The Market Week in Review is my weekend homework where I look over what happened in the previous week and what might come in the next week. It helps me evaluate my observations, recognize new data points, and create a plan for possible scenarios in the future.
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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Monday, December 7, 2020
Run for your life with me
Facts: +0.45%, Volume lower, Closing range: 78%, Body: 78%
Good: Higher high, higher low, closing range
Bad: Lower volume
Highs/Lows: Higher high, Higher low
Candle: No lower wick, small upper wick, green body
Advance/Decline: 0.91, slightly more declining stocks then advancing stocks
Sectors: Communications (XLC +0.63%) and Utilities (XLU +0.56%) were the leading sectors. Energy (XLE -2.34%) was the worst performing sector.
Expectation: Sideways or Higher
It was a good start to the week for the Nasdaq. The only problem, it was only the Nasdaq. The other major indexes had decidedly different days while the Nasdaq made a new all-time high. The index ended the day with a +0.45% gain on lower volume. The closing range of 78% and green body of 78% represent a day with no lower wick where the morning open was the low and the index never revisited that spot. There were two pullbacks in the afternoon that brought the index to the middle of the range, but both were bought back. The second pull back around 3:30p followed Consumer Credit data that was half of expectation. There were slightly more declining stocks than advancing stocks.
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Tuesday, December 8, 2020
If anything could ever be this good again
Facts: +0.50%, Volume higher, Closing range: 92%, Body: 56%
Good: Close higher on volume, reversing morning lows
Bad: Nothing
Highs/Lows: Higher high, Lower low
Candle: Bullish outside day with longer lower wick
Advance/Decline: 1.77, more than three advancers for every two decliners
Sectors: Energy (XLE +1.49%) and Health Services (XLV +0.76%) were top sectors. Utilities (XLU -0.30%) and Real Estate (XLRE -0.46%) were the bottom.
Expectation: Sideways or Higher
After sending some mixed signals on Monday, the market reconfirmed the current bullish rally on Tuesday. The Nasdaq closed at an all-time high, and the Russell 2000 continued its rally after a short pause. There was more breadth in the market with more than three advancing stocks for every two declining stocks on the Nasdaq and 195 stocks making new highs. The index finished the day with a +0.50% on higher volume. The outside day is marked by a higher high and lower low than Monday and is bullish with the 92% closing range and large 56% body over a long lower wick.
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Wednesday, December 9, 2020
Long road to ruin there in your eyes
Facts: -1.94%, Volume higher, Closing range: 15%, Body: 80%
Good: Support above 12,300
Bad: Sold off with little to no upward reversals
Highs/Lows: Higher high, Lower low
Candle: Bearish outside reversal day
Advance/Decline: 0.54, two decliners for every advancer
Sectors: Energy (XLE +0.22%) and Industrials (XLI +0.22%) were top sectors. Communications (XLC -1.19%) and Technology (XLK -1.92%) were the bottom.
Expectation: Sideways or Lower
191 stocks on the Nasdaq managed to set a new high before the index took a downward spiral that never came back. The index closed sharply down after progress stalled in congress to pass a new stimulus bill. By the end of the day there were two declining stocks for every advancing stock. The Nasdaq finished with a -1.94% loss on higher volume. The closing range of 15% and 80% red body define a bearish outside reversal candle with a higher high and a lower low than yesterday.
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Thursday, December 10, 2020
Do you remember the days
We built these paper mountains?
Facts: +0.54%, Volume lower, Closing range: 88%, Body: 73%
Good: Held support near 12,250, closed near high
Bad: Gap down at open, then choppy intraday
Highs/Lows: Lower high, Lower low
Candle: Thick green body, high closing range
Advance/Decline: 1.59, three advancing to two declining
Sectors: Energy (XLE +3.07%) was top. Industrials (XLI -0.95%) was bottom.
Expectation: Sideways or Higher
The Nasdaq opened the day with a gap down after disappointing employment data released in the morning. The index tested the support area around 12,250, but refused to go lower. The bulls ruled the morning as the index rose to the intraday high and then going back and forth in a choppy afternoon but closing near the high. The Nasdaq finished the day with a +0.54% gain on lower volume. The closing range was 88% with a 73% body. There were three advancing stocks for every two declining stocks.
