Daily Summary – February 19, 2021

 

  Daily Summary – February 19, 2021

All week I've been referencing the above tweet from Bespoke about what typically happens President's Day week as it has pretty well described what we saw (basically flat to down action every day), particularly the RUT which coming into today had been down all week. And, magically, RUT followed the script today posting a big over 2% gain to pare its losses for the week to 1%. SPX, Naz, and NDX, which started the day with ok to decent gains gave those up though with Naz finishing barely green, SPX down two tenths and NDX down little over four tenths.  For the week they were down in the 1-2% range, so a red week all around. In terms of today's action, on the small side it was balanced between value and growth, but in the large caps there was a definite bias to value with large growth finishing well behind the rest of the style boxes.

Technically, RUT bounced right where it "should" have off that 20-day MA. So now all of the indices are around the same place from just above (NDX) to a couple of percent above (RUT and SPX) their 20-day MAs and remaining in a channel going back to at least November.

SPX sector flag a little better looking with five green sectors, and four of them up at least a percent with energy getting edged out by materials. Other two over 1% also cyclicals (inds and fins). Defensives led to the downside with four of those down over 1% (staples, health care, comms, and utes). 

On the sector charts, health care fell below its 50-day, staples below its 20-day, both of those looking a little dicey technically, while industrials and financials set ATH's and look very good although fins are overbought. 

In key subsectors, bios ended a rough week with a positive day even though health care overall didn't do well, but couldn't clear its 20-day MAs. Transp pushed up to an ATH (as did the DJIA so have a bullish confirmation there), the new transports (semi's) also big green day but not quite to an ATH, and retail also had a good day. So lots of green in the key subsectors.

And in more good news, breadth bounced back to very much outperform. 68% of volume was positive NYSE and 74% on Naz.  Excellent readings for a day SPX was down and Naz was flat.  Issues also decent at 64 and 67% positive respectively.  One day doesn't fix the trend of poor breadth, but have to start somewhere, right?  In that regard, it's an important time for this.  Below is a chart of Naz cumulative volume summation index, and as you can see in the circle it's started to roll over for the first time since the correction last October. As you can see from that period, really don't want to see that get going to the downside.  NYSE doesn't have as high a correlation with price but it's also started to roll over.  So getting those pointed back up would be nice.   

Outside of equities, selling in crude picked up today, pushing it down to the 59 area WTI.  I still think it heads to at least a 57 handle near term which is around the 20-day MA and top of the longer term trendline dating back to last March. Also red were the dollar which fell beneath its 50-day MA so doesn't have much support other than the 90 level (DXY), VIX, and long bonds which pushed the 10-year to a new recovery high and highest level since last February. It's getting pretty overbought though so have to wonder how much more its got. It was around 1.6% last year pre-pandemic in the US (early Feb). Nat gas finished flat.

On the green side, gold managed a green day but still looks awful technically, while copper shot up over 4% to a 10-year high and into levels last seen during the China stocking "super cycle".  It's getting a bit frothy with RSI pushing above 80, and the chart on the verge of parabolic.

Next week another pretty full week of data (see below). I'll be focused on LEI's, consumer confidence, home sales, jobless claims, durable goods, and personal income and spending. 

Also while don't have the mega caps still have nearly a thousand companies reporting next week, so there will be plenty for investors to chew on.  Monday's biggest is MELI but PANW also reports. Thought they were bigger than $38B market cap. 

Anyway, while I often have a feeling (often wrong) about which way things will go the next week, I'm not really sure today. Indices are overbought with lots of technical issues, but they sit above pretty good support. Breadth has been spotty, but today was solid. There's a definite loss of momentum, but we're edging closer another injection of liquidity and news on the virus just keeps getting better. So I really am not sure. At some point we'll at least revisit those 50-day MA's but I'm not so sure it will be next week.  Anyway, we'll find out next week.  Have a good weekend.