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Market Intelligence

Are Markets Returning To Their Bullish Ways?

Wednesday, October 31, 2018, 11:48 AM, EST

  • NASDAQ Composite+1.92%Dow+1.11%S&P 500+1.22%Russell 2000+0.97%
  • NASDAQ Advancers:1590Decliners:694
  • Market Movers: Facebook+6%,CDW+10%, GM+7.2%, and Kellogg-8.3%

Market Movers

  • ADP Employment for October +227k versus 187K expectations, Sept revised -12k
  • Chicago Purchasing Manager for October missed with 58.4 vs 60.4 in September
  • Chinese Manufacturing PMI missed at 50.2, down from 50.8 in September
  • Asian and European markets are higher across the board

Steve’s Commentary

Yesterday’s market was hesitant from the start but heading into the final hour the major indices melted up and closed at session highs. The green extended to both Asia and Europe, and full circle back the US this morning. What stands out today is that the market opened higher and has stayed higher with no choppiness. The Nasdaq Composite leads with a boost from both Tech and the new Communications sector, which are leading with gains of over 2.5% each.

The FAANG stocks have been under pressure recently, but not today with each in the green led by Facebook post earnings. The REIT and Utility sectors are off over 1.2% each as investors shift elsewhere in a risk on environment, and Consumer Staples is off over 1.5% after Kellogg lowered EPS guidance.

The Dow is back even with its 200-day moving average, and should the SPX closing higher today it marks the first back-to-back gains in that index since September 20th. Lastly the R2K is higher by 1%, but after leading yesterday it is underperforming a bit today.

Volumes yesterday were around 35% above average for a sixth session, and today’s first hour volume is down about 3% from yesterday but still strong. Putting the volume aside, what stood out yesterday was that in the end it seemed like an ordinary day. The morning hesitancy was understandable given the recent gyrations, but the general tone among traders seemed more upbeat as the day wore on. The concerns over slowing growth haven’t gone away, but slower growth is not the same as no growth and that leads some to think the market pull-back is perhaps overdone.

Today’s economic data is a good case in point. ADP Employment came in at a still healthy +227k new positions, that’s the highest number since February. No sign of a slowdown there. On the other side of the coin is the Chicago Purchasing Manager barometer, which declined from 60.4 in September to 58.4 this month. Although that is the third monthly decline and the lowest read since April, it is still a perfectly good number.

Crude oil remains under pressure with WTO trading 0.4% lower following DOE inventory stats. Crude stockpiles increased as expected by 3.2m barrels, the sixth weekly increase, but gasoline and distillate stockpile fell much more than expected. The dollar index continues higher, up 0.2% today and now at its highest since May 2017. Treasury yields are firmer with the 10-year at 3.154%. After moving higher over the past few weeks Gold trades down 0.8%, its third consecutive decline and a similar move tomorrow puts it below its 50-day moving average.

China remains a wildcard after their manufacturing PMI fell to 50.2 this month from 50.8 in September. That is the lowest level since July 2016 and anything below 50.0 is considered contraction. New export orders are already indicating a contraction. Non-manufacturing PMI also fell from 54.1 to 53.1 this month. Whether anything regarding trade develops from the G-20 meeting in late November is anyone’s guess at this point, so in the near term look for additional stimulus measures.

Sector Recap

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Brian’s Technical Take

A Happy Halloween for Bulls

ASSUMING equities can hold today’s gains, it will be the first time this month the S&P 500 has finished positive in consecutive sessions. According to Ryan Detrick, CMT of Nasdaq-listed LPL Financial, the SPX has never gone the entire month of October without two consecutive sessions in the green. What may sound like a random stat to some, it is noteworthy to market players following the daily squiggles. A change of character could be underway for a market that has sold off far deeper and longer than what many expected.

Over the last week the SPX has been establishing positive divergences evidenced by the short term RSI’s – 60min and daily periods – which bottomed nearly three weeks ago on October 11th and have since been making higher lows as price continued down to a low of 2,604 made on Monday of this week. In constructive fashion today’s “pop” has moved above Friday’s 2,700 gap level (minor resistance), as well as the well-established down trend line where price has stalled on all relief rallies this month.

The SPX has now clawed back as much as 121 points off Monday’s low, which exceeds the previous mid-October rebound of 106 points. This month’s total decline measures 336 points and if THE lows are in the books, the natural price targets to look to are the 50% and 61.8% Fibonacci Retracements, 2,770 and 2,810.

The latter 2,810 level coincides with the highs made at the mid-October and thus are more significant level from this near term technical perspective. By then we should have clarity on the Midterms which may determine which direction the SPX goes from there. As far as today goes, put on your bull costume and go scare a bear. Happy Halloween!

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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