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.

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.

Comments

they say trump incited the violence and he should be prosecuted for murder - > good luck with that - if that hppened then watchout maxine waters/others .....you are toast before trump is toast https://abcnews.go.com/Politics/trump-told-supporters-stormed-capitol-hill/story?id=75110558 "I know that everyone here will soon be marching over to the Capitol building to peacefully and patriotically make your voices heard. Today, we will see whether Republicans stand strong for integrity of our elections." "So we are going to--we are going to walk down Pennsylvania Avenue, I love Pennsylvania Avenue, and we are going to the Capitol, and we are going to try and give--the Democrats are hopeless, they are never voting for anything, not even one vote but we are going to try--give our Republicans, the weak ones because the strong ones don't need any of our help, we're try--going to try and give them the kind of pride and boldness that they need to take back our country. So let's walk down Pennsylvania Avenue." Forbes? ...a word of advice > your closet is full of enough activity in past years that could bite you and eliminte you as a credible source of "anything" prettydirect on 1/12/2021 9:25:35 AM

Thank you so much Charles. You have changed my life! question- I am sitting here looking at 2 of my stocks (AOUT & CCMP). Any council on when to take profits? They are both ascending. Malcolm Lee Gibson on 1/12/2021 11:25:44 AM

Going back to the obama years," Those jobs are never coming back!" He also should have said," We giving them all, and our secrets, to China." Too bad for you American worker. ' Lorin K on 1/12/2021 12:14:44 PM

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