Daily Market Update for 1/28

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 28, 2022

Facts: +3.13%, Volume lower, Closing Range: 100%, Body: 62% Green
Good: Closing range, higher high, great breadth (a/d)
Bad: Lower low, volume lower on gain
Highs/Lows: Higher high, Lower low
Candle: Long lower wick underneath thick green body, no upper wick
Advance/Decline: 1.79, more than three advancing stocks for every two declining stocks
Indexes:SPX (+2.43%), DJI (+1.65%), RUT (+1.93%), VIX (-9.28%)
Sector List: Technology ( XLK +4.37%) and Real Estate ( XLRE +3.47%) at the top. Materials ( XLB +0.58%) and Energy ( XLE -0.42%) at the bottom.
Expectation: Sideways or Higher

Market Overview

We ended a volatile week with one more whipsaw day. Thankfully, this one whipped to the upside. It seems the strong earnings week finally lifted sentiment in the market, overcoming fears of inflation and geopolitical events. Will it stick?

The Nasdaq gained +3.13% by the end of the day. A dip in the morning created a long lower wick, but then the bulls came back in to end the day with gains. The 62% green body sits above the long lower wick. The 100% closing range leaves behind no upper wick. Volume was lower than the previous day. There were more than three advancing stocks for every two declining stocks.

The S&P 500 (SPX) was the second-best index. Both the Nasdaq and S&P 500 were helped by Apple AAPL ) which crushed earnings estimates on Thursday evening. The Dow Jones Industrial Average (DJI) rose +1.65%. The Russell 2000 (RUT) climbed +1.93%. The VIXVolatility Index dropped back by -9.28% but remains elevated.

Ten out of the eleven S&P 500 sectors gained for the day. Technology ( XLK +4.37%) and Real Estate ( XLRE +3.47%) were the top sectors. Materials ( XLB +0.58%) and Energy ( XLE -0.42%) were the bottom two sectors.

Core PCE Price Index data was just slightly higher than forecast, coming in at 4.9% year-over-year. 4.8% was expected. Michigan Consumer Sentiment and Expectations were both lower than the forecast.

The US Dollar index DXY ) was steady, rising just +0.01% today. US 30y, 10y, and 2y Treasury Yields all declined. High Yield ( HYG ) and Investment Grade ( LQD ) Corporate Bond prices rose. Silver and Gold continued to tumble, losing -1.34% and -0.34% today.

The put/call ratio ( PCCE ) rose to 0.953. The CNN Fear & Greed index remained in Fear. The NAAIM money manager exposure index is at 53.39, down from 56.73 last week.

All four largest mega-caps had significant gains. Apple AAPL ) soared +6.98% to close back above its 21d EMA and 50d MA lines. Microsoft MSFT ) climbed +2.81% to close just below its 21d EMA . Alphabet GOOGL ) gained +3.37% and closed just below its 200d MA. Amazon ( AMZN ) rose +3.11% but had more work to get back to moving averages.

Visa (V) and Mastercard (M) were the top mega-caps for the day. Visa gained +1.60% while Mastercard advanced +9.12%. The stocks were lifted by Visa’s earnings beat and optimistic outlook on travel spending. There was only one mega-cap in the list to decline. It was Chevron CVX ) which declined -by 3.52%, giving back some of the year-to-date gains. It had risen 16% since the new year.

In a surprise reversal from overnight sentiment, Robinhood (HOOD) topped the Daily Update Growth List with a +9.65% advance. Robinhood sank in after-hours yesterday, disappointing investors with almost all of its business metrics. Only a handful of stocks on the list declined. Ehang Holdings (EH) was the biggest loser, dropping -6.51%.

Looking ahead

There is not much economic news for Monday. Several Asian markets will be closed on Monday for the New Year holidays. The Chicago Purchasing Managers Index data will be available Monday after the market opens.

Next week will be another big week for earnings , including Alphabet GOOGL ), Meta ( FB ), and Amazon ( AMZN ). However, Monday doesn’t have any earnings reports relevant to this update. Check your own portfolio for earnings events.

Trends, Support, and Resistance

The Nasdaq was up and down today but ended the day with an afternoon rally. There seems to be a support/resistance area around 13,800 and the index closed just below that area.

If the one-day trend continues, expect a +1.72% advance on Monday.

The five-day trend line ends with a -1.21% decline.

If the index is to return to the trend line from the 1/12 high, it would mean a -5.28% drop.

Wrap-up

The Nasdaq ended a wild week with a +0.01% gain. Not much, but still ends a four-week losing streak. It remains to be seen if this is just a pause before further declines or if the market is getting more support.

Is the Fed going to simply take the foot off the gas that has been accelerating growth in the economy, or will it put on the brakes? That’s the question large institutions need to answer for themselves. If it is the former, we’ll see more support coming into the market with a few higher volume green days.

Next, we will need to see investors that have taken profits and moved to the sidelines reengage. That will show up win breath thrust indicators. The most popular one, the Zweig Breadth Thrust indicator is on day one of ten today. The indicator rarely triggers, but if it did, it would provide new life to the bull market.

The expectation for Monday is Sideways or Higher. If we get Lower, we can expect more volatility ahead.

Stay healthy and trade safe!

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