Daily Market Update for 12/8
Trend lines drawn from the 10/30 bottom (27d), 12/2 (5d), and today 12/8 (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.
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Tuesday, December 8, 2020
If anything could ever be this good again
Facts: +0.50%, Volume higher, Closing range: 92%, Body: 56%
Good: Close higher on volume, reversing morning lows
Bad: Nothing
Highs/Lows: Higher high, Lower low
Candle: Bullish outside day with longer lower wick
Advance/Decline: 1.77, more than three advancers for every two decliners
Sectors: Energy (XLE +1.49%) and Health Services (XLV +0.76%) were top sectors. Utilities (XLU -0.30%) and Real Estate (XLRE -0.46%) were the bottom.
Expectation: Sideways or Higher
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Market Overview
After sending some mixed signals on Monday, the market reconfirmed the current bullish rally on Tuesday. The Nasdaq closed at an all time high, and the Russell 2000 continued its rally after a short pause. There was more breadth in the market with more than three advancing stocks for every two declining stocks on the Nasdaq and 195 stocks making new highs. The index finished the day with a +0.50% on higher volume. The outside day is marked by a higher high and lower low than Monday and is bullish with the 92% closing range and large 56% body over a long lower wick.
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Indexes and Sectors
All major indexes closed the day higher with the Russell 2000 (RUT +1.40%) returning to the top of the list. The S&P 500 (SPX +0.28%) and Dow Jones Industrial (DJI +0.35%) shook off potential reversal patterns yesterday to produce a bullish gain today.
Energy (XLE +1.49%) was the leading sector of the day. Health (XLV +0.76%) came in second and just ahead of four other sectors also with positive gains. Real Estate (XLRE -0.46%) was the worst performing sector. Utilities (XLU -0.30%) lost on the day as investors exited the defensive play.
The VIX volatility index dropped -2.91%.
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Market Indicators
US30Y and US10Y bond yields dropped for another day and the spreads between long term and short-term bonds tightened.
Corporate Bond yields also rose another day while short term treasury bond yields dropped. The tightening spread between the two bond types shows a little hesitation of investors but is not yet significant.
The US dollar (DXY +0.14%) rose for the day. It is reversing off a low not seen since April 2018.
Silver (SILVER +0.37%) and Gold (GOLD +0.39%) are continuing to climb from early December pivots. Crude Oil (CRUDEOIL1! -1.61%) dropped after Crude Oil Stock numbers came in higher than expected signaling lower demand. Timber (WOOD +1.36%) gained for the day. Copper (COPPER1! -0.43%) continued to pull back from recent highs. Aluminum (ALI1! -1.29%) is forming a downward trend, pivoting off last week’s high.
The put/call ratio rose slightly to 0.486 but is still showing overly bullish sentiment. 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.
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Market Leaders
Three of the four biggest mega-caps had gains for the day with Microsoft (MSFT +0.8%) and Amazon (AMZN +0.61%) outperforming the index for the first time in several sessions. Apple (AAPL +0.51%) also outperformed but is showing some indecision in the days result. Alphabet (GOOGL -0.31%) was the only one of the four that lost for the day and is trending down from a 12/3 reversal day. Amazon closed above its 21d EMA but is still trading below its 50d EMA.
Plenty of mega-caps closed the day with gains. AT&T (T +3.95%) was a top performer followed by Pfizer (PFE +3.18%). Johnson & Johnson (JNJ +1.73%) is testing some upper resistance. Tesla (TSLA +1.27%) continues its climb toward inclusion in the S&P 500 on 12/21.
Fastly (FSLY +14.69%) led popular growth stocks with a huge gain and three days of whipsaw action. Moderna (MRNA +6.48%), Draft Kings (DKNG +6.09%) and ETSY (ETSY +4.49%) were also top performers on a day that many growth stocks did well. Sumo Holdings (SUMO +18.05%) had a huge gain after a big loss the day before upon surprising investors with a mid-day earnings report. The earnings report beat expectations but spooked investors when it was released without warning in the middle of the day.
