Daily Market Update for 2/4
Summary: Amazon helped markets move higher on Friday, but some trepidation remained for investors who are worried about a hawkish Fed.
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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Friday, February 4, 2022
Facts: +1.58%, Volume lower, Closing Range: 66%, Body: 37% Green
Good: Higher high, good closing range, advance/decline ratio
Bad: Lower low, volume
Highs/Lows: Higher high, Lower low
Candle: Similar length upper and lower wicks with a medium-size green body
Advance/Decline: 1.68, more than three advancing stocks for every two declining stocks
Indexes: SPX (+0.52%), DJI (-0.06%), RUT (+0.57%), VIX (-4.68%)
Sector List: Consumer Discretionary (XLY +2.84%) and Financials (XLF +1.70%) at the top. Real Estate (XRE -1.37%) and Materials (XLB -1.66%) at the bottom.
Expectation: Sideways or Higher
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Market Overview
Amazon helped markets move higher on Friday, but some trepidation remained for investors who are worried about a hawkish Fed.
The Nasdaq gained +1.58%. Volume was lower than the previous day. The candle has similar length upper and lower wicks with a 66% green body in the middle of the candle. The higher high is great and the closing range is good. However, the lower low in the morning was a surprise and a sell-off before close, creating the upper wick, shows nervous investors heading into a weekend. There were more than three advancing stocks for every two declining stocks.
The S&P 500 (SPX) gained +0.52% and the Russell 2000 (RUT) advanced +0.57%. The Dow Jones Industrials Average (DJI), weighed down by large cyclicals, declined -by 0.06%. The VIX Volatility Index (VIX) remains elevated but declined by -4.68% today.
Consumer Discretionary (XLY +2.84%) was the top sector for the day, led higher by Amazon. Financials (XLF +1.70%) was the next best sector, helped by rising yields on Treasuries. Real Estate (XRE -1.37%) and Materials (XLB -1.66%) were at the bottom of the sector list.
The employment data released in the morning showed a robust labor market which is good for the economy, but bad for investors who see more reason for the Fed to be hawkish. Nonfarm Payrolls for January defied expectations by adding 467,000 jobs. Analysts expected a much lower number of 150,000 due to Omicron. Average Hourly Earnings increased 5.7% year-over-year, more than the expected 5.2% increase, signaling sticky inflation.
The US Dollar strengthened for the first time in five days. The index (DXY) rose +0.13%. US 30y, 10y, and 2y Treasury Yields rose sharply on expectations of a more hawkish Fed. As yields rise, prices drop and Corporate Bond prices follow big moves in Treasuries. Both the High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices were sharply lower for the day. Crude Oil Futures continue to soar higher, rising +3.93% today, likely due to both increased demand outlook and potential supply disruption from possible actions in Ukraine.
The put/call ratio (PCCE) fell to 0.808. The CNN Fear & Greed index is in the Fear range. The NAAIM money manager exposure index showed an increase in exposure, rising to 62.54 from 53.39 the previous week. The exposure index is released on Wednesday nights, so does not reflect Thursday's market declines.
Four of the big six mega-caps gained for the day. Amazon (AMZN) added $150 billion to its market cap, the largest rise in history on the day after Meta (FB) recorded the largest market cap loss in history. Amazon gained +13.54% after an exemplary fourth-quarter earnings report and 2022 outlook for the business. Tesla (TSLA) rose +3.61%. Microsoft (MSFT) hit resistance at its 21d EMA but closed with a +1.56% gain. Apple (AAPL) got support at its 50d MA but closed -0.29% lower.
Amazon was the best mega-cap for the day. Bank of America (BAC) was second with a +3.98% gain, followed by Tesla. Novo Nordisk (NVO) was at the bottom of the mega-cap list with a -4.74% decline after missing analyst profit estimates.
Snap (SNAP) topped the Daily Update Growth List with a whopping +58.82% gain after reporting huge user growth and ad sales. Pinterest (PINS) was third on the list, gaining +11.18%. The two smaller players put further pressure on Meta after the top social network blamed Apple and TikTok for declines in their business. D.R. Horton (DHI) was at the bottom of the list, falling -by 4.72% along with the Real Estate sector.
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Looking ahead
It will be a quiet start to the week for economic news with no significant events planned for Monday.
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Trends, Support, and Resistance
The Nasdaq had an outside day today with the low and high both outside yesterday's low and high. It's representative of continued volatility in equity markets.
If the one-day trend continues, that would follow the trend-line from the 1/24 low and mean a +2.27% gain on Monday.
If the index follows the five-day trend, that would result in a -0.04% decline.
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Wrap-up
Investors are torn between an economy that's continuing to show strength and what that means for Fed action later this year. Will the Fed raise rates three times, four times, six times? Will the March rate hike by 0.25% or 0.50%? Estimates are all across the board among analysts. Those who believe inflation will begin to ease see a more dovish Fed and fewer rate hikes. Those who believe inflation will stay high expect a more hawkish Fed and higher rate hikes.
