Daily Market Update for 2/2Summary: The rally in the Nasdaq slowed on Wednesday as investors took profits in some sectors while chasing a more select set of companies turning in great earnings this past two weeks.
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, February 2, 2022
Facts: +0.50%, Volume lower, Closing Range: 64%, Body: 32% Red
Good: Higher high, higher low, decent closing range
Bad: Red body, lower volume gain, low advance/decline
Highs/Lows: Higher high, Higher low
Candle: Long lower wick under a thin red body
Advance/Decline: 0.52, two declining stocks for every advancing stock
Indexes: SPX (+0.94%), DJI (+0.63%), RUT (-1.03%), VIX (+0.59%)
Sector List: Communications (XLC +2.00%) and Real Estate (XLRE +1.72%) at the top. Materials (XLB +0.31%) and Consumer Discretionary (XLY -0.60%) at the bottom.
Expectation: Sideways
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Market Overview
The rally in the Nasdaq slowed on Wednesday as investors took profits in some sectors while chasing a more select set of companies turning in great earnings this past two weeks.
The Nasdaq gained +0.50% for the day. The index opened with a gap up but declined through the morning to create a long lower wick. The recovery in the afternoon left behind a 32% red body and a 64% closing range. Volume was lower than the previous day. There were two declining stocks for every advancing stock.
The S&P 500 (SPX) advanced +0.94%, led higher by Alphabet's huge gain. The Dow Jones Industrial Average (DJI) climbed by +0.63%. The Russell 2000 (RUT) declined -by 1.03%. The VIX Volatility Index (VIX) rose by +0.59%.
Communications (XLC +2.00%) and Real Estate (XLRE +1.72%) were the top two of the eleven S&P 500 sectors. Only one sector, Consumer Discretionary (XLY -0.60%) declined.
ADP Nonfarm Employment Change for January showed a decline of 301,000 payrolls vs an expected increase of 207,000.
The US Dollar Index (DXY) continued its fall, declining -by 0.29% today. Treasury Yields are relatively steady with small declines across the 30y, 10y, and 2y yield. High Yield (HYG) and Investment Grade (LQD) Corporate Bond prices increased. Crude Oil Futures continues to rise. Timber and Copper Futures are also on the rise while Aluminum Futures is falling.
The put/call ratio (PCCE) increased to 0.751. The CNN Fear & Greed index remained in the Fear range.
Four of the big six gained today. Alphabet (GOOG) was the big winner with a +7.52%. The stock was up over 10% intraday, setting a new all-time high but couldn't hold on for a record close. Microsoft (MSFT) rose +1.52% to close above its 21d EMA. Meta (FB) rose +1.25% but is down over 20% after hours, disappointing investors with missed earnings expectations.
Google was at the top of the mega-cap list, followed by Qualcomm (QCOM) which rose +6.25% in anticipation of earnings which turned out great. Despite the great earnings, the stock is down after hours. Alibaba (BABA) is at the bottom of the mega-cap list. The stock remains volatile with a -3.41% decline today.
There were only four stocks with gains in the Daily Update Growth List. Nvidia (NVDA) topped the list, gaining +2.45% today. At the bottom of the list was PayPal (PYPL) which declined -24.59 after missing most business metrics and lowering its outlook in its earnings call yesterday. That also brought down Block (SQ) by -10.63%.
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Looking ahead
The weekly jobless claims will be available before the market opens tomorrow. We'll also have the Q4 Nonfarm Productivity and Unit Labor Costs data at the same time.
After the market opens, we'll get Non-Manufacturing / Services Purchasing Managers Index data for January that shows if the sector is growing or shrinking in economic activity.
Amazon (AMZN) will round out the big six earnings reports for this season. In addition, we'll get earnings for Eli Lilly (LLY), Merck (MRK), Shell (SHEL), Honeywell (HON), Ford Motor (F), Activision Blizzard (ATVI), Snap (SNAP), Unity Software (U), Pinterest (PINS), and Paylocity (PCTY). The list of reports for Thursday is long and these are just a few relevant to the Daily Update.
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Trends, Support, and Resistance
The Nasdaq closed just above the 21d EMA today. The index hit resistance at 14,500 after opening, slid through the morning but regained ground to close higher.
If the index returns to the five-day trend line, that would mean a +2.48% advance for Thursday.
The one-day trend line and trend line from the 1/24 low point to a +0.21% gain.
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Wrap-up
Great earnings reports have helped the Nasdaq rally. However, the disappointment on Facebook earnings could derail things tomorrow. Overall, the earnings season is still strong, but the size of Facebook will influence the entire market, especially with a severe reaction to the miss.
Based on the chart the expectation for tomorrow is Sideways, but a move Lower would not be a huge surprise.
Stay healthy and trade safe!
