Trend lines drawn from the 10/30 bottom (73d), 2/9 (5d) and today 2/16 (1d).
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or 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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Tuesday, February 16, 2021
Facts: -0.34%, Volume higher, Closing range: 29%, Body: 58%
Good: Higher high, lower low, new ATH
Bad: Could not hold the morning high
Highs/Lows: Higher high, higher low
Candle: Red body with slightly longer lower wick than upper wick
Advance/Decline: 0.84, slightly more declining stocks than advancing stocks
Indexes: SPX (-0.06%), DJI (+.20%), RUT (-0.72%), VIX (+7.4%)
Sectors: Energy (XLE +2.51%) and Financials (XLF +1.71%) were top. Real Estate (XLRE -1.07%) and Utilities (XLU -1.12%) were bottom.
Expectation: Sideways or Higher
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Market Overview
The week opened with all-time highs, but the market could not hold on to those highs. After the first hour of trading, the indexes dropped going into mid-day and then spent the afternoon trading in back and forth choppiness. Despite declines, the major indexes put in higher highs and higher lows for the day.
The Nasdaq closed with a -0.34% decline on slightly higher volume. The closing range of 29% is not great, but is above a low which is higher than Friday's low. The 58% body was formed from the opening gap up and quick sell-off in the morning. There were more declining stocks than advancing stocks.
The Russell 2000 (RUT) was the worst performing of the indexes with a -0.72% decline. It's also the only index that did not make a new all-time high today. The S&P 500 (SPX) declined -0.06% while the Dow Jones Industrial (DJI) gained +0.20%.
The VIX volatility index rose +7.46%.
Energy (XLE +2.51%) and Financials (XLF +1.03%) were the top sectors again. Likewise, Real Estate (XLRE -1.07%) and Utilities (XLU -1.12%) were again the bottom sectors. Both are positive signals for the market. Energy and Financials sector gains are being led by optimism for the economic recovery. Energy is expected to benefit from high demand of recovering transportation sectors. Financials is seen to benefit from higher yields on bonds. Real Estate and Utilities tend to be defensive plays for money managers who need to stay invested in equities. So seeing them at the bottom of the list is another signal of confidence.
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Economic Indicators
The US Dollar (DXY) remained steady with a +0.03% gain. The US 30y, 10y and 2y yields all climbed for the day. The spread between long term and short term bonds continues to widen.
High Yield Corporate Bond (HYG) prices declined for the day but remained high compared to Investment Grade (LQD) corporate bond prices which declined more. The spread between corporate bonds and treasury bonds widened as investors seek out the riskier asset classes for better returns.
Silver (SILVER) and Gold (GOLD) declined. Crude Oil (CRUDEOIL1!) declined just slightly after an accelerated rise since the beginning of February. Timber (WOOD) continued to advance. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined slightly.
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Investor Sentiment
The put/call ratio declined to 0.535. 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.
The CNN Fear & Greed index moved more to the greed side.
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Market Leaders
Of the four biggest mega-caps, only Alphabet (GOOGL) advanced for the day, gaining +0.75%. Microsoft (MSFT) and Amazon (AMZN) declined -0.53% and -0.27%. Apple (AAPL) had the worst decline, losing -1.61%. Both Amazon and Apple are trading below the 21d exponential moving average.
Salesforce.com (CRM), Exxon Mobil (XOM), Bank of America (BAC) and Nvidia (NVDA) were the top four mega-cap stocks. JP Morgan (JPM) and PayPal (PYPL) also added to the financial mega-cap stocks with gains over 2%. Facebook (FB) gained +1.28% driving the Communications sector (XLC) to positive gains, along with Google's advance.
Growth stocks had a mixed day. Chinese financial stocks FUTU Holdings (FUTU) and UP Fintech (TIGR) advanced with huge +29.43% and +22.52% gains. On the other hand, Chinese aerial vehicle company Ehang Holdings (EH) lost -62.69% on a damaging report questioning the validity of the business.
