Daily Market Update for 2/1

Original Chart

Notes

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

Tuesday, February 1, 2022

Facts: +0.75%, Volume lower, Closing Range: 96%, Body: 24% Green
Good: Higher high and higher low, high closing range, advance/decline ratio
Bad: Nothing
Highs/Lows: Higher high, Higher low
Candle: Long lower wick under a thin green body
Advance/Decline: 2.76, Five advancing for every two declining stocks
Indexes:SPX (+0.69%), DJI (+0.78%), RUT (+1.10%), VIX (-11.56%)
Sector List: Energy ( XLE +3.56%) and Materials ( XLB +1.54%) at the top. Real Estate ( XLRE -0.68%) and Utilities ( XLU -1.33%) at the bottom.
Expectation: Sideways or Higher

Market Overview

Stock indexes rose along with optimism as corporate America continues to provide earnings beats and positive outlooks for 2022.

The Nasdaq rose +0.75% for the day after dipping in the morning. Volume was lower than the previous day, but gaining stocks continued to outnumber declining stocks at a 5:2 ratio. The dip in the morning formed a long lower wick, but the index recovered to create a 24% green body and a 96% closing range.

Small-caps outperformed today. The Russell 2000 (RUT) small-cap index rose +1.10%. The S&P 500 (SPX) advanced +0.69%. The Dow Jones Industrial Average climbed +0.78% higher. The VIXVolatility Index continues to recede, falling -11.52% today.

Only three of the eleven S&P 500 sectors declined today, all defensive sectors. Energy ( XLE +3.56%) led the sector list, having another record close. The sector was lifted by great earnings from Exxon Mobile ( XOM ). Materials ( XLB +1.54%) was the second-best sector. Real Estate ( XLRE -0.68%) and Utilities ( XLU -1.33%) were at the bottom of the sector list.

The ISM Manufacturing Purchasing Managers Index (PMI) for January was lower than the previous month but higher than the forecast. JOLTs Job Openings improved in December to 10.925m against an expected 10. 3m API Weekly Crude Oil Stock showed more demand than forecasted with supplies dipping to -1.645m vs the expectation of a 1.833m barrel surplus.

The US Dollar Index DXY ) declined -by 0.39%. The US 30y and 10y Treasury Yields rose while the 2y Treasury Yield dropped. High Yield ( HYG ) Corporate Bond prices rose and Investment Grade ( LQD ) Corporate Bond prices decreased. Silver and Gold advanced , primarily on the weakening dollar. Crude Oil Futures are holding near recent highs.

The put/call ratio declined to 0.738. The CNN Fear & Greed index remained in the Fear range.

Three of the big six mega-caps gained. Alphabet GOOGL ) rose +1.73% ahead of earnings and closed above its 21d EMA . The stock was up 10% in after-hours thanks to an earnings beat and a positive outlook for 2022. Meta ( FB ) also closed above its 21d EMA , advancing +1.83% today. Microsoft MSFT ) closed just below its 21d EMA , declining -by 0.71%.

United Parcel Service (UPS) was the top-performer in the mega-cap list, soaring +14.08% today on an earnings surprise, beating almost every business metric for the company and raising revenue guidance. Toyota Motor TM ) was at the bottom of the mega-cap list, declining -by 1.02%.

All but two stocks advanced in the Daily Update Growth List. Draft Kings ( DKNG ) topped the list, climbing +7.20% today. Etsy ETSY ) dropped -by 3.13%, ending up at the bottom of the list.

Looking ahead

There is an OPEC Meeting scheduled for the early morning. ADP Nonfarm Employment Change data will be available before the market opens. After the market opens, the Weekly Crude Oil Inventories will be released.

Facebook FB ) will be the top earnings report for tomorrow, but there are many more. Alibaba (BABA), AbbVie ABBV ), Thermo Fisher ( TMO ), Novo Nordisk NVO ), Qualcomm QCOM ), T-Mobile ( TMUS ), Spotify (SPOT), and DR Horton ( DHI ) are some that stand out as notable for the Daily Market Update.

Trends, Support, and Resistance

The Nasdaq is approaching the 21d EMA but remained below the line today. Trend lines are within a relatively tight range.

If the one-day trend line continues, we can expect a +0.59% advance for Wednesday.

The five-day trend line points to a -0.13% decline.

The trend line from the 1/24 low ends with a -0.75% decline for Wednesday.

Wrap-up

This earnings season is showing that public companies continue to show earnings and revenue growth that beat expectations. More importantly, those companies are providing outlooks for 2022 that are higher than expected. The result is investors are seemingly putting aside fears over inflation and interest rate hikes by the Fed.

We can still expect volatility as the Fed rolls out new monetary policy , but it appears there is still constructive growth that will happen in 2022.

The expectation for tomorrow is Sideways or Higher.

Stay healthy and trade safe!

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