Three well-known concerns weigh on the stock markets

Carlsquare

6. joulukuuta 2021 | 5 min lukea

The New York Stock Exchange has three worrying clouds over it; omicron, inflation, and the Fed's tapering. We have written about all three before. Expectations ahead of the US Non-Farm Payrolls report on Friday, December 3, were on 550,000 new jobs in November. Further, this would not affect the Fed's tapering of economic support.

In this weekly trading note from Carlsquare, we elaborate on the following topics, indices, and stocks:

Three well-known concerns weigh on the stock markets
VIX shows considerable uncertainty in the stock market
Shanghai stock market rises, contrary to most other
Buying S&P500 at MA20 in the weekly graph is not for the faint-hearted
Scary times in Tesla
Nasdaq with a broken neckline
VIX and Skew imply investors still fear the downside
Perhaps EUR/USD has bottomed out
Brent looks pretty uncertain about what's next
Buy OMXS30 and buy the falling trend
In a better market,Volvo may be able to close the gap
DAX also have a gap that can be closed…in better markets

The 210,000 jobs outcome did not support increasing interest rates as we advance, nor an accelerated tapering. But the main drivers of inflation are producer and commodity prices, not wages. The inflationary turmoil has already been dampened somewhat by lower oil prices.

There were new jobs in nine sectors in the United States, with Professional Services being the strongest. The Government lost 25,000 jobs in November. At the same time, the US Bureau of Labor Statistics increased the number of jobs created in September and October retrospectively. Furthermore, 1.1 million more Americans had gone into employment in the US as of November 30, 2021, corresponding to an expansion of the total labor force by 0.7%. The unemployment rate is now down to 4.2% in the US. All in all, a mixed impression.

As the graph shows, the recovery in employment has lagged the stock market performance since the spring of 2020. But as we know, the same is true for corporate profits. Stock markets have gone up ahead. Let us assume that the recovery in the number of new jobs continues at the same pace as it did from August to November this year. Then it will take until January 31, 2023, before there are as many jobs in the US as there were on December 31, 2019.

Source: Fred Economic Data (St Louis Fed).

The VIX index has risen to ever-higher levels, demonstrating that the stock market is not feeling well. Admittedly, today's levels at around 30 are modest compared to about 80 at the time of the Covid breakout in Q1 2020. However, we must go back almost a year to January 2021 to find levels nearly as high as today.

Source: Refinitiv Eikon

The price pattern for global stock markets on a weekly and monthly basis does not look good. The Nasdaq 100 lost 2.6 percent last week. Now only the FTSE (London Stock Exchange) to some extent and especially the Shanghai Stock Exchange are bucking the general stock market trend, which is down.

Source: www.di.se, www.marketwatch.com

The Shanghai Stock market has performed poorly in 2021 but has also not been affected by recent turmoil as the New York and European stock markets.

Source: Refinitiv.

One wonders if there are any fundamental explanations for the Shanghai stock market to bucking the general stock markets trend. Below we find China Industrial and Services Purchasing Managers Index for the last two years.

Source: Refinitiv.

Apart from the plausible drop in February 2020 linked to the Covid outbreak, China's purchasing managers' index has been surprisingly stable in recent months. In recent surveys, service-economy firms are slightly more optimistic than manufacturing, typically 52 versus 49. But the reason for Shanghai's divergence from other bourses may have to be sought elsewhere. Such as expectations of continued stimulus from the Chinese Government. The significant economic risks of a large real estate sector have affected the performance of the MSCI China Financials ETF.

The broad S&P 500 index fell on Friday, given the weaker than expected US job numbers. The index is trading below MA50 as falling EMA9 and MA20 pressure from the above. MA100 serves as another strong support level on the downside. However, note how MACD has generated a sell signal.