Daily Summary – January 22, 2021

Daily Summary – January 22, 2021

Day 3 of the Biden Era started out with a similar theme to Days 1 and 2 with large caps and growth outperforming but with a more negative tone than the first two days, with all major indices opening solidly in the red. But right at 9.45 am when the better than expected Markit ISM's were released (actually right before hmm) indices turned around and started heading up until a little after 10 am when all the indices pulled back. From there, paths diverged a bit. The small caps, which had steadily traded lower since the inauguration, bottomed well off the lows and moved higher in a seesaw pattern until 2.15 pm when they took off, ramping right up into the close with the RUT finishing up 1.28%. Naz also trended up, although not quite as smoothly to finish modestly green (up one tenth) due to a last minute drop of several tenths (not sure of the catalyst). SPX, and NDX on the other hand retested the lows, and while they at one point got to around breakeven levels, they also sold off just before the close to finish solidly red down three tenths. Style box clearly shows the bias to small caps and growth, making that small growth box the easy winner today. For the week, Naz was the winner up 4.2%, NDX up 3.4% while the SPX and RUT were around 2%.

Technically RUT broke through the bottom of its channel before reclaiming it to finish in the middle. SPX pulled back a bit from the top of its channel, while Naz and NDX, who had broken above y'day were able to stay on the top side of their channels. We'll see if they can hold that line. 

SPX sector flag looked a lot like yesterday's with just different sectors in different places, although the sectors were much more clustered with a total range of around 1% from the high to the low.  It's been a while since we've seen that small a dispersion. Three green sectors today were comms (again) along with RE and utes, none up over 0.31%. Bottom four sectors same cyclicals as y'day (fins, industrials, energy, and materials) although the losses were much more mild.

In key subsectors, semi's took another breather today and closed below y'day's lows so might be a sign that they are due for some consolidation after their huge move last couple of weeks. RSI on SOX also went from over to under 70 signaling a loss of momentum (although MACD remains in decent shape for now). After consolidating all week, retail powered higher, XRT up over 2%. Transp down again today to cap a red week pulling back to its 20-day MA (IYT), while bios (XBI) bounced off their 20-day MA to finish with a green day but slightly red week.

Breadth was better today with 56% of volume and 52% of issues positive NYSE, 61 and 59% Naz. That's pretty decent for a red day SPX and basically flat day Naz. Certainly better than y'day. Hopefully we'll continue to see breadth hold in.

Outside of equities, wasn't a lot of green with crude, gold, copper, nat gas all solidly red although all but nat gas finished above the respective support we've discussed this week. Nat gas really has no close support (next is around $2.30). VIX was mildly green but couldn't stay above its 20/50-day MA convergence, dollar and bonds were basically flat. 

Next week we get a normal data week (see table below with major US releases in addition to the normal weekly releases). Big ones to me will be durable goods on Tuesday and personal income and spending on Friday, but I'll note them all. As noted in there, also have an FOMC meeting on Wednesday. Nothing much is expected but you never know I guess. 

We'll also continue to get earnings rolling in with a heavier week with several hundred companies reporting. Below is a list of some of the bigger names. 

And, of course, we'll continue to get more stuff from the new administration. Whether you agree with their politics, he's staffed is organization with a lot of pros, and they seem to know how to get things done. But I'd love to see a little more optimism.  I don't think all of the talk about "dark winters" and "the worst is yet to come" is helping.  

Finally, one other thing I wanted to note is something I should have thought to look at last week, which is what happened last earnings season.  I'm sure most will remember that stocks in general did not react as typical to earnings beats (don't have the precise numbers but the reaction was far less positive to beats than was typical). What I at least had forgotten was that starting on the day of the JPM earnings (10/13) the indices sold off for the most part for a couple of weeks (bottoming on 10/30 which marked the end of our last major selloff).  During that time SPX sold off -9.2% (see chart), NDX -10.7% RUT -7.5%, and Naz -9.6% despite one of the highest beat rates for earnings and revenues in history. I have no idea if that translates to this go 'round, just thought it was interesting, as we seem to have a similar dynamic going on (companies with earnings beats on net are finishing red).  We'll see. Regardless, have a great weekend!