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US Stock Market Analysis Dec 2021 | Dstockmarket

How will the US stock market work in December? Will there be a rebound? Will the stock market continue to go higher?

We have a nasty sell off towards the end of November. Let us take a look at the charts below to see if the year end rally will happen.

December 31 2021

A very good new year's eve to you and Happy New Year! The year 2021 is coming to a close and a brand new year begins tomorrow. I do hope that next year will be a great year for you and I also hope that your account will grow by 100% to 1000%.

The techs has done very very well and they look set to close near the year's highs. Sure there are ups and downs even in recent weeks but I do think that its performance is not bad at all.

Even if we were to close 1% lower today we are still very near the all time highs. That is not a bad thing at all and this is indeed good.

Its rise is a bit tired, a bit exhausted but the fact that it is still staying above its rising 20 MA and 50 MA tells us that the trend is strong. So it is very likely that we will continue to move higher into the new year.

The recent correction did not see the XLK drop below its 50 day moving average. All 3 moving averages which are the 20 MA, 50 MA and 200 MA are sloping upwards and this is a hint that the uptrend is likely to continue.

The semiconductor sector has also done very well this year. But towards November and December it has been trading sideways which made it hard to make money in semi stocks.

SMH is a bit tired and as you can see from the overbought stochastics it is tired. A overbought stochastics may make it hard for the SMH to rise in the next couple of days.

Even so, the SMH is still trading above its 50 MA and it has not closed below it. The rising 50 MA indicates strength in the semi sector and I do advise that you remain bullish bias in the SMH moving into the new year.

While the major indexes are near their all time highs, the small caps or the IWM has not been doing that well. So the rise in the stock market was fueled by large cap stocks and tech stocks such as AAPL, MSFT and Tesla.

The IWM formed a double bottom in the daily charts recently. However, it is finding difficulty to move above the 200 MA. The next resistance will be the 50 MA.

So for small caps I do think it will be some struggle for them to move up moving into the new year.

Therefore, your focus in the beginning of the year should still be in the techs and the larger cap stocks.

Hope you have a great trading day and wish you all the best moving into the new year!

December 29 2021

The SPY has also made a new highs recently. It broke above a previous resistance and is now above support. The green area is the new support and I think it would be wise to follow the trend.

The trend is up and as long as SPY stays above the support area, stay bullish short term.

December 28 2021 

December 23 2021 - SPX May Be Setting An Ascending Triangle Breakout

December 14 2021

With the Feds meeting today and giving us a clue what it wants to do on Wednesday, I think most traders will be waiting for the FEDS's decisions. Which is why the market has been trading sideways for some time.

The stochastics is very overbought and this tells us that the risk is bigger to enter stocks right now until the Fed decision. If the market likes the Fed's decision it will likely shoot up and thus we can enter stocks huge to ride the year end wave higher. 

Until then I advice you to be a bit patient.

Consumer staples are doing very well and making new highs. But this is worrying as this tells us that investors are nervous of the current market environment. Perhaps they are also nervous about the Fed's decisions.

Utilities are also doing well and this adds to the fears that investors have of the general market. This is something to take note off.

Which is why you should look at the SPX carefully. This trading range needs to resolve itself to breaking higher above the consolidation. If it breaks above the consolidation then I think we will have a really nice rally towards year end.

Otherwise, a break down will result in some short term weakness.

A very promising thing is happening in the Nasdaq 100. If you take a look at the 2 hour chart above, you might recognize the reverse head and shoulders pattern. This is a bullish pattern.

That is if it is able to form a right shoulder and stays above the left shoulder. If it can stay above that area and then break above the neckline then be prepared for a massive rally up towards year end.

That is when you should enter as the techs will likely go up quite a lot since the reverse head and shoulders pattern can give us a nice target.

Be prepared! Hope this helps.

December 13 2021

Last week was a great week for the stock market as the major indices rose a lot.

This week, we are seeing the stochastics getting overbought in the daily chart of SPY. This will no doubt cause some problem as an overbought reading can cause some selling.

We are also at a resistance area in the SPY so this will also cause some selling as well.

The good thing about the SPY is that there is a buy signal in the daily MACD. The last time it gave a buy signal the market rose quite a lot as you can see from the stock chart above.

Is there a conflicting signal here? Where the stochastics is overbought and the MACD gives a buy signal.

