Dollar Bulls Maintain Control

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Monday, April 30, 2018, 10:31 AM, EST

  • NASDAQ Composite +0.48% Dow +0.32% S&P 500 +0.27% Russell 2000 +0.21%
  • NASDAQ Advancers: 1129 Decliners: 988
  • Today's Volume (100 day avg) -10.2%

As April comes to an end the markets opened with solid gains and most sectors are in the green with last week's laggard Tech (+0.2%) leading while Industrials (-0.5%) underperforms and trails the S&P-500 by the most since mid-2009. The gains follow a burst of M&A news and strength in Asia where Chinese manufacturing and service PMIs rose above expectations, and European stocks are mostly higher on strength in consumer and healthcare stocks. An active week lies ahead with over 950 earnings reports expected as well as ISM economic data and Nonfarm payroll numbers on Friday.

  • Merger Monday is back as Marathon Petroleum (MPC) announced the acquisition of Andeavor (ANDV) in a stock & cash deal valued at nearly $30.5 billion. Also, capping nearly 4 years of dating, Sprint (S) and T-Mobile (TMUS) have agreed to finally merge in an all-stock transaction with T-Mobile agreeing to acquiring Sprint for $57.8 billion making it one of the largest announced deals of 2018. Financial Engines (FNGN) agreed to be acquired by private equity firm Hellman & Friedman for $45.00 a share in cash, valuing the deal at just over $3 billion. YTD, global M&A has top $2.1 trillion of announced or proposed deals which is up 5.5% from this time last year.

  • The Fed's preferred inflation measure rose and hit the elusive 2% level in March , the PCE Deflator rose 0.3% from February to 2.0% and excluding food & energy was in line at +1.9%. Consumer spending rebounded with an 0.4% gain and incomes held steady at +0.3% but that missed estimates. Disposable incomes rose 0.2% while wages & salaries gained 0.2%, the smallest increase since October. Pending Home Sales rose 4% versus the expected 0.7% gain and was much lower than February's revised +2.8%. Lack of inventory was the primary culprit and a -5.6% decline in the Northeast gets blamed on lousy weather.

  • There is some conjecture out today regarding a relatively strong earnings season that is not driving the markets higher . After all, earnings are at their best in at least a decade yet the S&P is flat YTD for all practical purposes and the Dow is slightly in the red. The WSJ notes that the markets are forward looking but market gains came late last year. That seems reasonable considering that the S&P was positive in fourteen of the fifteen months ended this past January. Factset notes that looming higher input costs and uncertainly over the extent of tax savings are leading to some caution.

Technical Take : Dollar Bulls Maintain Control

The US Dollar Index (DXY) finished 2017 with its largest annual decline in 14 years. That trend continued into January with a monthly decline of 3.25%, its biggest drop in 20 months. However as equities started to correct in early February, the US dollar Index (DXY) started an upside reversal which as of last week's close registered positive weekly gains in ten of the prior 13 weeks, as well as ten of the last 13 sessions. Over this time the daily RSI has gone from an extreme oversold reading of 20 to the current overbought 71 level. Friday's modest 0.02% decline finished well off the intra-day high which peaked exactly at the 200-day sma, 91.99, before reversing sharply lower and forming a bearish gravestone doji pattern. A topping pattern, along expected resistance, with overbought technicals are normally the ideal setup for a change in trend, however there has been no downside follow through today. The DXY is currently up 0.3% and is back to Friday's highs and the 200-day sma. It's quite possible there are still too many shorts on one side of the boat. If so then overbought can become more overbought as a breakout above the 91.99 resistance should trigger stops and lead to another run higher.

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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.

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 is a 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).

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.


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