Market Week In Review - 12/28/2020 - 12/31/2020
The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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Monday, December 28, 2020
Oh I bet you think you're John Wayne
Facts: +0.74%, Volume higher, Closing range: 70%, Body: 15%
Good: New all-time high, filled morning gap, closed in upper half
Bad: Could not close above open
Highs/Lows: Higher high, higher low
Candle: Dip in morning caused long lower wick, thin body in upper half
Advance/Decline: 1.08, about even advancing and declining stocks
Sectors: Communications (XLC +1.80%), Consumer Discretionary (XLY +1.14%), Technology (XLK +1.13%) were top. Energy (XLE -0.63%) was the worst performing, the only losing sector.
Expectation: Sideways or Higher
The Nasdaq came back from a long weekend with a gap-up on stimulus news that quickly sold-off to fill the gap. It then rose into the afternoon to set a new all-time high and then finish with a bit of selling late in the session. The index closed with a +0.74% gain. The closing range was 70% with a thin body of 15% in the upper half of the candle. Volume was higher, but only compared to a short session on Thursday. There were just a bit more advancing stocks than declining stocks.
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Tuesday, December 29, 2020
It's coming down on me
Water like misery
Facts: -0.38%, Volume lower, Closing range: 19%, Body: 76%
Good: New all-time high, held support above 12,800
Bad: Long red body, selling from open to close
Highs/Lows: Higher high, lower low
Candle: Long red body, short upper and lower wick
Advance/Decline: 0.41, more than two declining for every advancing stock
Sectors: Health (XLV +0.47%) and Consumer Discretionary (XLY +0.03%) are top. Real Estate (XLRE -0.77%) was bottom.
Expectation: Lower
The Nasdaq started the day by setting a new all-time high but quickly reversed downward and sold off the rest of the day. Still, it held above the 12,800 area which seems to be new support. The index closed with a -0.38% loss on lower volume. The closing range of 19% and 76% red body show the high open and intraday move to close near the low. Over two stocks declined for every advancing stock on the Nasdaq.
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Wednesday, December 30, 2020
It took me so long getting back to my right mind.
Facts: +0.15%, Volume higher, Closing range: 18%, Body: 54%
Good: Stayed above yesterday's low
Bad: Longer upper wick, closing range near bottom
Highs/Lows: Lower high, higher low
Candle: Outside day, >50% red body, longer upper wick
Advance/Decline: 2.24, more than two advancing stocks for every declining stock
Sectors: Energy (XLE +1.57%) and Materials (XLB +1.38%) are top. Communications (XLC -0.67%) was bottom.
Expectation: Lower
It's been a third day of rotation in the market as the money that supported a move from smaller-caps to larger-caps on Monday transitioned back to smaller-caps today (small and mid-caps). The result was a larger breadth of stocks advancing, but a bearish looking inside day for the Nasdaq. The index closed up +0.15% on higher volume. That was the good news. The closing range of 18% and 54% red body point to a more bearish view of the day. More than two stocks advanced for every declining stock.
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Thursday, December 31, 2020
Sun, sun, sun, here it comes
Facts: +0.14%, Volume higher, Closing range: 83%, Body: 14%
Good: Close high in the day's range
Bad: LH/LL, spent long time near lows
Highs/Lows: Lower high, lower low
Candle: Indecisive candle with a longer lower wick
Advance/Decline: 0.86, more declining than advancing stocks
Sectors: Utilities (XLU +1.49%), Financials (XLF +1.24%) at the top. Energy (XLE -0.84%) is the only losing sector.
Expectation: Sideways or Higher
The last trading day of 2020, finished a week of sideways movement in the market with an indecisive day. The body of only 14% shows the close is not very far above the open. The index closed with a 0.14% gain and a closing range of 83%. Volume was slightly higher than the previous day. There were more declining stocks than advancing stocks.
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The Meaning of Life (View on the Week)
Happy New Year!
The last week of trading in the Nasdaq resulted a pop on Monday that then moved sideways the rest of the week. The index did manage to set a new all-time high and close with a +0.65% for the week. But the close is just below the open, resulting in a spinning top style candle that marks some indecision. The lower closing range of 44% is still a positive as we like to see it above 40%.
