Thursday, March 14, 2019, 12:31 PM, EST
- NASDAQ Composite -0.04% Dow +0.05% S&P 500 +0.04% Russell 2000 -0.22%
- NASDAQ Advancers: 974 / Decliners: 1315
- Today's Volume (vs. Wednesday) +3.31%
- Crude +0.45% , Gold -1.05%
- A meeting between President Trump and President Xi Jinping to sign an agreement to end their trade war is now likely to happen in April at the earliest according to the White House
- US Jobless Claims for w/e 9-March 229K vs. consensus 225K; Continuing Claims for w/e 2-March 1776K vs. consensus 1760K. Prior week Jobless Claims unrevised from 223K. Prior week Continuing Claims revised to 1758K from 1755K
- February US Import Prices +0.6% vs consensus +0.3%; February Export Prices +0.6% vs. consensus +0.1%. January Import Prices revised to +0.1% from (0.5%) . January Export Prices revised to (0.5%) from (0.6%)
- January US New Home Sales 607K vs. consensus 620K. December revised to 652K from 621K
- Boeing's 737 Max 8 and Max 9 planes have been grounded in U.S. airspace
- Data on Thursday showed China's industrial output growth fell to a 17-year low in the first two months of the year. The data come as investors monitor clues about the health of China's economy, after growth cooled to 6.6 percent last year
- Members of the U.K. Parliament will vote again on Thursday evening to seek an extension to Article 50, which oversees the withdrawal process from the EU, thus extending the departure date beyond March 29th
Equities are off to a measured start this morning as investors juggle economic data against geopolitical concerns. Earlier today, prior to the open, investors got a reminder of global economic weakness when China released data that showed industrial output had grown by a paltry 5.3 percent in the first two months of the year, expanding at its slowest rate in 17 years. China's economic growth cooled to 6.6 percent last year, the slowest in nearly three decades, and it is expected to lose more momentum in the next few months. Investors can take a glass half empty look at this or a glass half full. From a glass half full perspective one could view this as a bottoming stage and China will move swiftly to install new policy stimulus. Other data released for the region was more upbeat. Fixed-asset investment rose 6.1 percent, while retail sales rose 8.2 percent, both more than expected.
Domestically, investors were met with progress or lack there of in the trade negotiations with China. After U.S. Trade Representative Robert Lighthizer earlier this week pointed to major issues still unresolved in the trade talks, specifically relating to the most difficult issues such as the treatment of intellectual property, news broke on Bloomberg that China and the U.S. are trying to push back a trade meeting between the countries' leaders from the scheduled late March to sometime in April. President Trump was quoted yesterday as saying he was in no rush to form an agreement.
On the economic front we have some positive data to report. From a jobs perspective, jobless claims rose slightly to 229,000 for the period ending March 9th above economists forecast of 225,000. Continuing claims for the period ending March 2nd increased to 1.776 million. The four week average which tends to be a less volatile average fell to a six week low of 223,750 while the four week average for continuing claims fell to 1,766,250. All in all the readings were fairly steady indicating that tight labor conditions were discouraging employers to cut staff.
Import and Export prices for the month of February rose 0.6% on a month by month basis. Ex-fuel, import prices were flat. Ex-agriculture export prices were up 0.7%. All in all the data seemed to indicate that there was no real inflation pressure. The Consumer Comfort Index measured by Bloomberg for period ending March 10th fell to 60.8 vs 62.1 a week earlier. Overall the gauge was 18.2 points above its 33 year average but 8.2 points below the record high during January of 2000.
In a report that was delayed 2 weeks die to the government shutdown, new home sales in January fell to a 607,000 annualized rate the weakest pace since October as continued high prices and a noticeable decline in the Midwest deterred new buying. Purchases of new homes dropped in three of the four U.S. regions with the Midwest having the largest decline and the West gaining. The supply of new homes rose to 6.6 months from 6.3 months in December.
Oil continues its recent march higher, hitting a four month high today, on continued OPEC cuts, a decrease in domestic inventories and continued snafu's in Venezuela. In addition In the Middle East, the United States aims to cut Iran's crude exports by about 20 percent to below 1 million barrels per day from May by requiring importing countries to reduce purchases to avoid U.S. sanctions . Gold is pulling back today, breaking below the key support level of $1,300 as the dollar increased after British Parliament voted against a no deal Brexit and European stocks rose making safe haven gold less attractive.
Sectors are mixed at best with Financials, Utilities and Tech leading while Materials, Healthcare and Industrial's are lagging.
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Brian's Technical Take
Yesterday was the third time in three weeks the S&P 500 (SPX) ran into the 2,815 level and was turned back. This marks the upper bound of a clearly defined resistance zone (2,800 - 2,815) which was recently established during the three "bear market" rallies amidst the Q4 selloff. The SPX reached an intraday high of 2,821, its highest level since October 10th, before pulling back to close at 2,811.
Coming into this week the SPX was down five straight sessions for a loss of 2.2%. The high-low decline totaled 95 points, THE biggest retracement since the start of the December rally. Over this time the overbought technicals reset to more normalized levels with the daily RSI peaking at 70 in February and pulling back to last Friday's low of 49. Three sessions later and the SPX has recovered the entire retracement, and then some.
While there is risk that a large, complex "double top" pattern is forming since the first test of the 2,815 resistance line in late February, this would not be confirmed until a break below last week's low, 2,722. My bias is towards a more optimistic scenario with this week's rebound being the start of a more prolonged uptrend that will carry on well into the Spring.
Not only does the 2019 price action and strong breadth deserve much respect, seasonal trends are favorable for March and April, particularly so after midterm elections. According to highly regarded technician Ryan Detrick, CMT from Nasdaq-listed LPL Financial (LPLA), the S&P 500 has been higher in the 12-months following each midterm election since WW II, 18 for 18, for an average gain of 14.2%. The SPX is currently up less than 2% since the November midterms.
So while sellers have successfully defended this 2,800 - 2,815 battleground on numerous occasions over the last six months, bulls may soon have them headed for the hills.
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Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
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.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq's Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President 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.