The story of the session was Silicon Valley versus conservatives. The debate over free speech will make its way into the courts, but it will never be properly debated in the public square. Nonetheless, Wall Street chimed in on business ramifications.
Although headlines blared “Big Tech Takes on Trump,” the reality is the key players in this saga are in three sectors:
- Technology: Apple (AAPL)
- Consumer Discretionary: Amazon (AMZN)
- Communication Services: Alphabet (GOOG and GOOGL), Facebook (FB), and Twitter (TWTR)
It should be noted these stocks had become lackluster coming into 2021, although it’s nothing to raise red flags. It’s just that all the hot money is pouring into so many other individual stocks and industries within these sectors. It’s not panic time, but these highly public battles will bring additional regulatory and investment scrutiny.
As I have been stressing for the last couple of years, these names can skew the true picture of the stock market because of their outsized influence on the index.
Range Anxiety
Tesla (TSLA) is finally part of the S&P 500. And now its giant daily moves will play a major role in the daily close of the overall index. There are just four stocks with more influence:
- Apple (AAPL) 6.7% weighting
- Microsoft (MSFT) 5.3% weighting
- Amazon (AMZN) 4.4% weighting
- Facebook (FB) 2.1% weighting
- Tesla (TSLA) 1.7% weighting
Yesterday, the stock got two upgrades with new share price targets of $800 and $900 from $400 and $500, respectively. The shares still closed lower.
With the stock going parabolic, there could be a pullback, which would put two small downside gaps into play. Further pressure could see gaps at $750 and $725 closed. Those events are often the time to buy the stock. Keep an eye on further pressure, as these are the gaps that trigger fresh waves of buying.
A reversal in Tesla would almost guarantee the stock will form a double top.
Speaking of High-flyers, Bitcoin (BTC) got a chunk taken out of its price today, and the financial media could not contain their joy (see headline above). I think the cryptocurrency comes roaring back strong.
Message of the Market
Yesterday, the market stumbled out of the gate, and while there were several rally attempts, there was never a chance big money was coming off the sidelines.
Most of the explosive action was on the NASDAQ Composite, which surprisingly saw significantly more conviction on the upside, as measured by the up to down volume.
It was a slow and sloppy session, which is inevitable.
Market Breadth | NYSE | NASDAQ |
Advancing | 1,259 | 1,750 |
Declining | 1,895 | 2,047 |
52 Week High | 183 | 266 |
52 Week Low | 5 | 7 |
Up Volume | 2.45B | 4.43B |
Down Volume | 2.01B | 2.39B |
Portfolio Approach
We added a new position to Consumer Staples in the Hotline Model Portfolio.
Today’s Session
The futures have given up most of their gains from earlier and are pointing to a slightly lower to flat open for the major indices. Financials and banking stocks in particular are doing well as U.S.Treasuries continue to climb, with the 10 year yielding 1.167%.
Crude is also on the rise this morning, with WTI up 1% to $52.80. The greenback is relatively flat to slightly higher and has strengthened of late.
On the economic front, the Jolts report is due out at 10am ET.
Let’s see if the markets can trader higher.
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