As November came to a close, volatility returned to the stock markets. October erased most of September’s sell off; November took us to new highs, but the latest Omicron variant of the Coronavirus and the reaction of governments worldwide, markets once again sold off. Today, chairman Powell who has recently been reinstated as the chairman of the Federal Reserve, said that The Fed will end its asset purchase program faster than previously expected due to this new variant, further increasing the volatility as seen here on the $QQQ:
The MACD indicates that this down move might just be starting.The volume by price chart puts the area of control down at 350 on the $QQQ.
The $QQQ, which is the ETF of the technology index, continues to be the strongest and most resilient of the market’s three indexes. The $DIA is the weakest of the major ETFs that track the U.S. stock market indices. The industrial companies seem to be most affected by supply chain problems, labor shortages, inflation and all sorts of other economic interruptions.
The $DIA might already be crossing its point of control on the volume by price chart. The CCI is now saying that it’s oversold and might be ready to bounce soon. Technically, this is called the bounce or break point.
Bitcoin ($BTC) as represented by the ETF $GBTC, pulled back 20% which just about entered bear market territory before rallying back up. Bitcoin and other cryptocurrencies are benefiting from their status as a hedge for U.S. dollar weakness, but they also sell off on fear and panic just like a major U.S. market, as they are heavily leveraged and are very susceptible to fear and panic and as margin calls make sell offs more steep and severe.
The Uptrend on $GBTC is still intact and should continue on its way as the MACD histogram continues higher and turns back to positive territory. The CCI has moved up firmly from the oversold regions confirming the reversal.
Gold as represented by the $GLD ETF, is also acting as a hedge to runaway inflation, but it has also not moved up significantly. This is partly due to cryptocurrency’s acting as an alternative hedge to gold’s traditional role as the best place to put your money during inflationary times.
Fear of additional lockdowns and the release of U.S. oil reserves has kept oil prices in check for this month. As seen here on the chart of $USO. This short term solution is like the analogy, that IF you do not have enough money to buy your Christmas gifts, you MIGHT dip into your savings in hopes that in the coming months, things will get better and you will be able to replace your savings in better times. We will all see how this plays out in the coming months, but inflation at least for now seems to have been put on hold as oil is the prime commodity which has the largest effect on inflation and consumer spending.
The release of the U.S. oil reserves and the fear of new lockdowns can be seen in the chart by the big red down candles. On the $USO the CCI is deeply oversold, the MACD signal lines are also about to cross over.
This brings us to our final and most important consideration for this month. Just like we were two months ago, we are now once again facing the debt ceiling crisis. The U.S. federal government runs out of operational cash going into the next two weeks and still needs to devise a long-term solution to the debt ceiling issue that caused markets to sell off two months ago. The Biden administration is still trying to pass its Human infrastructure bill (Build, Back, Better Bill), which has successfully made it through the House of Representatives but has yet to pass through the Senate. The main problem here is that any additional spending bills will only add to inflationary problems, adding potential fuel to the proverbial fire. Hopefully this time Congress will come to a long-term solution to the debt ceiling and inflation problem. Until then, expect volatility and stay cautious. Early indications from sales this holiday season are not encouraging as consumer buying patterns have been severely interrupted by both the post pandemic recovery and supply chain problems.
This will be our final Market Analysis newsletter for 2021, so until next year, trade well, be cautious and enjoy the Holiday season!
What’s New from DAS
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