Technical Strategy Video:
Key Takeaways
- Equity trends remain mixed over the last few trading days, yet still quite positive from 12/21 lows. There continues to be divergence between SPX and NASDAQ which is -2% below all-time highs
- Most of the volatility to kick off the new year has happened in FX and Rates, while Equity gains have proven more muted. Sharp Treasury selloff along with US Dollar gains are hurting the Precious metals space
- Groups like Financials are showing better relative strength given yields backing up, while Healthcare, Industrials, REITS, and Utilities are all down more than 1%
Monday’s fractional gains remain within the context of some choppy trading which saw SPX and DJIA break out to new highs during the final week of 2021. Yet, NASDAQ should be watched carefully in this regard, as it remains lower by 2% off All-time high peaks. Overall, movement back above SPX 4809 would lead to 4825 and likely 4850-60. Meanwhile, any reversal down under SPX 4732 would change trends to negative in the Short-run.
What’s Technically Important as 2022 gets underway
Intermarket divergence continues as SPX gains to new highs are still not being matched with a similar move out of NASDAQ. Importantly, other groups like Transports and Small, Mid-Caps have been notably weaker.
Large-Cap Tech, Discretionary continue to camouflage market gains – Sector-wise, Large-Cap Technology and Discretionary showed far more strength on Monday than Equal-weighted versions of these sectors. AAPL breaking out looks important and positive for Large-Cap Technology and Tech Hardware in the short run.
Market gains of late haven’t been as broad-based as desired. Monday’s losses of 1%+ were seen in Industrials, Healthcare, and REITS (Equal-weighted ETF performance). Meanwhile only Communication Services and Energy showed gains of more than 1%
Santa rally period will be positive barring Tuesday drop of more than 1.1%. The Santa Claus rally period from 12/27/21-1/4/22 as of now is positive by +1.1%, with most of these gains having occurred on 12/27/21. Unless these are immediately reversed Tuesday, this looks, yet again, to have been a profitable time to be long stock indices, marking six straight years.
Defensive strength has been an oddity for December 2021 given market gains. The pickup in relative strength in Utilities, REITS, Healthcare looks difficult to fade and these groups might outperform further, particularly in 1H 2022.
AAPL breakout important as stock nears its first ever $3 Trillion Market capitalization.
AAPL’s gains to kick off 2022 look to be making an important and positive Cup and Handle breakout, (See chart above) something which bodes well for strength in AAPL to continue in the short run. In the short run, a daily close above 181.33 should lead this to 187-190 before resistance sets in, while a break of 167.46 is necessary before weighing in on the likelihood of any type of selloff. While weekly charts have reached overbought levels and might show some negative momentum divergence on this breakout this week, hardly any evidence of true deterioration has been present to make investors want to avoid this name. Furthermore, counter-trend measures of exhaustion based on proprietary models look to be still two-to-three weeks away from completion. Thus, additional strength in AAPL looks likely.
Treasury Yields near important resistance – While the Equity picture was a bit muddled to kick off the New year, the move in Treasury yields surged the most since Sept 2021 on Monday, finishing just below an area thought to be important technical resistance. Overall, the area at 1.693% is thought to be important for US 10-Year Treasury yields. Until/unless this is surpassed, it’s thought that Monday’s Treasury weakness (yield strength) likely faces resistance and might reverse back lower over the next couple weeks.
Bitcoin sluggishness- What does this say about Crypto’s start to 2022?
Bitcoin had a rather lackluster beginning to the new year in recent days, with prices just fractionally above where it started the year. The Bitcoin Dominance chart, which measures changes in Bitcoin’s market capitalization (and thought by many as important to judging upcoming times of out/underperformance) has now pulled back to test a very important level of multi-month support. Breaks of $45655 in BTCUSD would argue for continued weakness down to challenge September lows $39573, and this Dominance chart would likely show a more pronounced breakdown going back since last Spring. This would argue that other Altcoins likely would be preferred over BTC as a Cryptocurrency of choice in the short run. Last year it was noted that Ethereum looks better than Bitcoin, technically, and this still looks to be the case as 2022 gets underway. Movement back over $49k is needed to jump-start the bullish case for Bitcoin.
