Market at a Glance - 1/26/2023
By: Christopher Mistal
January 26, 2023
[Members Only Webinar: Please take a moment and register for our member’s only webinar, 2023 January Indicator Trifecta & Annual Forecast Update on Wednesday February 1, 2023, at 1:00 PM EST here:]
Market at a Glance
1/26/2023: Dow 33949.41 | S&P 4060.43 | NASDAQ 11512.41 | Russell 2K 1903.06 | NYSE 15985.87 | Value Line Arith 9296.10
Seasonal: Bullish. Normally the “weak link” of the Best Months, February has been stronger in pre-election years, #5 for DJIA, NASDAQ and Russell 1000; #6 for S&P 500 and #4 for Russell 2000. Average gains range from 1.2% by S&P 500 to 2.8% from NASDAQ. Benefitting from January Effect spillover, Russell 2000 averages 2.7% in pre-election Februarys.
Fundamental: Improving. Q4 GDP was better than anticipated at 2.9%. According to S&P Capital IQ estimates, corporate earnings are expected to hit their trough in the first half of this year. Inflation metrics are trending lower with headline CPI down to 6.5% in December from its peak of 9.1% last June. Weekly jobless claims are low and steady with a better than expected reading this week of just 186,000. Government spending continues to support economic growth.
Technical: Near Resistance. NASDAQ is currently challenging resistance at its still descending 200-day moving average which happens to be right around the 11,500 level that NASDAQ failed to break through in November and December. S&P 500 is nearing resistance at 4,100 while DJIA’s struggle with 34,000 stretches back to last August. DJIA’s chart is the only one where its 50-day moving average is above the 200-day moving average. S&P 500 will likely need to break through 4100 to produce a golden cross on its chart. NASDAQ has even more ground to recover. Resistance will fall, but it may not happen until the market gets a clear signal from the Fed.
Monetary: 4.25 – 4.50%. According to CME Group’s FedWatch Tool, as of today, there is a 100% chance of another Fed rate increase next week. Odds are nearly as high for the March Fed meeting. March is widely expected to be the last increase for the current hike cycle. Higher rates have bitten into housing and auto markets and may have aided in turning the trajectory of inflation. We do not expect the rate increases or quantitative tightening to tip the U.S. into recession.
Sentiment: Neutral. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 45.1%. Correction advisors are at 26.7% while Bearish advisors numbered 28.2% as of their January 25 release. This year’s strong start has expanded the number of bullish advisors, but not to the point that would warrant caution. The lack of an elevated number of bulls suggests there is still ample cash on the sidelines waiting to be put back to work. As NASDAQ continues to surge higher, it will likely become harder and harder to hold that cash.