Trend lines drawn from the 10/30 bottom (22d), 11/24 (5d), and today 11/30 (1d).
If you have ideas to make the daily update better, please let me know in the comments.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Tuesday, December 1, 2020
I was shaking at the knees
Facts: +1.28% higher, Volume lower, Closing range: 64%, Body: 29%
Good: New all-time high, afternoon dip stayed in upper half of range
Bad: Gap up with lower volume
Highs/Lows: Higher high, Higher low
Candle: Spinning top, longer upper/lower wicks than body.
Advance/Decline: 0.88, more declining stocks than advancing stocks
Sectors: Communications (XLC +1.83%) and Financials (XLF +1.54%) top. Industrials (XLI -0.25%) only losing sector.
Expectation: Sideways
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The Nasdaq opened the first session of December on a gap up and further strengthened during the morning on news that a bi-partisan group of senators put a fresh stimulus plan back on the table for negotiation. The gains took the index to a new all-time high before reversing course in the afternoon and closing in the middle of the trading range. The Nasdaq closed with a +1.28% gain on lower volume. The closing range was at 64% with a 29% green body. The spinning top candlestick has upper and lower wicks longer than the body, indicating indecision, which could represent some doubt on whether the new stimulus will pass through the political hoops and become real. The gains on the Nasdaq were not broad across the stocks, with more declining stocks than advancing stocks for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
All the major indexes ended the day with gains. The S&P 500 (SPX +1.13%) finished with gains just behind the Nasdaq. The gains for the Dow Jones Industrial average (DJI +0.63%) and Russell 2000 (RUT +0.89%) were not as high. The DJI closed in the lower part of the trading range.
There was some churn in the sectors throughout the day. Communications (XLC +1.83%) ended the day with the highest gains, followed by Financials (XLF +1.54%). Energy (XLE +0.46%) led the morning with a 3% gain but lost those gains after OPEC struggled to reach a consensus on production. Healthcare (XLV +0.84%) also started the day with gains but faded before the morning was over. The only losing sector for the day was Industrials (XLI -0.25%). Even Industrials did well in the morning before manufacturers purchasing data came in less than expected, signaling less future demand for the sector.
The VIX volatility index rose slightly by +0.97%, but is still in a downward trend.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
US30Y and US10Y bond yields spiked on the stimulus news. US30Y-US10Y spread widened slightly while the US10Y-US02Y spreads widened by 11%.
Corporate Bond yields also rose for the day but not as must as Treasury bonds, tightening the spread between the two groups.
The US dollar (DXY -0.75%) had a sharp decline after the stimulus news.
Silver (SILVER +5.96%) and Gold (GOLD +2.14%) pivoted off yesterday’s low to make solid gains. Crude Oil Futures (CRUDEOIL1! -1.16%) continued to slide on indecision from OPEC. Timber (WOOD +2.85%) got a huge boost from the stimulus news. Aluminum (ALI1! +1.13%) is on the rise again after moving sideways for a few weeks.
The put/call ratio dipped to 0.508 showing overly bullish optimism. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All the big four mega-caps outperformed the index today. Apple (AAPL +3.08%) had the largest gain of the four as its breaking out of a consolidation pattern. Microsoft (MSFT +1.00%), Amazon (AMZN +1.64%), and Alphabet (GOOGL +2.33%) are all trading in an area of support above their 21d EMA and 50d MA lines. Apple, Microsoft, and Amazon all have overhead supply to clear that may provide resistance for more gains. Most mega-caps had gains on the day. Taiwan Semiconductor (TSM +3.96%) led semiconductors higher while Facebook (FB +3.46%) contributed to the Communications sector’s lead for the day.