Retail stock Chewy (CHWY +5.84%) dipped -1.44% after hours even after beating expectations on revenue and earnings. MongoDb (MDB +0.90%) also beat expectations but is down -3.14% after hours.
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Looking ahead
JOLT Job Openings data will be released tomorrow which will provide an update on recovering businesses. More job openings could mean businesses are coming back online after being stymied by pandemic lock downs. That would have a positive impact on the US Dollar.
Crude Oil Inventories data will also be released and may disappoint as did the inventory information released today by the API and the dismal short-term energy outlook.
Mortgage data and Wholesale Inventories will also be released providing some clues on consumer confidence and retail heading into the holidays.
Adobe (ADBE +0.62%), Restoration Hardware (RH +0.69%) and Campbell Soup (CB +0.04%) are notable companies releasing earnings after market close tomorrow.
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Trends, Support and Resistance
The one-day trend line points to a gain of +1.07% tomorrow.
The five-day trend line and longer trend line from the 10/30 bottom are pointing to a more modest gain of +0.12%.
Both outcomes would continue the streak of all-time highs. After six days of gains, it would not be a surprise to see a small pullback.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The market continues its bullish climb, making new all-time highs almost every day for the past week. It seems to shrug off any bad news, focusing optimism on the coming vaccines and the possibility of a new stimulus. Although the gains have been consistent, that have not been gains so huge to extend the index way above support areas. The key moving average lines are still within view. A pause or pullback would not be a surprise, but also does not seem necessary just yet.
On the other hand, the overly bullish optimism shown in the put/call ratio remains a concern. This level of optimism usually proceeds a sharp pullback in the market. There are some indications that the optimism is cooling. The downward movement in treasury bonds and loosening spread between corporate and short-term treasury bonds show a small amount of caution in the market. And the CNN Fear & Greed index has pulled back from the high greed levels in recent days.
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 8, 2020
If anything could ever be this good again
Facts: +0.50%, Volume higher, Closing range: 92%, Body: 56%
Good: Close higher on volume, reversing morning lows
Bad: Nothing
Highs/Lows: Higher high, Lower low
Candle: Bullish outside day with longer lower wick
Advance/Decline: 1.77, more than three advancers for every two decliners
Sectors: Energy (XLE +1.49%) and Health Services (XLV +0.76%) were top sectors. Utilities (XLU -0.30%) and Real Estate (XLRE -0.46%) were the bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
After sending some mixed signals on Monday, the market reconfirmed the current bullish rally on Tuesday. The Nasdaq closed at an all time high, and the Russell 2000 continued its rally after a short pause. There was more breadth in the market with more than three advancing stocks for every two declining stocks on the Nasdaq and 195 stocks making new highs. The index finished the day with a +0.50% on higher volume. The outside day is marked by a higher high and lower low than Monday and is bullish with the 92% closing range and large 56% body over a long lower wick.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Indexes and Sectors
All major indexes closed the day higher with the Russell 2000 (RUT +1.40%) returning to the top of the list. The S&P 500 (SPX +0.28%) and Dow Jones Industrial (DJI +0.35%) shook off potential reversal patterns yesterday to produce a bullish gain today.
Energy (XLE +1.49%) was the leading sector of the day. Health (XLV +0.76%) came in second and just ahead of four other sectors also with positive gains. Real Estate (XLRE -0.46%) was the worst performing sector. Utilities (XLU -0.30%) lost on the day as investors exited the defensive play.
The VIX volatility index dropped -2.91%.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Indicators
US30Y and US10Y bond yields dropped for another day and the spreads between long term and short-term bonds tightened.
Corporate Bond yields also rose another day while short term treasury bond yields dropped. The tightening spread between the two bond types shows a little hesitation of investors but is not yet significant.
The US dollar (DXY +0.14%) rose for the day. It is reversing off a low not seen since April 2018.
