Tag: technical

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The 2023 stock market rally is facing its first technical challenge

The 2023 stock market rally is facing its first technical challenge

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Thursday, January 26, 2023

Today’s newsletter is by Jared Blikre, a reporter focused on the markets on Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with the Yahoo Finance App.

Stocks mounted an impressive comeback Wednesday, with the Nasdaq Composite (^IXIC) nearly erasing its biggest opening deficit since October. The Dow Jones Industrial Average (^DJI) eked out a small gain — its fourth straight — after spending most of the day in the red.

Even Microsoft (MSFT) rallied back from a 4.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} early loss to end the day down only about half a percent.

As we’ve been writing, this year’s market action has been a reversal of one of last year’s most important trends, which saw the Dow outperform the Nasdaq by the widest margin in two decades.

This year, the Nasdaq is now up 8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, substantially outperforming the Dow’s return of just under 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.

And while it’s unlikely a new bull market led by tech has begun, this relative performance is a tantalizing reminder of the gains tech bulls reaped in growth stocks during the ultra-low interest rate regime that had prevailed since the Global Financial Crisis.

And with several benchmark indexes right now at key levels, a squeeze out of current trading ranges would likely generate upside momentum.

First, take a look at the highly cyclical semiconductor space, where the PHLX Semiconductor Index (^SOX) is attempting to break out of a 9-month long inverse head-and-shoulders technical formation.

A breakout higher would suggest bulls retaking control after bears dictated price action for most of 2022.

The PHLX Semiconductor Index is breaking the neckline of an inverse head and shoulders pattern.

The PHLX Semiconductor Index is breaking the neckline of an inverse head and shoulders pattern.

If the majors follow suit and manage their own respective technical breakouts, those moves would likely generate significant momentum given the duration of the consolidation under current levels. The longer an index, stock, ETF, or any other traded asset consolidates around a particular price level, the stronger moves tend to be when the price breaks higher or lower.

For the S&P 500, the December highs around 4,100 mark the upper end of the current range; the index closed at 4,016 on Wednesday.

Meanwhile, Nasdaq has been constrained by 11,500 on the upper end since September, while the Dow has been stuck under 34,500 since April. These indexes closed at 11,313 and 33,743, respectively, on Wednesday.

However, it would be slightly unusual for risk markets to simply rally from here given how stretched the Nasdaq is versus the Dow — as evidenced by the below chart, which dates back to the beginning of the pandemic.

Dow Jones Industrial Average vs. Nasdaq Composite

Dow Jones Industrial Average vs. Nasdaq Composite

The Dow’s weakness in the face of Nasdaq strength this year appears to have reached a short-term extreme, and is in the process of reversing. And extreme readings have tended to coincide with short-term highs in stocks since the bear market got under way last year. However, during the pandemic bull market of 2020-2021, these extreme readings of relative outperformance tended to do little to dent the rally.

So, if the major indexes do roll over from here, tech and growth stocks would likely sell off more than cyclical and defensive names, allowing the Dow’s performance relative to the Nasdaq to normalize in the short-term. For those concerned with news and fundamentals instead of the technicals, the narrative to explain this price action would likely fixate around a hawkish Fed, higher rates, and disappointing earnings du jour.

Conversely, if chip stocks and the big benchmark indexes rip higher through current resistance, that would likely send the Dow-to-Nasdaq ratio sinking far below its current level.

The bottom line is that stocks could very well surge from here, and the technical setup suggests we’re a crucial juncture for this year’s market rally.

But any rally led by tech stocks is likely to be fast, furious, and short-lived.

Otherwise, markets will need to consolidate and save energy for a more durable move higher another day.

