Summary: Jerome Powell says Inflation is bad and possibly getting worse. While the initial release from the Fed meeting met expectations, which predicted an interest rate hike in March, markets turned fearful again when comments from Powell showed much more concern than anticipated.
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Wednesday, January 26, 2022
Facts: +0.02%, Volume lower, Closing Range: 25%, Body: 54% Red
Good: Higher high and held onto a gain for the day
Bad: Lost intraday momentum to make a lower low
Highs/Lows: Higher high, Lower low
Candle: Outside day, equal size upper and lower wicks surround a red body
Advance/Decline: 0.5, two declining stocks for every advancing stock
Indexes: SPX (-0.15%), DJI (-0.38%), RUT (-1.38%), VIX (+2.57%)
Sector List: Technology (XLK +0.59%) and Financials (XLF +0.26%) at the top. Communications (XLC -1.46%) and Real Estate (XLRE -1.66%) at the bottom.
Expectation: Sideways
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Market Overview
Jerome Powell says Inflation is bad and possibly getting worse. While the initial release from the Fed meeting met expectations, which predicted an interest rate hike in March, markets turned fearful again when comments from Powell showed much more concern than anticipated.
The Nasdaq barely held onto the daily gain, advancing just +0.02% after being up +3.42% intraday. Volume was higher thanks to the volatility. The 54% red body sits in between equal size upper and lower wicks. The upper wick formed from the intraday gains while the lower wick formed during the fear-induced sell-off. There were two declining stocks for every advancing stock.
The S&P 500 (SPX) fell -0.15%. The Dow Jones Industrial Average (DJI) lost -0.38%. The Russell 2000 (RUT) declined -1.38%. The VIX Volatility Index was on the decline but reversed to its highest close since one year ago, when the Fed also caused panic among investors.
Technology (XLK +0.59%) and Financials (XLF +0.26%) were the only two sectors to hold onto gains for the day. Communications (XLC -1.46%) and Real Estate (XLRE -1.66%) ended at the bottom of the list. After the Jerome Powell speech all sectors sold off, but the defensive sectors of Utilities (XLU -0.82%) and Consumer Staples (XLP -0.76%) had the smallest declines.
The day started off with mixed economic news. The Goods Trade Balance (Dec) show the US was importing far more than it was exporting. Analysts expected a -96.10B imbalance but the actual was -100.96B. New Home Sales for December outpaced expectations. There were 811,000 sales vs the expected 760,000. Crude Oil Inventories showed less demand than forecasted.
The biggest economic news for the day was from the Fed. They confirmed a timeline for March to start increasing interest rates and begin reducing the balance sheet. That initial information was Ok with the market, causing a short rally. The rally was ended by Jerome Powell's speech which raised concern about a worsening situation with inflation.
The US Dollar index (DXY) rose +0.54% for the day. US 30y, 10y, and 2y Treasury Yields all rose while the gap between long term and short term treasuries narrowed. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices declined sharply. Gold and Silver both dropped, relative to the dollars increase.
The put/call ratio rose to 0.758. The CNN Fear & Greed index continued to move further into the Fear range.
Microsoft (MSFT) outperformed the other largest mega-caps. After beating earnings expectations and providing a positive surprise for 2022 guidance, the company was up +6.76% intraday. Microsoft held onto a +2.85% gain. Alphabet (GOOGL) also closed the day in the positive, gaining +1.81%. Apple (AAPL) declined -0.06% and Amazon (AMZN) was down -0.80%.
Broadcom Inc (AVGO) was the top mega-cap today, winning some favorable analyst praise and a +4.20% advance. Alibaba (BABA) was at the bottom of the mega-cap list, losing -4.84%.
The Daily Update Growth List lost a lot of gainers after the Fed meeting, but some held on to finish in the green. The top performer was Draft Kings (DKNG) which gained +5.23% after Morgan Stanley upgraded the stock to equal weight. FUTU Holdings (FUTU) declined -7.36% to end up at the bottom of the growth list.
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Looking ahead
Tomorrow morning will start with the Durable Goods Orders data for December. We'll also get a reading on GDP for Q4 of 2021. The weekly jobless claims data will be available before the market opens and Pending Home Sales for December will print after the market opens.
Apple (AAPL) is the big earnings report for tomorrow. Will the positive earnings week continue? In addition to Apple, Visa (V), Mastercard (MA), Comcast (CMCSA), McDonald's (MCD), SAP (SAP), Atlassian (TEAM), Western Digital (WD), and Southwest Airlines (LUV) are among many companies reporting earnings on Thursday.
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Trends, Support, and Resistance
The Nasdaq rallied today but then gave up the gains to close just above yesterday's close.
The one-day trend line points to a -1.10% decline for tomorrow.
The five-day trend line and the trend line from the 1/12 high point to a -2.47% decline.
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Wrap-up
Shock is never a good thing for investors and Jerome Powell's comments today set off nerves driving selling in the late afternoon. Now that the market is closed, analysts can look closer at his comments and reassess what they think the Fed's timeline is for interest rate hikes and reducing the balance sheet. We'll see what the institutional opinion is in tomorrow's market moves.
