Commenting on the momentum in tech stocks and today’s trading Gorilla Trades strategist Ken Berman said:
While the major indices settled down in afternoon trading, the tension between the strong and the weak sectors remained tangible. It’s rare to see most sectors losing ground on a day when the large-cap benchmarks all hit new record highs, and these conditions don’t usually last for long, so we could be in for a tumultuous Friday session.
Canyon Capital Has Tapped Into The Pandemic Fallout: In-Depth Analysis [Q4 Letter]
Canyon Balanced Funds was up more than 41% net since the end of last year's first quarter. It took about 10 months for the fund to recover from the lows in that quarter, a few months longer than the 2009 rebound after the Global Financial Crisis. The fund has a little over $26 million in Read More
Momentum In Tech Stocks Might Surge From Intel's Earnings Beat
The main sectors continued to diverge substantially amid the rotation into tech stocks, which could gather even more momentum thanks to Intel’s (INTC, +6.9%) after-hours earnings beat. Industrials and railroads, in particular, struggled in the wake of Union Pacific’s (UNP, -4.3%) earnings report, despite the bullish Philly Fed Index, with real estate stocks, utilities, the healthcare sector, financials, materials, and energy stocks all closing the day in the red. Consumer-related issues fared slightly better although, without the contribution of a handful of tech names, the Dow and the S&P 500 would have lost considerable ground for the second day in a row.
The energy space continues to be very active, with the mixed global COVID trends and U.S. politics making waves in the sector. Even though the price of oil was stable today, despite the new global record in COVID-related deaths, energy stocks were hit hard due to the likely freeze of oil and coal leasing on federal land and the rumors regarding a possible carbon tax by the Biden administration. Despite the regulatory concerns, the fact that oil is holding up well points to optimism concerning the global economic outlook, which could soon fuel another leg higher in the sector.
No New Stimulus Measures From The ECB
The ECB held its monetary meeting this morning but despite the worrisome wave of outbreaks in Europe, President Christine Lagarde hasn’t announced new stimulus measures. The euro pushed higher in the wake of the decision, despite the ECB’s reiterated pledge to intervene if needed, but the common currency remains below its recent multi-year highs against the dollar. The coming weeks could provide valuable information regarding the impact of the new lockdowns in Europe and the ECB might soon be forced to act yet again.
Following today’s bullish reports, we will have another very busy day of economic releases tomorrow, with the U.S. Markit manufacturing and services PMIs in the spotlight. Both measures are forecast to edge lower compared to last month’s surprisingly strong readings, and with the promising stimulus developments in mind, another better-than-expected month would make a double-dip recession extremely unlikely. Existing home sales will also be out just after the opening bell, while the overnight session will be highlighted by the European PMIs.
Ford And Apple Reach New Highs
Ford’s (F, +6.2%) surge to a nearly three-year high made headlines over the past couple of days, as the automaker blew past a key technical resistance level. The improving outlook for the firm’s electric vehicle segment is likely behind the explosive move, and with Tesla’s (TSLA, -0.7%) historic rally in mind, more gains could be ahead in the coming months for Ford. The stock is well above both its 50- and 200-day moving averages, and while it's overbought from a short-term perspective, its relative strength confirms the long-term bullish shift.
Apple (AAPL, +3.8%) finished the session right at its all-time closing high today, hitting its highest level of 2021 just a hair below its record intraday price level. From a technical standpoint, the $2.2 trillion behemoth is at a crucial juncture, and given its massive weight in the major indices, the fate of Apple is important for all investors. The stock looks ready to leave behind its four-month-long consolidation pattern, which followed its mind-boggling summer rally, and since the company will release its earnings report next Wednesday, there are plenty of possible catalysts ahead that could trigger a breakout. Stay tuned!
- Stocks finished mixed for the second day in a row but the large-cap benchmarks hit new all-time highs thanks to the continued Big Tech rally
- Energy stocks and materials got hit hard as the details of President Biden’s climate initiative started to surface
- The Philly Fed Index, building permits, and housing starts all smashed expectations while the number of new jobless claims also provided a positive surprise
- The European Central Bank (ECB) left its monetary policies unchanged despite the continued COVID pressure on the Eurozone
- The Volatility Index (VIX, -1.2%) closed at its lowest level since early December thanks to decreasing political risk
|Index||G/L||Current level||Year-to- date||50-day||200-day|
Decliners outnumbered advancing issues by a more than 3-to-2 ratio on the NYSE today, with 106 stocks hitting new 52-week highs and no stocks hitting new 52-week lows, while volume was in line with the average.
Price Action Gauge ******** (reading for 01/21: 66)
The major indices had another active and moderately bullish day, with relatively low volatility, but “under-the-hood” the picture was mixed and small-caps finished broadly lower, weighing on the key breadth indicators.
Oversold/Overbought Gauge ******** (reading for 01/21: 43 Color: green)
Large-cap stocks remain slightly overbought across the board, with small-caps still being extremely stretched, which could lead to short-term headwinds on Wall Street.