I think that what the signal is telling us is we are short term overbought and may have a correction but in the mid term there is a big possibility that the market may shoot up soon.

A good sign is if we take a look at the daily 20 MA. This will be the red line in the chart above. I think that if SPY is able to stay above the daily 20 MA then the correction will be minimal and we will be heading higher soon.

If the SPY can stay above the 20 MA then the overbought signal in the stochastics will be ignored and this of course will help the SPY to go higher as ignored signals are probably more powerful than the signal itself.

Last week I wrote about how the SPY and DIA may be forming a cup with handle in the smaller time frame.

The 60 min chart of the SPY shows a cup with handle developing. This kind of pattern appears when the market is trying to absorb the supply from the previous resistance high.

This is a strong bullish pattern as well since the SPY refuses to go down but trade sideways. When the sideways trading is over, the market have the strength to move higher.

The SPY is forming an ascending triangle type of pattern as well. I think that as long as SPY remains above the lows of this 60 min chart pattern then we could be heading higher in the near future.

Perhaps the markets are waiting for the FED decisions since this will have a big impact on the direction of the stock market.

Taking a longer view, let us take a look at the XLK's weekly chart.

The tech sector is still trading above its rising weekly 20 MA and 50 MA. This is a good sign that the bull market in the tech sector is still alive. When the tech sector is doing well in the long term, this translates to a healthy stock market as well.

Whatever the stock market does, as long as the XLK stays above the weekly 20 MA, I want you to stay bullish on the US stock market.

The next thing I want to bring to your attention is the fact that financial data and stock exchange companies are doing very well. This usually happens when the stock market is good and healthy.

I suppose when the market is good more people will need a broker and that in turns translates to a higher stock price.

Take a look at ICE. It is very near the old highs and it found support at the 50 MA. It is also breaking a downtrend line which if it stays above the downtrend line then it is likely to make new highs in the near future.

The NASDAQ,, the company, not the Nasdaq Composite is also doing very very well. This company's stock has been in a long term uptrend and above its rising weekly 20 MA. For a very long time it has not drop below this MA.

This tells us that Nasdaq is doing well and in turn this tells us that the long term picture of the US stock market is good and will most likely continue to move higher.

Hope this helps. Sometimes it is little gems like these that help us to know whether we are in a strong bull market or not.

December 10 2021 - Is A 2 Hour Cup With Handle Developing In SPY And DIA?

A quick look at the 2 hour chart of SPY and DIA would tell us that there is still quite a lot of supply overhead that needs to be absorb. As I take a look at the smaller time frame chart, the sideways trading for the past 2 days may be hinting to us that a handle of a cup with handle may be forming.

If a cup with handle is indeed forming in SPY and DIA, then this means that the correction to absorb supply is a sideways trading correction. A breakout above the handle would help to send the markets higher.

On the other hand, a break below the handle will tell us that more downward correction is needed to absorb supply from the left.

As you can see from the chart above, the DIA is also making a cup with handle in the 2 hour chart. The question for us is whether DIA wants to break above the handle or break below.

Well, if SPY and DIA eventually breaks above the handle then this means we are in a strong stock market and the market is just ignoring the Omicron cases.

Small caps are not doing as well as the large caps. They did have a slight bounce up. Not as good as the techs and the S&P. But support is holding and as long as this support holds we know that the small caps have a chance to move higher.

We ideally want to see it break above the trend line I have drawn in the chart above. Then we want to see it trade back above its daily 20 MA and 50 MA.

If you look at the ratio chart of IWM to SPX, it tells us a clear picture that you should focus your money in large caps stocks. Previously in October 2020 to March 2021 the ratio was rising. This told us that small caps were doing better.

But from March till now the ratio clearly tells us that it is in a downtrend and our money would be doing better investing in large caps rather than small caps.

What about investing in US stocks or stocks around the world?

The ACWI to SPX ratio is still in a bad downtrend. This tells us that ACWI is weaker compared to the SPX and what this means is an investor would do better to invest in the S&P 500 rather than stocks around the world.

Sometimes these ratios are simple but they do offer the investor or trader a glimpse into what might be better to focus on in the near future.

Hope this analysis helps and have a great weekend!

December 9 2021

The S&P 500 has gone up quite a lot since the bottom.

