Millions of People Will Be Blindsided in 2022. Will You Be One of Them?

On December 7, Louis Navellier, Eric Fry & Luke Lango will reveal the major events that will rock the markets in 2022. Will your money be safe?

Tue, December 7 at 7:00PM ET
 
 
 
 

Small Caps Hold Up as Blue Chips Take a Dive

Stocks were slammed at Tuesday’s opening as a very disappointing durable goods report and earnings misses by several blue chips had sellers heading for the exits.

Caterpillar Inc. (NYSE:CAT) and Microsoft Corporation (NASDAQ:MSFT) accounted for 68 points of the Dow’s decline. MSFT fell 9.3%, citing the strong U.S. dollar as the reason that it will not meet Wall Street’s annual revenue and earnings estimates. CAT lost 7.2%, also blaming the dollar as well as falling oil prices for its Q4 earnings miss. United Technologies Corporation (NYSE:UTX), Procter & Gamble Co (NYSE:PG), and E I Du Pont De Nemours And Co (NYSE:DD) each warned of declines due to currency problems.

While large-cap international corporations of the Dow were hurt by a stronger dollar, which makes their products more expensive in foreign markets, small caps held the line. The Russell 2000 fell just 0.5% compared to the Dow’s 1.7% decline and the Nasdaq’s 1.9% sell-off.

The Commerce Department reported that durable goods orders fell 3.4% in December versus an expected increase of 0.3%. The miss was one of the largest on record and sparked fear that the economy could be in decline.

Safe-haven assets generally advanced with gold up 1% to $1,291.70 an ounce and utility stocks gaining 0.2%. Crude oil futures rose 2.4% to $46.23 a barrel.

At Tuesday’s close, the Dow Jones Industrial Average fell 291 points at 17,387, the S&P 500 lost 28 points at 2,030, the Nasdaq fell 90 points to 4,682, and the Russell 2000 lost 6 points at 1,195.

The NYSE traded total volume of 3.4 billion shares, and the Nasdaq crossed 1.7 billion. On the Big Board, decliners outpaced advancers by 1.3- to-1, and on the Nasdaq, decliners were ahead by 1.7-to-1.

S&P 500 Chart
Click to Enlarge

Chart Key

The S&P 500 fell from a small double-top at 2,063, breaking through its 50-day moving average at 2,047. The next significant support rests at 2,000, which is the intermediate support line. Just below that is its 200-day moving average, which many consider the most important point of support since a break of it puts the overall bull market in question.

Dow Jones Industrial Average Chart
Click to Enlarge

Like the S&P 500, the Dow Jones Industrial Average failed to successfully challenge its 50-day moving average. But the Dow’s fall was limited only by the January lows, and a late rally failed to recover even half of the overall decline.

The next support for the Dow is the trading band at 17,140 to 17,280, and just below that is the 20-day moving average near 17,000. MACD has turned lower and now resides within the bear zone.

Russell 2000 Chart
Click to Enlarge

The Russell 2000 did not suffer nearly as much damage as the other indices. Initial support for the index is at its 20-day moving average at 1,186, and then the important 50-day at 1,180. MACD is on a buy signal.

Conclusion

The reason for Tuesday’s sell-off was clear: Big-cap, international companies’ earnings were negatively impacted by a strong U.S. dollar. The Russell 2000 was not hit as hard as the Dow or S&P 500 since small caps’ earnings are largely derived from U.S. sales.

I continue to suggest patience with a stock market that has not yet revealed its true intermediate-term direction. Long positions taken now by ambitious investors could be subject to a fast and extremely damaging sell-off.

We are at a crucial point where stocks like the blue chips could drag down the entire market. The difference between last year and this year is that currency shifts are impacting earnings, and earnings are having a direct impact on stock prices.

We can no longer look to the Federal Reserve for support since it can only delay the inevitable increase in interest rates, which, whenever it occurs, will be viewed as another negative.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/01/daily-market-outlook-russell-2000-holds-dow-drops/.

©2021 InvestorPlace Media, LLC