume higher, Closing range: 22%, Body: 63%
Good: Not much, held support after closing last week's gap.
Bad: Gap down, long red body with late day selling
Highs/Lows: Lower high, lower low
Candle:Mostly body with visible upper and lower wick
Advance/Decline: 0.19, five declining stocks for each advancing stock
Indexes: SPX (-2.57%), DJI (-2.05%), RUT (-1.91%), VIX (61.64%)
Sectors: Real Estate (XLRE -1.28%), Energy (XLE -1.35%) were top. Communications (XLC -3.23%) was bottom.
Expectation: Lower
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Market Overview
Today was a little more exciting then yesterday, but not in the way we wanted. The Nasdaq opened with a gap down, chopped back and forth and then sold off after the Fed announcements. The fed will keep current monetary policy and interest rates, but said there are still a lot of headwinds for the economy.
The Nasdaq closed with a -2.61% loss after testing the 21d EMA. Volume was over 60% higher than the previous day. The gap down at open along with the selling during the day resulted in a 19% closing range and a 63% red body. There were five declining stocks for every advancing stock
The S&P 500 (SPX), Dow Jones Industrial (DJI) and Russell 2000 (RUT) all closed with losses. The RUT had the smallest loss at -1.91%, but still a big pullback. The VIX gained 61.64% for the day and ended with a 100% closing range. It is at the highest point since the beginning of November.
All sectors lost for the day. Real Estate (XLRE -1.28%) and Energy (XLE -1.35%) were the smallest losses. Communications (XLC -3.23%) had the biggest loss. Energy was in positive territory at mid-day before the late afternoon sell-off.
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Economic Indicators
The US Dollar (DXY) gained +0.53% for the day. US 30y and 10y treasury bond yields declined for the day. US 2y treasury yields gained for the day. High Yields Corporate bond (HYG) prices declined.
Silver (SILVER) and Gold (GOLD) both declined for the day. Crude Oil (CRUDEOIL1!) gained as inventory data showed a better outlook on demand than the previous week. Timber (WOOD) declined -3.59% for the day. Copper (COPPER1!) and Aluminum (ALI1!) both declined.
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Investor Sentiment
The put/call ratio rose for the day, but remained at a low level of 0.588. 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
Three of the four largest mega-caps all declined for the day. Alphabet (GOOGL) had the biggest loss at -4.67%. Apple (AAPL) had the smallest loss at -0.77%, but declined another -3.23% after hours despite beating earnings and revenue expectations. Amazon (AMZN) lost -2.81%. Microsoft (MSFT) closed the session with a +0.25% advance, but at one point was up +3.5% after pleasing investors with yesterday's earnings release.
Microsoft was the only mega-cap with a gain. Netflix lost nearly all of its post-earnings gap with a -6.88% loss today.
A few growth stocks still did OK today. Palantir (PLTR) ended the day with a +10.26% gain, although was much higher mid-day. Beyond Meat (BYND) added to yesterday's big gains with a +2.81% gain.
Tesla (TSLA) is down -5% in post-market trading after missing earnings expectations. Facebook (FB) is down -2.07% after hours, despite beating earnings and revenue expectations.
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Looking ahead
Tomorrow's economic news will include Q4 GDP data and Initial Jobless claims before market open.
After the market opens, New Home Sales data for December will be released.
Earnings tomorrow will include Mastercard (MA) before market open and Visa (V) after market close. Comcast (CMCSA) and McDonalds (MCD) will also announce earnings before market open. Atlassian (TEAM) will release earnings after market close. Several airlines including Southwest (LUV), American Airlines (AAL) and JetBlue (JBLU) will also release earnings tomorrow.
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Trends, Support and Resistance
The index moved back below the long-term trend line from the 10/30 bottom. Returning to that line would be a +2.36% gain. The five-day trend line is under that point with a +1.74%.
Continuing the one-day trend points to a -1.22% loss. That would be below the 21d EMA which provided support today.
In addition to the 21d EMA, the previous two week's highs around 13,200 acted as support after the index closed last week's gap up. Beyond that, 13,000 support seemed to hold 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
It was a distribution day for the major indexes today. Certainly a character change in the market. The gap up from last Wednesday's open was filled and the index seemed to pause at that point. As a defense to the selling, there was some purchasing of bonds but not a huge amount. The more alarming signal is the negative after hours reactions to fairly positive earnings reports from Apple and Facebook.
Some extra caution is required heading into tomorrow's session. The market can choose which direction it wants to go, and that could be a reversal off the 21d EMA for gains tomorrow. Or it could be further downside.
