LIVE MARKETS 2021’s swagger signals 2022 strength

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2021’S SWAGGER SIGNALS 2022 STRENGTH (1045 EST/1545 GMT)

The stock market kicked off 2022 with benchmark indexes hitting fresh record highs, and perhaps investors should have known as much because of how equities ended 2021.

The S&P 500 gained 4.4% in December, the 20th time the index had logged a December gain of at least 4% since 1928, according to Frank Cappelleri, desk strategist at Instinet.

For the prior 19 instances, the S&P 500 rose 16 times in January, or 84% of the time, Cappelleri said in a note, while January has only posted an increase 62% of the time overall. The average move during those 19 times was a gain of 2.3% versus an overall average 1.2% gain for January.

The S&P 500’s 10.6% rise in the fourth quarter is also a positive omen. The index has now gained at least 10% in 24 quarters since 1980, per Cappelleri. In past occasions, the index has risen in the following quarter 20 out of 23 times, or 87%, with an average move of 5.4%.

“Strength has begotten strength for quite some time, and while this could change at any time, we shouldn’t ignore studies like these – especially when they line up across different time frames,” Cappelleri said in his note.

(Lewis Krauskopf)

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U.S. STOCKS MIXED, BUT CLEAR TILT IN FAVOR OF VALUE (1019 EST/1519 GMT)

The Dow (.DJI) and the S&P 500 (.SPX) hit record highs on Tuesday as worries about the Omicron variant of the coronavirus subsided.

Meanwhile, the U.S. 10-Year Treasury yield continues to jump. It now stands around 1.67%.

With this banks are outperforming again. The S&P 500 Banks index (.SPXBK) is rallying more than 3% for a second-straight day. It’s rolling two-day gain is on pace to be its biggest since early 2021.

Chips (.SOX), FANGs (.NYFANG), and tech (.SPLRCT) are on the losing side, dragging the Nasdaq (.IXIC) into the red.

Therefore, not surprisingly, value (.IVX) is sharply outperforming growth (.IGX) in early trade.

Here is where markets stand in early trade:

(Terence Gabriel)

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NASDAQ COMPOSITE: HEALTHIER GUT (0900 EST/1400 GMT)

While gains in Apple (AAPL.O) read more and Tesla (TSLA.O) read more were grabbing headlines on Monday, Nasdaq vital signs continue to improve:

The Nasdaq New High/New Low (NH/NL) index, a measure built around new yearly highs and lows, rose to 32.2% on Monday, which is its highest reading since Nov. 26. read more

Of note, the Nasdaq NH/NL index bottomed at 12.5% on December 6. It then showed a bullish convergence into the Nasdaq Composite’s (.IXIC) Dec. 20 low, and then established a higher trough at 19.7% on Dec. 22. It is now rapidly nearing a hurdle in the form of its mid-October low at 33.6%.

If 33.6% is cleared, the NH/NL index would certainly have substantial room for further improvement before it would approach intact resistance lines from its 2021 peaks. Its November high was 75.7%. read more

In that event, the IXIC could easily have sufficient underlying strength to propel it to fresh record highs.

Longer-term, however, concerns remain given that the Composite is so close to its record highs yet this measure is massively below its early-to-mid 2021 levels.

A NH/NL index break of its rising 10-day moving average, and then its late-December low, however, may potentially put the Composite back at risk for intensive care.

(Terence Gabriel)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

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