Daily Market Update for 1/24

Original Chart

Notes

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

Monday, January 24, 2022

Facts: +0.63%, Volume higher, Closing Range: 97%, Body: 48% Green
Good: High closing range, gain on higher volume , high advance/decline ratio
Bad: Big dip in the morning, lower high, lower low
Highs/Lows: Lower high, Lower low
Candle: Long lower wick underneath a 48% green body, tiny upper wick
Advance/Decline: 1.29, more advancing than declining stocks
Indexes:SPX (+0.28%), DJI (+0.29%), RUT (+2.29%), VIX (+3.64%)
Sector List: Consumer Discretionary ( XLY +1.20%) and Communications ( XLC +0.73%) at the top. Health ( XLV -0.33%) and Utilities ( XLU -0.96%) at the bottom.
Expectation: Sideways or Higher

Market Overview

Markets rebounded after a massive dip in the morning brought on by worries over the Fed interest rate decisions mid-week and what’s happening between Russia and NATO over Ukraine.

The Nasdaq closed with a +0.63% gain. That came after dip of -4.90% in the morning. The candle has a 48% green body above a long lower wick from the morning dip. The recovery and rally into close led to a 97% closing range. Volume was higher than the previous day. There were more advancing stocks than declining stocks. At its lowest point, the Nasdaq was down -19.23% from its all-time high.

The Russell 2000 (RUT) outperformed for the day. The small-cap index rose +2.29%. The S&P 500 (SPX) climbed +0.28% while the Dow Jones Industrial Average (DJI) rose +0.29%. All three indexes dipped severely in the morning. The VIXVolatility Index soared 35% intraday, but ended the day just +3.64% higher. The intraday top was the highest reading since November 2020.

Consumer Discretionary ( XLY +1.20%) and Communications ( XLC +0.73%) were the top sectors for the day. Health ( XLV -0.33%) and Utilities ( XLU -0.96%) were at the bottom. From the upside reversal around 12:00p, all sectors gained with Technology ( XLY +0.52%) leading the list.

The Manufacturing and Services Purchasing Managers Index came in lower than expected. However both prints were above 50 which signals expansion in their respective sectors.

The US Dollar strengthened, with the index ( DXY ) gaining +0.24% The US 30y and 10y Treasury Yields rose while the 2y yield declined. Both High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices declined. Silver retreated while Gold advanced Crude Oil , Timber, Copper and Aluminum all retreated.

The put/call ratio remained at a relatively bearish level, declining to 0.950 today. The CNN Fear & Greed index remained in the Fear area.

All four largest mega-caps recovered from morning dips. Only Apple AAPL ) could not end the day with a gain, declining -0.49%. Microsoft dipped well below its 200d MA, but recovered to close above the line and gain +0.11%. Amazon ( AMZN ) rose +1.33%. Alphabet GOOGL ) improved by +0.35%.

Home Depot (HD) gained +4.21% today to top the mega-cap list. Adobe ( ADBE ) was the next best with a +3.95% advance. At the bottom of the list was Alibaba (BABA) and Pfizer PFE ) which lost -2.32% and -2.37%.

The Daily Update Growth List had some big winners. Chewy CHWY ) topped the list with a +13.72% gain. Peloton (PTON) continued its rebound, advancing +9.79% today. Chinese stocks were at the bottom of the list, with Nio NIO ) having the most significant decline, losing -9.07%.

Looking ahead

CBĀ Consumer Confidence for January will be available after the market opens tomorrow.

Microsoft MSFT ), Johnson&Johnson ( JNJ ), Verizon ( VZ ), Texas Instruments ( TXN ), Raytheon RTX ), American Express AXP ), General Electric ( GE ), Lockheed Martin LMT ), 3M MMM ), and Logitech ( LOGI ) are among the earnings reports tomorrow. All eyes will be on Microsoft to set a tone for the mega-cap reports coming later this week and next.

Trends, Support, and Resistance

The index dipped to almost 13,000 before catching some support and recovering to close higher. Still, the trend is downward with a lower low and lower high.

If the one-day trend line continues into Tuesday, expect a +1.11% advance.

The trend line from the 1/12 high and the five-day trend line both represent the steep declines over the two time periods. After today’s rally, if the index returns to those lines it would mean a decline of -3.29% to -4.55%.

Wrap-up

We are not out of the woods yet, but today was a positive day. The candle itself has a long lower wick that can indicate a reversal when in a downtrend. The result is a move higher on higher than average volume (although a large portion of that volume came in the dip). The closing range of 97% shows the rally rode right into close. We also have more advancing stocks than declining stocks.

To continue the momentum, look for another positive day tomorrow on increased volume . We also want to see the advance/decline line remain above 1.0 and a good closing range. The last thing we need to see and we didn’t get today, is a higher high and a higher low.

The expectation is for Sideways or Higher.

Stay healthy and trade safe!

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