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Monday, November 23, 2020
Now take it in but don’t look down
Facts: +0.22% higher, Volume lower, Closing range: 55%, Body: 24%
Good: Body and close in upper half of range
Bad: Lower low after morning high
Highs/Lows: Higher high, Lower low
Candle: Body and close in upper half
Advance/Decline: 1.39, more advancing than declining stocks
Sectors: Energy ( XLE +7.07%) was the top. Health ( XLV -0.26%) and Real Estate ( XLRE -0.32%) were at the bottom.
The Nasdaq continued its march sideways on Monday as the other indexes had gains and the Russell 2000 closed at another all-time high. Investors remain focused on small caps, energy, and industrials as a more positive outlook on the economy is supported by additional vaccine news to end the pandemic. The Nasdaq index closed up +0.22%, but still below 12,000, a resistance level it has been testing for over a week. Volume was just slightly lower than Friday. The outside day candlestick has a 24% negative body in the upper half of the range and a closing range of 55%. There were more advancing stocks than declining stocks as small caps in the index had gains while the larger caps weighed the index down.
Indexes and Sectors
The Russell 2000 (RUT +1.85%) soared again to close at all-time highs. In the past week it surpassed the Nasdaq to be the index with the highest gains since March lows. This is the small-cap rally. The S&P 500 ( SPX +0.56%) and Dow Jones Industrial average (DJI +1.12%) also outperformed the Nasdaq today.
Energy ( XLE +7.07%) is back as the leading sector kicking off the week with a massive gain from news that the amount of Thanksgiving travel exceeded expectations. Utilities ( XLU +0.02%) which seemed to be getting more attention late last week, faded back to underperformance. Health ( XLV -0.26%) and Real Estate ( XLRE -0.32%) were the worst performing sectors of the day.
US 30-year and 10-year Treasury bond yields rose, and spreads widened for the day as investors moved money back to equities.
Corporate Bond yields fell for the day. Another sign investors are positive on US companies ability to survive, if not recover from the pandemic economy.
Silver ( SILVER -2.25%) and Gold ( GOLD -1.71%) continued to slide after last weeks declines. Crude Oil Futures (CRUDEOIL1! +2.11%) gained for the day. Timber (WOOD +0.96%) also ended the day with gains.
The put/call ratio rose slightly to 0.546, still a low number that will hopefully rise and show a bit more caution by investors. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. 0.7 is considered normal. As it approaches 0.60 (overly bullish ) and below, watch for a reversal in the market.
Apple ( AAPL -2.97%) ended a very bearish day closing underneath its 21d EMA and 50d MA, key moving average lines. Microsoft ( MSFT -0.13%) and Amazon ( AMZN -0.03%) closed with minor losses and are trading below the two moving average lines. Google ( GOOG -0.42%) also had losses but closed above its 21d EMA and 50d MA. All four of the mega-caps underperformed the market. It was not all bad for mega-caps with just over half closing with gains. Tesla ( TSLA +6.58%) continued to gain in anticipation of being added to the S&P 500 . Walt Disney (DIS +3.48%) and Taiwan Semiconductor Manufacturing ( TSM +2.94%) were among the top mega-cap performers.
Growth stocks generally had a good day. NIO Inc ( NIO +12.45%) made a new all-time high. Square ( SQ +6.03%) and PayPal ( PYPL +4.23%) rose on new crypto offerings. RIOT (RIOT +20.60%) made another huge advance. Zoom Video (ZM -2.12%) fell back and continues to trade up and down with pandemic news. NIU Tech ( Niu -9.10%) sold off on disappointing earnings news.
Tomorrow, Consumer Confidence numbers will be released. Forecast is a slight decrease. A surprise here could further drive gains in retail stocks that have done well after a strong earnings week.
Technology companies Dell Technologies (DELL +1.52%), HP Inc . ( HPQ +3.62%), Autodesk ( ADSK +0.93%) and VMWare ( VMW +-/77%) will announce earnings . Also on Tuesday, several Retailers including Gap Inc ( GPS +6.93%), Dollar Tree ( DLTR +2.78%), Best Buy ( BBY +2.43%) and Burlington Stores ( BBY +2.43%) will release earnings updates.
Trends, Support and Resistance
The index remains below the 10/12 pivot high and the 12,000 November resistance area . A +2.19% would get it past that area and to new all-time highs. That would rejoin the trend line from the 10/30 bottom. The five-day and one-day line have been pointing sideways for most of the past week’s daily updates. They now point to a +0.05% gain.
It was a good start to the week, despite the Nasdaq index and QQQ ETF being weighed down by underperformance of the largest mega-caps. The theme for this rally is clearly in small-caps and recovering sectors such as Energy, Transportation and Travel. Retail also has the momentum as the holiday season approaches. Consumer Confidence could add more momentum or put a damper on the rally. Still, there are lots of great stocks and setups to pick from. Happy trading and have a great week!
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