Daily Market Update for 11/25

Original Chart

Trend lines drawn from the 10/30 bottom (19d), 11/19 (5d), and today 11/25 (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.

Wednesday, November 25, 2020

You made me a believer, believer

Facts: +0.48% higher, Volume higher, Closing range: 78%, Body: 43%
Good: A new all-time high
Bad: Nothing
Highs/Lows: Higher high, Higher low
Candle: Short candle, with even upper and lower wicks
Advance/Decline: 0.98, about the same number of advancing and declining stocks
Sectors: Utilities ( XLU +0.26%) and Real Estate ( XLRE +0.24%) were the top sectors. Energy ( XLE -2.33%) was the worst performing.
Expectation: Sideways

Market Overview

After a long period of underperforming the other major Indexes, the Nasdaq finally had a day to shine. It closed at a new all-time high while the other indexes had inside days. Volume was lower and traders focused mostly on buying the pullbacks in mid-cap growth stocks. The index closed with a +0.48% gain with a closing range of 78% and most action contained within the middle of the candle. The 43% green body is surrounded by even length upper and lower wicks.

Indexes and Sectors

The S&P 500 SPX -0.16%), Dow Jones Industrials (DJI -0.58%) and Russell 2000 (RUT -0.46%) all took a step back while the Nasdaq had its day to shine. Each of the indexes that pulled back did so within the previous days range. An inside candle (the high and low is contained within the high and low of the previous day) after a strong trend is often in a continuation pattern, so I would expect these indexes to pick up with their uptrends in the next week.

Utilities ( XLU +0.26%) was the top performing sector of the day, with a surge in buying in the last hour of trading. Utilities is a haven within equities and some investors wanted to park their money there during the holiday. Technology ( XLK +0.21%) spent most of the day as the top sector before being passed by Utilities at the end of the day. Energy ( XLE -2.33%) pulled back from massive gains over the past few weeks and ended the day as the worst performing sector. Energy is still way ahead of the other sectors on gains for the week.

The VIX volatility index decreased by -1.80%, continuing a downward trend.

Market Indicators

snapshot

The US30Y yield increased +1.11% while the US10Y decreased by -0.55%, expanding the US30Y-US10Y spread, a long-term bullish view for the economy. The US10Y-US02Y spread contracted a bit, showing maybe a bit of bearish outook for the short term.

Corporate Bond yields gained for the day with the spread between Treasury and Corporate bonds tightening. Both indicators are still at bullish levels compared to earlier in the year.

snapshot

The US dollar DXY -0.25%) hit a new low for the year and is at its lowest point since April, 2018.

Silver SILVER +0.43%) and Gold GOLD +0.02%%) paused from the downward trend from the past two weeks. Crude Oil Futures (CRUDEOIL1! +2.01%) rose on positive Crude Oil Inventory news. Timber (WOOD -0.47%) pulled back from recent gains.

snapshot

The put/call ratio rose to 0.521 but still showing very bullish sentiment. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. 0.7 is considered normal. As it approaches 0.60 (overly bullish ) and below, watch for a reversal in the market.

Market Leaders

snapshot

Amazon ( AMZN +2.15%) closed the day with gains that brought it above its 21d EMA and 50d MA. Apple AAPL +0.75%) also gained for the day, closing above its 50d MA. It tested the 21d EMA , but sold off after touching the line. Microsoft MSFT +0.0%) closed even with yesterday’s close after a gap up at open turned into a test of its 21d EMA . Alphabet GOOGL +0.01%) also closed even with yesterday after a choppy trading session. Apple and Amazon outperformed the market while Microsoft and Alphabet underperformed. PayPal ( PYPL +4.11%) was the top performing mega-cap for the day while Tesla TSLA +3.35%) continues to add to recent gains.

Growth stocks recovered nicely from yesterday’s rotation. Many of the stocks that sold off yesterday were back in the game today. ETSY ETSY +5.44%), Pinterest (PINS +5.29%), Cloudflare (NET +4.94%) and Square ( SQ +4.94%) were among the top winners. Moderna MRNA +10.78%) closed the day with a huge gain after analysts upgraded price targets.

Looking ahead

Tomorrow is Thanksgiving and markets will be closed. Friday markets will continue trading but the trading day will end at 1pm.

There is no economic news or significant earnings announcements planned for Friday.

Trends, Support and Resistance

The current set of trend lines are all pointing at positive gains for Friday. When they all land in a similar area, I typically draw attention to the longest trend line . That is the trend from the 10/30 bottom which points to a +0.87%. The five-day trend is pointing to a 0.19% gain and the one-day trend lands in the middle.

Wrap-up

Initial Jobless Claims data released today was higher than expected, putting some caution into investors minds about the near-term economic recovery. Still investors seem confident in US corporation’s ability to weather the storm and are bullish on the mid to long-term. The pullback in the major indexes is warranted given the aggressive climb to new highs.

The fall to new lows for the US Dollar is something to keep an eye on. A bit weaker dollar can be a boon for large multi-national companies and could bring a healthy level of inflation to the US economy. However, if it continues to fall, expect some action by foreign central banks to keep currencies balanced and protect their own economies from trade impact .

Have a great Thanksgiving and Take care!

Comments

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