1/10/2022

STOCKS – AMZN, AMD, SHOP

MACRO – SPY, QQQ, IEF

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• RTM: Earnings Estimates For The NASDAQ Are Dropping
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• RTM: A Pause In The Middle Of The Storm
• RTM- The Fed Is Going To Be Much More Aggressive Then The Markets Thought
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• RTM: Don’t Rush Into The Reflation Trap Yet
• RTM: Evidence Of Further Economic Slowing
• RTM- Topping Patterns – Video
• RTM First Look: Adobe’s Shares May Have Significant Downside Risk

Stocks finished the day mixed, but looking on the surface doesn’t do it justice. The S&P 500 fell by nearly 2% today to recover all of the losses and finish the day down just 14 bps. The rally appeared to be short-covering ahead of Powell tomorrow, as the VIX fell sharply in the final few hours of trading. 

S&P 500 (SPY)

The S&P 500 rose right back to resistance at 4,670, almost enough to fill the morning gap. With Powell due to testify tomorrow in front of the Senate for a reconfirmation hearing, traders appeared to want to get out flat on the day. There seems to be a five-wave impulse move off the low, so it seems possible this was the end of the move higher off the lows. Additionally, if this was just about filling gaps, the index shouldn’t move much beyond 4,680 before continuing the downward trend.

NASDAQ (QQQ)

The pattern on the Qs is something of a mystery to me because the daily candle today looks like the one from December 21, which kicked off the Santa rally. Could we be about to start a 4-day rally? Anything is possible; I don’t have all the answers. But even if it were, it would likely result in a lower higher, given we starting from a lower low.

Given that, the indexes may rally back, with the S&P 500 moving to say 4,700 and the Qs moving to around to say $390. But even if it did, it is likely just a short-term type of move. Because overall, NASDAQ earnings estimates are falling and are nearly 5% off their highs. Markets and earnings can only diverge for so long. With multiples at peak levels and the Fed now looking to tighten monetary policy and financial conditions, it just doesn’t favor further multiple expansion. So can the market move higher from here, yes? Is likely to see another all-time high, probably not. (For members of Reading The Markets – RTM: Earnings Estimates For The NASDAQ Are Dropping)

VIX

The VIX managed to rise to 23.5 before turning around and falling, which helped to give the S&P 500 that Vanna tailwind.

10-Year

The 10-year managed to fall some today, finishing around 1.75% and holding that critical resistance level. I still think that level will hold, and we see lower rates on the 10-year. I explain why in this week’s technical take for subscribers or a one-time purchase in my Shopify store in more detail.

2-Year

However, the 2-year was up to 90 basis points, and I expect it could be going much higher, perhaps to around 1.4%. It would result in the curve flattening dramatically.

Amazon (AMZN)

Amazon fell below the uptrend today, and so did the RSI. Yes, the stock finished well off the lows, but the trend breaking seems very important, and momentum appears to be lost.

Shopify (SHOP)

Shopify fell hard today and managed to bounce, filling part of the gap from this morning’s opening. There should be some resistance around $1140,

AMD gapped below support today at $131.50 and managed to fill the gap at $132.25 by the close. Probably not the most bullish of patterns. This is a stock probably heading back to $117.

 

That’s all for today. 

Mike