The Russell 2000 (RUT) ended its eight week winning streak by losing -0.26% for this week, after setting another new all-time high. The S&P 500 (SPX) and Dow Jones Industrial (DJI) both had bullish weeks with +0.64% and +0.65% gains respectively.
For the Nasdaq, Monday started with a gap-up on positive stimulus news, but quickly filled the gap during morning selling. Even with the selling, the index could stay above the previous Friday's close and end the day in the upper range of the candle. Growth stocks gave up recent gains as investors moved money back into larger-cap stocks. That would be the story for most of the week.
Tuesday brought a very bearish day of trading as the Nasdaq lost for the day, opening with a new all-time high, but closing below Monday's close. The bearish candle was representative of over two declining stocks for every advancing stock on the index.
Wednesday would be the one bright spot for small caps as the Russell 2000 had its only positive day of the week. Breadth seemed to come back into the market as small-caps and several growth stocks made gains. But Thursday finally ended the week with expected defensive moves into Utilities and Value (see VTV and IUSV as examples) stocks as investors prepared for a long weekend and also a turnover to the new year.
The weekly chart shows the spinning top candle with a bit of bearishness to it, despite the index ending the week in the positive. On the positive side, the candle shows a higher high and a higher low. The closing range of 44% is not great, but also not bad, since we look for a closing range above 40%.
Communications ( XLC ) and Consumer Discretionary ( XLY ) spent about half the week each at the top of the sector list.
But it was Utilities ( XLU ) that would rise at the end of the week as the winner. No doubt a defensive play going into the long weekend and a turn of the clock to a new year.
Energy ( XLE ) had a very short-lived time at that top on Monday morning, but ended the week as the worst performing sector. Energy was the only sector to end the week with a loss.
US Treasury Bond Yields dropped for a second week. The spreads between long term and short term bonds tightened slightly. The US 30y and US 10y yields are both in uptrends as investors are not interested in the long term bonds. The US 2y yield is in a sideways to downward trend.
Prices for corporate bonds (HYG) continues to trend upward while short-term treasury bond prices (IEI) trend sideways, signaling confidence in the economy from investors.
The US dollar (DXY) declined -0.32% for the week. The dollar is at a support/resistance area formed in the first quarter of 2018.
The put/call ratio (PCCE) ended the week at 0.688. The level is more comfortable than the overly bullish levels seen in recent weeks. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction.
Silver (SILVER) was up +2.08% for the week while Gold (GOLD) rose +1.01%. Crude Oil was down -0.76%. Timber (WOOD) was up +0.61%. Copper (COPPER!1) pulled back with a -1.92% loss while Aluminum (ALI1!) declined -2.12%.
Of the four largest mega-caps, only Microsoft (MSFT) closed the week with a loss, declining -0.15% for the week. Amazon (AMZN) had the largest gain moving +2.66%. Alphabet (GOOGLE) was up +1.07% for the week, and closed above its 10w MA line. Apple (AAPL) gained +0.55%.
Interesting chart of Growth vs Value stocks on a monthly basis. Value stocks still have a ways to catch up to Growth stocks in 2021.
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The Week Ahead
The first week of the year will kick-off with an OPEC meeting on Monday morning. Manufacturing PMI data for December earlier in the week will give an update on manufacturing data. Crude Oil inventories and updated employment data will come later in the week.
FOMC meeting minutes from a few weeks ago will be released on Wednesday providing more insight into policy decisions.
It will be a light week for earnings reports. Some retailers including Bed Bath & Beyond (BBBY), Walgreen Boots Alliance (WBA) and Helen of Troy (HELE) will release earnings on Thursday.
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The Bullish Side
The last week of the 2021 year was a bit rough with rotations from smaller caps to larger caps, several industry sectors, and a big move at the end of the week into Utilities sector. That may have felt bearish for some investors and bullish for others. Looking at the Nasdaq chart, we see a higher high and a lower low on top of a decent gain. Confirmed by the bullish SPX and DJI charts.