After an inside day, following by a volatile outside day, the expectation for tomorrow is Sideways.
Stay healthy and trade safe!
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wednesday, January 26, 2022
Facts: +0.02%, Volume lower, Closing Range: 25%, Body: 54% Red
Good: Higher high and held onto a gain for the day
Bad: Lost intraday momentum to make a lower low
Highs/Lows: Higher high, Lower low
Candle: Outside day, equal size upper and lower wicks surround a red body
Advance/Decline: 0.5, two declining stocks for every advancing stock
Indexes: SPX (-0.15%), DJI (-0.38%), RUT (-1.38%), VIX (+2.57%)
Sector List: Technology (XLK +0.59%) and Financials (XLF +0.26%) at the top. Communications (XLC -1.46%) and Real Estate (XLRE -1.66%) at the bottom.
Expectation: Sideways
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Jerome Powell says Inflation is bad and possibly getting worse. While the initial release from the Fed meeting met expectations, which predicted an interest rate hike in March, markets turned fearful again when comments from Powell showed much more concern than anticipated.
The Nasdaq barely held onto the daily gain, advancing just +0.02% after being up +3.42% intraday. Volume was higher thanks to the volatility. The 54% red body sits in between equal size upper and lower wicks. The upper wick formed from the intraday gains while the lower wick formed during the fear-induced sell-off. There were two declining stocks for every advancing stock.
The S&P 500 (SPX) fell -0.15%. The Dow Jones Industrial Average (DJI) lost -0.38%. The Russell 2000 (RUT) declined -1.38%. The VIX Volatility Index was on the decline but reversed to its highest close since one year ago, when the Fed also caused panic among investors.
Technology (XLK +0.59%) and Financials (XLF +0.26%) were the only two sectors to hold onto gains for the day. Communications (XLC -1.46%) and Real Estate (XLRE -1.66%) ended at the bottom of the list. After the Jerome Powell speech all sectors sold off, but the defensive sectors of Utilities (XLU -0.82%) and Consumer Staples (XLP -0.76%) had the smallest declines.
The day started off with mixed economic news. The Goods Trade Balance (Dec) show the US was importing far more than it was exporting. Analysts expected a -96.10B imbalance but the actual was -100.96B. New Home Sales for December outpaced expectations. There were 811,000 sales vs the expected 760,000. Crude Oil Inventories showed less demand than forecasted.
The biggest economic news for the day was from the Fed. They confirmed a timeline for March to start increasing interest rates and begin reducing the balance sheet. That initial information was Ok with the market, causing a short rally. The rally was ended by Jerome Powell's speech which raised concern about a worsening situation with inflation.
The US Dollar index (DXY) rose +0.54% for the day. US 30y, 10y, and 2y Treasury Yields all rose while the gap between long term and short term treasuries narrowed. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices declined sharply. Gold and Silver both dropped, relative to the dollars increase.
The put/call ratio rose to 0.758. The CNN Fear & Greed index continued to move further into the Fear range.
Microsoft (MSFT) outperformed the other largest mega-caps. After beating earnings expectations and providing a positive surprise for 2022 guidance, the company was up +6.76% intraday. Microsoft held onto a +2.85% gain. Alphabet (GOOGL) also closed the day in the positive, gaining +1.81%. Apple (AAPL) declined -0.06% and Amazon (AMZN) was down -0.80%.
Broadcom Inc (AVGO) was the top mega-cap today, winning some favorable analyst praise and a +4.20% advance. Alibaba (BABA) was at the bottom of the mega-cap list, losing -4.84%.
The Daily Update Growth List lost a lot of gainers after the Fed meeting, but some held on to finish in the green. The top performer was Draft Kings (DKNG) which gained +5.23% after Morgan Stanley upgraded the stock to equal weight. FUTU Holdings (FUTU) declined -7.36% to end up at the bottom of the growth list.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Looking ahead
Tomorrow morning will start with the Durable Goods Orders data for December. We'll also get a reading on GDP for Q4 of 2021. The weekly jobless claims data will be available before the market opens and Pending Home Sales for December will print after the market opens.
Apple (AAPL) is the big earnings report for tomorrow. Will the positive earnings week continue? In addition to Apple, Visa (V), Mastercard (MA), Comcast (CMCSA), McDonald's (MCD), SAP (SAP), Atlassian (TEAM), Western Digital (WD), and Southwest Airlines (LUV) are among many companies reporting earnings on Thursday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq rallied today but then gave up the gains to close just above yesterday's close.
The one-day trend line points to a -1.10% decline for tomorrow.
The five-day trend line and the trend line from the 1/12 high point to a -2.47% decline.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Shock is never a good thing for investors and Jerome Powell's comments today set off nerves driving selling in the late afternoon. Now that the market is closed, analysts can look closer at his comments and reassess what they think the Fed's timeline is for interest rate hikes and reducing the balance sheet. We'll see what the institutional opinion is in tomorrow's market moves.
After an inside day, following by a volatile outside day, the expectation for tomorrow is Sideways.
Stay healthy and trade safe!