What to Watch Today

Economy

  • 8:30 a.m. ET: Chicago Fed Nat Activity Index, December (-0.05 during prior month)

  • 8:30 a.m. ET: GDP Annualized, quarter-over-quarter, Q4 Advance, (2.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 3.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during prior quarter)

  • 8:30 a.m. ET: Personal Consumption, quarter-over-quarter, Q4 Advance (2.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 2.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} prior)

  • 8:30 a.m. ET: GDP Price Index, quarter-over-quarter, Q4 Advance (3.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 4.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} prior)

  • 8:30 a.m. ET: Core PCE, quarter-over-quarter, Q4 Advance (3.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 4.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} prior)

  • 8:30 a.m. ET: Advance Goods Trade Balance, December (-$88.5 billion expected, -$83.3 billion during prior month)

  • 8:30 a.m. ET: Wholesale Inventories, month-over-month, December Preliminary (0.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 1.0{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during previous month)

  • 8:30 a.m. ET: Retail Inventories, month-over-month, December (0.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during prior month)

  • 8:30 a.m. ET: Initial Jobless Claims, week ended Jan. 21 (205,000 expected, 190,000 during prior week)

  • 8:30 a.m. ET: Continuing Claims, week ended Jan. 14 (1.665 million expected, 1.647 million during prior week)

  • 8:30 a.m. ET: Durable Goods Orders, December Preliminary (2.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, -2.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during prior month)

  • 8:30 a.m. ET: Durables Excluding Transportation, December Preliminary (-0.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during prior month)

  • 8:30 a.m. ET: Non-Defense Capital Goods Orders Excluding Aircraft, December Preliminary (-0.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during prior month)

  • 8:30 a.m. ET: Non-Defense Capital Goods Shipments Excluding Aircraft, December Preliminary (-0.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during prior month)

  • 10:00 a.m. ET: New Home Sales, December (612,000 expected, 640,000 during prior month)

  • 10:00 a.m. ET: New Home Sales, month-over-month, December (-4.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} expected, 5.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} during prior month)

  • 10:00 a.m. ET: Kansas City Fed Manufacturing Activity, January (-8 expected, -9 during prior month)

Earnings

  • American Airlines (AAL), Visa (V), Archer-Daniels-Midland (ADM), Blackstone (BX), Comcast (CMCSA), Intel (INTC), JetBlue Airways (JBLU), Mastercard (MA), McCormick (MKC), Sherwin-Williams (SHW), Southwest Airlines (LUV), T. Rowe Price (TROW), Valero Energy (VLO), Xerox (XRX)

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Why this technical analyst sees a nearly 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} S&P 500 nosedive

Why this technical analyst sees a nearly 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} S&P 500 nosedive

The charts say stocks could have significantly additional to fall as buyers price in the three-headed monster that is elevated inflation, soaring desire costs from the Federal Reserve and a potential Ukraine-Russia war.

“Every aspect of my do the job carries on to propose that this is a chart guide consistent with a 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} drawdown in the S&P [500]. Although ephemeral reduction rallies will manifest as the conflict ebbs and flows, the seeds of the current decline ended up planted by plan and the pandemic prolonged before troops massed on the border, and I urge you to combat the temptation “buy when the cannons are firing” for something more than a “trader’s bounce” although even now staring down the ominous specter of the maximum inflation in 40 several years and extra hikes than conferences to fight explained inflation,” explained veteran EvercoreISI technical analyst Loaded Ross.

Ross’ work displays (see chart down below) the S&P 500 becoming vulnerable to a shift down to 3,600 if the main inventory index drops underneath the critical 4,200 amount.

“When bounces will arise (see Europe) as bulls attempt to defend the neckline of the properly-described head and shoulders leading, the sum of the charts throughout asset lessons is only as well considerably to bear,” Ross extra.

That 4,200 stage on the S&P 500 could be tested shortly.

On Monday, Russian President Vladimir Putin ordered the deployment of Russian troops to two breakaway areas of Ukraine. The transfer — observed by the West as a provocation — arrived immediately after Putin recognized their independence.

S&P 500 is lined up for a further drop, argues EvercoreISI technical analyst Rich Ross.

