Daily Market Update for 1/12

Original Chart

Notes

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

Wednesday, January 12, 2022

Facts: +0.23%, Volume lower, Closing Range: 35%, Body: 37% Red
Good: Higher high and higher low
Bad: Red body, fade after topping 15,200
Highs/Lows: Higher high, Higher low
Candle: Red body in middle of equal length wicks
Advance/Decline: 0.71, more declining stocks than advancing
Indexes:SPX (+0.28%), DJI (+0.11%), RUT (-0.82%), VIX (-4.29%)
Sector List: Materials ( XLB +1.01%) and Consumer Discretionary ( XLY +0.66%) at the top. Consumer Staples ( XLP +0.04%) and Health ( XLV -0.29%) at the bottom.
Expectation: Sideways

Market Overview

A rally back into large-cap stocks drove the major indexes higher on Wednesday, while small-caps fell back. Consumer Price Index data for December was higher than forecast, but investors remained confident that the Fed would remain vigilant in controlling inflation in 2022.

The Nasdaq rose +0.23% for the day. Volume was lower than the previous day. The red body covers 35% of the candle, sitting in the middle of equal-length upper and lower wicks. The second day of higher highs and higher lows is the start of an uptrend. However, there were more declining than advancing stocks, and volume remained low.

The S&P 500 (SPX) rose +0.28% for the day. The Dow Jones Industrial Average (DJI) climbed by +0.11%. Small-caps in the Russell 2000 (RUT) did not participate in the rally, declining -0.82% today. The VIXVolatility Index fell -4.29%.

Ten out of the eleven S&P 500 sectors rose today. Materials ( XLB +1.01%) and Consumer Discretionary ( XLY +0.66%) were the top sectors. Health ( XLV -0.29%) was the only sector to decline.

The Core Consumer Price Index rose 0.6% in December compared to the forecast of 0.5%. Year-over-year growth was 5.5% compared to an expected 5.4%. Crude Oil Inventories showed higher demand than expected. The 10-year Note Auction didn’t move yields much.

The US Dollar Index DXY ) fell sharply, declining -0.64% today.
The US 30y and 2y Treasury Yields rose while the 10y yield declined slightly. High Yield ( HYG ) Corporate Bond prices rose while Investment Grade ( LQD ) Corporate Bond prices fell. Timber, Copper , and Aluminum Futures increased significantly for a second day.

The put/call ratio increased to 0.617. The CNN Fear & Greed index moved into the Greed range.

Apple AAPL ) continued to rally with a +0.26% gain today after closing above its 21d EMA yesterday. Microsoft MSFT ) and Alphabet GOOGL ) also had gains but have some work before repairing their charts. Amazon ( AMZN ) declined -0.09% today.

Alibaba (BABA) was the top mega-cap for the day, gaining +3.95%. It was followed closely by Tesla TSLA ), which ended the day with a +3.93% advance. Ely Lilly was at the bottom of the mega-cap list, declining -2.44% today.

The Daily Update Growth List had mixed results. NIO NIO ) was at the top of the list with a +5.53% gain. Peloton (PTON) was at the bottom of the list with a -5.66% decline.

Looking ahead

Produce Price Index data will be available tomorrow morning. We will also get the weekly Initial Jobless Claims before the market opens.

Earnings reports will include Taiwan Semiconductor ( TSM ) and Delta Air Lines (DAL).

Trends, Support, and Resistance

The index rallied in the morning but then faded the rest of the day, closing below the 15,200 support/resistance area.

If the one-day trend line continues into tomorrow, it will meet with the five-day trend line for a -0.43% decline.

The trend line from the 12/28 high points to a -2.74% decline.

Wrap-up

Two days of higher highs and higher lows is good. However, the index needs to make it back to 15,900 to claim a new trend and attempt a new all-time high. The lowering volume and advance/decline line below 1.0 signals weakness even as the index rallies this week.

We need to see the index break back above the 21d EMA and head toward 15,900 on higher volume with broad support. Other key indicators to watch for are the percentage of stocks above their 50d and 200d averages. Both of these indicators remain below 0.5 at the moment.

For tomorrow, the expectation is Sideways as we wait for the index to decide on a direction.

Stay healthy and trade safe!

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