Last couple weeks of January likely difficult before a trading low materializes

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Key Takeaways

  • Minor stabilization on Friday doesn’t take away from the short-term negative case given momentum, structural issues & weakness expected the last two weeks before a low
  • Treasury yields and the US Dollar both strengthened on Friday; Yields in particular likely push back to new yearly highs (TNX) and could make Friday’s weakness in Financials buyable into February
  • Energy intermediate-term bullish, but near-term stretched as WTI nears Oct 2021 peaks

Friday’s recovery looks to have happened directly following an Elliott five-wave decline from mid-Week.  Thus, while many might feel emboldened that markets were able to stabilize, it’s likely that 4665-88 could contain any bounce before turning back lower to test this past week’s lows.   My list of concerns is highlighted on the following page, but it’s worth pointing out that momentum, structure, and cycles are three factors that could result in a difficult final two weeks of January before any relief.   Bottom line, a defensive stance is preferred for now, with Staples, Utilities, REITS and Healthcare likely continuing to outperform Technology near-term.

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