Growth stocks did not benefit from the stimulus news and many had losses on the day. Zoom Video (ZM -15.06%) dropped back significantly after earnings. Although it beat expectations, outlook for customer churn after the pandemic caused some investor panic. NIO (NIO -10.23%) and Moderna (MRNA +7.68%) both gave up morning gains to finish the day with big losses. Docusign (DOCU -5.34%), Fastly (FSLY -3.62%), Datadog (DDOG -3.26%), Peloton (PTON -3.71%) and other pandemic growth stocks all seemed to be dragged down after Zoom Video’s earnings call.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Federal Reserve Chair Jerome Powell will continue his testimony in front of congress tomorrow. Updates on Nonfarm Employment Changes and Crude Oil Inventories will be released.
Several growth companies will release earnings tomorrow. Snowflake (SNOW ) will release its first earnings report after going public earlier this year. Crowdstrike (CRWD -3.77%), SPLK (SPLUNK +1.10%), ZScaler (ZS -2.61%), Okta (OKTA -3.29%) will also report after market close.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The one-day trend line and the five-day trend line both point to a +0.74% gain. That would be another all-time high and provide a positive signal after today’s indecisive day. Go bulls!
Or will it be the bears? The longer trend line from the 10/30 bottom points to a -0.30% loss. Not a huge loss and would likely involve filling today’s gap before regaining support.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The target keeps moving. Last Wednesday, there was a rotation out of mid-caps (especially popular growth stocks) to small and larger caps. That happened again today but not quite as severe. The stimulus, the weakening dollar, the end of the pandemic has investors searching for the next themes for their portfolios.
Many mid-caps will continue to grow after the pandemic but will not see the same levels of earnings acceleration in comparison to 2020. Multinational large cap and mega cap will benefit from the weakening dollar. Small caps look to grow after being impacted by the pandemic economy.
For now, we know investors are not looking outside the equity markets, except for possibly some commodities. Bond yields are too low and the weakening US dollar make them an even worse safe haven. Stimulus continues to offer liquidity in the markets. So, we can have some confidence in the markets continued strength, albeit their could be pullbacks. Look for news from the fed on continued stimulus since there is some disagreement on that today. Also watch out for positive/negative news on the new stimulus.
Take care!
If you have ideas to make the daily update better, please let me know in the comments.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Tuesday, December 1, 2020
I was shaking at the knees
Facts: +1.28% higher, Volume lower, Closing range: 64%, Body: 29%
Good: New all-time high, afternoon dip stayed in upper half of range
Bad: Gap up with lower volume
Highs/Lows: Higher high, Higher low
Candle: Spinning top, longer upper/lower wicks than body.
Advance/Decline: 0.88, more declining stocks than advancing stocks
Sectors: Communications (XLC +1.83%) and Financials (XLF +1.54%) top. Industrials (XLI -0.25%) only losing sector.
Expectation: Sideways
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
The Nasdaq opened the first session of December on a gap up and further strengthened during the morning on news that a bi-partisan group of senators put a fresh stimulus plan back on the table for negotiation. The gains took the index to a new all-time high before reversing course in the afternoon and closing in the middle of the trading range. The Nasdaq closed with a +1.28% gain on lower volume. The closing range was at 64% with a 29% green body. The spinning top candlestick has upper and lower wicks longer than the body, indicating indecision, which could represent some doubt on whether the new stimulus will pass through the political hoops and become real. The gains on the Nasdaq were not broad across the stocks, with more declining stocks than advancing stocks for the day.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
All the major indexes ended the day with gains. The S&P 500 (SPX +1.13%) finished with gains just behind the Nasdaq. The gains for the Dow Jones Industrial average (DJI +0.63%) and Russell 2000 (RUT +0.89%) were not as high. The DJI closed in the lower part of the trading range.
There was some churn in the sectors throughout the day. Communications (XLC +1.83%) ended the day with the highest gains, followed by Financials (XLF +1.54%). Energy (XLE +0.46%) led the morning with a 3% gain but lost those gains after OPEC struggled to reach a consensus on production. Healthcare (XLV +0.84%) also started the day with gains but faded before the morning was over. The only losing sector for the day was Industrials (XLI -0.25%). Even Industrials did well in the morning before manufacturers purchasing data came in less than expected, signaling less future demand for the sector.