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Friday, December 11, 2020
Take it till life runs out
Facts: -0.23%, Volume lower, Closing range: 96%, Body: 30%
Good: Held support near 12,250
Bad: Inside day not indicating direction
Highs/Lows: Lower high, Higher low
Candle: Inside day, small body over longer lower wick
Advance/Decline: 0.69, three declining to every two advancing
Sectors: Communications (XLC +0.60%) was top. Energy (XLE -1.15%) was bottom.
Expectation: Sideways
The Nasdaq closed the week with an inside day that included an intraday bounce of the 12,250 support area. That inside day could mean a continuation of the downward bearish movement. However, balance that with a high closing range and the mid-day reversal which could be a bullish sign. The direction changes came as mixed economic news was shared. Producer Purchasing Index was lower than expected, released before market open. Consumer Confidence was higher than expected, released mid-morning. Ultimately it was a stop-gap bill in congress to prevent government shutdown that brought the index off its lows to close with a 93% closing range and a 30% body over a long lower wick. The Nasdaq finished the day with a -0.23% loss, a much smaller loss than the 1% at mid-session. There were almost three declining stocks for every two advancing stocks.
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The Meaning of Life (View on the Week)
The Nasdaq lost -0.69% in a volatile week that had new all-time highs at the top and tested support areas at the bottom. The weekly candle has a closing range of 42% under a 21% red body. The candle's long upper wick and long lower wick along with the smaller body represent a week of indecision. And that's exactly what it felt like. There was one broad market rally day, and all the others were either lopsided gains for the Nasdaq or rotations among sectors. Volume for the week was lower than last week, but higher than average.
The S&P 500 (SPX) lost -0.96% for the week and the Dow Jones Industrial (DJI) pulled back -0.57%. The Russell 2000 (RUT) was the only index to finish the week with gains, climbing +1.02%. That is the sixth week in a row that the small-cap index outperformed the other major indexes.
The week began with a new all-time high. However, Monday's rally was not shared by the other indexes, sending mixed signals on what would happen next. What happened on Tuesday was a big rally day where all indexes gained for the day, likely on the positive news that UK had administered its first vaccine dose. That would be short-lived as Wednesday brought a sell-off that resulted in the Nasdaq losing almost 2%. The next two days continued the down trend with lower highs and another losing day on Friday.
Stepping back and looking at the weekly chart, the Nasdaq still has a higher high and a higher low. The indecisive candle is still in an uptrend which could confirm the rally continuation next week. However, this is the lowest closing range in six weeks, potentially a turning point.
Despite starting the week in last place, Energy (XLE) rose to the top of the sector list starting from Tuesday as the first vaccine doses were made available in the UK. That positive vaccine news boosted the sector that is likely to benefit from the increased activity in travel and leisure sectors.
Communications (XLC) led at the beginning of the week, but could not keep up with Energy and finished the week in second.
Utilities (XLU) also had moments of leadership on Monday and Tuesday. The sector is a defensive play in equities and an alternative to moving money into other safe havens such as bonds.
Real Estate (XLRE) was the worst performing sector for the week.
Technology (XLK) that heavily impacts market performance, underperformed the S&P 500 this week.
Communications (XLC) led for two days, before being overtaken by the top three and ending the week in fourth place.
Utilities (XLU) was the loser of the week. The defensive play was not needed by investors who seemed optimistic about vaccines, stimulus talks and oil agreements. That was enough optimism to ignore the unemployment data signaling trouble for the economy.
US Treasury Bond Yields were lower for the week as investors bought up the safe haven bonds among volatility in the equity market. The spreads between long term and short term bonds tightened, although the US10Y-US02Y spread widened on Friday.
The bond buying did give some support to the US Dollar. The US Dollar (DXY) rose +0.30% for the week. That follows a three week downtrend that brought the dollar to its lowest value since April 2018.
Corporate bond yields rose for the week while short term treasury bonds yield lowered. This wider spread between the two bonds shows a bit nervousness in US corporations and the economic recovery.
The put/call ratio (PCCE) ended the week at a much more comfortable level of 0.737, showing a bit less bullish optimism among investors. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction.
Silver (SILVER) was down -1.05% for the week while Gold (GOLD) remained flat at -0.08% for the week. Crude Oil was up +0.94% as demand continues to increase from summer lows. Timber (WOOD) is still in strong demand gaining another +3.11%. Copper (COPPER!1) continued to climb with a +0.86% gain while Aluminum (ALI1!) dropped -1.25%.
