Chart Advisor: Snapback Rebound

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Monday, 24th January, 2022

1/ Indexes rebound with small caps leading out

2/ Gold and dollar are preferred hedges 

3Investors like Halliburton’s quarterly results 

4/ The bottom line

1/ Indexes Rebound with Small Caps Leading Out   

Stocks launched a dramatic snapback rebound from the lows of the session today as the indexes to close in positive territory. It was the first positive close in a week for the major market indexes. Large cap stock indexes tracked by State Street’s S&P 500 index ETF (SPY), the Dow Jones Industrial Average ETF (DIA) and Invesco’s Nasdaq 100 ETF (QQQ) closed about .5% higher. However, iShares’ Russell 2000 index ETF (IWM) out more than 2% higher. 

The price action for the small cap ETF today began by opening lower but with the strong movement upward created a green candle that completely eclipsed the red candle, as shown in the chart below. This two-day candlestick formation is known as a bullish engulfing pattern. Day traders consider it an indication that buyers have overwhelmed the sellers and that prices may continue to go higher hereafter. 

Source: TradingView

2/ Gold and Dollar are Preferred Hedges 

Recent geopolitical tensions have caused currency traders to begin looking for ways to hedge their positions. The chart below compares two currency pairs and the two asset classes most likely to be considered hedges for them and others like them. 

The chart shows the U.S. Dollar Index (DXY) and State Street’s Gold Trust ETF (GLD) are trending higher over the last three months. This implies that the assets are preferred hedges right now over other asset classes that are not trending higher. Looking for hedge assets is an important consideration for those traders who hold large positions in currencies such as the Russian ruble (RUBUSD) or the Ukrainian hryvnia (UAHUSD) right now.

Source: TradingView

3/ Investors like Halliburton’s quarterly results  

Investors bought shares in Halliburton (HAL) today after the company announced its quarterly report before the bell. The company reported net income of $824 million, or $0.92 per diluted share, for the fourth quarter of 2021. This was a significant increase over the previous quarter’s $0.26 cents per share. The company’s revenue for the fourth quarter of 2021 was $4.3 billion, up from $3.9 billion in the previous quarter. 

Source: TradingView

4/ The Bottom Line

Stocks rebounded dramatically today giving investors some hope for relief after the devastating slide indexes took last week.  Small cap stocks fared better than large cap stocks. 

Originally posted on 24th January, 2022

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