The expectation for Monday is Sideways or Higher.
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=-
Friday, February 4, 2022
Facts: +1.58%, Volume lower, Closing Range: 66%, Body: 37% Green
Good: Higher high, good closing range, advance/decline ratio
Bad: Lower low, volume
Highs/Lows: Higher high, Lower low
Candle: Similar length upper and lower wicks with a medium-size green body
Advance/Decline: 1.68, more than three advancing stocks for every two declining stocks
Indexes: SPX (+0.52%), DJI (-0.06%), RUT (+0.57%), VIX (-4.68%)
Sector List: Consumer Discretionary (XLY +2.84%) and Financials (XLF +1.70%) at the top. Real Estate (XRE -1.37%) and Materials (XLB -1.66%) at the bottom.
Expectation: Sideways or Higher
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Market Overview
Amazon helped markets move higher on Friday, but some trepidation remained for investors who are worried about a hawkish Fed.
The Nasdaq gained +1.58%. Volume was lower than the previous day. The candle has similar length upper and lower wicks with a 66% green body in the middle of the candle. The higher high is great and the closing range is good. However, the lower low in the morning was a surprise and a sell-off before close, creating the upper wick, shows nervous investors heading into a weekend. There were more than three advancing stocks for every two declining stocks.
The S&P 500 (SPX) gained +0.52% and the Russell 2000 (RUT) advanced +0.57%. The Dow Jones Industrials Average (DJI), weighed down by large cyclicals, declined -by 0.06%. The VIX Volatility Index (VIX) remains elevated but declined by -4.68% today.
Consumer Discretionary (XLY +2.84%) was the top sector for the day, led higher by Amazon. Financials (XLF +1.70%) was the next best sector, helped by rising yields on Treasuries. Real Estate (XRE -1.37%) and Materials (XLB -1.66%) were at the bottom of the sector list.
The employment data released in the morning showed a robust labor market which is good for the economy, but bad for investors who see more reason for the Fed to be hawkish. Nonfarm Payrolls for January defied expectations by adding 467,000 jobs. Analysts expected a much lower number of 150,000 due to Omicron. Average Hourly Earnings increased 5.7% year-over-year, more than the expected 5.2% increase, signaling sticky inflation.
The US Dollar strengthened for the first time in five days. The index (DXY) rose +0.13%. US 30y, 10y, and 2y Treasury Yields rose sharply on expectations of a more hawkish Fed. As yields rise, prices drop and Corporate Bond prices follow big moves in Treasuries. Both the High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices were sharply lower for the day. Crude Oil Futures continue to soar higher, rising +3.93% today, likely due to both increased demand outlook and potential supply disruption from possible actions in Ukraine.
The put/call ratio (PCCE) fell to 0.808. The CNN Fear & Greed index is in the Fear range. The NAAIM money manager exposure index showed an increase in exposure, rising to 62.54 from 53.39 the previous week. The exposure index is released on Wednesday nights, so does not reflect Thursday's market declines.
Four of the big six mega-caps gained for the day. Amazon (AMZN) added $150 billion to its market cap, the largest rise in history on the day after Meta (FB) recorded the largest market cap loss in history. Amazon gained +13.54% after an exemplary fourth-quarter earnings report and 2022 outlook for the business. Tesla (TSLA) rose +3.61%. Microsoft (MSFT) hit resistance at its 21d EMA but closed with a +1.56% gain. Apple (AAPL) got support at its 50d MA but closed -0.29% lower.
Amazon was the best mega-cap for the day. Bank of America (BAC) was second with a +3.98% gain, followed by Tesla. Novo Nordisk (NVO) was at the bottom of the mega-cap list with a -4.74% decline after missing analyst profit estimates.
Snap (SNAP) topped the Daily Update Growth List with a whopping +58.82% gain after reporting huge user growth and ad sales. Pinterest (PINS) was third on the list, gaining +11.18%. The two smaller players put further pressure on Meta after the top social network blamed Apple and TikTok for declines in their business. D.R. Horton (DHI) was at the bottom of the list, falling -by 4.72% along with the Real Estate sector.
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Looking ahead
It will be a quiet start to the week for economic news with no significant events planned for Monday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq had an outside day today with the low and high both outside yesterday's low and high. It's representative of continued volatility in equity markets.
If the one-day trend continues, that would follow the trend-line from the 1/24 low and mean a +2.27% gain on Monday.
If the index follows the five-day trend, that would result in a -0.04% decline.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
Investors are torn between an economy that's continuing to show strength and what that means for Fed action later this year. Will the Fed raise rates three times, four times, six times? Will the March rate hike by 0.25% or 0.50%? Estimates are all across the board among analysts. Those who believe inflation will begin to ease see a more dovish Fed and fewer rate hikes. Those who believe inflation will stay high expect a more hawkish Fed and higher rate hikes.
The expectation for Monday is Sideways or Higher.
Stay healthy and trade safe!
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