Daily Market Update for 1/11

Original Chart

Trend lines drawn from the 10/30 bottom (49d), 1/5 (5d) and today 1/11 (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.

Monday, January 11, 2021

Facts: -1.25%, Volume lower, Closing range: 27%, Body: 9%
Good: Lower volume , stayed above 13k
Bad: Morning gains turn to a new intraday low before close
Highs/Lows: Lower high, lower low
Candle:Bearish inside day, thing body at bottom of candle
Advance/Decline: 0.83, more declining than advancing
Indexes:SPX (-0.66%), DJI (-0.29%), RUT (-0.03%), VIX (+11.69%)
Sectors: Energy ( XLE +1.57%) and Health Services ( XLV +0.47%) were top. Communications ( XLC -1.78%) and Consumer Discretionary ( XLY -1.87%) were bottom.
Expectation: Sideways or Lower

Market Overview

It was tough to have any expectation coming into today’s trading session. Nervousness about what will happen in DC on top of continuing pandemic pressures over the weekend resulted in a low start to the day. Confidence grew as buyers came in but ultimately the bears ruled the day, bringing the index back down to a new intraday low before close.

The index closed with a -1.25% loss on lower volume . The bearish day resulted in a 27% closing range where the close is just under the open. The 9% body and long upper wick show the morning buying turning to afternoon selling. More stocks declined than advanced .

The S&P 500 (SPX) and Dow Jones Industrial (DJI) had similar patterns, but closed the day with smaller losses. The Russell 2000 (RUT) also had a loss but with a more bullish look and the smallest loss of the four indexes. The VIX volatility Index rose +11.69%.

Energy ( XLE +1.57%) and Health Services ( XLV +0.47%) were the top sectors for the day. Crude Oil prices continuing to rise helped Energy take the top spot after a morning dip. Financials ( XLF +0.32%) was the only other sector to gain for the day. Communications ( XLC -1.78%) and Consumer Discretionary ( XLY -1.87%) were bottom.

Economic Indicators

The US Dollar DXY ) continues to gain at the beginning of this new year. US Treasury 30y ( US30Y ), 10y ( US10Y ), and 2y ( US02Y ) bond yields all gained for the day. Spread on the 10y and 2y is widening while the spread on the 30y and 10y is tightening. Corporate Bonds ( HYG ) prices dropped for the day, signaling some nervousness from investors.

Silver SILVER ) and Gold GOLD ) both continue to drop. Crude Oil (CRUDEOIL1!) advanced for another day. Timber (WOOD), Copper (COPPER1!) and Aluminum (ALI1!) all dropped for the day.

Investor Sentiment

The put/call ratio rose to 0.603 as investor optimism remains very bullish . 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.

Market Leaders

The biggest four mega-caps all declined for the day. Apple AAPL ) and Alphabet GOOGL ) remain above the key 21d EMA and 50d MA lines. Microsoft MSFT ) closed below the 21d EMA while Amazon ( AMZN ) is below both lines. The relative strength of these big mega-caps compared to the market is at low levels. The has been a bearish sign in the past, but may just be representative of the focus on small caps in recent months.

Taiwan Semiconductor ( TSM ) and Nvidia NVDA ) topped the mega-cap list, giving a pop for semiconductor stocks. The majority of mega-caps were down for the day.

Growth stocks had a mix of results. Grow Generation ( GRWG ) and Lemonade LMND ) led with 13.77% and 14.01% gains respectively. Chinese EV manufacturer NIO NIO ) gained after releasing their new car model over the weekend. Tesla TSLA ) declined for the first time in 12 sessions, losing -7.82%.

Looking ahead

Economic news tomorrow will include the EIA Short-Term Energy outlook before market open. Several FOMC members will make comments throughout the day. Lots of attention will be paid to the JOLTs Job Openings number to understand how the labor market is doing.

No notable earnings reports for this update are scheduled for Tuesday.

Trends, Support and Resistance

The five-day trend points to a +1.95% gain.

The long trend line from the 10/30 bottom points to a gain of +1.15%.

The one-day trend points to a -0.22% loss.

The 21d EMA is about 2% below the index which should be an area of support if there’s further downside. The index also held the 12,550 area recently. If it passes that area, the next support area is 12,250.

Wrap-up

It wasn’t a particularly decisive day. The expectation from Friday’s action was higher for today, so that expectation was broken and we need to watch closely over the next few days to see what the market wants to do.

Investors remain positive on the possibility of more stimulus, resulting in the higher yields in treasury bonds. But the lowered prices on corporate bonds sends the opposite signal. Small caps continue to outperform heading into the new year.

I’ll continue to watch the mega-caps as their relative strength to the rest of the market continues to weaken.

Stay healthy and take care!

Comments

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