Daily Market Update for 12/6

Original Chart

Notes

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

Monday, December 6, 2021

Facts: +0.93%, Volume lower, Closing Range: 84%, Body: 31% Green
Good: High closing range, rally off 15,000 support
Bad: Lower high
Highs/Lows: Lower high, Higher low
Candle: Inside day, small green body in upper half of the candle
Advance/Decline: 1.36, more advancing stocks than declining stocks
Indexes:SPX (+1.17%), DJI (+1.87%), RUT (+2.05%), VIX (-11.38%)
Sector List: Consumer Staples ( XLP +1.76%) and Industrials XLI +1.69%) at the top. Technology ( XLK +0.95%) and Health ( XLV +0.57%) at the bottom.
Expectation: Sideways

Market Overview

Whiplash moves in the market driven by Omicron fears continued today. Optimism gained over the weekend as doctors reported mild symptoms for Omicron cases, and it seems vaccines are still effective against the new variant. The positive outlook helped drive markets higher today.

The Nasdaq closed with a +0.93% gain. Volume was lower than the previous day. The closing range of 84% comes above a 31% green body in the upper half of the candle. The long lower wick formed in the first minutes after the market opened. However, investors bought the dip and brought the index back to the 50d moving average line, where it met resistance. There were more advancing stocks than declining stocks.

The Russell 2000 (RUT) outperformed the other major indexes, gaining +2.05% today. The Dow Jones Industrial Average (DJI) also performed well, advancing +1.87% as investors looked for value in industrials and recovery stocks. The S&P 500 (SPX) climbed by +1.17%. The VIXVolatility Index remains high even though it declined -11.38% today.

All eleven S&P 500 sectors gained today. Consumer Staples ( XLP +1.76%) and Industrials XLI +1.69%) were at the top of the sector list. Technology ( XLK +0.95%) and Health ( XLV +0.57%) were at the bottom.

The US Dollar index DXY ) gained +0.15%. US 30y, 10y, and 2y Treasury Yields gained for the day. High Yield ( HYG ) Corporate Bond prices rose while Investment Grade ( LQD ) Corporate Bond prices declined.

Crude Oil Futures moved higher after falling sharply for the past week. Timber (WOOD) prices rose as the index moved to its highest point since September.

The put/call ratio ( PCCE ) dropped to 0.729 after nearly hitting 1.0 on Friday. The CNN Fear & Greed index moved back into Fear from Extreme Fear at the end of last week.

All four largest mega-caps gained for the day. Apple AAPL ) gained +2.15%, although it faded back from an intraday gain of +3.73%. Microsoft MSFT ) has a long lower wick that tested the 50d moving average line before ending the day with a +0.98% gain. Amazon (AMAZN) gained +1.11%, and Alphabet GOOGL ) gained +0.81%. Both closed above their 50d moving average lines.

Most mega-caps gained for the day. Alibaba (BABA) was the top mega-cap for the day, gaining +10.40% today as China tech seems to be on the rebound. The worst-performing mega-cap of the day was Pfizer PFE ) -5.14% as investors exited vaccine trades after more experts reduced fears in their Omicron outlook.

Joining Alibaba (BABA) at the top of the Daily Update Growth List was FUTU Holdings ( FUTU ), a Chinese fintech stock that gained +10.01% for the day. Most of the stocks in the growth list gained, but some familiar names lost. Cloudflare (NET) declined -7.51%, beat in decline only by Zscaler (ZS), which lost -12.44%. Investors are moving away from richly priced tech stocks and looking at value stocks for the next cycle.

Looking ahead

Trade Balance data for October will be available in the morning. We will also get a look at Nonfarm Productivity and Unit Labor Costs for Q3. In the afternoon, the API Weekly Crude Oil Stock will be released.

AutoZone (AZO), Pagerduty PD ), and Dave & Busters (PLAY) are a few of the earnings releases for Tuesday.

Trends, Support, and Resistance

The Nasdaq got support around the 15,000 area before moving higher in the morning. It then reached resistance at the 50d moving average line before closing slightly below it.

If the one-day trend line continues into Tuesday, that would mean a +1.72% gain.

The trend line from the 11/22 high points to a -1.33% decline, while the five-day trend line ends with a -2.26% decline.

We need to see a close above the 50d moving average at 15,279.93 as a first test of the rebound. Next, look for the index to move above 15,545.99, where the 21d exponential moving average line is now. Finally, 15,833.11 is the high of last week. Creating a higher high for this week will be a key indicator of a recovery from the Omicron sell-off.

Wrap-up

We are not out of the woods with Omicron. News headlines are still flashing positive and negative sentiment as the global story unfolds. It seems for now that fears are subsiding, and investors are optimistic again about value and reopening stocks.

Given the inside day candle today, the expectation for tomorrow is Sideways.

Stay healthy and trade safe!

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