S&P 500 is lined up for a further more fall, argues EvercoreISI specialized analyst Rich Ross.

Nations around the world wasted no time employing fresh new sanctions on Russia, providing a style of what could occur economically should Putin invade Ukraine.

U.K. Prime Minister Boris Johnson unveiled a deal of sanctions on Russia Tuesday early morning. Germany halted the critical Nord Stream 2 gasoline pipeline that sends Russian organic gas to Europe.

The U.S. unveiled a first tranche of sanctions on Russia Tuesday afternoon.

All three key stock indexes fell as traders assessed how the scenario will impact electrical power markets and Fed policy.

The Dow Jones Industrial Normal definitely took it on the chin, slipping almost 700 details by 2:00 p.m. ET. Only a few Dow components were in the eco-friendly (somewhat): Amgen, Vacationers and McDonald’s.

“We think traders really should be extremely cautious about viewing the intermediate-expression potential clients for the stock market place via the prism of geopolitics by yourself,” warned Miller Tabak chief marketplaces strategist Matt Maley.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Observe Sozzi on Twitter @BrianSozzi and on LinkedIn.

Adhere to Yahoo Finance on Twitter, Fb, Instagram, Flipboard, LinkedIn, YouTube, and reddit

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Why bitcoin may face another 20{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} plunge in coming weeks, as ‘risk is heightened,’ says prominent technical analyst: ‘We’re watching $37,000.’

Hello, there! I’m stepping in this week for MarketWatch’s crypto reporter Frances Yue.

I’ll walk you through the latest and greatest in digital assets this week so far, as we enter the week before an important meeting of the Federal Reserve and consider its possible impact on bitcoin and other crypto, if any. We’ll also talk about the whipsawing weekend that was and what to expect from here.

Send tips, or feedback, and find us on Twitter at @mdecambre or @FrancesYue_.

But most important, sign up here to get Distributed Ledger delivered fresh to your inbox weekly!

Crypto movers
Biggest Gainers

 Price

 {21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} 7-day Return
Near Protocol (NEAR)

 $9.24

 12.42
Terra (LUNA)

 $67.26

 6.95
BitTorrent (BTT)

 $0.003313

 5.57
UNUS SED LEO (LEO)

 $3.70

 4.3
Huobi Token (HT)

 $9.86

 2.54
Source: CoinMarketCap.com of the top 100 as of Dec. 9
Biggest Decliners

 Price

 {21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} 7-day Return
Kadena (KDA)

 $10.48

 -36.83
Qtum (QTUM)

 $10.01

 -33.26
THORChain (RUNE)

 $7.13

 -32.39
Fantom (FTM)

 $1.45

 -30.50
THETA (THETA)

 $4.44

 -30.26
Source: CoinMarketCap.com of the top 100 as of Dec. 9
After the crypto crash?

MarketWatch’s Distributed Ledger spoke to Katie Stockton, founder of technical analysis firm Fairfield Strategies, about the crash in crypto over the past weekend. The declines took bitcoin
BTCUSD
to around $42,000 and Ether
ETHUSD
on the Ethereum blockchain to around $3,500 before those digital assets bounced back.

Although Fairlead is fairly bullish long term, over the next six months or so, on the crypto sector, including bitcoin and Ether, Stockton said that some considerable damage had been done to the uptrend in the short to intermediate-term, based on her analysis.

A short-term breakdown in trend was confirmed on Sunday, when bitcoin failed to return to its recent support at $53,000 based on the September high and now that it is hanging well below that level—it was trading at $47,702 on CoinDesk, down 5.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}—another support level of $44,000 needs to be the next point to monitor, with the $37,000 serving as secondary technical support area.

“We feel that risk is heightened near term and even over the next two months or so,” Stockton said.

