Near Term Outlook
February 3, 2022
Yesterday’s disappointing FB guidance arrived as the S&P 500 closed just beneath technical resistance near 4,600 and the CBOE Volatility Index (VIX) reached short-term support just above 20. Once released, equity market volatility takes several weeks to unwind. In the near-term, VIX levels above 20 only increase the likelihood of an unsuccessful breakout above 4,600 and increase the likelihood of a retest at 4,222. The miss by FB puts the onus on AMZN results this afternoon to recoup the uptick in sentiment that followed better earnings from mega-cap peers MSFT, AAPL and GOOGL. Those are some of the largest constituents of the market cap weighted SPX and NASDAQ 100 (NDX) that rallied to similar resistance yesterday in the 15,000-15,400 range. We expected both indices to fail on their first attempts as this type of price action is typical once a post-correction low has been established. The SPX established a short-to-medium term low when it lifted beyond ~4440 and the NDX when it cleared ~14,800. When it’s time to add equity exposure, we continue to favor names from cyclical/value sectors rather than growth/Tech. And suspect the NDX will have a more difficult time clearing resistance than the SPX, which has some value sector offset.