Although investors moved into defensive positions at the end of the week, the money stayed within equity markets with relatively little movement to treasury bonds. The demand for corporate bonds also shows that investors are bullish on the recovery for US companies.
The stimulus that was signed into law early last week will start to filter into areas of the economy most in need, including checks for individuals. There was a spike in demand for Oil as travelers put pandemic worries aside and hit the road for the holidays.
Europeans signed a huge trade deal with China while tensions between the UK and Europe should start to ease as the Brexit deal was finally agreed. As vaccines continue to be distributed across Europe, the end to lockdowns should be near, just in time for the increased economic opportunities.
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The Bearish Side
Next week will bring the Georgia run-off elections which will determine if the Republicans or Democrats will control the Senate. A win for the Democrats will mean another shift back toward Blue Wave investments. The shift will no doubt benefit some while catching others off guard.
The meteoric rise in Bitcoin over the last few weeks brings with it lots of questions. Is it speculative investors jumping in at new all-time highs? More likely is smart money buying up bitcoin as a hedge against the devaluation of world currencies, one of the well-known advantages of bitcoin. That, and some speculative investment. The smart money moving in could be a warning signal for the economy just as any other indicator based on treasury bonds, currency movements or commodities.
After several weeks of higher highs and higher lows, the market could be due for more of a pullback. The 50d moving average line is about 6.5% below Thursday's close.
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Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
On the downside, there are several key levels to raise caution flags:
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Wrap-up
I hope you have a great start to the New Year and wish you many great successes in 2021!
Good luck, stay healthy and trade safe!
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
- A recap of the daily updates that I do here on TradingView.
- The Meaning of Life, a view on the past week
- What's coming in the next week
- The Bullish View, The Bearish View
- Key index levels to watch out for
- Wrap-up
If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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Monday, December 28, 2020
Oh I bet you think you're John Wayne
Facts: +0.74%, Volume higher, Closing range: 70%, Body: 15%
Good: New all-time high, filled morning gap, closed in upper half
Bad: Could not close above open
Highs/Lows: Higher high, higher low
Candle: Dip in morning caused long lower wick, thin body in upper half
Advance/Decline: 1.08, about even advancing and declining stocks
Sectors: Communications (XLC +1.80%), Consumer Discretionary (XLY +1.14%), Technology (XLK +1.13%) were top. Energy (XLE -0.63%) was the worst performing, the only losing sector.
Expectation: Sideways or Higher
The Nasdaq came back from a long weekend with a gap-up on stimulus news that quickly sold-off to fill the gap. It then rose into the afternoon to set a new all-time high and then finish with a bit of selling late in the session. The index closed with a +0.74% gain. The closing range was 70% with a thin body of 15% in the upper half of the candle. Volume was higher, but only compared to a short session on Thursday. There were just a bit more advancing stocks than declining stocks.
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Tuesday, December 29, 2020
It's coming down on me
Water like misery
Facts: -0.38%, Volume lower, Closing range: 19%, Body: 76%
Good: New all-time high, held support above 12,800
Bad: Long red body, selling from open to close
Highs/Lows: Higher high, lower low
Candle: Long red body, short upper and lower wick
Advance/Decline: 0.41, more than two declining for every advancing stock
Sectors: Health (XLV +0.47%) and Consumer Discretionary (XLY +0.03%) are top. Real Estate (XLRE -0.77%) was bottom.
Expectation: Lower
The Nasdaq started the day by setting a new all-time high but quickly reversed downward and sold off the rest of the day. Still, it held above the 12,800 area which seems to be new support. The index closed with a -0.38% loss on lower volume. The closing range of 19% and 76% red body show the high open and intraday move to close near the low. Over two stocks declined for every advancing stock on the Nasdaq.
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Wednesday, December 30, 2020
It took me so long getting back to my right mind.
Facts: +0.15%, Volume higher, Closing range: 18%, Body: 54%
Good: Stayed above yesterday's low
Bad: Longer upper wick, closing range near bottom
Highs/Lows: Lower high, higher low
Candle: Outside day, >50% red body, longer upper wick
Advance/Decline: 2.24, more than two advancing stocks for every declining stock
Sectors: Energy (XLE +1.57%) and Materials (XLB +1.38%) are top. Communications (XLC -0.67%) was bottom.
