Trend lines drawn from the 10/30 bottom (28d), 12/3 (5d), and today 12/9 (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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Wednesday, December 9, 2020
Long road to ruin there in your eyes
Facts: -1.94%, Volume higher, Closing range: 15%, Body: 80%
Good: Support above 12,300
Bad: Sold off with little to no upward reversals
Highs/Lows: Higher high, Lower low
Candle: Bearish outside reversal day
Advance/Decline: 0.54, two decliners for every advancer
Sectors: Energy (XLE +0.22%) and Industrials (XLI +0.22%) were top sectors. Communications (XLC -1.19%) and Technology (XLK -1.92%) were the bottom.
Expectation: Sideways or Lower
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Market Overview
191 stocks on the Nasdaq managed to set a new high before the index took a downward spiral that never came back. The index closed sharply down after progress stalled in congress to pass a new stimulus bill. By the end of the day there were two declining stocks for every advancing stock. The Nasdaq finished with a -1.94% loss on higher volume. The closing range of 15% and 80% red body define a bearish outside reversal candle with a higher high and a lower low than yesterday.
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Indexes and Sectors
The S&P 500 (SPX -0.79%), Dow Jones Industrial average (DJI -0.35%) and Russell 2000 (RUT -0.82%) also reversed lower from yesterdays gains. They all outperformed the Nasdaq, with the Dow Jones Industrial having the smallest loss.
Energy (XLE +0.22%) and Industrials (XLI +0.22%) were the leading sectors of the day. Consumer Discretionary (XLY -0.10%) led mid-morning before losing ground. Communications (XLC -1.19%) was just behind Energy at the beginning of the day but finished second to last, ahead of Technology (XLK -1.92%).
The VIX volatility index gained +7.69%.
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Market Indicators
US30Y and US10Y bond yields rose for the day while spreads between long term and short term bonds stayed about even.
Corporate Bond yields also rose for the day. The spread widened a bit between corporate bonds and short-term treasury bonds as investors became a little more nervous about economic recovery.
The US dollar (DXY +0.15%) rose for the day. It is reversing off a low not seen since April 2018.
Silver (SILVER -2.43%) and Gold (GOLD -1.63%) dropped back from a recent high. Crude Oil (CRUDEOIL1! +0.18%) ticked up a bit despite Crude Oil Inventories data being higher than expected. Timber (WOOD +1.33%) gained for the day. Copper (COPPER1! +0.45%) and Aluminum (ALI1! +2.33%) reversed from yesterday’s losses.
The put/call ratio rose to 0.644 showing less optimism from investors. 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
The big four mega-caps all had losses for the day. Apple (AAPL -2.09%) and Alphabet (GOOGL -1.85%) are still trading above key moving average lines. Microsoft (MSFT -1.95%) and Amazon (AMZN -2.3%) closed below their 21d EMA and 50d MA lines.
Most other mega-caps were down for the day. AT&T (T +2.11%) and Johnson & Johnson (JNJ +1.02%) were able to complete a second day of gains. Tesla (TSLA -6.99%) and Netflix (NFLX -3.72%) fell back from recent gains.
Hardest hit were the growth stocks. Moderna (MRNA -7.81%), Cloudflare (NET -7.47%), Okta (OKTA -7.47%) and Fastly (FSLY -6.99%) were among the biggest losers. PagerDuty (PD +0.49%) was one of the few growth stocks I watch that had a gain.
Restoration Hardware (RH -0.89%) is up 1% after hours after beating expectations on earnings.
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Looking ahead
Core Consumer Price Index data for November will be released tomorrow before the market opens. Initial Jobless Claims will also be released before the market opens.
Lululemon Athletica (LULU -2.02%), Broadcom (AVGO -1.70%), Oracle (ORCL +1.19%), and Costco (COST -0.88%) are among companies reporting earnings after hours.
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Trends, Support and Resistance
The trend lines diverged today for the first time in a few weeks. The long-term trend from the 10/30 bottom continues to point to new all-time highs with a gain of +2.36%. The five-day trend flattened a bit but still points to a +1.53% gain.
The one-day trend line is pointing to another -3.12% decline. That trend line is derived from the steep slope of today’s sell-off. Likely the index will pause before passing through three support areas. The first area is around 12,250-12,300. Next, expect the index to get some support at the 21d EMA. If not, then the third support area is the November support around 12,000. A drop tomorrow beyond that point should raise the alarm.
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Wrap-up
The day started with several breakouts in both large, mid, and small-cap stocks. The Nasdaq had 191 stocks hit new highs before reversing and going lower. Many of the breakouts failed and the prices are back below the day’s open. When so many breakouts fail, there may be something wrong.
The Nasdaq had a sharp pull-back from a new all-time high. It could bounce back tomorrow, or it could continue to pull back a bit until it finds an area of support. If support areas break down, that could mean a deeper and/or longer correction. Have a plan for raising cash and getting to the sideline or using a hedge strategy to protect your portfolio.
