Daily Market Update for 1/3

Original Chart

Notes

Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.

Monday, January 03, 2022

Facts: +1.20%, Volume higher, Closing Range: 100%, Body: 53% Green
Good: Close at intraday high, great advance/decline ratio
Bad: Nothing
Highs/Lows: Higher high, Higher low
Candle: Long lower wick, underneath 53% green body, no upper wick
Advance/Decline: 1.77, three advancing stocks for every two declining stocks.
Indexes:SPX (+0.64%), DJI (+0.68%), RUT (+1.21%), VIX (-3.60%)
Sector List: Energy ( XLE +3.10%) and Consumer Discretionary ( XLY +2.87%) at the top. Health ( XLV -1.03%) and Materials ( XLB -1.30%) at the bottom.
Expectation: Higher

Market Overview

Happy New Year! The first day of 2022 had indexes trading higher as money and trading volume came back into the market. Stocks broadly shared gains, but not all sectors benefited from the advances.

The Nasdaq finished the day with a +1.20% gain. The index closed at its intraday high, creating a 53% body in the upper half of the candle while the long lower wick formed in the first hour of trading. There were more than three advancing stocks for every two declining stocks.

Small-caps in the Russell 2000 (RUT) outperformed, with the index gaining +1.21%. The S&P 500 (SPX) climbed by +0.64%. The Dow Jones Industrial Average (DJI) advanced +0.68%. The VIXVolatility Index ( VIX ) declined -3.60%.

Five of the eleven S&P 500 sectors gained for the day. Energy ( XLE +3.10%) and Consumer Discretionary ( XLY +2.87%) were at the top of the list. Health ( XLV -1.03%) and Materials ( XLB -1.30%) were at the bottom. It’s good to see the Energy sector leading, with the Financial sector also having positive gains along with the growth sectors.

The US Dollar index DXY ) gained +0.58% on the first day of the year. US Treasury yields were sharply higher as investors moved back into equity instruments. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond Prices were lower, tracking lower along with treasuries (prices move opposite yields). Gold was also lower as the market increased exposure to riskier assets after the holiday.

The put/call ratio ( PCCE ) dropped to 0.535. The CNN Fear & Greed index is back in the Greed range after being in the Fear range before Christmas. The NAAIM Money Manager Exposure Index moved up to 85.71 last week.

Three of the four largest mega-caps gained. Apple AAPL ) made headlines with a record close and the first company to exceed $3 trillion in market cap. Amazing! Today’s gain was +2.50%. Amazon ( AMZN advanced +2.21%, and Alphabet GOOGL ) rose +0.10%. Microsoft MSFT ) declined -0.47%. Apple and Microsoft are the only two trading above their 21d EMA .

Today, Tesla TSLA ) topped the mega-cap list with a +13.53% gain. The company revealed that its number of car deliveries for Q4 smashed analyst expectations. Pfizer PFE ) was at the bottom of the mega-cap list with a -4.06% decline.

Tesla also topped the Daily Update Growth List. Following Tesla was Ehang Holdings (EH) which gained +6.64%. There were surprisingly more decliners than advancers in the list. DataDog was at the bottom of the list with a -8.02% decline. Those declines were common among high growth, richly valued stocks. Today was not a good start for those looking to leave behind 2021 volatility for these stocks.

Looking ahead

There is an OPEC meeting scheduled for Tuesday morning. After the market opens, we’ll get the ISM Manufacturing data. We’ll also get the JOLTs Job Openings reports which have been influential to sentiment over the past year. After the market closes, API Weekly Crude Oil Stock will be available.

Trends, Support, and Resistance

If the index returns to the trend line from the 12/20 low, that would mean a +1.37% gain for tomorrow.

The one-day trend line points to a +0.61% advance.

Following the five-day trend line would result in a -0.64%.

Wrap-up

Looking across all inputs, it appears to be a constructive start to the new year. Volume is much higher than last week’s holiday volume but has not yet returned to the fifty-day average volume . The advance/decline ratios were good, and growth sectors all had gains. However, several stocks that have enjoyed rich valuations, such as DataDog and MongoDb , dropped today, showing investors have limits heading into the new year.

For tomorrow, the expectation is higher.

Stay healthy and trade safe!

Comments

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