Market Insights for the Start of December

Tom Gentile

Posted in
Big Picture

By: Tom Gentile
December 1st, 2022

4 mins read

Welcome to December. 

This is the first day of winter from a meteorological standpoint and we have one more month for 2022 in which the markets have an opportunity to fare better than the year overall.

With the very bullish view of investors and traders yesterday post the Fed commentary they may start initiating rate hikes smaller than they have been, we talked the markets could continue to ramp higher today or soften up a bit, maybe testing the price high breakout that occurred yesterday before buyers started adding to the gains from yesterday.

The latter happened in that the markets traded down a bit.  At least that was the case for the Dow and S&P 500.  The NASDAQ was the only one of the three big indexes that ended up higher for the day.

The NASDAQ closed up 0%. where as the Dow and S&P 500 closed lower by 0.6% and 0.1%respectively.

Inter Market Analysis US Equities vs. US Dollar

Note that when I type about intermarket analysis and how two different ‘corners’ of the market can trade and or tend to trade inverse to each other that doesn’t mean it will act like that 100% of the time or at the same magnitude over any specific time frame.

Take today for example.  One would anticipate the US Dollar had moved higher since the us equities market traded lower.

If the USD continues to slide that may be because folks are moving money into equities.

The reverse could happen where an increase in selling US equities is because, in part, folks are putting their money to work in the greenback.

Today the Dow and S&P 500 slid back a bit as already noted and the US Dollar also slid back resulting in the USD experiencing its worst monthly performance in over a decade.

How about Bonds?

US Treasuries traded in a bullish fashion similar to what the equities market did yesterday.

I use the TLT to analyze and gauge my directional bias and if you DO want to see a telling picture on what divergence looks like look at the charts on the TLT compared to that of SPY and notice the difference between the two today.

Figure 1: 20-day Candle Chart on TLT
Figure 1: 20-day Candle Chart on TLT

Remind me to educate you all on bullish Japanese Candlestick formations later.

Figure 2: 20-day Candle Chart on SPY
Figure 2: 20-day Candle Chart on SPY

Correlation Analyzer to see Stocks that Move in Tandem with an Index

In analyzing intermarket relationships between certain securities, one is either looking for one security to coincide / track WITH another; this is said they are correlated with each other.

When that happens a tactic to use is to trade one so long as the other is performing up to your assessment.  Example:  Looking for stock to correlate with the Dow or S&P 500 or NASDAQ.

Our tools can run a correlation analysis to see what stocks correlate at 100% or as close to it as the S&P 500.

When you find one that does that is where one might pin their ears back on a bullish option trade.

In my tools www.tomsoptiontools.com find this by going to Stocks > Stock Analysis > Correlations

Set the page up as shown below and click Analyze.

Figure 3: Stock Correlations page in www.tomsoptiontools.com
Figure 3: Stock Correlations page in www.tomsoptiontools.com
Figure 4: Stocks with highest correlation to S&P 500 Today 2022-12-01
Figure 4: Stocks with highest correlation to S&P 500 Today 2022-12-01

You can get as many up to the limit you select, but we are only showing the first 10 on the list of stocks from our Penny and Weekly list, (stocks whose options are in penny/pennies increments or stocks with Weekly options) or LIST 1 to that of the stocks from the S&P 500 or LIST 2.

As long as you feel bullish SPY these stocks are correlating as close to 100% to the SPY and one can now go explore bullish option trades on these if they and their broker like.

App: Toms Option Tools

Market Insight articles may show images of lists of stocks meeting a variety of options parameters like Unusual Call and or Put activity or Expensive IV found on my app Toms Option Tools.

Other times I will have other charts may work to amplify my educational points. 

Those options data lists, however, can be found on my app Tom’s Option Tools. Use your device to search up and download this app and get free access to the Morning Reports section of the app.

Other parts of the app are available at a premium subscription rate, but the Morning Reports Lists are yours free.