Welcome to 2022! Twenty, twenty-two has a nice ring to it, cheers.
Before we get to the state of the Stock Market, we have three predictions for the New Year:
- COVID will be “over”: It will move from pandemic to endemic by June.
- There won’t be the “Red Wave” many predict in the 2022 mid-term elections. However, Republicans will take control of the House and Senate with small majorities.
- Stocks will struggle to make gains as profit margins slip in the first half of the year and rising interest rates act as headwinds in the second half of the year.
It will be fun to look back this time next year to see if any of our Nostradamusesque predictions come to pass.
Let’s move onto current day prognostications. Stocks could give us some clarity as to where they want to go next. The NASDAQ rallied strongly after closing below key support at 15,000, albeit on declining volume. Wall Street took some of the top of gains last week and started 2022 on an up note.
That puts the NASDAQ in a compact, little box. If the index can get past last week’s high of 15,901, then it should resume the Christmas rally and move on to challenge and possibly set new 52-week highs. And new highs tend to be followed by newer, higher highs.
At the bottom of the box, we see the 50-day moving average of 15,602 close to last week’s low of 15,645. Both could serve as springboards in the event sellers take prices lower in the next couple of days. If the 50-day fails to hold, 15,000 could come into view once again.
Our momentum model leans, ever so slightly, in the favor of the NASDAQ moving higher. Monday’s rebound moved the measuring stick barely into “bullish” territory. It’s on the border and a down day or two would likely move Mo into a neutral reading.
The NASDAQ closing above 15,901 would be a double positive, a bullish break out of the box while pulling the momentum score firmly into the buy column. If that happens, index investors might consider adding Invesco QQQ Trust (QQQ) and more aggressive types might consider leveraged exchange-traded index funds like ProShares UltraPro QQQ (TQQQ). QQQ Trust’s objective is to mirror the daily performance of the NASDAQ 100 and UltraPro QQQ seeks to double the return of the N-100 on a daily basis.
Not surpassingly, defensive sectors were the leaders in a week where just 12 of the industries we monitor managed to put positive numbers on the board. Once again, when stocks go south, we find Utilities Select Sector SPDR Fund (XLU) going north. XLU was the top gainer in the last week, up a little more than 2%.
If the NASDAQ does pop out of the box like Jack, then we’d expect tech to take the reins. If so, ETFMG Prime Mobile Payments ETF (IPAY) is the first tech sector on our leaderboard. If IPAY can maneuver past $60, it has plenty technical headroom in the immediate-term.
Fiserv, Inc. (FISV) could be a decent IPAY top 10 holding to consider. Shares of the Information Technology Services company moved sharply higher to start the week, busting out of a consolidation phase and putting FISV in position to possibly move to $110 in the near-term. Mid-to-longer term, if the fintech company can close above $112, then it would have a good chance to challenge its 52-week high of $127.34. On the downside, we’d consider cutting losses if the stock closed under $100.