Today’s charts – December 2/21

From MarketWatch…

Stocks finished higher for the first time in three sessions but for some bulls the downtrend may feel longer, amid a slide characterized at times by stomach-churning swings and white-knuckle climbs higher.

Investors have been on edge because the omicron-inspired jitters have resulted in some erosion of upward trend lines for the main stock benchmarks and bears wanted to see if another shoe would drop on Thursday to help solidify the downtrend.

“The bouncing in the markets due to incoming news has slowed, with markets led by cyclicals and the recovery trade,” wrote Rob Haworth, senior vice president and senior investment strategist, at U.S. Bank Wealth Management, in emailed comments to MarketWatch.

On Thursday, health officials confirmed another case, a Minnesota resident who had recently traveled to New York City for a convention, experienced mild symptoms and has since recovered. The new case makes it likely that further infections from omicron in the New York area.

“The hope is that Omicron is more benign than expected and any shutdowns will be limited in time and scope,” the UBS strategist wrote.

Note: Tomorrow we get the non farm payrolls, a report that tends to move markets, both up and down.

The S&P 500 briefly touched our near-term support level at 4495, but was able to bounce off that level today. If that support level does not hold, then the next support is at 4295, and a break below that level would signal a deeper correction is likely.

Here is an ominous chart, showing that the percent of stocks that are trading above their 50-DMA has plummeted to less than 30%. This tells us that while the S&P 500 has been in a long uptrend, the percentage of stocks participating in that bullish move has been declining since last April (red arrow).

Based on seasonality, we typically get a ‘Santa Claus Rally’ from the last couple of weeks in December into early January. But all investors need to understand that we are in tax-loss selling season and that usually creates a correction in early November (red box) before the rally to end the year. .

The CRB commodity index had a phenomenal run from 108 in April’20 to 243 in late October’21. But since that October high, the CRB has been rolling over with lower highs and lower lows, and then the huge gap down this past week, knocking it out of its uptrend channel.

Oil was up .93 today but still down close to 23% since the high in late October.

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