Every week when I look at the market in general from the top down, I look at a set of, for a lack of a better word, indicators to see what the world is thinking. Some people call this intermarket analysis, I call it the top down approach. Starting broad and focusing on things that look interesting. Briefing.com has a great set of market indicators which help.
- Transports(IYT) have taken the brunt of selling pressures over the latter half of January, taking the IYT back below its 50-day ma to a fresh 2-month low, just starting to bounce back.
- The 10-Year Yield($TNX) has been gradually on the rise off key support and pushing back to January highs. 6-month uptrend remains intact above a rising 50-day ma.
- The US Dollar($USD) has been breaking out slowly above multi-week resistance and downtrends, getting back above its 50-day ma.
- Crude($WTIC) breaking out above its Jan consolidation to over $54/barrel. Firmly holding above a rising 20-day ma since November’s rally off multi-month lows.
- Gold($GOLD) takes a hit below multi-week support as strength in the US Dollar puts the pressure on.
- Sentiment and Breadth Readings:
- The VIXjumped above 30 on last week’s distribution days, but sinks back below 25 as the dust settles surrounding Earnings reactions and low-float/short-squeezes.
- The Put/Call ratiorecently jumped briefly over the 0.80 reading to its highest level in weeks, suggesting a possible shift ahead in the underlying bullish dynamics to more of a “neutral” tone.
- The NYSE McClellan Oscillatormeasures the spread between the 19 and 39 day moving averages of Advancing vs. Declining stocks. The recent decline below -50 forecasted the current bounce in equities, with readings currently near zero.
- The Weekly AAII Sentiment (as of February 3) shows bullishness is near flat from the prior week, just 1% below its historical average. Bearishness fell approx -3%, sitting +5% above its historical average. The Fear & Greed Indexis moderately bullish at 68%.
As we can see the market is trading back up at its all time highs, but can we push higher? Can we hold this level? I notices the Put / Call ratio increasing and that is a signal that we could see another leveling off soon. With Vix this low and the market this high, might look to buy some put protection.
Happy Monday. Good Luck out there this week.
Global Spotlight
East Asia celebrates the Lunar New Year. Next week will bring the Feb. 12 Lunar New Year holiday, which is the centerpiece of a major travel and consumption period in key Asia-Pacific markets such as China, South Korea and Vietnam.
The African Union Heads of State summit. Running from Feb. 6-7, COVID-19 will be a primary focus of the annual summit given the outbreak of the South African variant that has spread significantly in southern Africa over the last two months and the fact that the continent has struggled to gain the same access to early COVID-19 vaccines that wealthier countries enjoy.
A presidential election in Ecuador. Over 16 presidential candidates will face off in the Feb. 7 vote, of whom three have pulled ahead, according to recent polls.
Stratfor.com
Economic Calendar
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Briefing.com
Last Weeks Numbers
Review Last weeks numbers here.
Earnings
Source I/B/E/S data from Refinitiv
Aggregate Estimates and Revisions
- 20Q4 earnings are expected to be 2.4% from 19Q4. Excluding the energy sector, the earnings growth estimate is 6.2%.
- Of the 286 companies in the S&P 500 that have reported earnings to date for 20Q4, 83.6% have reported earnings above analyst expectations. This compares to a long-term average of 65% and prior four quarter average of 76%.
- 20Q4 revenue is expected to be 1.1% from 19Q4. Excluding the energy sector, the growth estimate is 4.4%.
- During the week of February 8, 82 S&P 500 companies are expected to report quarterly earnings.
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Of Note
Every couple of weeks I go over to visit my friends at The Visual Capitalist to see different types of data visualization with regards to the market. This week let’s explore some INVESTOR EDUCATION Stock Market Basics: How Do Investors Choose Stocks?
I know this might seem a bit amateurish, but even as advanced options traders, we need to remember how we actually make money and that is on what the underlying instrument is doing. A great place to start is the video located here.
Enjoy.
