Daily Market Update for 12/22
Trend lines drawn from the 10/30 bottom (37d), 12/16 (5d) and today 12/22 (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 22, 2020
Up on the housetop, reindeer pause.
Facts: +0.51%, Volume higher, Closing range: 78%, Body: 16%
Good: New ATH, close higher than open, higher volume
Bad: Dip after morning high
Highs/Lows: Higher high, higher low
Candle: Opening gap filled by long lower wick, small body in upper part of candle
Advance/Decline: 1.20, more advancing stocks than declining stocks
Sectors: Technology (XLK +0.87%) and Real Estate (+0.70%) were top. Energy (XLE -1.68%) worst performing.
Expectation: Sideways or Higher
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Market Overview
The Nasdaq opened a positive session with a gap up driven by optimism for the recovering economy. GDP data came in higher than expected and the stimulus bill is passing through congress with some certainty of passing. That optimism was tempered a bit mid-morning after Consumer Confidence and Existing Home Sales data was lower than expected. Eventually the bulls came back in and the index gained 0.51% for the day on higher volume. The closing range was 78% and the 16% green body is in the upper half of the candle. More stocks advanced than declined.
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Indexes and Sectors
The Russell 2000 (RUT +0.99%) had the largest gain as the stimulus is likely to help small-cap businesses in the economic recovery. The S&P 500 (SPX -0.21%) and Dow Jones Industrial (-0.67%) had losses for the day. Both traded on inside days where the high and low are within the high and low of the previous day.
Technology (XLK +0.87%) and Real Estate (+0.70%) were the top performing sectors of the day. All other sectors lost for the day with Energy (XLE -1.68%) at the bottom again.
The VIX volatility index declined -3.70%.
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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 bond yields fell back from yesterday's gains and the spread between corporate bonds and treasury bonds tightened slightly.
The US dollar (DXY+0.66%) gained for the day.
Silver (SILVER -3.74%) and Gold (GOLD -0.87%) declined. Crude Oil futures (CRUDEOIL1! -1.28%) dropped for the second day since Europe announced new lock downs. Timber (WOOD +0.31%) rose for the day. Copper (COPPER1! -1.86%) and (ALI1! -1.36%) both dropped for the day.
The put/call ratio dropped to 0.481, an overly bullish level. 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
Apple (AAPL +2.85%) had a big gain on news they are developing an electric vehicle. Microsoft (MSFT +0.61%) also had a big gain. Amazon (AMZN +0.01%) closed just above yesterday's close. Alphabet (GOOGL -0.83%) declined for the day. Of the four biggest mega-caps, only Alphabet is trading below its 21d EMA.
PayPal (PYPL +2.43%), Salesforce.com (CRM +2.08%) and Adobe (ADOBE +1.16%) were other gainers among mega-caps. But there were more losers than gainers in the mega-caps. AT&T (T -2.10%) and Facebook (FB -2.09%) were at the bottom of the list. Tesla (TSLA -1.46%) slid for the second day after being added to the S&P 500.
If it was supposed to be a pullback day, growth stocks didn't get the memo. Many of them turned in positive days. Peloton (PTON +11.65%) soared on news it would acquire Precor. Cloudera (CLDR +13.31%) broke out on higher volume. Crowdstrike (CRWD +6.76%) continues to rise this week.
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Looking ahead
Before market opens tomorrow, PCE Price Index data will be released giving an indication on inflation. Personal Income and Personal Spending data to be released can further impact sentiment on the recovery. We will also have the weekly update on Initial Jobless Claims.
After the market opens, Consumer Sentiment, New Home Sales and Crude Oil Inventories data will be released around 10am.
Paychex (PAYX +0.04%) earnings will be released before market open. Their outlook on upcoming quarters will be as interesting as the earnings update.
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Trends, Support and Resistance
The long trend-line from the 10/30 bottom points to a +0.71% gain.
The one-day trend line and five-day trend lines point to a -0.19% sideways move.
The stimulus is on its way and that should give the market some support, so a large pullback would be a surprise. If the new crisis in Europe extends to the US, that could cause a 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.
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Wrap-up
I did not expect a broad rally on good stimulus news. It seemed to already be priced in at each stage getting closer to passing. There was impact in small-caps and specific areas where the stimulus is focused.
Now the markets can breathe a bit. The new high on the Nasdaq and continuing strength of the Russell 200 are a positive. Hopefully, the broader S&P 500 and Dow Jones Industrial average will put in positive gains after today's inside day. We will keep a close eye on the progress of Brexit and the new European lock downs.
