Daily Market Update for 12/7
Trend lines drawn from the 10/30 bottom (26d), 12/1 (5d), and today 12/7 (1d).
If you have ideas to make the daily update better, please let me know in the comments.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
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Monday, December 7, 2020
Run for your life with me
Facts: +0.45%, Volume lower, Closing range: 78%, Body: 78%
Good: Higher high, higher low, closing range
Bad: Lower volume
Highs/Lows: Higher high, Higher low
Candle: No lower wick, small upper wick, green body
Advance/Decline: 0.91, slightly more declining stocks then advancing stocks
Sectors: Communications (XLC +0.63%) and Utilities (XLU +0.56%) were the leading sectors. Energy (XLE -2.34%) was the worst performing sector.
Expectation: Sideways or Higher
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Market Overview
It was a good start to the week for the Nasdaq. The only problem, it was only the Nasdaq. The other major indexes had decidedly different days while the Nasdaq made a new all-time high. The index ended the day with a +0.45% gain on lower volume. The closing range of 78% and green body of 78% represent a day with no lower wick where the morning open was the low and the index never revisited that spot. There were two pullbacks in the afternoon that brought the index to the middle of the range, but both were bought back. The second pull back around 3:30p followed Consumer Credit data that was half of expectation. There were slightly more declining stocks than advancing stocks.
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Indexes and Sectors
Results were not as good for the other major indexes. The S&P 500 (SPX -0.19%), Dow Jones Industrial average (DJI -0.49%), and the Russell 2000 (RUT -0.06%) all closed the day with losses. The S&P 500 chart shows a bearish harami candle. The Dow Jones Industrial shows a bearish reversal that opened at an all-time high but closed below the mid-range of the previous day. The Russell 2000 candle is an indecisive spinning top. Although the expectation for the Nasdaq chart would be sideways or higher, the rest of the indexes are not providing such a positive outlook.
Communications (XLC +0.63%) and Technology (XLK +0.29%) were in the top three sectors. The Nasdaq has many stocks who are in these sectors. The surprise sector in the top three is Utilities (XLU +0.56%), a defensive play for investors, showing a bit of nervousness. Utilities peaked in the morning as the top sector but fell back to second place behind Communications. Energy (XLE -2.34%) is back at the bottom of the sector list on heightened concerns around the pandemic and new lockdowns in California.
The VIX volatility index rose by +2.45% and broke through the upper line of a downward channel for the past three weeks. That is a trend to watch closely as an indicator of investor nervousness.
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Market Indicators
US30Y and US10Y bond yields dropped for the day and the spreads between long term and short-term bonds tightened. Yields rise when investors sell bonds and yields lower when investors buy bonds. The yields are still within an upward channel, but it is something to watch this week.
Corporate Bond yields rose slightly for the day while short term treasury bond yields dropped. The tightening spread between the two bond types shows a little hesitation of investors but is not significant yet.
The US dollar (DXY +0.10%) rose for the day. It is reversing off a low not seen since April 2018.
Silver (SILVER +1.11%) and Gold (GOLD +0.07%) are continuing to climb from early December pivots. Crude Oil (CRUDEOIL1! +0.56%) is up despite a lowered outlook for Energy on pandemic worries. Timber (WOOD -0.04%) was about even on the day. Copper (COPPER1! -0.34%) had its first decline after a seven-day run. Aluminum (ALI1! -1.26%) is forming a downward trend, pivoting off last week’s high.
The put/call ratio dropped to 0.480, still showing overly bullish sentiment. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
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Market Leaders
Of the four big mega-caps, only Apple (AAPL +1.23%) closed the day with gains, outperforming the Nasdaq. Microsoft (MSFT -0.03%) dipped below the key moving average lines, the 21d EMA and the 50d MA. Amazon (AMZN -0.14%) closed below the two support/resistance lines. Alphabet (GOOGL -0.37%) closed with a loss but is still trading well above the moving average lines.
