EB Daily Market Report - Monday, November 29, 2021

Tom Bowley - November 29, 2021

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Executive Market Summary

Futures were very strong overnight as initial fears over the new COVID-19 variant calmed down
Crude oil ($WTIC) has rebounded roughly 2% to $69.50 per barrel, but it's well off earlier highs
Bonds are selling today as yields rise, but these yields too are well off intraday highs
Commodities are mixed, though copper ($COPPER, +1.21%) is showing strength - a bullish signal
Cryptocurrencies are up nicely with etherium ($ETHUSD) jumping more than 6%
Technology (XLK, +2.62%) and consumer discretionary (XLY, +1.73%) are leading today's market rebound - a "risk on" development, which is bullish
All 11 sectors are higher today, reversing Friday's action that saw all 11 sectors lower; industrials (XLI, -0.44%) is today's weakest sector
Moderna (MRNA, +11.25%) is today's top performing S&P 500 component stock

Market Outlook

Relative strength these past couple days is taking place in NASDAQ 100 stocks ($NDX). While both the Dow Jones and S&P 500 languish beneath last Wednesday's close, meaning that they have not been able to recoup the opening gap lower on Friday, the NDX has had no such problem. In fact, the NDX is making another push above its 20-day EMA and isn't too far from another all-time high. The PPO negative divergence on the daily chart does remain, however:

The uptrend line remains perfectly intact, but you can see that the PPO has not yet moved above the high established a few weeks. While this guarantees us nothing in terms of selling, it does tell us that bullish momentum is slowing a bit.

Sector/Industry Focus

Our major indices have more work to do before breaking out, but semiconductors ($DJUSSC), one of the hottest industry groups right now, are unbelievably staring at yet another record all-time high. If we close today where we're trading right now, it would mark the highest close ever. The following DJUSSC chart is shown on both candlestick and line charts. The line chart removes all the noise from candlestick charts and simply focuses on closing price. Check out this chart:

The bottom panel shows a new high as today's current price is higher than the close from November 19th, the last time that a new all-time closing high printed. That was at 9490.22. We're roughly 30 points above that level currently. In order to break to a new candle body high, which includes both opening and closing prices, we'd have to clear the November 22nd opening price of 9550.71. I tend to favor the candle body highs on candlestick charts, but wanted to point out the difference.

ChartLists/Strategies

I looked at dozens of stocks, looking for stocks that could be poised for a nice rebound off recent weakness. Here are two I found:

STEP:

STEP has been under a lot of selling pressure lately, but today's rebound is seeing a slight uptick in volume and it's occurring at a key price support area. So long as 41 price support holds, STEP looks like a solid reward-to-risk trade.

CVS:

The AD line on CVS has been very strong for the past year. You can also see that the heavy volume in early November coincided with a gap higher. With the recent price weakness, that gap has now been filled near 91 bucks. I like the stock from this level down to the next support level at around 89 (the prior price high in May before the recent breakout). I'd be careful on any close beneath 89.

Earnings Reports

Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.

Monday, November 29:

Tuesday, November 30:

CRM, BNS, ZS, GFS, NTAP, HPE, AMBA, BOX, JKS, MOMO

Economic Reports

October pending home sales: +7.5% (actual) vs. +0.7% (estimate)

Happy trading!

Tom