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 22, 2020
Up on the housetop, reindeer pause.
Facts: +0.51%, Volume higher, Closing range: 78%, Body: 16%
Good: New ATH, close higher than open, higher volume
Bad: Dip after morning high
Highs/Lows: Higher high, higher low
Candle: Opening gap filled by long lower wick, small body in upper part of candle
Advance/Decline: 1.20, more advancing stocks than declining stocks
Sectors: Technology (XLK +0.87%) and Real Estate (+0.70%) were top. Energy (XLE -1.68%) worst performing.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The Nasdaq opened a positive session with a gap up driven by optimism for the recovering economy. GDP data came in higher than expected and the stimulus bill is passing through congress with some certainty of passing. That optimism was tempered a bit mid-morning after Consumer Confidence and Existing Home Sales data was lower than expected. Eventually the bulls came back in and the index gained 0.51% for the day on higher volume. The closing range was 78% and the 16% green body is in the upper half of the candle. More stocks advanced than declined.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The Russell 2000 (RUT +0.99%) had the largest gain as the stimulus is likely to help small-cap businesses in the economic recovery. The S&P 500 (SPX -0.21%) and Dow Jones Industrial (-0.67%) had losses for the day. Both traded on inside days where the high and low are within the high and low of the previous day.
Technology (XLK +0.87%) and Real Estate (+0.70%) were the top performing sectors of the day. All other sectors lost for the day with Energy (XLE -1.68%) at the bottom again.
The VIX volatility index declined -3.70%.
-=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 bond yields fell back from yesterday's gains and the spread between corporate bonds and treasury bonds tightened slightly.
The US dollar (DXY+0.66%) gained for the day.
Silver (SILVER -3.74%) and Gold (GOLD -0.87%) declined. Crude Oil futures (CRUDEOIL1! -1.28%) dropped for the second day since Europe announced new lock downs. Timber (WOOD +0.31%) rose for the day. Copper (COPPER1! -1.86%) and (ALI1! -1.36%) both dropped for the day.
The put/call ratio dropped to 0.481, an overly bullish level. 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
Apple (AAPL +2.85%) had a big gain on news they are developing an electric vehicle. Microsoft (MSFT +0.61%) also had a big gain. Amazon (AMZN +0.01%) closed just above yesterday's close. Alphabet (GOOGL -0.83%) declined for the day. Of the four biggest mega-caps, only Alphabet is trading below its 21d EMA.
PayPal (PYPL +2.43%), Salesforce.com (CRM +2.08%) and Adobe (ADOBE +1.16%) were other gainers among mega-caps. But there were more losers than gainers in the mega-caps. AT&T (T -2.10%) and Facebook (FB -2.09%) were at the bottom of the list. Tesla (TSLA -1.46%) slid for the second day after being added to the S&P 500.
If it was supposed to be a pullback day, growth stocks didn't get the memo. Many of them turned in positive days. Peloton (PTON +11.65%) soared on news it would acquire Precor. Cloudera (CLDR +13.31%) broke out on higher volume. Crowdstrike (CRWD +6.76%) continues to rise this week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Before market opens tomorrow, PCE Price Index data will be released giving an indication on inflation. Personal Income and Personal Spending data to be released can further impact sentiment on the recovery. We will also have the weekly update on Initial Jobless Claims.
After the market opens, Consumer Sentiment, New Home Sales and Crude Oil Inventories data will be released around 10am.
Paychex (PAYX +0.04%) earnings will be released before market open. Their outlook on upcoming quarters will be as interesting as the earnings update.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The long trend-line from the 10/30 bottom points to a +0.71% gain.
The one-day trend line and five-day trend lines point to a -0.19% sideways move.
The stimulus is on its way and that should give the market some support, so a large pullback would be a surprise. If the new crisis in Europe extends to the US, that could cause a 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
I did not expect a broad rally on good stimulus news. It seemed to already be priced in at each stage getting closer to passing. There was impact in small-caps and specific areas where the stimulus is focused.
Now the markets can breathe a bit. The new high on the Nasdaq and continuing strength of the Russell 200 are a positive. Hopefully, the broader S&P 500 and Dow Jones Industrial average will put in positive gains after today's inside day. We will keep a close eye on the progress of Brexit and the new European lock downs.
Stay healthy and take care!
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