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Today’s Summary
Monday, December 21st, 2020
Indices: US Stocks were little changed after today’s volatile session. The Dow Jones Industrial Average inched higher by just 37 points or 0.12%. The S&P 500 and Nasdaq slipped 0.10% and 0.39%, respectively. The Russell 2000 was flat, changing just 0.02%.
Sectors: 1 of the 11 sectors closed higher. Financials was the only sector to close higher, rising 0.81%. Energy lagged, dropping 3.22%.
Commodities: Crude Oil futures dropped 2.80% to $47.86 per barrel. Gold futures slipped 0.32% $1,883 per ounce.
Currencies: The US Dollar Index closed flat.
Interest Rates: The 10-year US Treasury yield inched lower to 0.936%
Here are the best charts, articles, and ideas being shared on the web today!
Chart of the Day
If I was going to make a bet on Large Cap Tech outperforming in the coming weeks/months, it's right here. pic.twitter.com/07BlwkJPgl
— Ian McMillan, CMT (@the_chart_life) December 21, 2020
Today’s Chart of the Day was shared on Twitter by Ian McMillan (@the_chart_life). It’s a ratio chart of the Nasdaq 100 futures vs. the Russell 2000 futures over the past year and a half. As we know, the Nasdaq is heavily weighted towards Large and Mega-cap stocks, while the Russell 2000 is the benchmark for Small-Cap stocks. Therefore, this ratio is effectively another way to visualize the rotation between Small and Large-Cap stocks. The Nasdaq has underperformed the Russell 2000 since September. However, Ian points out that we could see the Nasdaq reassert its leadership in the near-term. In a comment to The Chart Report, Ian said “The relationship between these two indices has reached the same low point we saw in June, and has approached this area with a bullish divergence in momentum. If we were going to see Large and Mega-Cap stocks, particularly the FAAMG names, outperform in Q1 2021, there’s a good shot that accumulation could begin this week. The great part about this is the risk/reward opportunity: If the Nasdaq doesn’t turn higher here, and Small Caps continue to lead, we will know very quickly.”
Quote of the Day
“The more I read, the more I acquire, the more certain I am that I know nothing.”
– Voltaire
Top Links
Macro Monday – Jotting on Charts
Grant Hawkridge takes a look at a few big-picture macro trends.
The Commodity Report – The Rotation Report
Aaron Jackson shares his thoughts on commodities, inflation, and more.
Size Matters – MurphyCharts
Shane Murphy explains that we’re currently seeing market-cap rotation rather than sector rotation.
The Big Squeeze – Momentum Monday
In their weekly Momentum Monday video, Howard Lindzon and Ivanhoff highlight the strongest stocks, trends, and themes across the markets.
Legends Podcast with Walter Deemer – Renaissance Macro Research
Here’s a great conversation between two respected technicians, Walter Deemer & Jeff deGraff. Tons of insights in here.
Top Tweets
Stocks are down today.
But it’d be super unusual to see stocks decline big over the next two weeks.
The S&P 500 hasn’t dropped more than 1.9% from this point (trading day #245) through the end of the year since 1937.
??
— Callie Cox (@callieabost) December 21, 2020
Here's where the S&P 500 stands after a crazy year, with some downside levels shown. An 8% drop from here doesn't even get you back to the pre-COVID high. $SPY $$ pic.twitter.com/sivTGCWoPR
— Bespoke (@bespokeinvest) December 21, 2020
Nice kick save by market participants today off the November highs to hold the breakout and 20-day moving average. $SPY $SPX pic.twitter.com/cnTPKJxZAu
— Matthew Timpane, CMT (@mtimpane) December 21, 2020
$VIX Volatility Index – jumped up to its 200 dma early in the session and met resistance. It closed back down below its 50 dma but still up over 16% on the day. pic.twitter.com/SmTu1JRips
— Rob Moreno (@rightviewrob) December 21, 2020
Today’s 16% increase in the $VIX is only the 15th biggest move of 2020. pic.twitter.com/lmQIu7wz5M
— MicroSectors (@msectors) December 21, 2020
Large-Cap Tech is basically unchanged since September $XLK
Meanwhile, Small-Cap Tech is up nearly 30% $PSCT
It's market cap rotation, not exactly sector rotation… pic.twitter.com/ahwS85MG44
— Steven Strazza (@sstrazza) December 21, 2020
Strong breadth everywhere:
NASDAQ New High/Low ratio has crossed 50 for the first time in years.
Historically, such strong breadth ALWAYS led to more gains for the NASDAQ next year. Average gain +22% pic.twitter.com/YaX23U1WxB
— Troy Bombardia (@bullmarketsco) December 21, 2020
Commercial Hedgers are really getting this whole Copper thing wrong, is it just another one of those times they got on the wrong side of the trade? It was hard to think there was going to be this much of a steamrolling with positioning so extreme $HG_F pic.twitter.com/9s6quX0twl
— Louis Sykes (@haumicharts) December 21, 2020
A 50bp rally in the Dollar coinciding with a hiccup in most risk assets.
With prices back down towards their 2018 lows, the question I'm asking is what happens if prices start to stabilize and move higher from here? pic.twitter.com/j2EPMCaYEk
— Tom Bruni, CMT (@BruniCharting) December 21, 2020
So much for that robust Dollar breakout. $DXY cleared its trendline resistance only to not put in with its biggest 'upper wick' since June 24, 2016 (Brexit day). Seems a cut down on its safe haven status offset relative stimulus enthusiasm pic.twitter.com/Fcp59spy3o
— John Kicklighter (@JohnKicklighter) December 21, 2020
FFS $LUMBER pic.twitter.com/S4s1at9Ds1
— Arun S. Chopra CFA CMT? (@FusionptCapital) December 21, 2020
So much for the awakening. $xle pic.twitter.com/V2cIVZb5fs
— Michael Kahn, CMT (@mnkahn) December 21, 2020
I love how every year-to-date chart this year is just like pic.twitter.com/RoJkzOhace
— Katherine Greifeld ? (@kgreifeld) December 21, 2020