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December 5th 2021 |

Market Review |

U.S. stocks experienced a roller-coaster week that left major averages lower for the week. The Dow Jones Industrial Average dropped 0.9% for the week to finish at 34,580.08. The S&P 500 fell 1.2% in five trading days to end at 4,538.43. The Nasdaq finished at 15,085.47 and plummeted 2.6% this week. Nearly all key S&P sectors ended in negative territory for the week, led by communication services. The utilities sector was the only gainer. The CBOE Volatility Index (VIX) – seen by many investors as the best “fear gauge” on Wall Street – jumped to 30.7.

Strategy Review

Despite the fact that the market was just trading slightly below its all-time high two weeks ago, we received a growing number of evidences that the market was highly at risk for stronger disappointments. To be more precise, our indicator framework showed that only due to the strong performance of a handful of large caps, the S&P 500 was holding up quite well, although the remaining stocks were already faltering. In other words, the bullish trend quality was extremely low, whereas market sentiment was additionally quite stretched. According to our decision making framework, such a situation is extremely dangerous. As result, we advised our members to place a stop loss limit at 4,565 as the opportunity cost (risk-/reward ratio) of not being invested was extremely low. In fact, the stop-loss limit was triggered on Tuesday and since then the condition of the market continued to worsen.

Short-Term Technical Condition

The short-term trend remains clearly bearish since the S&P 500 closed nearly 100 points below the bearish threshold from the Trend Trader Index. Consequently, the short-term oriented price trend of the market remains negative as long as the S&P 500 does not manage to close above… READ MORE


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