Daily Market Update for 12/1

Original Chart

Notes

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

Wednesday, December 01 , 2021

Facts: -1.83%, Volume lower, Closing Range: 2%, Body: 87% Red
Good: Nothing
Bad: Failed morning rally turned into a huge sell-off
Highs/Lows: Lower high, Lower low
Candle: Longer upper wick above a long red body, tiny lower wick
Advance/Decline: 0.22, more than four declining stocks for every advancing stock
Indexes:SPX (-1.18%), DJI (-1.34%), RUT (-2.34%), VIX (+14.45%)
Sector List: Utilities ( XLU +0.18%) and Health ( XLV -0.18%) at the top. Consumer Discretionary ( XLY -1.80%) and Communications ( XLC -2.31%) at the bottom.
Expectation: Lower

Market Overview

Fears over omicron continued to put pressure on markets, despite optimism that drove a morning rally. Not only did the US find its first case of the new variant, but the Fed’s Jerome Powell signaled that inflation might not recede next year as previously thought. The two caused markets to give up early gains and decline further.

The Nasdaq ended the day with a -1.82% decline. The morning started with a +1.8% gain, but then worries crept back in, causing the index to lose more than -3.6% from the intraday high. The candle has a longer upper wick above an 87% red body. The 2% closing range shows bears were in control all the way into close. Volume was slightly lower than the previous day but still elevated over the 50d average volume . There were more than four declining stocks for every advancing stock.

Small caps had the worst performance, with the Russell 2000 (RUT) declining -2.34%. The S&P 500 (SPX) fell -1.18%, and the Dow Jones Industrial Average (DJI) declined -1.34%. The VIXVolatility index closed the day at its highest level since January, climbing +14.45% today.

Utilities ( XLU +0.18%) was the only S&P 500 sector that gained for the day. Energy ( XLE -1.06%) was the leading sector before the morning reversal. Health ( XLV -0.18%) was the second-best sector for the day. Consumer Discretionary ( XLY -1.80%) and Communications ( XLC -2.31%) were at the bottom of the sector list.

ADP Nonfarm Employment Change for November was higher than expected. ISM Manufacturing Employment also increased with the Purchasing Managers Index rising to 61.1, compared to the expectation of 61.0.

The US Dollar index DXY ) rose +0.15%. US 30y, 10y, and 2y Treasury Yields started the morning higher but ended the day lower. High Yield ( HYG ) Corporate Bond prices declined to their lowest point in 2021. Investment Grade ( LQD ) Corporate Bond prices also fell today, but not as sharply.

The put/call ratio rose to 0.770. The CNN Fear & Greed index moved into the Extreme Fear area.

All four largest mega-caps declined for the day. Apple AAPL ) set a new all-time high before falling, ending the day with a -0.32% loss. Microsoft MSFT ) declined -0.15%, closing below its 21d EMA for the second day. Alphabet GOOGL ) moved further below its 50d MA with a -0.60% decline. Amazon ( AMZN ) dropped the most, losing -1.81%.

Taiwan Semiconductor ( TSM ) soared +5.42% in the morning before giving back some of the gains. TSM still topped the mega-cap list with a +2.97% gain for the day. Pfizer PFE ), Johnson & Johnson JNJ ), and Procter & Gamble PG ) all gained more than 1% for the day, closing among the few gainers in the mega-cap list. Salesforce.com ( CRM ) disappointed investors on their revenue outlook, dropping the stock to the bottom of the list with a -11.74% decline.

Only three stocks in the Daily Update Growth List gained for the day. JD.com was the top gainer with a +1.27% advance. The biggest loser was CloudFlare (NET), declining -12.77% today.

Looking ahead

The weekly Initial Jobless Claims data will be available in the morning.

Marvell ( MRVL ), Dollar General (DG), Kroger KR ), Domo (DOM), and Ehang (EH) are a few of the earnings reports expected tomorrow.

Trends, Support, and Resistance

The Nasdaq dropped below another support level at 15,400 to close right at its 50d moving average line.

All trend lines are downward moving.

If the index can return to the five-day trend line , it would mean a +1.98% gain for tomorrow.

The trend line from the 11/22 high points to a +1.53% gain.

If the one-day trend line continues into Thursday, expect a -2.22% decline.

Wrap-up

Markets were in free fall on Wednesday as the drama around the Omicron variant continued to grow. Governments are responding aggressively to the new variant as scientists scramble to answer questions on how fast it will spread and whether it will bypass vaccines and natural immunity.

Still, a lot of today’s decline could be from Jerome Powell’s statements on continued high inflation in the second half of 2022. Those statements are signaling a much more hawkish Fed, which could accelerate bond tapering and interest rate hikes.

The expectation for Thursday is Lower.

Stay healthy and trade safe!

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