EB Daily Market Report - Monday, December 20, 2021
Executive Market Summary
- Futures were very weak overnight as renewed Omicron fears drive U.S. equities lower
- All 11 sectors are lower today, though defensive sectors are outperforming on a relative basis
- Consumer staples (XLP, -0.52%) is today's best performing sector, while financials (XLF, -2.79%) are threatening a 3-month low
- The 10-year treasury yield ($TNX) is flat today, stubbornly failing to move higher following last week's Fed announcement of potentially 3 rate hikes in 2022
- Carnival (CCL, +3.17%) lowered its upcoming quarterly forecast, but raised guidance for the second half of 2022
- Renewable energy ($DWCREE, -7.49%) is lagging the rest of the market badly today as SolarEdge Technologies (SEDG, -9.74%) is the worst S&P 500 component stock
- Volatility ($VIX, +16.97%) surged at the opening bell and remains high as uncertainty grips the market
- The NASDAQ is trading beneath key support at 15000; unless we see an afternoon reversal higher, odds increase that we'll see further selling, possibly down to 14200
Market Outlook
Here are the hourly charts for both the S&P 500 and the NASDAQ. Should the key support levels be lost, and with Volatility ($VIX) on the rise, we could see selling accelerate in the very near-term. The best case scenario for the bulls would be an afternoon rally with our major indices finishing at or above their opening prices:
Based on just the above chart, the NASDAQ is in the most trouble technically in the near-term as this index has already lost its early-December price support level. Also, if I drag the trendline from the recent price highs down to connect to the most recent price low, the NASDAQ is currently trading beneath that trendline as well. The NASDAQ could definitely use an afternoon rally.
Will we hold?
Sector/Industry Focus
Two industries that recently broke out are struggling today and falling back to or near key price support. The two groups, personal products ($DJUSCM) and health care providers ($DJUSHP), are both defensive groups and show technical outlooks as follows:
$DJUSCM:
$DJUSHP:
It's important that recent leaders hold breakouts to sustain a bull market advance. Therefore, watch both of these indices. Should one or both lose the key price support levels (horizontal lines) identified, it will only add to the short-term bearishness that we see in other growth-related areas.
ChartLists/Strategies
I looked through the Bullish Trifecta ChartList (BTCL) to identify any stocks that are selling off, but continue to show a very healthy AD line, which could signal false weakness in order for Wall Street firms to accumulate shares cheaper. Here are several to consider:
ACLS:
CDNS:
DDOG:
MXL:
SNOW:
SPGI:
Just remember that one filter used in developing the BTCL is that these stocks should have strong AD lines. But I was looking specifically stocks setting brand new AD line highs to accompany the recent market weakness. It's an interesting group of stocks. When/if the stock market rebounds, I'd look for these companies to do quite well on such a rebound.
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, December 20:
NKE, MU, BRZE, CVGW
Tuesday, December 21:
GIS, FDS, BB, NEOG, AIR
Economic Reports
November leading indicators: +1.1% (actual) vs. +0.8% (estimate)
Happy trading!
Tom