Market Commentary | January 20, 2022

Looking to the Futures

Tech Wades in Correction Territory

Key Points

  • Oil’s bout with Omicron Quick, Mild after Initial Fear and Panic

US. Equities took another hit Wednesday as inflation builds a compelling case for multiple rate hikes to be implemented this year by our Federal Reserve. With another -1.15% decline yesterday, the Nasdaq Composite index has crossed into technical correction territory.

A market correction is termed as a decline of 10% or greater in the price of an investment or index. The Nasdaq reached a high point of 16,212 mid-November and closed -11.5% lower yesterday at 14,340.

Stocks had initially started the day positive off morning Q4 earnings reports, but aggressive selling would eventually take the mid-week trading session. Bank of America (BAC) and Procter and Gamble (PG) posted better than expected earnings, while the overall market was weighed down by tech sector giants in the likes of Qualcomm (QCOM), Tesla (TSLA) and Nvidia (NVDA).

In relative markets, our Treasury prices took a breath from the recent downtrend while precious metals climbed. Wednesday, the 10-year U.S. Treasury yield traded -4.5 basis points lower to 1.9%, with the Dollar Index slightly lower. Gold elevated almost +2%, silver was up an additional +3%, and crude oil prices continuing their climb up +1% higher.

As we progress into earnings season, technology companies will need to produce solid numbers and outlook to support their market values. On the horizon, we have Netflix Inc. (NFLX) producing earnings numbers tonight, Microsoft (MSFT) next Tuesday, Tesla (TSLA) next Wednesday, and Apple Inc. (AAPL) next Thursday to name a few.

 

Technicals

The March Micro E-mini Nasdaq futures contract (MNQH22) is currently trading up from yesterday’s slump, up +140.50 at 15,174 in the premarket. Trading well below the 20 and 50-SMA figures near 16,000, the recent weeks have found little to no support in the rouse of inflation fears.

The RSI for the last 14 days is almost producing an oversold reading at 34.50%, 4.5% away from meeting that mark.

The MNQH22 has seemingly found short term support in the 200-day SMA of 14,974. Our partners at Trading Central see daily support near 14,850 and 14,990 with resistance at 15,316 and 15,435.

 

Contract Specs (MNQH22)

 

Created in 2019, the CME made ‘micro’ versions of the E-mini contract to aid in the ability for investors to manager risk. This also allows investors to more precisely scale in and out of this exposure, with lower requirements, in a liquid and related market.

The MNQ futures contract tracks the Nasdaq-100, which includes the largest non-financial companies in the Nasdaq Composite and accounts for over 90% of its movement. The larger E-mini futures contract (NQ) is a cash settled product, represents $20 a point with 4 ticks per point, and has quarterly expirations. The Micro E-Mini Nasdaq, represents 1/10 the notional value of its larger counterpart with 1/10 the tick size.

CME Micro E-mini Nasdaq futures trade on your StreetSmart Central platform. If you have questions regarding futures trading at Charles Schwab please contact our Futures Desk at 877-280-6040.

 

Economic Calendar Today

 

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