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Market Analysis For Week of January 11, 2021 [Premium Articles]

The analysis is for week of January 11, 2021, and includes major market indexes, ETFs and spot currencies. Access to full article requires Premium Articles subscription.

Report contents

  1. Weekly summary and recap.
  2. Technical analysis of major indexes.
  3. Low volatility versus high beta S&P 500.
  4. Analysis of major indexes.
  5. Analysis of major ETFs.
  6. Analysis of sector, asset and commodity ETFs.
  7. Analysis of spot currency pairs.
  8. Chart of the week
  9. Conclusion.

1. Weekly summary

  • Stocks gained on the first week of the year.
  • High beta large caps and small caps surged.
  • Bond yields rallied the most since June 2020.
  • Gold fell while crude oil was significantly higher.
  • The U.S. dollar was steady on the week.

Recap (January 4, 2021 – January 8, 2021)

Index Week YTD
S&P 500 +1.8% +1.8%
DJIA +1.6% +1.6%
NASDAQ +2.4% +2.4%
Russell 2000 +5.9% +5.9%
10-Year Note +19 bps +0.19%
Gold (London fix) -1.5% -1.5%
Dollar Index +0.2% +0.2%
WTI Crude Oil spot +7.8% +7.8%

A surge in bond yields in the first week of the year triggered a new round of calls by some analysts for rising inflation reminiscent of those made in 2012-2013 period. However, 10-Year Note yields are more than 30 basis points below September 2019 lows and these calls are not only premature but in some cases irrational even when proper context is taken into account.

Note that a rise in the 10-Year Note yield by more than 100% from a low of about 1.4% in July 2012 to a high of about 3% by and the of 2013 fueled expectations about a bond market collapse and some hedge funds sold their Treasury holding or shorted bonds. The result was significant underperformance in their group or even liquidations, as in the case of a small fund managed by a well-known trend-follower. Bond yields fell again from January 2014 to July 2016 to retest July 2012 lows, as shown in the above chart, and then again rose to about 3.2% by October 2018 but then plunged afterwards to a low of 0.4% in March of last year. The analysts who think a rebound from 0.4% to about 1.1% is sufficient to justify calls of high inflation and a collapse in bond prices are probably wrong at this point.

2. Analysis of major indexes

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Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No updates to charts will be provided if market condition changes occur that affect the levels on the charts and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker

Data provider: Norgate Data

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