Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
Thursday, January 13, 2022
Facts: -2.51%, Volume lower, Closing Range: 5%, Body: 92% Red
Good: Close above 200d MA, volume lower on decline
Bad: Thick red body, selling all-day, failed support at 15,000
Highs/Lows: Lower high, Lower low
Candle: Mostly red body, tiny upper and lower wicks
Advance/Decline: 0.48, two declining stocks for every advancing stock
Indexes:SPX (-1.42%), DJI (-0.49%), RUT (-0.76%), VIX (+15.27%)
Sector List: Utilities ( XLU +0.49%) and Industrials ( XLI +0.22%) at the top. Consumer Discretionary ( XLY -2.01%) and Technology ( XLK -2.59%) at the bottom.
Tech stocks sold off this week’s gains in a reversal for the Nasdaq. Investors took profits as the Fed talked more about rate hikes in public comments.
The Nasdaq closed with a -2.51% decline, returning to the trend line from the 12/28 high. Volume was lower than the previous day. The closing range was only 5%, coming underneath a 92% red body. There were two declining stocks for every advancing stock.
Only three sectors ended the day with gains, led by the defensive sector of Utilities ( XLU +0.49%). Industrials ( XLI +0.22%) was the next best sector, followed by Consumer Staples ( XLP +0.18%. Consumer Discretionary ( XLY -2.01%) and Technology ( XLK -2.59%) had the most significant losses.
Producer Price Index (PPI) data came in lower than expected, growing only 2% month-over-month compared to the analyst forecast of 0.4%. That could indicate inflation is topping out as the producer price index is a forward-looking view on consumer price increases.
The weekly Initial Jobless Claims was 230,000, higher than the expected 200,000.
The US Dollar index ( DXY ) continued lower, declining -0.13% today. US 30y, 10y, and 2y Treasury Yields all fell. High Yield ( HYG ) Corporate Bond prices dropped, but Investment Grade ( LQD ) Corporate Bond prices advanced . Timber (WOOD) continues to climb higher while other commodities pulled back from recent gains.
All four largest mega-caps decline. Apple ( AAPL ) moved back below its 21d EMA with a -1.90% decline. Microsoft ( MSFT ) had the most significant loss of the four, dropping -4.23% today. Amazon ( AMZN ) lost -2.42%, and Alphabet ( GOOGL ) fell -2.01%.
Taiwan Semiconductor ( TSM ) topped the mega-cap list, gaining +5.26% after an exceptional earnings report before the market opened. Tesla ( TSLA ) was at the bottom of the list with a -6.75% decline.
Only three stocks in the Daily Update Growth List gained today. Beyond Meat ( BYND ) topped the list with a +4.75% gain, defying gravity today thanks to high short interest and a continued bullish sentiment from the Kentucky Fried Chicken deal. CloudFlare (NET) took the brunt of the profit-taking, declining -13.15% to give back all the gains this week and close at its lowest level year-to-date.
Retail Sales data for December will be available in the morning. We’ll also get numbers for Industrial Production for December. The Michigan Consumer Expectations and Consumer Sentiment Data for January will be available after the market opens.
Trends, Support, and Resistance
If the index can return to the five-day trend line , it would mean a +2.52% advance tomorrow.
The trend line from the 12/28 high points to a -0.44% decline.
If the one-day trend continues, expect another -2.37% decline for Friday.
It’s painful to watch, but the market is still figuring out how often and how quickly the Fed will increase rates this year to control inflation . As investors and analysts hang on every word of Fed officials’ public statements, they re-evaluate the impact on the bond and equity markets.
We can expect more volatility as the month progresses. Based on the broken support today and a new intra-week low, the expectation for tomorrow is Lower.
Stay healthy and trade safe!
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