The popular analyst who uses chart models and gauges of momentum to forecast moves in assets from stocks to crypto said that she feels that the support level for bitcoin at $44,000 will likely be breached and the secondary support level, which defines the recent uptrend in bitcoin, will be a pivotal area for investors to watch in recent trade.

So is there cause to worry about another flash crash? Stockton says that it’s impossible to know for sure but believes that much of the tumble that took place in the wee hours of last Saturday are likely flushed out of the system since it was underpinned by unwinding in derivatives.

Certainly the bulls are hoping that is the case.

Crypto goes to Washington

MarketWatch’s Chris Matthews covered a highly anticipated testimony from some of the biggest names in crypto in front of Washington lawmakers.

Crypto execs, including those from popular digital-asset exchange Coinbase Global Inc.
COIN,
made the case that their technologies hold promise for the future, and that the growth of their more than $2 trillion industry shouldn’t be impeded by wrongheaded legislation.

The nascent industry is hoping to push Congress to create a new regulatory framework for digital assets that could help them avoid a costly showdown with the U.S. Securities and Exchange Commission.

“A successful policy framework would allow crypto platforms to offer both spot and derivatives trading on crypto assets under one unified system, with one rule book and one technology platform to manage risks related to all trading activity in customer accounts,” said Sam Bankman-Fried, CEO of FTX, told the House Financial Services Hearing on crypto markets.

Officials from Circle Internet Financial Ltd., issuer of a stablecoin crypto, bitcoin-mining firm Bitfury Group Ltd., cryptocurrency-payments system, Stellar Development Foundation, and blockchain firm Paxos Trust Co. also testified.

The Wall Street Journal reported that one of the main concerns among those lawmakers wary of crypto is that its rapid growth poses a threat to financial stability, is rife with fraud and manipulation, and isn’t environmentally friendly since mining virtual coins uses lots of real energy.

Crypto shares

In crypto-related company trading, shares of Coinbase Global Inc. traded down 9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $287 Thursday afternoon. It was down 1.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the past five trading sessions. Michael Saylor’s MicroStrategy Inc.
MSTR
 traded 6.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} lower on Thursday to $595.58, and was down 5.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} over the past five days.

Mining company Riot Blockchain Inc.
RIOT
shares fell 9.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $26, contributing to an 6.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} loss over the past five days. Shares of Marathon Digital Holdings Inc.
MARA
were down nearly 11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to 41.72, but were up 0.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} over the past five days. Another miner Ebang International Holdings Inc
EBON.
fell 7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $1.33, but was up 2.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} over the past five days.

Overstock.com Inc
OSTK.
 traded down 3.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $78.57. The shares went down 2.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} over the five-session period.

Square Inc.’s shares
SQ
fell 4.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $186.85, paring its week-to-date gain to 3.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. Tesla Inc.’s shares
TSLA
 traded down 5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $1,015, trading flat for the week.

PayPal Holdings Inc.
PYPL
 fell 2.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $192.72, while it recorded a 4.8{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} gain over the five-session stretch. NVIDIA Corp.
NVDA
meanwhile, slumped 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $308.72, but was looking at a 0.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} advance over the past five days.

Advanced Micro Devices Inc.
AMD
 was off 4.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $139.04 and logged a 3.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} loss over the past five trading days, as of Thursday afternoon.

In the fund space, ProShares Bitcoin Strategy ETF
BITO
were 6.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} lower to $30.29 Thursday, and was down nearly 11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} for the week thus far, while Valkyrie Bitcoin Strategy ETF
BTF
was down 5.9{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, with a week-to-date skid of nearly 11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. VanEck Bitcoin Strategy ETF
XBTF
fell 6.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and was showing a nearly 11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} weekly drop, as of Thursday afternoon.

Grayscale Bitcoin Trust
GBTC
 was trading to $37.44, off 7.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} late-afternoon Thursday, heading for a weekly loss of 10.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.

Read: Grayscale Investment wants its largest bitcoin trust to be an ETF. A miscue briefly made its wish come true.

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