LIVE MARKETS U.S. stocks try to end a down January on an up note

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U.S. STOCKS TRY TO END A DOWN JANUARY ON AN UP NOTE (1013 EST/1513 GMT)

Major U.S. indexes are rallying in the early throes of the last trading day of January. This after a month where investors backed away from stocks with lofty valuations amid aggressive rate hike bets and geopolitical tensions.

The Nasdaq Composite (.IXIC) is advancing on Monday, but with a more than 10% drop in January, the tech-heavy index is still eyeing its worst start to the year ever.

With a more than 6% drop in January, the S&P 500 (.SPX) is on pace for its worst start to a year since 2009.

As it stands, with a more than 4% drop, it is the Dow’s (.DJI) worst January since 2016.

Meanwhile, the S&P 500 growth index (.IGX) / S&P 500 value index (.IVX) ratio is on track for its biggest monthly drop since February 2001.

Here is your early-trade snapshot:

(Terence Gabriel)

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SMALL CAPS: MORE GROWING PAINS AHEAD? (0900 EST/1400 GMT)

With a more than 20% swoon from its November 8, 2021 high, the small-cap Russell 2000 (.RUT) confirmed it has fallen into a bear market last week. The index was able to bounce on Friday, cutting its decline to 19.4% on a closing basis.

However, in premarket trade Monday, Russell 2000 e-mini futures are pointing to a RUT loss of around 0.7% at the open.

Meanwhile, the RUT’s rising 200-week moving average (WMA), once again, appears to be beckoning on the downside:

The RUT’s disparity vs its 200-WMA peaked at 149.8% in March 2021. This high almost exactly matched the 149.9% all-time high hit in October 1997. The measure then diverged into the RUT’s final high in early November of last year.

The disparity has since fallen to 112.8%.

Of note, since 1997, and prior to 2021, there were six 200-week disparity peaks greater than 130%. In all six instances, the RUT ultimately fell to meet, and break, the long-term moving average before establishing some form of low.

And since the late 1990s, the six most significant RUT 200-week disparity lows ranged from 98.6% to 49.8% (average 78.6%, median 81.6%).

The 200-WMA ended last week at 1,745 and is rising around 5 points per week. A deeper RUT decline to once again meet this long-term moving average in short order would put the index down around 28% from its November peak on a closing basis.

That said, it’s always possible the RUT could churn around current levels, which would allow the moving average to catch up. With this sort of action, disparity readings would fall over time without, perhaps, a major dose of added pain for the RUT. read more

In any event, if the 200-WMA is to be tested, and violated, the RUT would appear to be in for, at a minimum, a further struggle whether it be in terms of price or time.

(Terence Gabriel)

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

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