January 23, 2022
Good morning,
For the first time in months, technology stocks came to the rescue of the broader market last Friday. The holiday shortened week had gotten off to a rough start with the S&P 500 Index down over -2.5% through Thursday night. Most of the other domestic equity indexes were worse, and International indexes were not as bad, in line with recent trends. Friday morning saw Netflix surge on better subscriber numbers and Google lift on their plan to cut 12,000 jobs. Additionally, a few Fed governors said they backed moderating the size of the central bank’s rate increases at the next Fed meeting on 2/1/2023 (lower rate expectations are always good for tech). And Shazam! U.S. stocks clawed back some of the earlier in the week losses amid the rally in tech shares – the best since November. The S&P 500 Index ended the week off -.66%.
A one-day rally does not a trend make. Shy of some positive intermediate-term technical signals, I think it best to continue to assume that the equity market is range bound and now trading in the upper half of that range. I mentioned a short-term sentiment indicator last week (chart below). It is still high neutral, but will no doubt move into the bearish over-bought zone on any further rally in U.S. equities. I suspect the message from this indicator is that there is still room on the upside, but maybe not much. We’ll be watching it.
Be well,
Mike