EB Daily Market Report - Thursday, December 2, 2021
Executive Market Summary
- Futures were mixed overnight with the Dow Jones pointing to a higher open, while the NASDAQ opened lower initially, but it's since rebounded into positive territory
- Crude oil ($WTIC) is taking another hit, down 1% in to just below $65 per barrel
- Financials (XLF, +1.94%) and industrials (XLI, +1.73%) are leading today's early action
- All 11 sectors are higher today, with technology (XLK, +0.52%) the laggard
- Computer hardware ($DJUSCR, -1.79%), strong in recent days, is struggling today
- Boeing (BA, +4.28%) and American Express (AXP, +3.60%) are the Dow's leaders after both had been pummeled in recent days
Market Outlook
It's so difficult right now to predict short-term action. A Volatility Index ($VIX) that closed above 30 yesterday will make predictions rather impossible. Has the fear run its course? Probably not. We don't have a whole lot of information about the COVID-19 Omicron variant and as more news surfaces, particularly if it's bad, we could see significant moves in either direction. What could make short-term trading especially scary is the fact that news can hit at any point in the day, potentially while the market is open. That could mean a nice rally suddenly sees the proverbial "carpet pulled out from under it".
I am once again a believer that this is a health care crisis, not a financial crisis. Therefore, in my opinion, it's not something that would be particularly bothersome from a long-term perspective. But the short-term? Yeah, anything goes right now - quite literally.
Sector/Industry Focus
Growth stocks (IWF) have fallen in the 5-6% range over the past several days and are now testing both price support and the 50-day SMA. Loss of these two levels would add to the short-term selling pressure:
If you're looking to take on considerable risk and try to catch a bottom on growth stocks, you might consider the following combination - a VIX that moves into the upper-30s and a breakdown in the IWF that carries the ETF down to its trendline closer to 280. Please just understand that risks are very high right now. The potential reward of timing a bottom perfectly is immense, but failure to do so could be quite costly. It would likely result in emotional trading, which I try to avoid at all costs, as it almost always results in trading losses for me.
ChartLists/Strategies
To me, this is a "scalpers" market. By that I mean that we are likely to see swift moves in both directions. So making a quick 2-3% is much easier. However, it comes with much, much higher risk as you can be down 2-3% very quickly. This is not my kind of market. I try to manage risk, which is just impossible right now. The NASDAQ jumped 200 points in less than 30 minutes, then fell 175 points in maybe 10 minutes, and then gained 75 points in 5 minutes. I'm an active trader, but this is CRAZY volatility - similar to what we were experiencing in March 2020.
I'm completely sitting this out in my primary trading account. Cash only for me. I might miss out on a huge move higher, but I'm more interested in missing out on a lot of pain to the downside. Any time the VIX has pushed into the 20s, and especially the 30s, you should expect wildly unpredictable market behavior.
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.
Thursday, December 2:
TD, MRVL, DG, DOCU, KR, ULTA, ASAN, COO, GWRE, SMAR, SIG, OLLI, VRNT, DOMO, MEI, SCWX, ZUMZ
Friday, December 3:
BMO, RLX, BIG, HIBB
Economic Reports
Initial jobless claims: 222,000 (actual) vs. 245,000 (estimate)
Happy trading!
Tom