Daily Summary – February 23, 2021

   

  Daily Summary – February 23, 2021

I had a couple of thoughts book ending y'day:

.... while the indices made an attempt at a rally in the afternoon, that faded in the last hour, and all four indices finished basically at the lows of the day. Not a great setup for tomorrow.... [W]hether it's because of rising rates, rotation action, or whatever, there's been a clear break away from growth towards value last few days, including even the "loved" companies like TSLA which was down over 8% today. As I mentioned above, this sort of action has normally corrected itself quickly in the past. Whether it does this time remains to be seen. 

Well, let's just say the jury is still out. But as of the close things look a little more stable then they did around 9.50 this morning when after a weak overnight session that saw stocks opening solidly in the red and a first 20 minutes of trading that saw the SPX lose 50 points in straight down manner, the indices bounced like ball held underwater and after dipping midday (but staying well off the lows) they moved towards the flat line all finishing above their opens and SPX actually managing to poke just into the green. NDX was next finishing down two tenths, Naz half percent, and RUT lagged as small growth continues to underperform, finishing down almost nine tenths. The path of the NDX was even more dramatic as it went from down over 3% to nearly flat. Style box continued to be tilted to the left (value) for another day but interestingly small caps were very bifurcated with small value doing best while small growth did worst. 

There were various explanations for today's action (many centered around Jerome Powell's testimony) but I'd point to the fact that most traded index, SPX, bottomed precisely where it "should" have, at its 50-day. I think the buyers stepped in, the shorts covered, and the rest of the indices followed. So let's start there technically. SPX after falling to its 50-day, snapped back and ended up slightly ahead of where it started so back in its channel and above it's 20-day MA. RUT despite the losses also recovered its channel and 20-day (sort of - closed right on it). Naz and NDX both fell below their 50-days but were above to recover and close above but have now closed outside their channels for 2 consecutive days for the first time since November, so that's a change, and will now be resistance. They've got their 50-days and today's lows for support.  Here's NDX.

With the positive close, SPX sector flag looked a a little better than y'day with one more sector (seven total) positive led again by energy which along with comm's were the two sectors up over 1%. No sector down more than around four tenths (discr). 

In key subsectors, bios sold again (XBI now down almost 14% since 2/9) and both XBI and IBB rallied hard but could not recover their 50-day MA's. Semi's and retail also rallied from steep losses with SOX just recovering its 20-day MA but XRT remains below. Transp closed slightly green (new high).

While price rallied hard breadth told a slightly different tale particularly for Naz. Naz had only 23% of volume positive and 28% of issues. So the recovery in the Naz was on low buying volume, meaning to me it was more about sellers being exhausted then buyers being energized. NYSE a little better with 47% of positive volume (which isn't terrible given the RUT losses) but only 38% of positive issues. So overall chalk breadth up on the negative side today, particularly Naz. 

Outside of equities, a lot of back and forth in markets without them ending up going very far. Those then went from red to green were crude, copper, nat gas, and long bonds (although crude has since traded down almost $1 on the back of a bearish looking API report (I commented on that separately)). Gold also recovered from losses to finish nearly flat, while dollar gave up most of its gains. VIX went the other way (from green to slightly red).  

Light data overnight followed by mortgage apps, new home sales, and EIA in the US. Also Powell testimony cont's for a second day, with a Clarida speech scheduled for 1 pm just in case there's any "clarification" needed for anything Powell says.  Smart.  Also get 273 reports NVDA, SFTBY, LOW, RY, RIO are the $100B+ market cap companies (surprised RIO is that big).

Overall, you'd have to think that today reset some sentiment, and it did have that sort of "washout" feel to it. I think it might have been good enough for the SPX and RUT for now, but that buying volume and dicey technical position on the Naz concerns me a bit, making me think we might not have seen the end of the selling there.  We'll know soon enough I guess.