Daily Market Update for 1/14

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 14, 2022

Facts: +0.59%, Volume higher, Closing Range: 98%, Body: 89% Green
Good: Support at 200d MA, gain on higher volume , high closing range
Bad: Lower high and low, lower weekly close
Highs/Lows: Lower high, Lower low
Candle: Mostly green body, tiny wicks
Advance/Decline: 0.83, more declining than advancing stocks
Indexes:SPX (+0.08%), DJI (-0.56%), RUT (+0.14%), VIX (-5.51%)
Sector List: Energy ( XLE +2.35%) and Technology ( XLK +0.85%) at the top. Financials ( XLF -1.04%) and Real Estate ( XLRE -1.17%) at the bottom.
Expectation: Sideways

Market Overview

Markets were mixed on Friday after Q4 earnings reports from JP Morgan and Citigroup disappointed investors. However, Energy and Tech stocks closed the day higher, helping the Nasdaq recover some of yesterday’s loss.

The Nasdaq finished the day with a +0.59% gain. The candle is mostly green body, and the closing range of 98% comes on higher volume than the previous day. There were more declining stocks than advancing stocks.

The Dow Jones Industrial Average (DJI) was the only index to decline, losing -0.56% today, weighed down by large financial institutions and industrial sector stocks. The S&P 500 (SPX) gained +0.08%. The Russell 2000 (RUT) climbed by +0.14%. The VIXVolatility Index fell -5.51%.

Energy ( XLE +2.35%) and Technology ( XLK +0.85%) were the top sectors for the day. Financials ( XLF -1.04%) and Real Estate ( XLRE -1.17%) we at the bottom of the sector list.

Retail Sales in December declined more than expected month-over-month, dropping -1.9% compared to a forecast of -0.1%. Industrial Production was also lower than expected. Michigan Consumer Expectations and Sentiment for January is also lower than expected, likely impacted by the surge in Omicron cases across the US.

The US dollar strengthened after weakening significantly earlier in the week. The dollar index DXY ) rose +0.32% today. US 30y, 10y, and 2y Treasury Yields all rose. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices declined, tracking with treasury prices (yields rise, prices drop). Crude Oil Futures continues to track higher, nearing the high levels in October.

The put/call ratio rose to 0.875. The CNN Fear & Greed index is at Neutral but moved toward the Greed side.

All four largest mega-caps gained. Microsoft MSFT ) had the most significant gain after declining the most among the four yesterday. It gained +1.77% today. Apple AAPL ) gained +0.51% after hitting resistance at its 21d EMA . All four charts are not looking great, with Amazon ( AMZN ) struggling the most, 14% below its all-time and 52-week high.

Wells Fargo ( WFC ) topped the mega-cap chart, defying the rest of the Financial sector with an earnings beat and profits growing 86%. On the other end of the mega-cap list is JP Morgan Chase ( JPM ), which fell -6.15% after missing street revenue estimates.

The Daily Update Growth List had a good number of winners today, but most stocks in the list declined. At the top of the list is Futu Holdings ( FUTU ), with a +3.31% gain. That was followed by another Chinese stock, JD.com JD ), which gained +3.19%. Beyond Meat BYND ) was at the bottom of the list, giving back some of its recent gains with a -6.0% decline today.

Looking ahead

Markets will be closed on Monday for the Martin Luther King, Jr Holiday.

Tuesday will open with the NY Empire State Manufacturing Index. The API Weekly Crude Oil Stock will come after the market closes.

Bank of America ( BAC ), Charles Schwab ( SCHW ), Goldman Sachs ( GS ), PNC Financial ( PNC ) are some of the big financial company earnings reports for Tuesday.

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Trends, Support, and Resistance

The Nasdaq got support around the 200d moving average today before closing higher. The index remains below the 15,000 support/resistance area.

If the index returns to the five-day trend line , expect a +0.72% gain on Tuesday.

The one-day trend line would result in a -0.27% gain.

Returning to the trend line from the 12/28 high would result in a -1.57% decline to start the week.

Wrap-up

It was a crazy week. Monday and Tuesday looked good as the Nasdaq seemed to catch a bottom intraday on Monday and end the day with a gain on higher volume . Tuesday continued that momentum, but then sentiment turned on Wednesday as more rate increases in 2022 seemed likely from Fed officials’ public statements. That resulted in a crushing loss on Thursday and a loss for the week despite some support on Friday.

Only two sectors closed the week with gains. Energy rose +5% this week after gaining +10% last week. Communications somehow pulled out a +0.16% for the week. Real Estate was the worst-performing sector for the week as investors anticipate higher interest rates to impact profitability in the sector.

The percentage of stocks above their 50d moving averages is still in the low 40% range. That’s better than December when it was near 20% for the 50d, but we’d like to see the number near 60%.

We need to see some stabilization in the US dollar and the bond market that signals investors are more confident about the Fed’s playbook for 2022 (the speed of tapering, the number of interest rate hikes, and the run-off of balance sheet assets). Once that happens, volatility should finally recede a bit in equity markets. Until then, we’ll continue to feel some pain and possibly a little more correction. We’ve only seen a -10% drop from the top for the Nasdaq.

The expectation for Tuesday is Sideways.

Stay healthy and trade safe!

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