An image of a pen, a magnifying glass, a calculator and a laptop on a table

Battle Lines Drawn in the QQQ's

Wednesday,May16, 2018, 10:36 AM, EST

  • NASDAQ Composite +0.36% Dow +0.09% S&P 500 +0.21% Russell 2000 +0.50%
  • NASDAQ Advancers: 1418 Decliners: 718
  • Today's Volume (100 day avg) -14.3%

The markets opened tepidly higher this morning and the gains are firming. Seven sectors are higher with Materials (+0.7%) leading and notable strength in both Consumer Discretionary (+0.5%) and Staples (+0.5%) following some good earnings results; Energy (-0.3%) lags after advancing in seven of the past nine session. Treasury yields have eased just a bit with the 10-year at 3.078%, so that is not much of a factor today. Having gained about 4.7% since mid-April the US dollar continues higher with a modest 0.1% gin today, but those gains come at the expense of gold, down about 4.5% over the same time range and lower again today.

  • Home and building construction slowed in April but March was revised higher . Housing started declined -3.7%, far more than the expected-0.7% but March was revised upward from +1.9% to 3.6%; and Building Permits fell 1.8%, a little less than expected, but March was revised higher from +2.5% to 4.1%. Single family home construction rose 0.1% but the more volatile multifamily home constriction fell 11.3% after a 13.6% gain in March. The South was the only region that experienced growth, gaining 6.4% while the other three regions saw declines. Also Industrial Production surpassed expectations with a +0.7% advance and March was revised higher from +0.5% to +0.7%. Factory output (+0.5%) surged after coming in dead flat in March with mining and utilities also showing gains, and Capacity Utilization hit a three-year high. Taken together the data reflects an economy chugging along at a good clip.

  • Crude oil prices have risen a little over 70% since the June 2017 lows and the International Energy Agency says that is beginning to curb demand. The agency lowered its global demand growth forecast by about 100k bpd. Although the revision is relatively small, it's the first downward revision in quite some time. The DOE's weekly inventory data showed declines in crude oil stockpiles and a larger than expect drop is gasoline and virtually no change in distillates. Crude prices, already down before the data release, moved off the lows but still in the red.

Technical Take :Battle Lines Drawn in the QQQ's

The Nasdaq 100 was last year's top performing index with an annual gain of 33% and so far in 2018 it is repeating this leadership with a YTD gain of 8.25%. From a short term perspective the index reached a key technical juncture this week as seen in the tracking ETF, ticker QQQ. Monday's high of $170.82 came within 12c of the price gap at $170.94 made back on 3/19. Reinforcing this expected level of resistance is the January 26 high, $170.95. The one penny difference in price between the January high and the May high puts in place the possibility of a near perfectly symmetrical head and shoulder pattern. While conformation is a long ways off, even a reversal towards the neckline of this large five month consolidation pattern would provide ample investing opportunity for short to intermediate term investors. The recent May high made on Monday which would representing the "right shoulder" formed a bearish "gravestone die" pattern on the daily which was confirmed with yesterday's opening gap lower and decline of 1.1%. The top of yesterday's gap is $169.47 and thus the start of a key resistance range that extends to the top of the left and right shoulders, and Monday's gap, up at $170.95. Until price gets back above this key near term resistance, the risk is for more downside price action which sets up a big test of support at the $164.40 - 164.23 zone representing the 20 and 50-day soma's. Battle lines appear well defined.

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.

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