Month: January 2021

The tone of the market changed this week when all of the attention that was on cyclicals rotated into technology. Financials wobbled lower 2%, and energy drifted lower (-1.75% ). However, the big 6 tech names rallied higher, carrying the indexes up big. The front line for the bulls pushed down field! MSFT and AMZN rallied 6%. GOOGL, AAPL and FB rallied 9% this week. NFLX showed up moving up 13.5% on the week! Wham! Tesla was only up 2.5%. They make up 50% of the Nasdaq 100 and 23% of the $SPX. Big cap tech pretty much
straight-armed the bear in the teeth and sent him rocking on his back. The XLK had the lowest SCTR ranking in almost two years, only to show up as a bull stampede this week! The list on the right shows the weeks’ top performers on the Nasdaq 100.

Last week I highlighted that analyzing the market here is tricky, because my strength indicators are plummeting, but the advance/decline lines are holding up. According to Bob Pisani, 8% of the options traded are single contract (tiny) option entries, suggesting high retail investor involvement. I listed off 11 different euphoria’s last week, and they are still there. The massive push into the top 6 names this week, shows more bullish action. Large cap tech earnings
come out over the next two weeks. Can they continue to drive higher?

Summary: I will continue to protect capital. As the SSIH drops even lower, it validates my bias, but the large-cap anchor tenants are driving higher. More importantly, if the SSIH is waffling here, there is no tailwind. That is the information we are ultimately seeking. Careful out there! Keep watching the top Nasdaq names. The indexes might not drop until they start to weaken. Tech might be the place to look as I mentioned last week, but a thin market gets more dangerous. See September 3 high.

Click below to view the entire pdf document…

• By Greg Schnell, CMT, MFTA
• January 25, 2021

The US markets were up this week but underneath the surface, there were clues of a bigger market push. Breadth swelled, bullish percent indexes climbed, transports popped, and all my strength indicators swelled. Globally, it was a launch fest with the Shanghai breaking out to 5-year highs, while Canada, Brazil and Germany confirmed the move. Asia, North and South America, as well as Europe all popping to new highs to start the year. I can’t ignore that! Say it with swagger – “When you are hitting new highs, you are
not in a bear market!”.

The US political world had a newsworthy week. The attack on the capitol building had the world watching. It did slow down the US markets compared to the rest of the world, as the global surge was remarkably big.

Bitcoin had a massive range week of 13500 points. Marijuana names had a massive week. Energy had a massive week. Financials had a massive week. I can’t find the correlation between them, but each one launched their own party. Bitcoin investors continue to believe in the limited supply approach.
Digital printing of money. Marijuana names surged as the Senate got to a 50/50 political split suggesting a possibility of passing a law for recreational consumption. The Saudi’s trimmed oil production sending energy stocks up 10%! Bond prices plummeted, kicking financials much higher.

The Schnell Strength Indexes all improved this week. We saw the median stock up 5 % on the week which is obviously huge. This broad participation suggests more to come. Whenever I see everything so bullish, I am inclined to worry. But rising markets suggest being invested. Don’t be overly aggressive, but if you find some nice setups, the majority of stocks are trending higher. There were
over 1900 up more than 5% and only 250 down 5% as an example.

Summary: I am buying a little more as the SSIH suggests. As I mentioned last week → “My larger time frames suggest this pullback is a blip, but other big caution signs loom like the lower PPO right now on the Nasdaq” . If the market wants to push higher, I want to ride it. As the sign on the cross country ski trail says “Giddy Up!”

Let’s hit the charts. Click below to view the full PDF article.

• By Greg Schnell, CMT, MFTA
• January 11, 2021