Silver (SILVER +0.37%) and Gold (GOLD +0.39%) are continuing to climb from early December pivots. Crude Oil (CRUDEOIL1! -1.61%) dropped after Crude Oil Stock numbers came in higher than expected signaling lower demand. Timber (WOOD +1.36%) gained for the day. Copper (COPPER1! -0.43%) continued to pull back from recent highs. Aluminum (ALI1! -1.29%) is forming a downward trend, pivoting off last week’s high.
The put/call ratio rose slightly to 0.486 but is still showing overly bullish sentiment. 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
Three of the four biggest mega-caps had gains for the day with Microsoft (MSFT +0.8%) and Amazon (AMZN +0.61%) outperforming the index for the first time in several sessions. Apple (AAPL +0.51%) also outperformed but is showing some indecision in the days result. Alphabet (GOOGL -0.31%) was the only one of the four that lost for the day and is trending down from a 12/3 reversal day. Amazon closed above its 21d EMA but is still trading below its 50d EMA.
Plenty of mega-caps closed the day with gains. AT&T (T +3.95%) was a top performer followed by Pfizer (PFE +3.18%). Johnson & Johnson (JNJ +1.73%) is testing some upper resistance. Tesla (TSLA +1.27%) continues its climb toward inclusion in the S&P 500 on 12/21.
Fastly (FSLY +14.69%) led popular growth stocks with a huge gain and three days of whipsaw action. Moderna (MRNA +6.48%), Draft Kings (DKNG +6.09%) and ETSY (ETSY +4.49%) were also top performers on a day that many growth stocks did well. Sumo Holdings (SUMO +18.05%) had a huge gain after a big loss the day before upon surprising investors with a mid-day earnings report. The earnings report beat expectations but spooked investors when it was released without warning in the middle of the day.
Retail stock Chewy (CHWY +5.84%) dipped -1.44% after hours even after beating expectations on revenue and earnings. MongoDb (MDB +0.90%) also beat expectations but is down -3.14% after hours.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
JOLT Job Openings data will be released tomorrow which will provide an update on recovering businesses. More job openings could mean businesses are coming back online after being stymied by pandemic lock downs. That would have a positive impact on the US Dollar.
Crude Oil Inventories data will also be released and may disappoint as did the inventory information released today by the API and the dismal short-term energy outlook.
Mortgage data and Wholesale Inventories will also be released providing some clues on consumer confidence and retail heading into the holidays.
Adobe (ADBE +0.62%), Restoration Hardware (RH +0.69%) and Campbell Soup (CB +0.04%) are notable companies releasing earnings after market close tomorrow.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support and Resistance
The one-day trend line points to a gain of +1.07% tomorrow.
The five-day trend line and longer trend line from the 10/30 bottom are pointing to a more modest gain of +0.12%.
Both outcomes would continue the streak of all-time highs. After six days of gains, it would not be a surprise to see a small pullback.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
The market continues its bullish climb, making new all-time highs almost every day for the past week. It seems to shrug off any bad news, focusing optimism on the coming vaccines and the possibility of a new stimulus. Although the gains have been consistent, that have not been gains so huge to extend the index way above support areas. The key moving average lines are still within view. A pause or pullback would not be a surprise, but also does not seem necessary just yet.
On the other hand, the overly bullish optimism shown in the put/call ratio remains a concern. This level of optimism usually proceeds a sharp pullback in the market. There are some indications that the optimism is cooling. The downward movement in treasury bonds and loosening spread between corporate and short-term treasury bonds show a small amount of caution in the market. And the CNN Fear & Greed index has pulled back from the high greed levels in recent days.
Take care!
Website: drewby.com
Twitter: twitter.com/drewrobbins
All ideas are for information purposes only. I may or may not invest in the stocks discussed. Before investing in any stock, do your research and trade using your rules.
Twitter: twitter.com/drewrobbins
All ideas are for information purposes only. I may or may not invest in the stocks discussed. Before investing in any stock, do your research and trade using your rules.
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