Only Apple (AAPL) was able to finish the week with a gain, albeit just a slight increase over open. The doji style candle is entirely above the 10w MA which is a good sign for continuation of the upwards trend. Alphabet (GOOGL) traded well above its 10w MA but the week brings a lower high and lower low. Microsoft (MSFT) and Amazon (AMZN) closed the week below their 10w MA.
The week had two big IPOs. The first was DoorDash (DASH) which traded with a 20% range on Wednesday's opening day and following with two days of an 8% range.
AirBnB (ABNB) was the second big IPO, opening on Thursday with a 15% swing in the first 30 minutes. That action settled down to finish the week with a loss.
Greenwich Lifesciences (GLSI) traded up 2868% on Wednesday before settling at around a 930% gain by close. The company disclosed a 100% survival rate in trials of a breast cancer treatment.
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The Week Ahead
The week will begin with the OPEC monthly report on Monday. On Wednesday, Retail Sales data for November will be released. The FOMC will release several reports and the Fed will announce any decision on Interest Rate changes. The interest rates are expected to remain the same.
Thursday will bring Building Permits data for November. The weekly Initial Jobless Claims will also be released.
Thursday will also bring earnings announcements from Rite Aid (RAD), Fedex (FDX) and Jabil (JBL). Nike (NKE) will announce earnings on Friday.
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The Bullish Side
For the bullish side, take a look at the weekly chart. The week ended with a higher high and a lower low. That's the most apparent sign that we are still in an uptrend, despite a few choppy days this week. Volume was a little lower but higher than recent weekly averages.
As I write this, the Pfizer vaccine has been approved for the US and we should start to see the first doses made available in a few days. Each time we have vaccine news, there is a boost to the markets on improving confidence in the economic recovery. The US markets have lagged behind other foreign markets that are seen as recovering sooner from the pandemic. The availability of the vaccine in the US, could change that expectation.
The Put/Call ratio finally settled back into a reasonable range just above 0.7. Other contrarian indexes such at the CNN Fear & Greed index are starting to ease back to normal levels.
The weeks before Christmas historically do well in the markets.
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The Bearish Side
Congress went another week with mixed news on further stimulus and it now looks like it will be delayed until the new year. The markets soared on news that a bipartisan group of senators agreed to compromise on stimulus, but those hopes were quickly smashed by a refusal from Mitch McConnell to accept included terms. Optimism for a stimulus continued to wane as the week went on.
Short term treasury bond yields have been declining and the spread between long term and short term yields is widening. The buy up of short term bonds as well as the sale of corporate bonds shows some nervousness among investors in equity markets.
The nervousness resulted in a week of back-and-forth prices, rotations among industry sectors and lopsided rallies among the indexes. That volatility could also be seen in the VIX as it reversed from a downward trend that started six weeks ago. The VIX is at the same level it was the week of December 10, 2018 right before another decline into Christmas.
The Fed is not expected to change interest rates on Thursday. However, there is talk that short-term inflation is on the rise. If the fed were to decide to control that with an interest rate hike, it would surprise the markets and have at least a short-term negative impact on equities.
The weeks before Christmas historically do well in the markets, except when they don't.
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Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
Wrap-up
We are on the march to the Christmas holiday. Historically, this is one of the best times of the year to be in the market. Except two years ago in December 2018, when the market took a final dive to bottom out on Christmas eve day and then start a new rally the day after Christmas.
The vaccines in the US will start to become available next week and a massive coordination effort is under way to make sure it gets to the right people as soon as possible. Progress with that deployment should provide confidence to investors.
Caution and risk management is a must. But let's hope for a clear uptrend early in the week and momentum through the holidays.
Good luck, stay healthy and trade safe!
I do occasionally have some errors or typos and will correct them in my blog or in the comments on TradingView. I do not have an editor and do this in my free time.
If you find this helpful, please let me know in the comments. I am also more than happy to add new perspectives and data points if you have ideas.
The structure is the following:
- A recap of the daily updates that I do here on TradingView.
- The Meaning of Life, a view on the past week
- What's coming in the next week
- The Bullish View, The Bearish View
- Key index levels to watch out for
- Wrap-up
If you have been following my daily updates, you can skip down to the “The Meaning of Life”. If not, then this first part is a great play-by-play recap for the week. Click the original charts for more detail each day.
