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MID Special Update: January Review and Look Ahead .

The January Review and Look Ahead from Nasdaq’s Market Intelligence Desk (MID).

MID Special Update: January Review and Look Ahead



  • U.S. stocks hit new highs in January with the Dow and S&P 500 reaching key milestones.
  • The Nasdaq-100 outperformed the Dow by its widest margin (4.69%) since January 2012.
  • Materials and Info Tech were the strongest sectors, advancing by 4.6% and 4.3%, respectively.
  • During the final week of the month, the VIX dipped to its lowest level since July 2014 (10.58).

Animal spirits returned in January with the Dow, S&P500, Nasdaq Composite, Nasdaq-100, NYSE Composite, and the Transportation Index breaking out of multi week ranges to new all-time highs. Despite a fade in the final days of the month, January was a positive month for most equities with the broader averages adding to gains seen in 2016. For January, the Nasdaq Composite Index returned 4.3%, outperforming the Dow and S&P 500, which returned 0.5% and 1.8% respectively. Meanwhile the Russell 2000 eked out a gain of 0.35% after leading 2016 with a 19.5% return. Recall that the Russell 2000 had outperformed the Nasdaq Composite post-election and the Dow had outperformed the S&P 500. The Nasdaq-100’s outperformance can be traced to its lack of financial and small cap companies, both of which had outperformed in December and lagged in January. This reversion theme also played out amongst the primary sectors as the difficulty of immediately implementing pro-business policies along with some potential negatives around trade policy were priced in.


Amongst the major sectors, materials and technology led all groups with gains of 4.6% and 4.3%. Materials showed strong follow-through from Q4’s 4.1% gain whereas technology rebounded from a near flat 0.78% in Q4. Driving materials was a 9.3% gain in the metals & mining index. In a not-so-distant third was consumer discretionary sector, which gained 4.2% in January. Conversely, the laggards were energy and telecoms with declines of (3.6%) and (3.5%). Energy was 2016’s top performing sector with a 23.7% gain, and thus in that context its January decline looks for now like a healthy pullback rather than a longer term concern.

One of the more important developments in January took place in the FX market. The U.S. Dollar Index (DXY) declined 2.6% for its greatest monthly decline since March 2016. Amongst the major currencies, the dollar declined 2.7% versus the euro and 3.6% against the Japanese yen, which make up 57.6% and 13.6% of the index. On the final day in January the DXY surrendered the all-important 100 – 100.50 support level which previously was firm resistance for 20 months ending November 2016. Failure to hold this important support level risks a sharp move lower. The recent weakness in the dollar is being attributed to comments by Peter Navarro, the head of President Trump’s new national Trade Council, claiming Germany is using a “grossly undervalued” euro to gain a competitive advantage versus both the United States and its fellow European Union trade partners. Recall that the ECB is in the midst of its own QE program in an attempt to stoke growth and inflation. Recent data suggests that Eurozone consumer inflation is on the rise as the ECB just extended its QE with plans to “taper” purchases to €60B per month from the current €80B. After continuously labeling China a currency manipulator during his 2016 campaign, it appears the Trump administration is intent on talking down the dollar. Given the greenback’s role as the world’s reserve currency, its performance can have profound impact on other assets.



The Bloomberg Commodity Index (BCOM) was relatively flat in January after gains of 1.3% and 1.8% during the final two months of 2016. More importantly, in mid-January the commodity index came within 1% of its 2016 highs made in June. After seven months of consolidating price action, a breakout to new highs could be followed by strong upside momentum. Gold gained 5.5% for its best monthly performance since June and the gold miner ETF (GDX) was one of January’s top performers gaining 14.4%. Meanwhile crude oil declined 1.69% to $52.81 after robust gains of 5.5% and 8.7% in November and December. $55 has been a formidable resistance level since mid-December. Emerging markets also responded positively to the weaker dollar with the MSCI Emerging Market ETF (EEM) gaining 6.7%, its best monthly performance since March 2016.

Treasury rates and the yield curve were relatively flat as 10-year and 2-year yields each edged up 1bp to 2.45 and 1.2%. After record moves higher following the U.S. elections, it is constructive to see yields holding steady instead of a deeper pullback as they continue to work off overbought technical readings.

Milestones: In late January the Dow broke out of a five week range and reached the 20,000 milestone less than a week after the presidential inauguration. In the very next session the S&P 500 reached its own milestone of 2,300. While breakouts to new highs are certainly bullish, often times milestones at big round numbers can result in short-to-intermediate term tops. At these new highs the VIX Index, aka the fear index, moved below 11 for the first time since July 2014. While a lower VIX reflects a risk-on environment, an extreme low reading is widely seen as a contrarian indicator. In 2014 the VIX did not stay below 11 for more than two sessions before climbing more than 40% in less than two weeks over which time the S&P 500 saw a sharp pullback of 4.3%. With both major equity indices retracing back below these milestones, the risk is that stocks are in the early stages of a more meaningful correction.

S&P Seasonality


From a seasonal perspective, the S&P 500 had its best January in four years with a gain of 1.79% gain. Over the last five and ten years on average, January now owns the record for the worst performing month. Conversely, February ranks as the #1 performing month over the last five years which could be attributed to a simple mean reversion vs. January’s poor performance. Unfortunately for bulls mean reversion will not be a factor in 2017 given the positive start in the S&P 500. Longer term over the prior ten years, February’s average performance falls right in the middle of the pack with a sixth place ranking.

The information contained herein is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. All information contained herein is obtained by Nasdaq from sources believed by Nasdaq to be accurate and reliable. However, all information is provided “as is” without warranty of any kind. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information. 

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading. 

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors. 

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq’s Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

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