More Weakness, More Highs – Weekly Market Review January 22nd, 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.

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