Pinterest (PINS +6.08%) and Twitter (TWTR +2.87%) added to the gains of the larger communications sector stocks. Palantir (PLTR -12.75) sold off after a disappointing earnings release. Solar Edge (SEDG) is up 4% after hours on positive earnings news.
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Looking ahead
Some key economic data will be release before market open tomorrow. Producer Price Index data will give a leading indication on inflation. Consumer Price Index data released last week was lower than expected. An increase in Produce Price Index data would be positive as it will eventually impact consumer prices.
Also before market open, Retail Sales data for January will be released. Finally, Industrial Production data for January will be released just before the market opens.
Shopify (SHOP) will release earnings before market open tomorrow. Baidu (BIDU), Twilio (TWLO), Synopsis (SNPS), Fastly (FSLY), SunPower (SPWR), Tilray (TLRY) are some popular growth stocks reporting earnings after market close. Also reporting tomorrow will be Hilton (HLT) and Hyatt (H) which will provide insight to the hotel industry recovery.
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Trends, Support and Resistance
The five-day trend line points to a +0.28% for Wednesday.
The long-term trend line from the 10/30 bottom points to a sideways -0.05% decline.
The one-day trend points to a -0.91% decline that would meet up with the 14,000 support level.
If there is further downside, the 21d EMA line also offers an area of support and is -2.8% below Tuesday's close. The 13,000 level also seems to be an area of support. The index 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 may not be the start to the week that we all wanted, but there are positive signals in the underlying data that could turn into upside later in the week. The optimism for a stimulus bill that will boost the economic recovery is clear in the moves away from defensive plays and safe haven asset classes.
Optimism is also growing as vaccines continue to roll out with new providers of tests, vaccines and other treatments for the pandemic being released weekly. Eventually that could get consumers back out and spending, unleashing record amounts of household savings over the past year.
At the same time, the action today was another example of investors being bullish while keeping one foot out the door. A bad news cycle could send investors to the exit. It's important to keep those stop loss in place and manage positions to your level of risk acceptance.
Stay healthy and trade well!
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or 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=-
Tuesday, February 16, 2021
Facts: -0.34%, Volume higher, Closing range: 29%, Body: 58%
Good: Higher high, lower low, new ATH
Bad: Could not hold the morning high
Highs/Lows: Higher high, higher low
Candle: Red body with slightly longer lower wick than upper wick
Advance/Decline: 0.84, slightly more declining stocks than advancing stocks
Indexes: SPX (-0.06%), DJI (+.20%), RUT (-0.72%), VIX (+7.4%)
Sectors: Energy (XLE +2.51%) and Financials (XLF +1.71%) were top. Real Estate (XLRE -1.07%) and Utilities (XLU -1.12%) were bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The week opened with all-time highs, but the market could not hold on to those highs. After the first hour of trading, the indexes dropped going into mid-day and then spent the afternoon trading in back and forth choppiness. Despite declines, the major indexes put in higher highs and higher lows for the day.
The Nasdaq closed with a -0.34% decline on slightly higher volume. The closing range of 29% is not great, but is above a low which is higher than Friday's low. The 58% body was formed from the opening gap up and quick sell-off in the morning. There were more declining stocks than advancing stocks.
The Russell 2000 (RUT) was the worst performing of the indexes with a -0.72% decline. It's also the only index that did not make a new all-time high today. The S&P 500 (SPX) declined -0.06% while the Dow Jones Industrial (DJI) gained +0.20%.
The VIX volatility index rose +7.46%.
Energy (XLE +2.51%) and Financials (XLF +1.03%) were the top sectors again. Likewise, Real Estate (XLRE -1.07%) and Utilities (XLU -1.12%) were again the bottom sectors. Both are positive signals for the market. Energy and Financials sector gains are being led by optimism for the economic recovery. Energy is expected to benefit from high demand of recovering transportation sectors. Financials is seen to benefit from higher yields on bonds. Real Estate and Utilities tend to be defensive plays for money managers who need to stay invested in equities. So seeing them at the bottom of the list is another signal of confidence.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Economic Indicators
The US Dollar (DXY) remained steady with a +0.03% gain. The US 30y, 10y and 2y yields all climbed for the day. The spread between long term and short term bonds continues to widen.