Right now it is trading at the congestion area which will act as a resistance area. Resistance areas are tough and they need to be absorbed.

Which is why I advise you to be prepared in the event of a correction.

The correction may happen and S&P may fall down to meet the rising 50 MA. This could be the 4600 area. And if the 50 MA support holds then we may have a nice bounce up to new highs.

Of course there is also a possibility that the S&P may correct by trading sideways. In that case that would be better. One can trade the breakout higher.

The 60 min chart of SPY provides a cleared picture. The last 2 days trading range is within the box area. If SPY is able to breakout above the box then it can go higher.

On the other hand, if SPY breaks below the box then it may correct down to the support area which is $460.

If you take a look at the performance chart above then you will realize that leadership is in the semiconductor sector, technology and followed by consumer discretionary.

When the semis lead the market this is very good for the stock market. With techs and discretionary above the rest this is also conducive for the stock market as well.

So this tells us to have an open mind that the stock market may go higher from here.

The tech sector is charging ahead and despite the recent sell off it barely go below the support area. It did not fall below the rising 50 MA as well.

This tells us of strength in this sector.

I think that as long as XLK stays above the support area and stay above the rising 50 MA, then we could see more gains in the stock market.

The last chart I want to show you today is the DIA. Notice the gaps. One gap down and then a gap up.

Do you recognize this pattern? Well I think it is a bullish island reversal.

The gap area will be a support area and the 50 MA is there to support it as well. If there is a correction, the 50 MA may help to support it. As long as DIA finds support at the 50 MA, it will bounce back up and eventually make new all time highs.

Hope this helps. Have a great day!

December 8 2021

A great day to you!

Yesterday I was a bit busy so I did not update but if you have been reading my analysis you will realize that we were anticipating a break of a downtrend line.

Once SPX broke above the downtrend line, it shot up higher.

Well I think many experienced traders who we call the smart money were waiting for a break above the downtrend line. I have found that the breaking of downtrend lines are very very helpful.

I remember years ago a very successful trader who is one of the best S&P traders mentioned that he drew a lot and a lot of trend lines. Well, I figured out that if he was doing a lot of it and he was successful I should be doing it as well.

So today, I follow this gem and I like to draw trend lines. Whether they are uptrend lines or downtrend lines I found them to be very useful in telling us what the market or a stock like to do next.

I think that the break of the trend line by SPX yesterday is a sign that it wants to go higher. The recent lows will the lows as long as SPX stays above the downtrend line. I do believe that we will have a nice Christmas rally.

Beside the break of the trend line, the SPX also gave hints that it wants to go up by setting a low and then a higher low. When a stock or index makes a higher low, they can often signal that they want to bottom.

The daily chart of the SPY above shows how the SPY found support at the 50 MA. Stochastics were oversold and gave a buy signal. It is now in a railroad track moving upwards which is usually conducive for a nice move up. It is not overbought right now so I think there is quite a lot of room to move up.

The other nice thing is that the MACD Histogram has shortened and this told us that bearish momentum has slowed down. It is about to cross above the zero line which when it happens, the MACD lines will give a buy signal.

The buy signal might help to propel the SPY higher and this could be very bullish.

The last time the MACD gave a buy signal look at how much the SPY climb up. So if history repeats itself, then we could really see SPY moving higher by a lot.

The QQQ also broke above its downtrend line. It has also moved back above the 60 min 20 MA and 50 MA. All this is very positive for the techs. Watch the downtrend line carefully.

I think that as long as QQQ stays above this downtrend line then it is very very likely that the techs will continue to move up and even make more all time highs.

We can take some help from AAPL's stock chart. As you probably know, AAPL is a big component of the major indexes. What happened to AAPL is that it made a cup with handle. It has already met its cup with handle target.

The next target we have is the measured move target. If AAPL continues to move up this will really benefit the Nasdaq and the other major indexes.

Watch the rising 20 MA which is the red line. As long as AAPL is above the rising 20 MA then I think it is likely to continue to climb up and lift the major indexes.

Yesterday the semis had a very big rise. I think this no doubt is because of INTC. It gap up and this provided the needed lift to the semis. With the semis sector in a bullish mode and about to make new highs, this is indeed very very conducive for the stock market.

The other thing that I believe is that the semis may have made another base. It climb up very fast back in November 2021 then it traded sideways. This sideways trading is what sets up the base. The base is a place from where it can breakout higher of.

