Daily Market Update for 1/19

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 19, 2022

Facts: -1.15%, Volume lower, Closing Range: 3%, Body: 74% Red
Good: Lower volume
Bad: Lost the 14,500 support area , low closing range
Highs/Lows: Lower high, Lower low
Candle: Mostly red body, long upper wick, no lower wick
Advance/Decline: 0.51, two declining stocks for every advancing stock
Indexes:SPX (-0.97%), DJI (-0.96%), RUT (-1.60%), VIX (+4.65%)
Sector List: Consumer Staples ( XLP +0.63%) and Utilities ( XLU +0.45%) at the top. Financials ( XLF -1.68%) and Consumer Discretionary ( XLY -1.80%) at the bottom.
Expectation: Sideways or Lower

Market Overview

Markets continued to fall as actions from a more hawkish Fed loom in the near future. Two rally attempts in the Nasdaq couldn’t hold on today and investors fled to defensive sectors.

The Nasdaq finished with a -1.15% decline. Volume was lower than the previous day. A long upper wick was formed from a morning rally that failed. The rest of the candle is 74% red body, leaving behind practically no lower wick and a 3% closing range. There were two declining stocks for every advancing stock.

The Russell 2000 (RUT) led the losses for another day, dropping -1.60%. The S&P 500 (SPX) and Dow Jones Industrial Average (DJI) declined -0.97% and -0.96%. The VIXVolatility Index rose by +4.65%.

Only two sectors in the S&P 500 finished the day with gains, both defensive sectors. Consumer Staples ( XLP +0.63%) and Utilities ( XLU +0.45%) were at the top of the sector list. Financials ( XLF -1.68%) and Consumer Discretionary ( XLY -1.80%) were at the bottom.

Building Permits and Housing Starts data exceeded expectations for December. There were 1.87m Building Permits compared to the forecast of 1.70m. And there were 1.70m Housing Starts compared to a forecast of 1.65m. Consumer Price Index data from the UK and Canada were both higher than expected.

The US Dollar index DXY ) dropped by -0.11%. The US 30y and 10y Treasury Yields receded a bit while the 2y Treasury Yield rose slightly. High Yield ( HYG ) Corporate Bond prices continued to fall while Investment Grade ( LQD ) Corporate Bond prices rose. Silver and Gold both rose sharply for the day.

The put/call ratio ( PCCE ) dropped to 0.717 as some investors may be seeing a bounce from here. The CNN Fear & Greed index moved back into Greed, from a Neutral level yesterday.

Of the four largest mega-caps, only Microsoft MSFT advanced for the day although it gave back much of its intraday gains. The stock ended the day with a +0.22% advance. Apple AAPL ) joined the other three in closing below its 50d moving average, dropping -2.10% today. Alphabet GOOGL ) declined -0.65% while Amazon ( AMZN ) fell -1.65%.

Proctor & Gamble ( PG ) was the top mega-cap, rising +3.36% on a solid earnings report released in the premarket. The company stated that prices will continue to rise. Tesla TSLA ) was at the bottom of the mega-cap list, declining -3.38% today. Nvidia NVDA ) also declined more than -3%.

Peloton (PTON) was the top stock in the Daily Update Growth List. The stock climbed +5.33% after the company announced it would be cutting staff and other fixed costs, improving the profitability in the company despite slower growth. Digital Turbine (APPS) was at the bottom of the list, losing -6.08%.

Looking ahead

Tomorrow morning will bring the weekly Initial Jobless Claims. We will also get the Philadelphia Fed Manufacturing index. The NY index showed worsening conditions for January. After the market opens, Existing Home Sales data will be available. Crude Oil Inventories will come later in the morning.

Overnight, inflation data for Europe will be made available.

Tomorrow’s earnings reports include Netflix NFLX ), CSX CSX ), Travelers ( TRV ), Fifth Third ( FITB ), KeyCorp (KEY), and American Airlines (AAL).

Trends, Support, and Resistance

The Nasdaq continues to lose support areas as it moved well into correction territory, down -11.55% from the all-time high.

If the index moves back to the 12/29 trend line , that would mean a +0.68% advanced tomorrow.

The one-day and five-day trend lines point to a -0.78% decline.

Wrap-up

The pain continues. However, Treasury Yields showed some leveling off today. With some surprise economic data or better earnings reports, we could see a bounce over the next day or two. That won’t give us much indication of whether the bounce would hold into next week.

Confidence will only come when we see a rotation back into growth sectors that’s broadly shared across the Nasdaq (high advance/decline ratio ) and a an advance on higher volume .

Based on the chart and today’s intraday moves, the expectation is for Sideways or Lower tomorrow.

Stay healthy and trade safe!

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