High Yield Corporate Bond (HYG) prices declined for the day but remained high compared to Investment Grade (LQD) corporate bond prices which declined more. The spread between corporate bonds and treasury bonds widened as investors seek out the riskier asset classes for better returns.
Silver (SILVER) and Gold (GOLD) declined. Crude Oil (CRUDEOIL1!) declined just slightly after an accelerated rise since the beginning of February. Timber (WOOD) continued to advance. Copper (COPPER1!) advanced while Aluminum (ALI1!) declined slightly.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Investor Sentiment
The put/call ratio declined to 0.535. 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.
The CNN Fear & Greed index moved more to the greed side.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Of the four biggest mega-caps, only Alphabet (GOOGL) advanced for the day, gaining +0.75%. Microsoft (MSFT) and Amazon (AMZN) declined -0.53% and -0.27%. Apple (AAPL) had the worst decline, losing -1.61%. Both Amazon and Apple are trading below the 21d exponential moving average.
Salesforce.com (CRM), Exxon Mobil (XOM), Bank of America (BAC) and Nvidia (NVDA) were the top four mega-cap stocks. JP Morgan (JPM) and PayPal (PYPL) also added to the financial mega-cap stocks with gains over 2%. Facebook (FB) gained +1.28% driving the Communications sector (XLC) to positive gains, along with Google's advance.
Growth stocks had a mixed day. Chinese financial stocks FUTU Holdings (FUTU) and UP Fintech (TIGR) advanced with huge +29.43% and +22.52% gains. On the other hand, Chinese aerial vehicle company Ehang Holdings (EH) lost -62.69% on a damaging report questioning the validity of the business.
Pinterest (PINS +6.08%) and Twitter (TWTR +2.87%) added to the gains of the larger communications sector stocks. Palantir (PLTR -12.75) sold off after a disappointing earnings release. Solar Edge (SEDG) is up 4% after hours on positive earnings news.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Some key economic data will be release before market open tomorrow. Producer Price Index data will give a leading indication on inflation. Consumer Price Index data released last week was lower than expected. An increase in Produce Price Index data would be positive as it will eventually impact consumer prices.
Also before market open, Retail Sales data for January will be released. Finally, Industrial Production data for January will be released just before the market opens.
Shopify (SHOP) will release earnings before market open tomorrow. Baidu (BIDU), Twilio (TWLO), Synopsis (SNPS), Fastly (FSLY), SunPower (SPWR), Tilray (TLRY) are some popular growth stocks reporting earnings after market close. Also reporting tomorrow will be Hilton (HLT) and Hyatt (H) which will provide insight to the hotel industry recovery.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The five-day trend line points to a +0.28% for Wednesday.
The long-term trend line from the 10/30 bottom points to a sideways -0.05% decline.
The one-day trend points to a -0.91% decline that would meet up with the 14,000 support level.
If there is further downside, the 21d EMA line also offers an area of support and is -2.8% below Tuesday's close. The 13,000 level also seems to be an area of support. The index 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 may not be the start to the week that we all wanted, but there are positive signals in the underlying data that could turn into upside later in the week. The optimism for a stimulus bill that will boost the economic recovery is clear in the moves away from defensive plays and safe haven asset classes.
Optimism is also growing as vaccines continue to roll out with new providers of tests, vaccines and other treatments for the pandemic being released weekly. Eventually that could get consumers back out and spending, unleashing record amounts of household savings over the past year.
At the same time, the action today was another example of investors being bullish while keeping one foot out the door. A bad news cycle could send investors to the exit. It's important to keep those stop loss in place and manage positions to your level of risk acceptance.
Stay healthy and trade well!
