[PLUS] Market Update

JC Parets
December 1, 2021

From the desk of Willie Delwiche.

Stocks finished a volatile month of November in downbeat fashion, with breadth deteriorating and downside momentum expanding. Global equities bore the brunt of the weakness, though there was plenty of it to go around. Just one month removed from a new high in the All Country World Index (ACWI), a quarter of the country-level indexes that make up that composite finished November at new 12-month lows and only 10% were above their 50-day averages. Domestically, sector-level price, breadth and momentum trends showed a degree of weakness that in the past has been associated with index-level drawdowns of 7% or more and yet the S&P 500 finished November less than 3% from it's all-time high.

Some tentative signs of intense selling pressure to close out the month provided some hope that stocks could begin December on a stronger footing than they finished November. At this juncture, the bullish case needs to prove itself. Evidence that weakness is getting washed out is one thing. But it needs to be followed by broad strength if rallies are going to be believed and produce meaningful upside follow through. The good news is that this sort of environment is the type in which breadth thrusts typically emerge. The caution is that we have no evidence that such a thrust is imminent.

Coming into today, the thought was that a 9:1 up volume day would help staunch the downside volume that was evident in Friday's 9:1 down volume day. After that we could look for breadth thrust set-ups in terms of a spike in 20-day new highs and/or a sharp expansion in the percentage of stocks trading above their 50-day averages. On that front, today's early trading action was encouraging and by mid-morning we were working on a 9:1 up volume day on the NYSE. That early strength dissipated over the course of the trading day and by the close, down volume outpaced up volume by better than 2:1. The indexes gave up their early gains and the Value Line Geometric Index is pushing down against its summer lows.

Bottom line: A disappointing mid-day reversal leaves downside momentum intact and stocks struggling for traction.

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