Daily Market Update for 12/3

Original Chart

Notes

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

Friday, December 3, 2021

Facts: -1.92%, Volume lower, Closing Range: 29%, Body: 64% Red
Good: Support at 15,000
Bad: Close below 50d moving average, closing range, decline on higher volume
Highs/Lows: Higher high, Lower low
Candle: Outside day, mostly red body with a long lower wick
Advance/Decline: 0.3, more than three declining stocks for every advancing stock
Indexes:SPX (-0.84%), DJI (-0.17%), RUT (-2.13%), VIX (+9.73%)
Sector List: Consumer Staples ( XLP +1.24%) and Utilities ( XLU +1.00%) at the top. Technology ( XLK -1.67%) and Consumer Discretionary ( XLY -1.94%) at the bottom.
Expectation: Lower

Market Overview

Omicron fears continued to drive a volatile week while investors tried to understand the impact of mixed employment data on Fed bond purchase tapering.

The Nasdaq lost another -1.92% today. That brought the weekly decline to -2.92%, and the index is -6.95% below the all-time high set last week. The candle is 64% red body with a longer lower wick. The closing range of 29% signals that the bears were in control. The higher high and lower low create a bearish outside day. There were three declining stocks for every advancing stock.

The Dow Jones Industrial Average (DJI) performed the best for the day, declining only -0.17%. The S&P 500 (SPX) fell -0.84%. The Russell 2000 (RUT) dropped -2.13%. The VIXVolatility Index rose +9.74%.

Only three of the eleven S&P 500 sectors gained. They were defensive sectors. Consumer Staples ( XLP +1.24%) and Utilities ( XLU +1.00%) were the top two sectors. Technology ( XLK -1.67%) and Consumer Discretionary ( XLY -1.94%), both growth sectors, were at the bottom.

Only 210,000 Nonfarm Payrolls were added in November. Analysts expected 550,000. However, the Unemployment Rate dropped to 4.2%, beating the expectation of 4.5%. The two together sent mixed signals to investors trying to figure out the impact on Fed monetary actions.

The ISM Non-Manufacturing Purchasing Managers Index showed higher than expected economic activity, registering 69.1 against the expectation of 65.0. Markit Composite PMI and Services PMI were also higher than expected.

The US Dollar index DXY ) rose +0.02%. The US 30y and 10y Treasury yields dropped sharply again. The 2y Treasury yield also declined. There was no change to High Yield ( HYG ) Corporate Bond prices, but Investment Grade ( LQD ) Corporate Bond prices rose.

All four largest mega-caps declined today. Microsoft MSFT ) had the most significant decline, ending the day with a -1.97% loss after testing support at its 50d moving average line. Amazon ( AMZN ) dipped below its 200d moving average before recovering to end the day with a -1.38% decline. Alphabet GOOGL ) continues to trade around its 50d moving average, dipping -0.67% today. Apple AAPL ) is the only of the four to trade above its 21d exponential moving average and 50d moving average.

Pepsico PEP ) was the top mega-cap for the day, gaining +2.55%, benefiting from defensive investments in the consumer staple sector. The worst-performing mega-cap was Adobe, declining -8.24% today.

Only three stocks in the Daily Update Growth List advanced today. Zynga ZNGA ) and UP Fintech ( TIGR ) gained +5.89% and +5.49%, while Workday WDAY ) held onto a small gain of +0.12%. At the bottom of the list, DocuSign DOCU ) plunged -42.22% after providing a very disappointing revenue outlook to investors during its earnings call.

Looking ahead

There are no major US economic data scheduled for Monday.

MongoDB MDB ), Coupa Software (COUP), GitLab GTLB ), H&R Block ( HRB ), and Sumo Logic (SUMO) will report earnings on Monday.

Trends, Support, and Resistance

The Nasdaq closed below its 50d moving average line, continuing to decline until getting support at the 15,000 area.

If the index returns to the trend line from the 11/22 high, that will mean a +0.10% gain for Monday.

The five-day trend line points to a -1.24% decline.

If the one-day trend line continues, that would mean a -2.52% decline on Monday.

Wrap-up

There are two forces this week causing declines in the indexes. The one all over the news in fears of the Omicron variant. However, there is plenty of emerging commentary that Omicron may not be as bad as initially thought.

The second force has been the talk of accelerated tapering from the Fed’s Jerome Powell. Early in the week, he showed a change in attitude toward inflation , removing the word transitory from describing it. He indicated that more aggressive action might be required to control an overheated economy.

Given the low employment rate, investors seem sure that bond purchase tapering will happen faster than previously expected, and more interest rate hikes can be expected from a hawkish Fed.

The expectation for Monday is Lower.

Stay healthy and trade safe!

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