Daily Market Update for 12/9Summary: Now that Omicron fears seem behind us, investors' focus turned to inflation and how the Fed might react if Consumer Price Index data is higher than expected. That caused investors to move into defensive positions on Thursday ahead of the CPI report due on Friday.
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Thursday, December 9, 2021
Facts: -1.71%, Volume lower, Closing Range: 2%, Body: 71% Red
Good: Lower volume on decline
Bad: Low closing range, close below 21d EMA
Highs/Lows: Higher high, Lower low
Candle: Thick red body with no lower wick, long upper wick
Advance/Decline: 0.35, three declining stocks for every advancing stock
Indexes: SPX (-0.72%), DJI (-0.00%), RUT (-2.27%), VIX (+8.44%)
Sector List: Consumer Staples (XLP +0.27%) and Health (XLV +0.23%) at the top. Real Estate (XLRE -1.27%) and Consumer Discretionary (XLY -1.73%) at the bottom.
Expectation: Sideways or Lower
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Market Overview
Now that Omicron fears seem behind us, investors' focus turned to inflation and how the Fed might react if Consumer Price Index data is higher than expected. That caused investors to move into defensive positions on Thursday ahead of the CPI report due on Friday.
The Nasdaq declined -1.71% on lower volume than the previous day. The closing range was 2% underneath a 71% red body formed from sellers controlling the entire day. There were three declining stocks for every advancing stock, a reversal from several days of a high advance/decline ratio.
The Russell 2000 (RUT) took the most significant loss, declining -2.27%. The S&P 500 (SPX) fell -0.72%. The Dow Jones Industrial Average closed flat for the day, avoiding losses thanks to large health, consumer staples, and recovery stocks. The VIX Volatility Index rose +8.44%.
Consumer Staples (XLP +0.27%) and Health (XLV +0.23%) were the only two of the eleven S&P 500 sectors to gain for the day. Real Estate (XLRE -1.27%) and Consumer Discretionary (XLY -1.73%) had the biggest losses.
The weekly Initial Jobless Claims data came in better than expected. There were only 184,000 new claims compared to a forecast of 215,000 and last week's 227,000.
The US Dollar index (DXY) rose +0.26%. US 30y and 10y Treasury Yields receded slightly while the 2y yield moved higher. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices declined. Silver and Gold prices both fell as the US Dollar strengthened.
The put/call ratio declined to 0.689. The CNN Fear & Greed index remains at the Fear level. The NAAIM Money Manager Exposure Index dove to 69.46 after being above 100 for five weeks.
All four largest mega-caps declined for the day. Amazon (AMZN) was the only one to dip back below its 21d EMA, losing -1.13% today. Microsoft (MSFT) declined -0.56% but got support at its 21d EMA. Alphabet (GOOGL) fell -0.37%. Apple (AAPL) set another all-time high before ending the day with a -0.30% decline.
Abbvie (ABBV) and Pfizer (PFE) were the top mega-caps for the day, gaining +1.87% and +1.32%, respectively. Tesla (TSLA) declined -6.10%, falling to the bottom of the mega-cap list but getting support at its 50d moving average.
Only three stocks in the Daily Update Growth List gained for the day. RH (RH) led the way with a +5.47% gain after surprising investors with its earnings beat yesterday and providing upgraded guidance. For most of the growth list, the losses were steep. Sumo Digital (SUMO) dropped the most with a -12.47% decline, followed by Peloton (PTON), which lost -11.35%.
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Looking ahead
The big news for tomorrow morning will be the November Core Price Index data that measures inflation. The data will drive the outlook for analysts as they anticipate how quickly the Fed will taper bond purchases and when they would start interest rate hikes to control inflation.
We will also get the Michigan Consumer Sentiment and Consumer Expectations data for December after the market opens.
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Trends, Support, and Resistance
The Nasdaq failed to get support at the 15,600 area and closed below its 21d EMA.
If the index can return to its 5-day trend line, that would mean a +3.30% gain for Friday. That will take some very good but unlikely news on inflation.
If the trend line from the 11/22 high continues, expect another -0.95% decline tomorrow.
If the index continues the one-day trend line, that would mean a -1.24% decline.
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Wrap-up
There's always something for investors to fear in 2021. Omicron was a nice distraction, and we got a short rally once positive news arrived about the variant's potency against vaccination. However, the conversation about the Fed's changing monetary policy in the face of inflation never ended, and now its front-and-center again.
Expect Sideways or Lower tomorrow unless the CPI data comes in better than anticipated.
Stay healthy and trade safe!
