Although Microsoft and Alphabet, Inc. reported better-than-expected earnings after hours, and then with follow-up during the trading session, sellers came out to lock in gains or perhaps go short. After all, tech has done much of the market’s heavy lifting to date. The earnings were already priced in. And, as per the title of this Daily, many retail investors began to see the light ahead of the FOMC that logically, the Fed would pause and not get too dovish.
The wisest traders stopped buying big tech ahead of the earnings. And the wiser started selling after hours and into the early part of the day. The wise may remain in their positions, but should at least have profitable trailing stops in place.
What can we make from both the gap down in NASDAQ and the FOMC bullet points? Looking at the NASDAQ futures chart… it’s not horrible, as although it traded lower on the day, it did not leave a gap between Tuesday’s close and Wednesdays highs. What we can see is that 17,535 area is now resistance to clear and if does, the immediate impact of the drop in NASDAQ prices could easily become a one-day affair. However, we must remain open to the idea that NASDAQ does not clear resistance and has had its run for now.
As for the impact on the FOMC announcement…
Some of the highlights with my comments:
FOMC Does Not Expect to Reduce Rates Until It Has “Greater Confidence” Inflation Moving Toward 2% (Good luck with that, considering 2% is not realistic, especially if one considers a growing economy, let alone government spending, debt, geopolitics and so on…)
FOMC Judges Risks to Achieving Employment, Inflation Goals Moving Into Better Balance (In a perfect world best case scenario, or what folks call normalization where inflation and fed funds rates are aligned and the economy is humming along)
FOMC: “Any Adjustments” to Rates To Be Based On Incoming Data, Evolving Outlook, Balance of Risks (That is, assuming they can stay ahead of the curve and not left behind the 8-ball if any crisis occurs)
FOMC “Highly Attentive” to Inflation Risks, Says Economic Outlook Is Uncertain (Maybe the most relevant comment — it is uncertain, plus it leaves room for cutting rates if necessary)
FOMC: Economic Activity Expanding at “Solid” Pace (Yes and no — some have shrunk, others are steady and only a very few are actually expanding)
FOMC: Job Gains Have Moderated Since Early 2023, Remain Strong (Except we believe that the job gains have peaked, and layoffs are becoming more prevalent)
The initial reaction by the market today was nervousness. However, it often takes at least 24 hours for the market to digest the FOMC minutes. The glass thus far has been half full and half empty.
Today, the herd went towards half empty.
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Mish in the Media
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Mish presents 33 charts tell the story of markets and the economy to start 2024 in this appearance from Yahoo! Finance.
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Mish makes up a new ETF (not real) called VAIN, but really discusses the basket of stocks that are worth watching in this appearance on Yahoo! Finance.
Mish discusses Alibaba and how the rumors of China’s impending demise might be a bit exaggerated on Business First AM.
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On the Monday, January 22 episode of Your Daily Fivefrom StockCharts TV, Mish sees the potential for consumers to spend more money, from self-help to dieting, to makeup to skincare to fashion — pointing out several relevant stocks and how to trade them.
Mish looks at a selection of popular instruments in this video from CMC Markets, outlining their possible directions of travel.
Mish joins Jason Perz on the Against All Odds playlist, where she covers it all talking the mental game of trading, commodities, futures, equities, technical analysis, and macro.
Mish’s Market Minute on StockCharts TV returns, all new! Mish and Geoff Bysshe share how the powerful “Calendar Range” StockChartsACP plugin tells you who and what to believe, when to act, and what to trade. The new year is a big “reset” emotionally, and January sets the tone for the next six months AND the year. Every month is “like an inning in baseball,” financial reports focus on quarters, but analysts think in terms of the first half and second half of the year. How can you harness this knowledge to your benefit? Watch to find out!
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Weekly: Business First AM, CMC Markets
ETF Summary
S&P 500 (SPY): 480 now the pivotal zone.
Russell 2000 (IWM): 195 pivotal, 190 support to hold.
Dow (DIA): 375 support.
Nasdaq (QQQ): 415 support.
Regional Banks (KRE): 50 key to hold.
Semiconductors (SMH): 184 support.
Transportation (IYT): 262 now resistance.
Biotechnology (IBB): 135 pivotal.
Retail (XRT): 70 still has to clear to stay very bullish.
Mish Schneider
MarketGauge.com
Director of Trading Research and Education