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Monday, December 7, 2020
Run for your life with me
Facts: +0.45%, Volume lower, Closing range: 78%, Body: 78%
Good: Higher high, higher low, closing range
Bad: Lower volume
Highs/Lows: Higher high, Higher low
Candle: No lower wick, small upper wick, green body
Advance/Decline: 0.91, slightly more declining stocks then advancing stocks
Sectors: Communications (XLC +0.63%) and Utilities (XLU +0.56%) were the leading sectors. Energy (XLE -2.34%) was the worst performing sector.
Expectation: Sideways or Higher
It was a good start to the week for the Nasdaq. The only problem, it was only the Nasdaq. The other major indexes had decidedly different days while the Nasdaq made a new all-time high. The index ended the day with a +0.45% gain on lower volume. The closing range of 78% and green body of 78% represent a day with no lower wick where the morning open was the low and the index never revisited that spot. There were two pullbacks in the afternoon that brought the index to the middle of the range, but both were bought back. The second pull back around 3:30p followed Consumer Credit data that was half of expectation. There were slightly more declining stocks than advancing stocks.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Tuesday, December 8, 2020
If anything could ever be this good again
Facts: +0.50%, Volume higher, Closing range: 92%, Body: 56%
Good: Close higher on volume, reversing morning lows
Bad: Nothing
Highs/Lows: Higher high, Lower low
Candle: Bullish outside day with longer lower wick
Advance/Decline: 1.77, more than three advancers for every two decliners
Sectors: Energy (XLE +1.49%) and Health Services (XLV +0.76%) were top sectors. Utilities (XLU -0.30%) and Real Estate (XLRE -0.46%) were the bottom.
Expectation: Sideways or Higher
After sending some mixed signals on Monday, the market reconfirmed the current bullish rally on Tuesday. The Nasdaq closed at an all-time high, and the Russell 2000 continued its rally after a short pause. There was more breadth in the market with more than three advancing stocks for every two declining stocks on the Nasdaq and 195 stocks making new highs. The index finished the day with a +0.50% on higher volume. The outside day is marked by a higher high and lower low than Monday and is bullish with the 92% closing range and large 56% body over a long lower wick.
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Wednesday, December 9, 2020
Long road to ruin there in your eyes
Facts: -1.94%, Volume higher, Closing range: 15%, Body: 80%
Good: Support above 12,300
Bad: Sold off with little to no upward reversals
Highs/Lows: Higher high, Lower low
Candle: Bearish outside reversal day
Advance/Decline: 0.54, two decliners for every advancer
Sectors: Energy (XLE +0.22%) and Industrials (XLI +0.22%) were top sectors. Communications (XLC -1.19%) and Technology (XLK -1.92%) were the bottom.
Expectation: Sideways or Lower
191 stocks on the Nasdaq managed to set a new high before the index took a downward spiral that never came back. The index closed sharply down after progress stalled in congress to pass a new stimulus bill. By the end of the day there were two declining stocks for every advancing stock. The Nasdaq finished with a -1.94% loss on higher volume. The closing range of 15% and 80% red body define a bearish outside reversal candle with a higher high and a lower low than yesterday.
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Thursday, December 10, 2020
Do you remember the days
We built these paper mountains?
Facts: +0.54%, Volume lower, Closing range: 88%, Body: 73%
Good: Held support near 12,250, closed near high
Bad: Gap down at open, then choppy intraday
Highs/Lows: Lower high, Lower low
Candle: Thick green body, high closing range
Advance/Decline: 1.59, three advancing to two declining
Sectors: Energy (XLE +3.07%) was top. Industrials (XLI -0.95%) was bottom.
Expectation: Sideways or Higher
The Nasdaq opened the day with a gap down after disappointing employment data released in the morning. The index tested the support area around 12,250, but refused to go lower. The bulls ruled the morning as the index rose to the intraday high and then going back and forth in a choppy afternoon but closing near the high. The Nasdaq finished the day with a +0.54% gain on lower volume. The closing range was 88% with a 73% body. There were three advancing stocks for every two declining stocks.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Friday, December 11, 2020
Take it till life runs out
Facts: -0.23%, Volume lower, Closing range: 96%, Body: 30%
Good: Held support near 12,250
Bad: Inside day not indicating direction
Highs/Lows: Lower high, Higher low
Candle: Inside day, small body over longer lower wick
Advance/Decline: 0.69, three declining to every two advancing
Sectors: Communications (XLC +0.60%) was top. Energy (XLE -1.15%) was bottom.
