Daily Market Update for 1/6
Trend lines drawn from the 10/30 bottom (46d), 12/30 (5d) and today 1/6 (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 6, 2021
Bold as Love
Facts: -0.61%, Volume higher, Closing range: 35%, Body: 29%
Good: Stayed above opening low, held support at around yesterday's low
Bad: Sell-off in late afternoon
Highs/Lows: Higher high, lower low
Candle: Inverted hammer that signals buyers held support despite selling pressure
Advance/Decline: 1.64, Three advancing stocks for every two declining stocks
Indexes: SPX (+0.57%), DJI (+1.44%), RUT (+3.98%), VIX (-1.07%)
Sectors: Financials (XLF +4.42%) and Materials (XLB +4.09%) were top. Communications (XLC -0.48%) and Technology (XLK -1.72%) were bottom.
Expectation: Sideways or Higher
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Market Overview
It was a wild day for the markets as unbelievable events unfolded in the US capitol. The Georgia run-off elections resulted in Democrats taking control of the Senate, realizing the blue wave that was original anticipated with the November elections. The Nasdaq shook off the initial rotation and rose to gains by mid-afternoon, but would sell-off as rioters stormed the US Capitol in protest of election outcomes. The index closed -0.61% on higher volume with a closing range of 35% and a body of 29%. More stocks advanced than declined.
The other major indexes set new all-time highs before the afternoon sell-off. The rotation was moving investors back into Financials, Materials and Industrials as well as small-cap stocks. The Russell 2000 performed the best among the indexes, rising over 5% before settling back to just below 4% at close. The VIX declined by -1.07%.
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Economic Indicators
The US Dollar (DXY) advanced for the day. US Treasury 30y (US30Y), 10y (US10Y)and 2y (US02Y) bond yields all gained for the day. The yield curves expanded significantly. Corporate Bonds (HYG) price declined but were outpaced by the decline in short term treasury bond (IEI) prices.
Silver (SILVER) and Gold (GOLD) both declined. Crude Oil (CRUDEOIL1!) futures advanced to the highest since February 2020. Timber (WOOD) broke out of a recent base. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined.
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Investor Sentiment
The put/call ratio dropped to 0.570. 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 declined sharply for the day as investors rotated away from big tech firms. Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL) all closed below their 21d EMA. Only Apple closed above its 30d MA.
The financial mega-caps performed best for the day. Bank of America (BAC) and JP Morgan Chase (JPM) advanced 6.26% and 4.70% respectively. The anticipated stimulus from a blue wave government will raise yield prices, increasing interest rate income that benefits banks. Nvidia (NVDA) was among the big tech companies with a significant losses, dropping -5.90% for the day.
Popular growth stocks were also impacted by the day's events. New energy stocks including Solar Edge (SEDG) did well. Gaming stocks Draft Kings and Penn National Gaming also closed the day with gains. Many other growth stocks closed with 5-6% losses.
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Looking ahead
Thursday will bring an update on Initial Jobless Claims before market open. Later in the morning, an update on non-manufacturing PMI data will be released indicating economic activity in service sectors. Two FOMC board members will speak tomorrow.
Several retail companies will release earnings tomorrow including Walgreen Boots Alliance (WBA), Bed Bath & Beyond (BBBY) and Helen of Troy (HELE). Micron Technology (MU) will be the first of large semiconductors to announce earnings this year.
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Trends, Support and Resistance
The long-term trend line from the 10/30 bottom points to a +2.37% gain.
The one-day trend points to a +0.71% gain.
The five-day line points to a -0.06% loss.
The index held the 12,550 area this week. If it passes that area, the next support area is 12,250.
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Wrap-up
It was a tough day. Not only was it tough as a trader, but it was tough to deal with what occurred in the US capitol. As a trader, give yourself time to reflect and observe and center yourself on your own trading system before making a plan for the rest of this week.
The inverted hammer signals there was seller pressure in the afternoon, but buyers held support above the morning lows which was a positive sign heading into close.
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 6, 2021
Bold as Love
Facts: -0.61%, Volume higher, Closing range: 35%, Body: 29%
Good: Stayed above opening low, held support at around yesterday's low
Bad: Sell-off in late afternoon
Highs/Lows: Higher high, lower low
Candle: Inverted hammer that signals buyers held support despite selling pressure
Advance/Decline: 1.64, Three advancing stocks for every two declining stocks
Indexes: SPX (+0.57%), DJI (+1.44%), RUT (+3.98%), VIX (-1.07%)
Sectors: Financials (XLF +4.42%) and Materials (XLB +4.09%) were top. Communications (XLC -0.48%) and Technology (XLK -1.72%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
It was a wild day for the markets as unbelievable events unfolded in the US capitol. The Georgia run-off elections resulted in Democrats taking control of the Senate, realizing the blue wave that was original anticipated with the November elections. The Nasdaq shook off the initial rotation and rose to gains by mid-afternoon, but would sell-off as rioters stormed the US Capitol in protest of election outcomes. The index closed -0.61% on higher volume with a closing range of 35% and a body of 29%. More stocks advanced than declined.
The other major indexes set new all-time highs before the afternoon sell-off. The rotation was moving investors back into Financials, Materials and Industrials as well as small-cap stocks. The Russell 2000 performed the best among the indexes, rising over 5% before settling back to just below 4% at close. The VIX declined by -1.07%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) advanced for the day. US Treasury 30y (US30Y), 10y (US10Y)and 2y (US02Y) bond yields all gained for the day. The yield curves expanded significantly. Corporate Bonds (HYG) price declined but were outpaced by the decline in short term treasury bond (IEI) prices.
Silver (SILVER) and Gold (GOLD) both declined. Crude Oil (CRUDEOIL1!) futures advanced to the highest since February 2020. Timber (WOOD) broke out of a recent base. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio dropped to 0.570. 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 declined sharply for the day as investors rotated away from big tech firms. Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL) all closed below their 21d EMA. Only Apple closed above its 30d MA.
The financial mega-caps performed best for the day. Bank of America (BAC) and JP Morgan Chase (JPM) advanced 6.26% and 4.70% respectively. The anticipated stimulus from a blue wave government will raise yield prices, increasing interest rate income that benefits banks. Nvidia (NVDA) was among the big tech companies with a significant losses, dropping -5.90% for the day.
Popular growth stocks were also impacted by the day's events. New energy stocks including Solar Edge (SEDG) did well. Gaming stocks Draft Kings and Penn National Gaming also closed the day with gains. Many other growth stocks closed with 5-6% losses.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Thursday will bring an update on Initial Jobless Claims before market open. Later in the morning, an update on non-manufacturing PMI data will be released indicating economic activity in service sectors. Two FOMC board members will speak tomorrow.
Several retail companies will release earnings tomorrow including Walgreen Boots Alliance (WBA), Bed Bath & Beyond (BBBY) and Helen of Troy (HELE). Micron Technology (MU) will be the first of large semiconductors to announce earnings this year.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The long-term trend line from the 10/30 bottom points to a +2.37% gain.
The one-day trend points to a +0.71% gain.
The five-day line points to a -0.06% loss.
The index held the 12,550 area this week. If it passes that area, the next support area is 12,250.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
It was a tough day. Not only was it tough as a trader, but it was tough to deal with what occurred in the US capitol. As a trader, give yourself time to reflect and observe and center yourself on your own trading system before making a plan for the rest of this week.
The inverted hammer signals there was seller pressure in the afternoon, but buyers held support above the morning lows which was a positive sign heading into close.
Stay healthy and take care!
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