The VIX volatility index rose slightly by +0.97%, but is still in a downward trend.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
US30Y and US10Y bond yields spiked on the stimulus news. US30Y-US10Y spread widened slightly while the US10Y-US02Y spreads widened by 11%.
Corporate Bond yields also rose for the day but not as must as Treasury bonds, tightening the spread between the two groups.
The US dollar (DXY -0.75%) had a sharp decline after the stimulus news.
Silver (SILVER +5.96%) and Gold (GOLD +2.14%) pivoted off yesterday’s low to make solid gains. Crude Oil Futures (CRUDEOIL1! -1.16%) continued to slide on indecision from OPEC. Timber (WOOD +2.85%) got a huge boost from the stimulus news. Aluminum (ALI1! +1.13%) is on the rise again after moving sideways for a few weeks.
The put/call ratio dipped to 0.508 showing overly bullish optimism. The put/call ratio (PCCE) is a contrarian indicator that shows overly bullish or overly bearish investor behavior. The 0.7 level is considered normal. As it approaches 0.60 (overly bullish) and below, watch for a possible pullback in the market.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Leaders
All the big four mega-caps outperformed the index today. Apple (AAPL +3.08%) had the largest gain of the four as its breaking out of a consolidation pattern. Microsoft (MSFT +1.00%), Amazon (AMZN +1.64%), and Alphabet (GOOGL +2.33%) are all trading in an area of support above their 21d EMA and 50d MA lines. Apple, Microsoft, and Amazon all have overhead supply to clear that may provide resistance for more gains. Most mega-caps had gains on the day. Taiwan Semiconductor (TSM +3.96%) led semiconductors higher while Facebook (FB +3.46%) contributed to the Communications sector’s lead for the day.
Growth stocks did not benefit from the stimulus news and many had losses on the day. Zoom Video (ZM -15.06%) dropped back significantly after earnings. Although it beat expectations, outlook for customer churn after the pandemic caused some investor panic. NIO (NIO -10.23%) and Moderna (MRNA +7.68%) both gave up morning gains to finish the day with big losses. Docusign (DOCU -5.34%), Fastly (FSLY -3.62%), Datadog (DDOG -3.26%), Peloton (PTON -3.71%) and other pandemic growth stocks all seemed to be dragged down after Zoom Video’s earnings call.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Federal Reserve Chair Jerome Powell will continue his testimony in front of congress tomorrow. Updates on Nonfarm Employment Changes and Crude Oil Inventories will be released.
Several growth companies will release earnings tomorrow. Snowflake (SNOW ) will release its first earnings report after going public earlier this year. Crowdstrike (CRWD -3.77%), SPLK (SPLUNK +1.10%), ZScaler (ZS -2.61%), Okta (OKTA -3.29%) will also report after market close.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The one-day trend line and the five-day trend line both point to a +0.74% gain. That would be another all-time high and provide a positive signal after today’s indecisive day. Go bulls!
Or will it be the bears? The longer trend line from the 10/30 bottom points to a -0.30% loss. Not a huge loss and would likely involve filling today’s gap before regaining support.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The target keeps moving. Last Wednesday, there was a rotation out of mid-caps (especially popular growth stocks) to small and larger caps. That happened again today but not quite as severe. The stimulus, the weakening dollar, the end of the pandemic has investors searching for the next themes for their portfolios.
Many mid-caps will continue to grow after the pandemic but will not see the same levels of earnings acceleration in comparison to 2020. Multinational large cap and mega cap will benefit from the weakening dollar. Small caps look to grow after being impacted by the pandemic economy.
For now, we know investors are not looking outside the equity markets, except for possibly some commodities. Bond yields are too low and the weakening US dollar make them an even worse safe haven. Stimulus continues to offer liquidity in the markets. So, we can have some confidence in the markets continued strength, albeit their could be pullbacks. Look for news from the fed on continued stimulus since there is some disagreement on that today. Also watch out for positive/negative news on the new stimulus.
Take care!
Comment:
The afternoon reversal around 2:45pm was timed with resistance from top Republicans on the new stimulus proposal.