The bottoming tail from two days ago will mark the lows of the base. I think that as long as SMH stays above the lows of the bottoming tail then it will continue to move higher. With Semis moving higher this will be good for the stock market.

Let us take a look at he ratio of semis against the SPY. As you can see, it has been in an uptrend since many months ago. It made a new high and despite the correction, it is still staying above the highs made back in February.

I think this tells us that investors still prefer the semis and it is leading the market. As long as the ratio stays above the highs made in February, this means that the semis are still leading the stock market.

And when the semis lead the stock market we know that this is very bullish for the stock market.

By the way, a great trader made some study into the Christmas rally and what I learned is that around the mid of December, stocks can really go up nicely. Sometimes it does not work but most of the time the rally can give nice gains.

We are already moving up from the bottom and if the seasonal pattern manifest itself this year, then we should have a really really great rally this year.

Hope this analysis helps and do share this if you found it helpful.

Have a great day!

December 6 2021

At this moment we are still in a very cautious state. The S&P 500 is still drifting lower. Although it broke below 4500 it still manage to bounce back up. I still consider the SPX in a downtrend in the short term until it breaks back above 2 hour downtrend line.

If it manages to break above the downtrend line, then this could be the start of a big rally up.

But as long as the S&P 500 stays below the downtrend line we should continue to be a bit cautious.

Last Friday, the QQQs continued to sell off. As you can see, it is still in a 60 min downtrend. But the measured move target has already been met and this could possibly result in a bounce up.

Well, that may happen as long as we stay above the lows of Friday. Ideally we want to see it trade back above the 60 min 20 MA and 50 MA.

QQQ is at its daily 50 MA support so this could help it a bit. But if QQQ breaks below the low of last Friday, then more selling pressure may happen.

One bright spot is the DIA. It is at the daily 200 MA and last Friday it formed a daily bottoming tail. This could be a bullish reversal signal.

If you take a look at the 60 min chart of the DIA, you may see a 60 min triangle. Pre market it looks like DIA might gap above the upper trend line to breakout above the triangle at the open.

If DIA is really strong, it will not drop below the tip of the triangle. It will also not drop below the lower uptrend line. If it is able to do so, then we might really see a bullish reversal back up in the DIA.

The consumer discretionary to consumer staples has been going up since August 2021 and this still tells us that consumers are confident enough to use their money on "wants" rather than "needs". Things like Tesla and other luxury stuff. But it is challenging the uptrend line.

If the ratio breaks below the downtrend line, this may signal the start of flight to consumer staples. This will not be that good for the stock market. But as long as the ratio stays above the trend line then we can consider the market to be just having a correction and a bounce up is likely to happen.

The XLY is very near the 50 MA and this could help to support the XLY. If it breaks below the 50 MA, then this can be damaging to the stock market.

Last of all let us take a look at what the bond market is telling us. The TLT is breaking out higher. This implies a lower yield and lower interest rates. This may help companies and thus help to push stock prices higher.

In combination with the indexes and other charts, this may help us to gain a better picture of what the market wants to do. But in the end, it is price action that matter.

Wait for the breakout above the downtrend line in the SPX.

Hope this helps.

December 3 2021

As the SPX falls to price support and the rising 50 day moving average SPX was able to find support. We had a nice green bar yesterday and this could be the start of a bullish reversal back up.

You could say that the bullish green bar is a bullish piercing pattern. I don't know what to call it just that we know that the green candle erased a lot of losses from the previous day. So, this could be bullish as it sends shockwaves to the bears.

But we must bear this in mind. The next trading day, price ideally should not drop below the first half of the green candle. Otherwise, the bulls will be wiped out.

Worse if today, the bears take charge and goes below the low of the green candle and then below the low of the previous red candle then a new wave of selling will begin again.

This is scary and what could make it do so is the Jobs report on Friday. If the market does not like what it sees, then maybe it can slash through the lows of the last 2 days.

If we take a look at the 2 hour chart of the SPX we can see a lot more things that are going on. The SPX made a low and then a higher low and shot up. There is a 1st support area which I have highlighted.

This is about the 1/2 of the green candle in the daily chart. Which is why it is very important for the SPX to stay above the middle of the green candle. That is because we have price support in the 2 hour time frame.

