Equity Market Insight from Nasdaq MID - February 16, 2017

Thursday, February 16, 2017, 12:30 AM, EST

  • NASDAQ Composite -0.21% Dow -0.08% S&P 500 -0.28% Russell 2000 -0.8%
  • NASDAQ Advancers: 745 / Decliners: 1451
  • Today’s Volume (100day avg): +14%

US equities are taking a breather this morning, a possibly ending the S&P 500’s longest winning streak since Sept 2013. The CBOE Volatility Index is up more than 18% over the past 2 days (largest gain since Nov), suggesting “fear” is building amongst equities. Heading into today’s session, Utilities, Real Estate, and Telecoms have recently been the weakest sectors, but those groups are seeing a reversal this morning, and outpacing the broader markets.

  • On the earnings front, NTAP is surging to a 2 year high after reporting an earnings beat and an optimistic outlook. The company noted that they are seeing a boost in its emerging growth segments, triggering several analysts upgrade the stock and raise their estimates. Cisco (+2%), Applied Materials (flat) and Synopsys (+9%) also reported positive results and seeing elevated activity.
  • Economic data: Last week Initial jobless claims (239k) were slightly better than expected (245k), further supporting the healthy jobs market. Housing Starts in January saw an uptick (1246K), and hoovering around its highest level since 2007. Lastly, the Philly Fed Business Outlook was the strongest data released today, which surged by 20 pts to 43.3, and more than 2x the expectations (+18.0). Despite the positive report, the naysayers already out suggesting the manufacturing activity is not sustainable.

Technical Take:

The interest rate complex remains in consolidation mode following Q4’s record uptrend. After peaking on 12/15 at 2.64%, the UST 10-year yield has been carving out a triangle pattern of lower highs and higher lows. Yesterday’s high stalled right along the resistance of the triangle and today it is turning lower. As rates are now entering their third month of corrective price action, the yield sensitive REIT sector has steadily been gaining ground. In Q4’16 the Dow Jones REIT Total Return Index (REIT) declined (3.24%) recording its 2nd worst quarterly performing in five years. However the REIT index actually bottomed on November 10th, and then rose steadily for nearly two months until peaking on January 6th at 1,684. Over the ensuing six weeks to present as the REIT index has been consolidating, it successfully tested the rising support line connecting the November and December lows and thus affirming its importance with three touches. This rising support line is now converging closely towards the six week resistance at the 1,684 level suggesting a breakout, up or down, is imminent. The 1,684 price level is virtually equal to the 61.8% retracement of the 2H’16 downtrend which affirms its importance. The REIT’s fate could reside in the treasury rate complex. If the UST 10-year yield continues lower towards support around the 2.35% level, the REIT index could see its upside breakout which would should lead to a smoother path higher.

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.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

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 has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

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

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.