Take a look at your portfolio and have a plan based on your trading style and risk comfort level.
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=-
Wednesday, January 27, 2021
Facts: -2.61%, Volume higher, Closing range: 22%, Body: 63%
Good: Not much, held support after closing last week's gap.
Bad: Gap down, long red body with late day selling
Highs/Lows: Lower high, lower low
Candle:Mostly body with visible upper and lower wick
Advance/Decline: 0.19, five declining stocks for each advancing stock
Indexes: SPX (-2.57%), DJI (-2.05%), RUT (-1.91%), VIX (61.64%)
Sectors: Real Estate (XLRE -1.28%), Energy (XLE -1.35%) were top. Communications (XLC -3.23%) was bottom.
Expectation: Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Today was a little more exciting then yesterday, but not in the way we wanted. The Nasdaq opened with a gap down, chopped back and forth and then sold off after the Fed announcements. The fed will keep current monetary policy and interest rates, but said there are still a lot of headwinds for the economy.
The Nasdaq closed with a -2.61% loss after testing the 21d EMA. Volume was over 60% higher than the previous day. The gap down at open along with the selling during the day resulted in a 19% closing range and a 63% red body. There were five declining stocks for every advancing stock
The S&P 500 (SPX), Dow Jones Industrial (DJI) and Russell 2000 (RUT) all closed with losses. The RUT had the smallest loss at -1.91%, but still a big pullback. The VIX gained 61.64% for the day and ended with a 100% closing range. It is at the highest point since the beginning of November.
All sectors lost for the day. Real Estate (XLRE -1.28%) and Energy (XLE -1.35%) were the smallest losses. Communications (XLC -3.23%) had the biggest loss. Energy was in positive territory at mid-day before the late afternoon sell-off.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) gained +0.53% for the day. US 30y and 10y treasury bond yields declined for the day. US 2y treasury yields gained for the day. High Yields Corporate bond (HYG) prices declined.
Silver (SILVER) and Gold (GOLD) both declined for the day. Crude Oil (CRUDEOIL1!) gained as inventory data showed a better outlook on demand than the previous week. Timber (WOOD) declined -3.59% for the day. Copper (COPPER1!) and Aluminum (ALI1!) both declined.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio rose for the day, but remained at a low level of 0.588. 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
Three of the four largest mega-caps all declined for the day. Alphabet (GOOGL) had the biggest loss at -4.67%. Apple (AAPL) had the smallest loss at -0.77%, but declined another -3.23% after hours despite beating earnings and revenue expectations. Amazon (AMZN) lost -2.81%. Microsoft (MSFT) closed the session with a +0.25% advance, but at one point was up +3.5% after pleasing investors with yesterday's earnings release.
Microsoft was the only mega-cap with a gain. Netflix lost nearly all of its post-earnings gap with a -6.88% loss today.
A few growth stocks still did OK today. Palantir (PLTR) ended the day with a +10.26% gain, although was much higher mid-day. Beyond Meat (BYND) added to yesterday's big gains with a +2.81% gain.
Tesla (TSLA) is down -5% in post-market trading after missing earnings expectations. Facebook (FB) is down -2.07% after hours, despite beating earnings and revenue expectations.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tomorrow's economic news will include Q4 GDP data and Initial Jobless claims before market open.
After the market opens, New Home Sales data for December will be released.
Earnings tomorrow will include Mastercard (MA) before market open and Visa (V) after market close. Comcast (CMCSA) and McDonalds (MCD) will also announce earnings before market open. Atlassian (TEAM) will release earnings after market close. Several airlines including Southwest (LUV), American Airlines (AAL) and JetBlue (JBLU) will also release earnings tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The index moved back below the long-term trend line from the 10/30 bottom. Returning to that line would be a +2.36% gain. The five-day trend line is under that point with a +1.74%.
Continuing the one-day trend points to a -1.22% loss. That would be below the 21d EMA which provided support today.
In addition to the 21d EMA, the previous two week's highs around 13,200 acted as support after the index closed last week's gap up. Beyond that, 13,000 support seemed to hold 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
It was a distribution day for the major indexes today. Certainly a character change in the market. The gap up from last Wednesday's open was filled and the index seemed to pause at that point. As a defense to the selling, there was some purchasing of bonds but not a huge amount. The more alarming signal is the negative after hours reactions to fairly positive earnings reports from Apple and Facebook.
Some extra caution is required heading into tomorrow's session. The market can choose which direction it wants to go, and that could be a reversal off the 21d EMA for gains tomorrow. Or it could be further downside.
Take a look at your portfolio and have a plan based on your trading style and risk comfort level.
Stay healthy and take care!
