US stock market 2021 final trading week market review, December 31st 2021
As the year is coming to a close , I will be reviewing US stock market 2021 year end performance briefly in this post.
As of market closing at 31st December 2021,
S&P 500 closed at 4766.18 ( about 27% gain for year 2021 )
Nasdaq composite closed at 15644.97 ( about 21% gain for year 2021 )
Nasdaq 100 closed at 16320.08 (about 27% gain for year 2021 )
Dow jones industrial Average close at 36338.20 ( about 18.7% gain for year 2021 )
And bravo to Fundstrat Tom Lee for his amazingly close call of S&P 500 closing at 4800 ( it goes as high as 4808.93 during the week)
S&P 500 review
During the year S&P 500 have mostly been riding along the ascending channel, with a few +/- 5% healthy correction and most importantly it didn’t really breach through 100SMA decisively and it didn’t even come close to testing 200 SMA.
Blue circle indicate the 5 trading days that I am watching closely for the ongoing development of Santa Claus rally and next 5 days for first five days indicators of January.
To clarify again on the 3 most important indicators that predict the 2022 year end performance with somewhat high probability are
1) “Santa Claus Rally” period ( 7 days after Christmas, including first 2 trading days January 3rd and 4th. Will be checking closely if S&P 500 breach 4733.99 on January 4th close )
2) First five days ( will be watching the Monday open and Friday close like a hawk )
3) January barometer (will be monitoring the January 3rd opening and January 31st closing level closely )
In mid-term election year, we need all 3 to get a more reliable gauge for 2022 year end performance.
You might wonder what will happen in between 1st January to 31st December 2022 (regardless of whether 2022 is a bullish or bearish year )? that is such a great question, to that I say It will be one hell of a volatile period especially in Q2 and Q3, so if you feel that year 2021 is volatile , then year 2022 will be a far bumpier ride. I will be posting year 2022 preview on 3rd January, where I will chartout possible path for market in year 2022, as well as detail action plan for both investor and traders a like. Stay and tune check it out on January 3rd .
For the final trading week review of SPX
Data point 1 : Sector performance (Negative)
Weekly sector performance chart
Chart - SPX XLU XLP
This final trading week performance shows a negative tone, 3 out of top 4 are defensive sector, Real estate ( top 1 , gain 3.79% ), Utilities ( no. 2 , gain 2.67% ), Consumer staples ( no. 3 gain 2.47%). While the usual offensive sector, in particular the important general, technology sector gain only 0.54% and are in 2nd last position.
In the SPX XLU XLP chart, Utilities and staples continue making higher high relentlessly this week.
Data point 2 : Breadth data(Negative)
Out of 2/3 of S&P 500 issues come from NYSE, and 1/3 of them comes from Nasdaq, so when we look at breadth data (in particular advancer vs decliner , and to a lesser extent up (advancing) down (declining) volume ) from both NYSE and Nasdaq stock exchange.
NYSE and Nasdaq Breadth
In NYSE, Advance outpace decliners 4 out of 5 days,, but up volume outpace down volume 2 days only. In Nasdaq, the relative bearishness is more visible, Decliners outpace advancer in 3 out of 5 days, and up volume outpace down volume in 3 out of 5 days.
Since the picture is mixed, especially in NYSE, We will look at TRIN** for a more decisive reading, this reading reveal a more bearish reading for both NYSE and Nasdaq. TRIN reading is above 1 in both index 3 out of 5 days.
**TRIN calculation:
Advancing Issues / Declining Issues
--------------------------------------------
Advancing Volume / Declining Volume
The TRIN will read under 1.0 when advancing stocks are the major source of volume and above 1.0 when declining stocks are the predominant source of volume flow in the market.
Data point 3 : SPX – S&P high beta high yield bond ETF, BofA high yield options adjusted spread(Positive)
Chart shows both High beta and high yield bond ETF ( Junk bond ) , stall at higher level currently, will check if they stall, breakup or breakdown in the coming days. bottom graph shows the measure of credit stress, which is still very low.
ICE BofA high yield options adjusted spread measures all ratings category bond (all the safe & risky corporate bond, but riskier than treasury bond) vs treasury curve ( safest treasury)
Data point 4 : SPX – Put/Call ratio and VIX
Both Put / Call ratio and VIX is stalling at the lower level, will watch if f it breaks up higher or lower in the coming week.
Still it’s 2 negative point against 2 positive point, and a tie again. But in the coming January month, I expect SPX to have a correction by mid January ( could be as early as early January or latest Mid February, hint: Seasonality, which I will reveal in more detail in year 2022 preview post which will be published in 3rd January 2021 )
Nasdaq Composite and Nasdaq 100 review
Both Nasdaq composite and Nasdaq 100 more more volatile compared S&P500, where corrections are between 8 - 12%, but also didn’t come close to testing 200SMA.
In the coming days, I will be watching the NDX chart closely on how it respond to the 16300-16400 level ( horizontal support /resistance zone ), to see it break above or break down decisively in the zone. I am currently still in this trade, but I will be out of majority of NDX position by mid Jan, leaving only a small position at entry breakeven or slight below breakeven level ( earlier or later, depending on performance from next few days )
Tomorrow I will post part 2 of comprehensive review of US stock market in November December period , where I will review the entry and other supporting data for my entry.
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