Just over half of mega-caps closed the day with losses. Tesla (TSLA +7.13%) closed at a new all-time high after a short pullback. Netflix (NFLX +3.51%) finally broke above its 50d MA on higher volume. Taiwan Semiconductor (TSM +2.56%) and Pfizer (PFE +2.26%) round out the top four mega-cap gains for the day. Intel (INTC -3.43%) pivoted down after nine consecutive days of gains.
If was a good day for growth stocks. Cloudflare (NET +5.96%), NIO (NIO +4.81%), Moderna (MRNA +4.59%) and Pinterest (PINS +4.46%) were some of the leading gainers for the day. Fastly (FSLY -3.65%) returned to its 50d MA after acquisition rumors yesterday sent the stock on a round trip. Coupa Software (COUP +1.82%) is up 4.34% post-market upon beating expectations on earnings. Sumo Logic (SUMO -18.10%) surprised investors by releasing its first earnings report mid-day. The stock tumbled but is now up 5% after hours.
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Looking ahead
The EIA Short-Term Energy Outlook and API Weekly Crude Oil Stock numbers will be released tomorrow. In addition, Nonfarm Productivity and Unit Labor Costs data for Q3 will be released.
Retail stock Chewy (CHWY -0.21%) will announce earnings tomorrow after market close. MongoDb (MDB +1.02%) will be one of the few tech stocks to announce earnings.
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Trends, Support and Resistance
The five-day trend line and longer trend line from the 10/30 bottom are pointing to a +0.23% gain.
The one-day trend line points to a small loss of 0.29%.
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Wrap-up
Just looking at the Nasdaq chart, it looks like we had a very bullish Monday. But looking at the limited breadth of gainers/losers, the mix of Utilities as a defensive play and the slight drop in treasury bond yields, it’s not a surprise to see a much more bearish look on the other major index charts. And yet, the contrarian indicator put/call ratio moved even lower as investors seem bullish, possibly overly bullish to be good.
Any bad news on the pandemic, vaccines or stimulus could be a catalyst for a pullback or even correction. Watch your favorite stocks for signs of trouble, failed breakouts, or unexpected reversals off uptrends. Keep engaged as a stimulus could send the market to new heights but do have a plan if the market pulls back significantly.
Take care!
If you have ideas to make the daily update better, please let me know in the comments.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Monday, December 7, 2020
Run for your life with me
Facts: +0.45%, Volume lower, Closing range: 78%, Body: 78%
Good: Higher high, higher low, closing range
Bad: Lower volume
Highs/Lows: Higher high, Higher low
Candle: No lower wick, small upper wick, green body
Advance/Decline: 0.91, slightly more declining stocks then advancing stocks
Sectors: Communications (XLC +0.63%) and Utilities (XLU +0.56%) were the leading sectors. Energy (XLE -2.34%) was the worst performing sector.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
It was a good start to the week for the Nasdaq. The only problem, it was only the Nasdaq. The other major indexes had decidedly different days while the Nasdaq made a new all-time high. The index ended the day with a +0.45% gain on lower volume. The closing range of 78% and green body of 78% represent a day with no lower wick where the morning open was the low and the index never revisited that spot. There were two pullbacks in the afternoon that brought the index to the middle of the range, but both were bought back. The second pull back around 3:30p followed Consumer Credit data that was half of expectation. There were slightly more declining stocks than advancing stocks.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
Results were not as good for the other major indexes. The S&P 500 (SPX -0.19%), Dow Jones Industrial average (DJI -0.49%), and the Russell 2000 (RUT -0.06%) all closed the day with losses. The S&P 500 chart shows a bearish harami candle. The Dow Jones Industrial shows a bearish reversal that opened at an all-time high but closed below the mid-range of the previous day. The Russell 2000 candle is an indecisive spinning top. Although the expectation for the Nasdaq chart would be sideways or higher, the rest of the indexes are not providing such a positive outlook.