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=-
Wednesday, December 9, 2020
Long road to ruin there in your eyes
Facts: -1.94%, Volume higher, Closing range: 15%, Body: 80%
Good: Support above 12,300
Bad: Sold off with little to no upward reversals
Highs/Lows: Higher high, Lower low
Candle: Bearish outside reversal day
Advance/Decline: 0.54, two decliners for every advancer
Sectors: Energy (XLE +0.22%) and Industrials (XLI +0.22%) were top sectors. Communications (XLC -1.19%) and Technology (XLK -1.92%) were the bottom.
Expectation: Sideways or Lower
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
191 stocks on the Nasdaq managed to set a new high before the index took a downward spiral that never came back. The index closed sharply down after progress stalled in congress to pass a new stimulus bill. By the end of the day there were two declining stocks for every advancing stock. The Nasdaq finished with a -1.94% loss on higher volume. The closing range of 15% and 80% red body define a bearish outside reversal candle with a higher high and a lower low than yesterday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
The S&P 500 (SPX -0.79%), Dow Jones Industrial average (DJI -0.35%) and Russell 2000 (RUT -0.82%) also reversed lower from yesterdays gains. They all outperformed the Nasdaq, with the Dow Jones Industrial having the smallest loss.
Energy (XLE +0.22%) and Industrials (XLI +0.22%) were the leading sectors of the day. Consumer Discretionary (XLY -0.10%) led mid-morning before losing ground. Communications (XLC -1.19%) was just behind Energy at the beginning of the day but finished second to last, ahead of Technology (XLK -1.92%).
The VIX volatility index gained +7.69%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
US30Y and US10Y bond yields rose for the day while spreads between long term and short term bonds stayed about even.
Corporate Bond yields also rose for the day. The spread widened a bit between corporate bonds and short-term treasury bonds as investors became a little more nervous about economic recovery.
The US dollar (DXY +0.15%) rose for the day. It is reversing off a low not seen since April 2018.
Silver (SILVER -2.43%) and Gold (GOLD -1.63%) dropped back from a recent high. Crude Oil (CRUDEOIL1! +0.18%) ticked up a bit despite Crude Oil Inventories data being higher than expected. Timber (WOOD +1.33%) gained for the day. Copper (COPPER1! +0.45%) and Aluminum (ALI1! +2.33%) reversed from yesterday’s losses.
The put/call ratio rose to 0.644 showing less optimism from investors. 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
The big four mega-caps all had losses for the day. Apple (AAPL -2.09%) and Alphabet (GOOGL -1.85%) are still trading above key moving average lines. Microsoft (MSFT -1.95%) and Amazon (AMZN -2.3%) closed below their 21d EMA and 50d MA lines.
Most other mega-caps were down for the day. AT&T (T +2.11%) and Johnson & Johnson (JNJ +1.02%) were able to complete a second day of gains. Tesla (TSLA -6.99%) and Netflix (NFLX -3.72%) fell back from recent gains.
Hardest hit were the growth stocks. Moderna (MRNA -7.81%), Cloudflare (NET -7.47%), Okta (OKTA -7.47%) and Fastly (FSLY -6.99%) were among the biggest losers. PagerDuty (PD +0.49%) was one of the few growth stocks I watch that had a gain.
Restoration Hardware (RH -0.89%) is up 1% after hours after beating expectations on earnings.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Core Consumer Price Index data for November will be released tomorrow before the market opens. Initial Jobless Claims will also be released before the market opens.
Lululemon Athletica (LULU -2.02%), Broadcom (AVGO -1.70%), Oracle (ORCL +1.19%), and Costco (COST -0.88%) are among companies reporting earnings after hours.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The trend lines diverged today for the first time in a few weeks. The long-term trend from the 10/30 bottom continues to point to new all-time highs with a gain of +2.36%. The five-day trend flattened a bit but still points to a +1.53% gain.
The one-day trend line is pointing to another -3.12% decline. That trend line is derived from the steep slope of today’s sell-off. Likely the index will pause before passing through three support areas. The first area is around 12,250-12,300. Next, expect the index to get some support at the 21d EMA. If not, then the third support area is the November support around 12,000. A drop tomorrow beyond that point should raise the alarm.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The day started with several breakouts in both large, mid, and small-cap stocks. The Nasdaq had 191 stocks hit new highs before reversing and going lower. Many of the breakouts failed and the prices are back below the day’s open. When so many breakouts fail, there may be something wrong.
The Nasdaq had a sharp pull-back from a new all-time high. It could bounce back tomorrow, or it could continue to pull back a bit until it finds an area of support. If support areas break down, that could mean a deeper and/or longer correction. Have a plan for raising cash and getting to the sideline or using a hedge strategy to protect your portfolio.
Take care!
