EB Daily Market Report - Tuesday, December 7, 2021
Executive Market Summary
- Futures were very strong overnight and buying has continued throughout the day
- Today it's the NASDAQ's turn to lead as that index is up nearly 500 points, or 3.11%
- A weak finish today and close beneath the 20-day EMA would be bearish; otherwise, look for a move to 15800-15850
- Technology (XLK, +3.48%) and consumer discretionary (XLY, +2.53%) are among today's leading sectors; energy (XLE, +2.67%) also is very strong
- All 11 sectors are higher
- Semiconductors ($DJUSSC, +5.58%) are having a huge day, led by Ambarella (AMBA, +14.91%)
- Growth names ($DJUSGS, +3.69%) are turning on a dime - right where they needed to
- Cryptocurrencies are higher as bitcoin ($BTCUSD, +3.81%) rises back above 50,000
- Commodities are mostly higher as crude oil ($WTIC, +4.00%) jumps another $3 per barrel to above $72
Market Outlook
Because I believe we're in a secular bull market, when we go through selloffs like the current one, I begin to look for bullish continuation patterns to develop. I think bullish patterns, not bearish patterns. Here's a look at a possible inverse head & shoulders bullish continuation pattern on the NASDAQ:
Obviously, price action could go right through that recent price resistance and a neckline never forms, but if it does form, just keep in mind the bullish ramifications of a future neckline breakout.
Sector/Industry Focus
I've written recently about the equity only put call ratio ($CPCE) and how that can help us mark bottoms. Well, here's an update of the chart to show you where we currently stand:
The move on the CPCE above .55 once again coincided with a key market bottom. We have no guarantees that this low holds long-term, but an initial bottom appears to have been carved out.
ChartLists/Strategies
I looked through our Bullish Trifecta ChartList (BTCL) once again today. I've been using it personally in my own trading and I believe it offers up some absolutely GREAT trading candidates from time to time. We just have to remain patient so that they set up in solid reward-to-risk patterns. Yesterday, I featured several stocks that were at key price support, knowing that we could limit risk to the downside. After today's big advance, I want to focus on stocks that are consolidating in bullish fashion, either waiting for a return to support or a breakout. Here were three:
ICLR:
The triangle itself can result in frustrating trades as the stock bounds back and forth between support and resistance. A breakout above, however, would measure up to around the 325 level.
IT:
The first signal things are improving on the IT chart would be a close back above the 20-day EMA. An aggressive entry would be on that move.
PKI:
PKI had a great move higher earlier in 2021, but has been consolidating for months now. Best entries are either on a breakout above 191 or on a pullback to test key support at 167.
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.
Tuesday, December 7:
AZO, TOL, CHPT, CASY, PD, SFIX, AVAV, PLAY
Wednesday, December 8:
PATH, GME, CPB, RH, THO, FLNC, KFY, UNFI, PHR
Economic Reports
Q3 productivity: -5.2% (actual) vs. -4.9% (estimate)
Happy trading!
Tom