Daily Market Update for 1/7

Original Chart

Notes

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

Friday, January 7, 2022

Facts: -0.96%, Volume lower, Closing Range: 20%, Body: 54% Red
Good: Lower volume on decline
Bad: Lower high, lower low, closing range
Highs/Lows: Lower high, Lower low
Candle: Medium size body in middle of candle, slightly longer upper wick
Advance/Decline: 0.78, more declining than advancing stocks
Indexes:SPX (-0.41%), DJI (-0.01%), RUT (-1.20%), VIX (-4.33%)
Sector List: Energy ( XLE +1.37%) and Financials ( XLF +1.18%) at the top. Technology ( XLK -0.92%) and Consumer Discretionary ( XLY -1.67%) at the bottom.
Expectation: Sideways or Lower

Market Overview

Payrolls and Unemployment data sent a blurry picture to investors on the pace of economic recovery. The uncertainty ended a volatile week with more decline while investors continue to evaluate pending rate hikes from the Fed later this year.

The Nasdaq declined -0.96%. Volume was much lower than the previous day and is the third day of lowering volume in a row. The candle has a 54% red body in between two similar upper and lower wicks. The upper wick is slightly longer. There were more declining than advancing stocks.

The Russell 2000 (RUT) suffered the most significant loss today, declining -1.20%. The S&P 500 (SPX) dropped -0.41%. The Dow Jones Industrial Average (DJI) declined only -0.01%, helped along by large Energy and Financials stocks The VIXVolatility Index declined -4.33%.

Energy ( XLE +1.37%) and Financials ( XLF +1.18%) were the top performing sectors for another day. Energy has been a top-two sector every day this week. Financials was in the top-two for three of the five days. Technology ( XLK -0.92%) and Consumer Discretionary ( XLY -1.67%) were at the bottom of the sector list today.

Nonfarm Payrolls for December increased by only 199,000 compared to a 400,000 forecast by analysts. However, the unemployment rate declined to 3.9% whereas analysts only expected it to drop to 4.1%.

The US Dollar weakened with the index ( DXY ) declining by -0.52%. The US 30y and 10y Treasury Yields gained for the day while the 2y yield declined. Yields are at their highest since the start of the pandemic. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices continue to decline (tracking along with treasury prices).

The put/call ratio ( PCCE ) declined to 0.743. The CNN Fear & Greed index moved into Greed, but remains near neutral. The NAAIM money manager exposure index rose from 85.71 the previous week to 89.54 this week.

Two of the four largest mega-caps gained today. Apple AAPL ) And Microsoft MSFT ) ended the day with 0.10% and 0.05% gains, but also had lower highs and lower lows than the previous day. Apple AAPL ) is getting resistance at its 21d EMA while the other three, including Amazon ( AMZN ) and Alphabet GOOGL ), are trading well-below both their 21d EMA and 50d MA.

Alibaba (BABA) led the mega-cap list for another day, gaining +2.86% today. At the bottom of the list was Taiwan Semiconductor ( TSM ), declining -3.87%.

Futu Holdings ( FUTU ) topped the Daily Update Growth List, advancing +6.20%. The list had quite a few gainers, but also quite a few losers. The most significant loss came from Chewy CHWY ), which declined -8.26%.

Looking ahead

There are no significant economic events on the calendar for Monday.

Trends, Support, and Resistance

The Nasdaq, closed just below the 15,000 area today. The level is a support/resistance area and the index bound up and down close to that market.

If the index returns to the trend line from the 12/28 high, we can expect a +0.35% gain on Monday.

If the one-day trend line continues, then we can expect a -0.74% decline.

The five-day trend line leads to a -1.82% loss to start the week.

Wrap-up

The whole week was a bit depressing for investors. It started off with a new year’s rally as investors came back from the holiday. But the sentiment quickly changed and got worse with the Fed meeting minutes on Wednesday and mediocre economic data throughout the week.

Hopefully the first week of the year isn’t an omen for the rest of 2022. For Monday, expect sideways or lower based on the chart.

Stay healthy and trade safe!

Comments

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