Expectation: Lower
It's been a third day of rotation in the market as the money that supported a move from smaller-caps to larger-caps on Monday transitioned back to smaller-caps today (small and mid-caps). The result was a larger breadth of stocks advancing, but a bearish looking inside day for the Nasdaq. The index closed up +0.15% on higher volume. That was the good news. The closing range of 18% and 54% red body point to a more bearish view of the day. More than two stocks advanced for every declining stock.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Thursday, December 31, 2020
Sun, sun, sun, here it comes
Facts: +0.14%, Volume higher, Closing range: 83%, Body: 14%
Good: Close high in the day's range
Bad: LH/LL, spent long time near lows
Highs/Lows: Lower high, lower low
Candle: Indecisive candle with a longer lower wick
Advance/Decline: 0.86, more declining than advancing stocks
Sectors: Utilities (XLU +1.49%), Financials (XLF +1.24%) at the top. Energy (XLE -0.84%) is the only losing sector.
Expectation: Sideways or Higher
The last trading day of 2020, finished a week of sideways movement in the market with an indecisive day. The body of only 14% shows the close is not very far above the open. The index closed with a 0.14% gain and a closing range of 83%. Volume was slightly higher than the previous day. There were more declining stocks than advancing stocks.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Meaning of Life (View on the Week)
Happy New Year!
The last week of trading in the Nasdaq resulted a pop on Monday that then moved sideways the rest of the week. The index did manage to set a new all-time high and close with a +0.65% for the week. But the close is just below the open, resulting in a spinning top style candle that marks some indecision. The lower closing range of 44% is still a positive as we like to see it above 40%.
The Russell 2000 (RUT) ended its eight week winning streak by losing -0.26% for this week, after setting another new all-time high. The S&P 500 (SPX) and Dow Jones Industrial (DJI) both had bullish weeks with +0.64% and +0.65% gains respectively.
For the Nasdaq, Monday started with a gap-up on positive stimulus news, but quickly filled the gap during morning selling. Even with the selling, the index could stay above the previous Friday's close and end the day in the upper range of the candle. Growth stocks gave up recent gains as investors moved money back into larger-cap stocks. That would be the story for most of the week.
Tuesday brought a very bearish day of trading as the Nasdaq lost for the day, opening with a new all-time high, but closing below Monday's close. The bearish candle was representative of over two declining stocks for every advancing stock on the index.
Wednesday would be the one bright spot for small caps as the Russell 2000 had its only positive day of the week. Breadth seemed to come back into the market as small-caps and several growth stocks made gains. But Thursday finally ended the week with expected defensive moves into Utilities and Value (see VTV and IUSV as examples) stocks as investors prepared for a long weekend and also a turnover to the new year.
The weekly chart shows the spinning top candle with a bit of bearishness to it, despite the index ending the week in the positive. On the positive side, the candle shows a higher high and a higher low. The closing range of 44% is not great, but also not bad, since we look for a closing range above 40%.
Communications ( XLC ) and Consumer Discretionary ( XLY ) spent about half the week each at the top of the sector list.
But it was Utilities ( XLU ) that would rise at the end of the week as the winner. No doubt a defensive play going into the long weekend and a turn of the clock to a new year.
Energy ( XLE ) had a very short-lived time at that top on Monday morning, but ended the week as the worst performing sector. Energy was the only sector to end the week with a loss.
US Treasury Bond Yields dropped for a second week. The spreads between long term and short term bonds tightened slightly. The US 30y and US 10y yields are both in uptrends as investors are not interested in the long term bonds. The US 2y yield is in a sideways to downward trend.
Prices for corporate bonds (HYG) continues to trend upward while short-term treasury bond prices (IEI) trend sideways, signaling confidence in the economy from investors.
The US dollar (DXY) declined -0.32% for the week. The dollar is at a support/resistance area formed in the first quarter of 2018.
The put/call ratio (PCCE) ended the week at 0.688. The level is more comfortable than the overly bullish levels seen in recent weeks. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction.
