Daily Market Update for 12/14

Original Chart

Notes

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

Tuesday, December 14, 2021

Facts: -1.14%, Volume lower, Closing Range: 64%, Body: 10% Green
Good: Support at 15,100
Bad: Close below 50d moving average, decline on higher volume
Highs/Lows: Lower high, Lower low
Candle: Thin green body in center of candle with long wicks, signals indecision
Advance/Decline: 0.4, 5 declining stocks for every two advancing stocks
Indexes:SPX (-0.75%), DJI (-0.30%), RUT (-0.96%), VIX (+7.78%)
Sector List: Financials ( XLF +0.60%) and Consumer Staples ( XLP +0.07%) at the top. Real Estate ( XLRE -1.10%) and Technology ( XLK -1.64%) at the bottom.
Expectation: Sideways or Lower

Market Overview

Indexes moved lower for a second day as investors await the result of the Fed meeting on Wednesday. The Producer Price Index recorded its biggest increase since 2010, signaling more inflation on the horizon.

The Nasdaq declined -1.14%, gapping down at open and closing below its 50d moving average line. After dipping below the 15,200 support area , buyers returned when the index neared 15,100. It climbed into the afternoon to close near the morning open. The up and down created a spinning top candle that signals indecision in the market. There were five declining stocks for every two advancing stocks.

The Dow Jones Industrial Average (DJI) declined -0.30%. The S&P 500 (SPX) fell -0.75%. The Russell 2000 (RUT) dropped -0.96% and is now sitting just above the support area that the small-cap index held since February. The VIXVolatility index rose +7.78%.

Only two of the eleven S&P 500 sectors gained for the day. Financials ( XLF +0.60%) and Consumer Staples ( XLP +0.07%) were at the top of the list. Real Estate ( XLRE -1.10%) and Technology ( XLK -1.64%) performed the worst.

The Producer Price Index rose 0.8% month-over-month and 9.6% year-over-year. That was higher than the 0.5% monthly, and 9.2% yearly increases that analysts expected. The producer price index signals future inflation as producers will pass increased costs to consumers.

The US Dollar index DXY ) gained +0.20%. US 30y, 10y, and 2y yields gained for the day. Both High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices declined. In commodities , Timber prices dropped sharply.

All four largest mega-caps declined today. Microsoft MSFT ) had the most significant loss, falling -3.26% and closing below its 21d EMA after testing the 50d MA. Alphabet GOOGL ) declined -1.32%, closing below its 50d MA. Apple AAPL ) lost -0.80% but is still near all-time highs. Amazon ( AMZN ) dipped below its 200d MA before recovering and ending the day with a -0.28% decline.

Alibaba (BABA) was the top-performing mega-cap for the day, advancing +3.55%. Adobe ( ADBE ) was at the bottom of the mega-cap list, losing -6.60% after a JPMorgan Chase analyst downgraded the stock.

Beyond Meat BYND ) rose +9.29% today after an analyst upgraded it from underweight to neutral on news that their relationship with McDonald’s is expanding. The stock topped the Daily Update Growth List. At the bottom of the list was CloudFlare (NET), falling -9.98% today.

Looking ahead

Retail Sales data for November will be available in the morning. Crude Oil Inventories will be updated after the market opens.

The most important news will come after the FOMC meets and releases a statement at 2 pm that includes their economic projections and interest rate decision/projection.

Trends, Support, and Resistance

The Nasdaq continued its slide today, closing below the 50d moving average.

If the index returns to the trend line from the 11/22 high, that would mean a +0.50% gain for tomorrow.

The one-day trend line points to a -0.33% decline, while the five-day trend line ends with a -0.90% loss.

Wrap-up

So we wait. We wait for the Fed to decide on Wednesday about the pace of Bond Purchase Tapering and Interest Rate Increases to control a crazy amount of inflation . With such a pivotal event, the trends in the chart don’t matter as much.

Still, I’ll set an expectation for Sideways or Lower based on the current downtrend and lack of support in critical areas, including the 50d moving average. If the Fed is less hawkish than expected, we could see a nice upside reversal tomorrow.

Stay healthy and trade safe!

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