The trend structure in the 2 hour chart is still very bearish because the 2 hour 20 MA and 50 MA is still sloping down. This is a bearish trend and the bounce up yesterday may just be a relieve rally.

Which is why we need to see the SPX break above the 2 hour downtrend line. This will be a first serious sign that the SPX really really wants to change trend from short term bearish to short term bullish.

If SPX is able to break above the downtrend line then this may be the start of a new big rally in December with the SPX making another new fresh all time high.

We can also draw a similar downtrend line in the 60 min chart of the SPY.

As you can see in the 60 min chart of SPY above, the trend is still bearish at the moment. The SPY's 60 min 20 MA and 50 MA are still in a downtrend and this could result in another wave of sell off.

Which is why we really really need to see SPY break above the downtrend line. Breaking the downtrend line will signal a big shift from bearish momentum to bullish momentum. Then you will start to see the SPY's 60 min 20 MA curving back up and the 60 min 50 MA also curving up to form a bullish trend.

Next let us take a look at sentiment indicators. The CBOE VIX is a very good one. When fear is at an extreme level, the market usually bounce back up.

I have highlighted the areas where the VIX goes to an extreme level, the market seems to bounce back up. Right now we are at a very extreme level not seen for a long time.

If history repeats itself, then we may see the start of a reversal back up.

Last of all I want to show the chart of the Industrials represented by the XLI. As you can see, the MACD Histogram has improved showing a slowing down of bearish momentum. The stochastics is very oversold and just gave a buy signal.

Price is at a support level and also at the rising 200 MA. We also have a bullish candlestick pattern. All these points to a possible bottom in the XLI and asks us to take a closer look at it.

Hope all this analysis helps you and have a great weekend!

December 2 2021

The SPX is now at the 50 day moving average. It is also a previous high support. The MACD valley is getting extended and this could lead to a slowing down of momentum. The stochastics is also oversold.

All this points to us to be aware of a potential reversal.

Price action wise there is still something needed. There are no clear signs yet of a reversal like a bullish candlestick but let us continue to be cautious of the market but at the same time look carefully for any signs of reversal.

The same story can be told of SPY. Where the stochastics is oversold and the MACD valley is extended. It is also at price support and the 50 MA support. This is the area where I would like to see some signs of a reversal.

If the support does not hold and today does not give us any clear candlestick reversal then we can expect more selling to happen. Try not to long stocks in the short term until the SPY gives a clear indications of starting a new short term uptrend.

If you take a look at the 60 min chart of the SPY you can see that the structure and price action is not conducive at all for a quick start of an uptrend.

Even if support holds today I do expect some zig zag before it starts a new uptrend. What we most want to see is for SPY to break back above the 60 min uptrend line before you start to do any large scale buying.

With the oversold conditions and support in the daily chart, one can dip the toe in the water a bit. Perhaps one or two very very selective bottom fishing but to enter big large positions to ride a short term uptrend higher...now is still not the time. 

Patience.

December 1 2021

Up and down. That is a difficult time for traders. But the SPX is falling to a previous high support and also the rising 50 MA support. 

The 50 day moving average can be a very strong psychological support and this is a good area to see if the SPX can reverse back up. The previous high support is a price support and in combination with the 50 MA, this can provide traders with an area to long stocks.

The Dow Jones is also falling to an important area of support. The congestion area on the left can act as support. Since this is a congestion area, it will not be easy for Dow to break below it. Unless of course the Covid fears are so great that it slashes through it.

But I think with the combination of the 200 MA, the congestion support area is a good place to find if the Dow can form some bullish reversal patterns or bullish reversal candlestick patterns.

The sell off in the Dow is a bit too steep and therefore, I would prefer for it to slowly find a bottom before moving up.

Looking at the 60 min chart of SPY we can see how the SPY has already broken below the 60 min 200 MA. Currently it is trading below its 60 min 20 MA and 50 MA. This is not a good sign.

As long as the SPY is below the 60 min 20 MA I highly recommend not to long stocks for the short term as most stocks will be following the direction of the S&P.

I have drawn a downtrend line in the SPY. I think it will take some time for SPY to break above the downtrend line. If it is able to do so, then we might see a rebound back up in SPY.

At the moment, stay cautious and try not to long most stocks in the short term unless a clear bullish reversal pattern appears in SPY.

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