Communications (XLC +0.63%) and Technology (XLK +0.29%) were in the top three sectors. The Nasdaq has many stocks who are in these sectors. The surprise sector in the top three is Utilities (XLU +0.56%), a defensive play for investors, showing a bit of nervousness. Utilities peaked in the morning as the top sector but fell back to second place behind Communications. Energy (XLE -2.34%) is back at the bottom of the sector list on heightened concerns around the pandemic and new lockdowns in California.
The VIX volatility index rose by +2.45% and broke through the upper line of a downward channel for the past three weeks. That is a trend to watch closely as an indicator of investor nervousness.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
US30Y and US10Y bond yields dropped for the day and the spreads between long term and short-term bonds tightened. Yields rise when investors sell bonds and yields lower when investors buy bonds. The yields are still within an upward channel, but it is something to watch this week.
Corporate Bond yields rose slightly for the day while short term treasury bond yields dropped. The tightening spread between the two bond types shows a little hesitation of investors but is not significant yet.
The US dollar (DXY +0.10%) rose for the day. It is reversing off a low not seen since April 2018.
Silver (SILVER +1.11%) and Gold (GOLD +0.07%) are continuing to climb from early December pivots. Crude Oil (CRUDEOIL1! +0.56%) is up despite a lowered outlook for Energy on pandemic worries. Timber (WOOD -0.04%) was about even on the day. Copper (COPPER1! -0.34%) had its first decline after a seven-day run. Aluminum (ALI1! -1.26%) is forming a downward trend, pivoting off last week’s high.
The put/call ratio dropped to 0.480, still showing overly bullish sentiment. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
Of the four big mega-caps, only Apple (AAPL +1.23%) closed the day with gains, outperforming the Nasdaq. Microsoft (MSFT -0.03%) dipped below the key moving average lines, the 21d EMA and the 50d MA. Amazon (AMZN -0.14%) closed below the two support/resistance lines. Alphabet (GOOGL -0.37%) closed with a loss but is still trading well above the moving average lines.
Just over half of mega-caps closed the day with losses. Tesla (TSLA +7.13%) closed at a new all-time high after a short pullback. Netflix (NFLX +3.51%) finally broke above its 50d MA on higher volume. Taiwan Semiconductor (TSM +2.56%) and Pfizer (PFE +2.26%) round out the top four mega-cap gains for the day. Intel (INTC -3.43%) pivoted down after nine consecutive days of gains.
If was a good day for growth stocks. Cloudflare (NET +5.96%), NIO (NIO +4.81%), Moderna (MRNA +4.59%) and Pinterest (PINS +4.46%) were some of the leading gainers for the day. Fastly (FSLY -3.65%) returned to its 50d MA after acquisition rumors yesterday sent the stock on a round trip. Coupa Software (COUP +1.82%) is up 4.34% post-market upon beating expectations on earnings. Sumo Logic (SUMO -18.10%) surprised investors by releasing its first earnings report mid-day. The stock tumbled but is now up 5% after hours.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
The EIA Short-Term Energy Outlook and API Weekly Crude Oil Stock numbers will be released tomorrow. In addition, Nonfarm Productivity and Unit Labor Costs data for Q3 will be released.
Retail stock Chewy (CHWY -0.21%) will announce earnings tomorrow after market close. MongoDb (MDB +1.02%) will be one of the few tech stocks to announce earnings.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The five-day trend line and longer trend line from the 10/30 bottom are pointing to a +0.23% gain.
The one-day trend line points to a small loss of 0.29%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Just looking at the Nasdaq chart, it looks like we had a very bullish Monday. But looking at the limited breadth of gainers/losers, the mix of Utilities as a defensive play and the slight drop in treasury bond yields, it’s not a surprise to see a much more bearish look on the other major index charts. And yet, the contrarian indicator put/call ratio moved even lower as investors seem bullish, possibly overly bullish to be good.
Any bad news on the pandemic, vaccines or stimulus could be a catalyst for a pullback or even correction. Watch your favorite stocks for signs of trouble, failed breakouts, or unexpected reversals off uptrends. Keep engaged as a stimulus could send the market to new heights but do have a plan if the market pulls back significantly.
Take care!
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