Silver (SILVER) was up +2.08% for the week while Gold (GOLD) rose +1.01%. Crude Oil was down -0.76%. Timber (WOOD) was up +0.61%. Copper (COPPER!1) pulled back with a -1.92% loss while Aluminum (ALI1!) declined -2.12%.
Of the four largest mega-caps, only Microsoft (MSFT) closed the week with a loss, declining -0.15% for the week. Amazon (AMZN) had the largest gain moving +2.66%. Alphabet (GOOGLE) was up +1.07% for the week, and closed above its 10w MA line. Apple (AAPL) gained +0.55%.
Interesting chart of Growth vs Value stocks on a monthly basis. Value stocks still have a ways to catch up to Growth stocks in 2021.
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The Week Ahead
The first week of the year will kick-off with an OPEC meeting on Monday morning. Manufacturing PMI data for December earlier in the week will give an update on manufacturing data. Crude Oil inventories and updated employment data will come later in the week.
FOMC meeting minutes from a few weeks ago will be released on Wednesday providing more insight into policy decisions.
It will be a light week for earnings reports. Some retailers including Bed Bath & Beyond (BBBY), Walgreen Boots Alliance (WBA) and Helen of Troy (HELE) will release earnings on Thursday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Bullish Side
The last week of the 2021 year was a bit rough with rotations from smaller caps to larger caps, several industry sectors, and a big move at the end of the week into Utilities sector. That may have felt bearish for some investors and bullish for others. Looking at the Nasdaq chart, we see a higher high and a lower low on top of a decent gain. Confirmed by the bullish SPX and DJI charts.
Although investors moved into defensive positions at the end of the week, the money stayed within equity markets with relatively little movement to treasury bonds. The demand for corporate bonds also shows that investors are bullish on the recovery for US companies.
The stimulus that was signed into law early last week will start to filter into areas of the economy most in need, including checks for individuals. There was a spike in demand for Oil as travelers put pandemic worries aside and hit the road for the holidays.
Europeans signed a huge trade deal with China while tensions between the UK and Europe should start to ease as the Brexit deal was finally agreed. As vaccines continue to be distributed across Europe, the end to lockdowns should be near, just in time for the increased economic opportunities.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Bearish Side
Next week will bring the Georgia run-off elections which will determine if the Republicans or Democrats will control the Senate. A win for the Democrats will mean another shift back toward Blue Wave investments. The shift will no doubt benefit some while catching others off guard.
The meteoric rise in Bitcoin over the last few weeks brings with it lots of questions. Is it speculative investors jumping in at new all-time highs? More likely is smart money buying up bitcoin as a hedge against the devaluation of world currencies, one of the well-known advantages of bitcoin. That, and some speculative investment. The smart money moving in could be a warning signal for the economy just as any other indicator based on treasury bonds, currency movements or commodities.
After several weeks of higher highs and higher lows, the market could be due for more of a pullback. The 50d moving average line is about 6.5% below Thursday's close.
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Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
- The high of Tuesday at 12,973.33 will be the first test. A new high to start the week would be a positive sign to continue the current rally.
- The index is just below the round number of 13,000. Round-number resistance is caused by traders’ tendency to put in sell orders at round numbers.
On the downside, there are several key levels to raise caution flags:
- 12,821.23 is the low of this week. Staying above the low would put in another week of higher lows.
- 12,800 is the next support area. The index has traded around that area the last few weeks.
- The 21d EMA is at 12,612.94. The index has closed above this moving average line for the last 40 trading days.
- The support area of 12,250 is the next support area. Hopefully, that area will hold the index above that price level.
- The 50d MA is at 12,078.79. That is ~6.5% below Thursday's close. Testing the 50d MA will make a lot of investors nervous, already causing a big hit to portfolios.
- November support area is at 12,000 and a round-number point. A move below this line would raise more flags for investors.
- September Support line is at 11,300. Dropping to this level would be a sure sign of correction.
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Wrap-up
I hope you have a great start to the New Year and wish you many great successes in 2021!
Good luck, stay healthy and trade safe!
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