Daily Market Update for 1/20

Original Chart

Notes

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

Thursday, January 20, 2022

Facts: -1.30%, Volume lower, Closing Range: 3%, Body: 62% Red
Good: Nothing
Bad: Another failed rally, closing range of 3%, volume higher on decline
Highs/Lows: Lower high, Lower low
Candle: Long upper wick over a thick red body
Advance/Decline: 0.36, nearly three declining stocks for every advancing stock
Indexes:SPX (-1.10%), DJI (-0.89%), RUT (-1.88%), VIX (+7.30%)
Sector List: Utilities ( XLU +0.13%) and Financials ( XLF -0.64%) at the top. Materials ( XLB -1.45%) and Consumer Discretionary ( XLY -1.82%) at the bottom.
Expectation: Lower

Market Overview

A morning rally attempt failed, turning into more declines for the major indexes. Chinese stocks outperformed after China cut interest rates.

The Nasdaq closed with a -1.30% loss. Volume was higher than the previous day, marking another distribution day. The failed morning rally created a long upper wick that sits over a 62% red body. There is a tiny lower wick, leaving the candle with a 3% closing range. Nearly three stocks declined for every stock that advanced .

The Russell 2000 (RUT) continued to sell-off more than the other indexes, declining -1.88% today. The S&P 500 (SPX) lost -1.10%. The Dow Jones Industrial Average (DJI) fell -0.89%. The VIXVolatility Index rose +7.30%.

Only the Utilities ( XLU +0.13%) sector ended the day with a gain. Financials (-0.64%) was the second best sector for the day, helped by some positive earnings reports from banks in the morning. Materials ( XLB -1.45%) and Consumer Discretionary ( XLY -1.82%) were at the bottom of the sector list.

Initial Jobless Claims were higher than forecast, coming in at 286,000 compared to the forecast of 220,000. The Philadelphia Fed Manufacturing Index for January printed 23.2 compared to the expectation of 20.0. That was welcome news after the NY Manufacturing Index showed worsening conditions with a negative print.

Existing Home Sales for December was under the forecast by 4%. Crude Oil Inventories was higher than expected, marking some fall back in demand.

The US Dollar index DXY ) rose by +0.16%. US 30y, 10y and 2y Treasury Yields all declined. High Yield ( HYG ) Corporate Bond prices continued to slide while Investment Grade ( LQD ) Corporate Bond prices seemed to bottom. Silver continued to rise sharply while Gold declined. Aluminum Futures are reaching back toward record highs.

The put/call ratio ( PCCE ) rose to 0.816. The CNN Fear & Greed index moved back to Neutral, from the Greed area yesterday. The NAAIM money manager exposure index declined to 56.73 from 74.78 the previous week.

All four mega-caps declined today. Amazon ( AMZN ) continued to tumble, with a -2.96% decline. The stock is nearly 20% off its all-time high. Alphabet GOOGL ) closed just above its 200d moving average, losing -1.34% today. Apple AAPL ) made an attempt to get back above its 50d moving average, but ended the day with a -1.03% loss. Microsoft MSFT ) declined -0.57%.

Top performing stocks for the day in both the mega-cap and growth list were Chinese companies. Alibaba (BABA) sat at the top of the mega-cap list with a +2.58% advance. At the bottom of the list was Nvidia NVDA ), declining -3.66% today as the entire semiconductor segment continues to lose ground.

The top five stocks in the Daily Update Growth List were all Chinese, with Ehang Holdings (EH)leading the charge and gaining +11.40%. At the bottom of the growth list was Peloton (PTON). The company dropped -23.93% after news hit that they would be halting production of bikes and treadmills.

Looking ahead

Retail Sales data for the UK and Canada will come overnight. Otherwise, there is not much economic news in the calendar for Friday.

Schlumberger SLB ) and Huntington Bacnshares ( HBAN ) report earnings in the morning.

Trends, Support, and Resistance

The Nasdaq continues to tumble as it doesn’t seem to be catching any support areas. The index is -12.70% below its all-time high.

If the index can return to the trend line from the 12/28 high, it would require a +1.37% advance on Friday.

The five-day trend line points to a +0.35% gain.

If the one-day trend continues, expect another -1.86% decline.

Wrap-up

Pain, pain, pain. It’s tough to watch the failed rally attempts turn into significant losses day after day this week. The strengthening dollar today and rising Treasury prices both point to money coming back into the US market. If that can continue, we should see some support in US equity markets as investors look for greater returns.

Based on the chart, the index is not giving us any indication of a reversal, so the expectation for tomorrow remains Lower.

Stay healthy and trade safe!

Comments

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