Expectation: Sideways
The Nasdaq closed the week with an inside day that included an intraday bounce of the 12,250 support area. That inside day could mean a continuation of the downward bearish movement. However, balance that with a high closing range and the mid-day reversal which could be a bullish sign. The direction changes came as mixed economic news was shared. Producer Purchasing Index was lower than expected, released before market open. Consumer Confidence was higher than expected, released mid-morning. Ultimately it was a stop-gap bill in congress to prevent government shutdown that brought the index off its lows to close with a 93% closing range and a 30% body over a long lower wick. The Nasdaq finished the day with a -0.23% loss, a much smaller loss than the 1% at mid-session. There were almost three declining stocks for every two advancing stocks.
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The Meaning of Life (View on the Week)
The Nasdaq lost -0.69% in a volatile week that had new all-time highs at the top and tested support areas at the bottom. The weekly candle has a closing range of 42% under a 21% red body. The candle's long upper wick and long lower wick along with the smaller body represent a week of indecision. And that's exactly what it felt like. There was one broad market rally day, and all the others were either lopsided gains for the Nasdaq or rotations among sectors. Volume for the week was lower than last week, but higher than average.
The S&P 500 (SPX) lost -0.96% for the week and the Dow Jones Industrial (DJI) pulled back -0.57%. The Russell 2000 (RUT) was the only index to finish the week with gains, climbing +1.02%. That is the sixth week in a row that the small-cap index outperformed the other major indexes.
The week began with a new all-time high. However, Monday's rally was not shared by the other indexes, sending mixed signals on what would happen next. What happened on Tuesday was a big rally day where all indexes gained for the day, likely on the positive news that UK had administered its first vaccine dose. That would be short-lived as Wednesday brought a sell-off that resulted in the Nasdaq losing almost 2%. The next two days continued the down trend with lower highs and another losing day on Friday.
Stepping back and looking at the weekly chart, the Nasdaq still has a higher high and a higher low. The indecisive candle is still in an uptrend which could confirm the rally continuation next week. However, this is the lowest closing range in six weeks, potentially a turning point.
Despite starting the week in last place, Energy (XLE) rose to the top of the sector list starting from Tuesday as the first vaccine doses were made available in the UK. That positive vaccine news boosted the sector that is likely to benefit from the increased activity in travel and leisure sectors.
Communications (XLC) led at the beginning of the week, but could not keep up with Energy and finished the week in second.
Utilities (XLU) also had moments of leadership on Monday and Tuesday. The sector is a defensive play in equities and an alternative to moving money into other safe havens such as bonds.
Real Estate (XLRE) was the worst performing sector for the week.
Technology (XLK) that heavily impacts market performance, underperformed the S&P 500 this week.
Communications (XLC) led for two days, before being overtaken by the top three and ending the week in fourth place.
Utilities (XLU) was the loser of the week. The defensive play was not needed by investors who seemed optimistic about vaccines, stimulus talks and oil agreements. That was enough optimism to ignore the unemployment data signaling trouble for the economy.
US Treasury Bond Yields were lower for the week as investors bought up the safe haven bonds among volatility in the equity market. The spreads between long term and short term bonds tightened, although the US10Y-US02Y spread widened on Friday.
The bond buying did give some support to the US Dollar. The US Dollar (DXY) rose +0.30% for the week. That follows a three week downtrend that brought the dollar to its lowest value since April 2018.
Corporate bond yields rose for the week while short term treasury bonds yield lowered. This wider spread between the two bonds shows a bit nervousness in US corporations and the economic recovery.
The put/call ratio (PCCE) ended the week at a much more comfortable level of 0.737, showing a bit less bullish optimism among investors. A contrarian indicator, when the put/call ratio is below 0.7, it signals overly bullish sentiment which typically proceeds a pullback in the market. The indicator was at 0.458 just before the September correction and it was at 0.489 just before the short October correction.
Silver (SILVER) was down -1.05% for the week while Gold (GOLD) remained flat at -0.08% for the week. Crude Oil was up +0.94% as demand continues to increase from summer lows. Timber (WOOD) is still in strong demand gaining another +3.11%. Copper (COPPER!1) continued to climb with a +0.86% gain while Aluminum (ALI1!) dropped -1.25%.
Only Apple (AAPL) was able to finish the week with a gain, albeit just a slight increase over open. The doji style candle is entirely above the 10w MA which is a good sign for continuation of the upwards trend. Alphabet (GOOGL) traded well above its 10w MA but the week brings a lower high and lower low. Microsoft (MSFT) and Amazon (AMZN) closed the week below their 10w MA.
