Tuesday, August 7, 2018, 10:25 AM, EST
- NASDAQ Composite +0.38% Dow +0.60% S&P 500 +0.36% Russell 2000 +0.56%
- NASDAQ Advancers: 1340 Decliners: 772
- Today’s Volume (First Hour) +11.4%
US markets opened higher this morning following gains in both Europe and Asia with Chinese markets up nearly 3%. The Nasdaq Composite, R2K and S&P 500 indices are all within 1% or so from their record highs, thus the markets are performing well despite the angst over trade and other geopolitical matters. Today is mostly a quiet session with earnings the primary focus. Crude oil is trading about 1% higher following renewed sanctions on Iran, and the Chinese yuan strengthens 0.5% after the PBOC urges banks and lenders to prevent momentum trading in the currency. Looking at the sectors, seven are nicely higher with Energy (+0.9%) and Financials (+0.8%) leading while Utilities and REITs retreat about 0.7% each. Lastly the dollar index is down about 0.3% while gold is up 0.3%, and treasuries are a little weaker.
Also worth noting: Value stocks are back in vogue, maybe. A recent WSJ article notes the Russell 1000 Value index gains 3.8% in July versus 2.9% for growth stocks, and goes on to say this is typical in the late stages of the economic cycle. Bloomberg noted that the spread between the two was the widest since September 2017, but also cautions that it is not clear that this is a new trend for just a blip. Evercore’s Dennis DeBusschere says the gains indicate a “meaningful rotation” into overlooked value stocks is underway. As the saying goes: time will tell.
Technical Take: China - One Day Relief Rally Could Be the Start of a Bigger Trend
After closing on Friday at its lowest level since Q1’16, the Shanghai Composite Index (SHCOMP) responded today with its best trading session in more than two years gaining 2.7% . With seemingly no major catalyst behind today’s gains, it appears the reason for the sharp rebound is due to technical considerations that may suggest more gains are in store.
Friday’s intraday low came within a point of the prior pivot low made four weeks ago in early August, and on this short term time frame a bullish divergence existed with the daily RSI making a noticeably higher low. While still very early to call, a potential double bottom pattern is now in play.
The longer term weekly period chart shows the July/August lows bottomed at nearly the identical level where the SHCOMP bottomed in Q1’16. The Q1’16 low is significant because it represents the culmination of a 49% crash over three quarter’s time. This massive decline followed an eye popping 150% gain over the prior twelve months. Again a bullish divergence currently exists with the weekly RSI registering a higher low.
And finally the long term monthly period chart shows this same support level exactly coincides with the rising trend line connecting the lows of 2005 and 2013-2014. The repeated and successful tests of this rising support line in 2013 and 2014 then established its technical significance. With this 13-year trend line now clustering with intermediate and short term support at the same ~2,700 level, it indicates this level will not be easily penetrated. While one day does not make a trend, today’s bullish price action could very well be the start of a longer lasting relief rally, if not more.
Click the image for larger view
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 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
