Daily Market Update for 11/22

Original Chart

Notes

Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.

Monday, November 22, 2021

Facts: -1.26%, Volume higher, Closing Range: 1%, Body: 74% Red
Good: New all-time high
Bad: Could not hold high from morning, dropped below 16,000
Highs/Lows: Higher high, Lower low
Candle: Large red body with long upper wick, tiny lower wick
Advance/Decline: 0.4, more declining than advancing stocks
Indexes:SPX (-0.32%), DJI (+0.05%), RUT (-0.50%), VIX (+7.04%)
Sector List: Energy ( XLE +1.77%) and Financials ( XLF +1.41%) at the top. Technology ( XLK -1.11%) and Communications ( XLC -1.22%) at the bottom.
Expectation: Lower

Market Overview

After setting new record highs in two indexes, markets sold off quickly, ending the day with losses after President Biden decided to give Jerome Powell another term as the Fed Chairman.

The Nasdaq closed with a -1.26% decline. The index gained nearly 1% in the morning before fading from intraday highs. That created a long upper wick. The index continued to dip below the 16,000 support area , forming a thick 74% red body below the long upper wick. The closing range is 1%, as the index continued to sell off into the close. There were more declining stocks than advancing stocks. Volume was higher, creating a distribution day for the index.

The Dow Jones Industrial Average (DJI) was the only index to gain for the day, although it only advanced +0.05%. The S&P 500 (SPX) declined -0.32%. The Russell 2000 (RUT) lost -0.50% for the day, even though it led major indexes in the morning rally.

In a reversal from Friday, Energy ( XLE +1.77%) and Financials ( XLF +1.41%) were the top sectors of the day. Technology ( XLK -1.11%) and Communications ( XLC -1.22%) were at the bottom. Big tech mega-caps brought down both sectors.

Existing Home Sales for October came in higher than expected, counting 6.34 million vs. the expectation of 6.20 million. That helped indexes rally in the morning on positive sentiment for the economy. However, once Biden confirmed his selection of Jerome Powell as Fed Chairman, investors needed to price in the expectation that Powell would raise interest rates earlier than otherwise thought.

The US Dollar index DXY advanced +0.45% for the day. US 30y and 10y yields rose, but not nearly as much as the 2y yield, which rose +15.46%. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices declined. Silver and gold prices dropped sharply.

The put/call ratio declined to 0.593. The CNN Fear & Greed Index is still in Greed but moving closer to neutral.

Apple AAPL ) was the only of the four largest mega-caps to gain for the day, advancing +0.29% but ending the day far below the morning +3.21% rally. Microsoft MSFT ) set a new all-time high in the morning but couldn’t hold on, declining -0.96% by the end of the day. Amazon ( AMZN ) dropped -2.83%, while Alphabet GOOGL ) lost -1.76%.

Wells Fargo ( WFC ) was the top mega-cap for the day, gaining +3.11%. At the bottom of the list was Shopify (SHOP), declining -5.65% and just barely staying above 200b market cap to stay in the mega-cap list.

Only five stocks in the Daily Update Growth List gained for the day, led by NIO NIO ), which gained +7.32%. At the bottom of the list was Niu Technologies NIU ), losing -16.83% after disappointing earnings . CloudFlare (NET) fell -11.65% today, after gaining more than 90% during October and November.

Looking ahead

Manufacturing and Services Purchasing Managers Index data will be available as the market opens on Tuesday.

Autodesk ADSK ), VMWare VMW ), Dell Tech (DELL), Xpeng ( XPEV ), HP Inc HPQ ), Best By ( BBY ), Dollar Tree DLTR ), GameStop ( GME ), Burlington (BUTL), Gap ( GPS ), and Nordstrom JWN ) are some of the earnings reports for Tuesday.

Trends, Support, and Resistance

The Nasdaq set a new all-time this morning before dipping back below the 16,000 area. The index then climbed back above the 16,000 level before diving below it in the last 90 minutes of trading.

If the index returns to the trend line from the 11/10 low, expect a +1.83% gain for Tuesday.

The five-day trend line points to a +1.48% gain.

If the one-day trend continues, that will result in a -1.07% decline for Tuesday and a test of the 21d EMA .

Wrap-up

On one side, investors are relieved that they know what to expect with Jerome Powell. On the other hand, the alternative of Lael Brainard would have come with some unpredictability, but most thought she would extend out easy monetary policy for longer than Powell.

The decision was made, and markets sold-off today in the initial reaction. It will likely take a few days to shake out the bets that need to be reversed. Given the thick red candle for the Nasdaq today, the expectation is for Lower for Tuesday.

Stay healthy and trade safe!

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