The week had two big IPOs. The first was DoorDash (DASH) which traded with a 20% range on Wednesday's opening day and following with two days of an 8% range.
AirBnB (ABNB) was the second big IPO, opening on Thursday with a 15% swing in the first 30 minutes. That action settled down to finish the week with a loss.
Greenwich Lifesciences (GLSI) traded up 2868% on Wednesday before settling at around a 930% gain by close. The company disclosed a 100% survival rate in trials of a breast cancer treatment.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Week Ahead
The week will begin with the OPEC monthly report on Monday. On Wednesday, Retail Sales data for November will be released. The FOMC will release several reports and the Fed will announce any decision on Interest Rate changes. The interest rates are expected to remain the same.
Thursday will bring Building Permits data for November. The weekly Initial Jobless Claims will also be released.
Thursday will also bring earnings announcements from Rite Aid (RAD), Fedex (FDX) and Jabil (JBL). Nike (NKE) will announce earnings on Friday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Bullish Side
For the bullish side, take a look at the weekly chart. The week ended with a higher high and a lower low. That's the most apparent sign that we are still in an uptrend, despite a few choppy days this week. Volume was a little lower but higher than recent weekly averages.
As I write this, the Pfizer vaccine has been approved for the US and we should start to see the first doses made available in a few days. Each time we have vaccine news, there is a boost to the markets on improving confidence in the economic recovery. The US markets have lagged behind other foreign markets that are seen as recovering sooner from the pandemic. The availability of the vaccine in the US, could change that expectation.
The Put/Call ratio finally settled back into a reasonable range just above 0.7. Other contrarian indexes such at the CNN Fear & Greed index are starting to ease back to normal levels.
The weeks before Christmas historically do well in the markets.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
The Bearish Side
Congress went another week with mixed news on further stimulus and it now looks like it will be delayed until the new year. The markets soared on news that a bipartisan group of senators agreed to compromise on stimulus, but those hopes were quickly smashed by a refusal from Mitch McConnell to accept included terms. Optimism for a stimulus continued to wane as the week went on.
Short term treasury bond yields have been declining and the spread between long term and short term yields is widening. The buy up of short term bonds as well as the sale of corporate bonds shows some nervousness among investors in equity markets.
The nervousness resulted in a week of back-and-forth prices, rotations among industry sectors and lopsided rallies among the indexes. That volatility could also be seen in the VIX as it reversed from a downward trend that started six weeks ago. The VIX is at the same level it was the week of December 10, 2018 right before another decline into Christmas.
The Fed is not expected to change interest rates on Thursday. However, there is talk that short-term inflation is on the rise. If the fed were to decide to control that with an interest rate hike, it would surprise the markets and have at least a short-term negative impact on equities.
The weeks before Christmas historically do well in the markets, except when they don't.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Key Nasdaq Levels to Watch
There are several key levels in the Nasdaq to keep an eye out for and respond accordingly. First on the positive side:
- The high of Friday at 12,383.50 will be the first test. Let's see if the index can put in a new daily high to start the week.
- It was a good sign when the index passed 12,500 last week, but it is now below that line again. That could be an area of resistance moving back upward.
- The all-time high is at 12,607.14. A new all-time high signals the continuing bullish rally.
- The next round-number resistance could come at 13,000. Round-number resistance is caused by traders’ tendency to put in sell orders at round numbers.
- The support area of 12,250 proved itself this week. Hopefully, that area will hold the index above that price level.
- The 21d EMA is at 12,169.43. The index has closed above this moving average line for the last 29 trading days.
- November support area is at 12,000 and a round-number point. A move below this line would raise flags for investors.
- The 50d MA is at 11,758.18.
- The low of Thursday, Nov 4 is at 11,394.21. There is a gap to fill below that line.
- September Support line is at 11,300. Dropping to this level would be a sure sign of correction.
Wrap-up
We are on the march to the Christmas holiday. Historically, this is one of the best times of the year to be in the market. Except two years ago in December 2018, when the market took a final dive to bottom out on Christmas eve day and then start a new rally the day after Christmas.
The vaccines in the US will start to become available next week and a massive coordination effort is under way to make sure it gets to the right people as soon as possible. Progress with that deployment should provide confidence to investors.
Caution and risk management is a must. But let's hope for a clear uptrend early in the week and momentum through the holidays.
Good luck, stay healthy and trade safe!
