Market Intelligence

Equity Market Insight from Nasdaq MID - January 26, 2017

Thursday, January 26, 2017, 11:40 AM, EST

  • NASDAQ Composite +0.02% Dow +0.2% S&P 500 -0.02% Russell 2000 -0.5%
  • NASDAQ Advancers: 768/ Decliners: 1376
  • Today’s Volume (100day avg): +10%

All major US indices opened at all-time highs, but those initial gains have been erased, as investors sift through more than 30 S&P 500 companies quarterly earnings. A Mega proposed deal in the Media & Cable space has the S&P Consumer Discretionary Index up more than 0.4%, while weak results from several Semiconductor names weighing on equities. The US Dollar is higher vs other major currencies, with DXY Index surging to its biggest move since 1/6.

  • The CBOE Volatility Index has fallen to its lowest level since July 2014, which is also the last time the VIX Index closed below 11 for 2 consecutive sessions. Time for a reversal? The “Fear Index” didn’t stay below 11 for very long as it climbed by 40% over the next 9 days.
  • Merger Mania hits 2017 withas M&Aactivity grabs headlines globally. Ina $30 billion deal, Johnson & Johnson will acquire Actelion for $280 a share in an all cash deal while also spinning out a new R&D Company. Also, Cisco (NASDAQ: CSCO) acquired privately held AppDynamics for $3.7 billion, United Rental bought NES Rentals Holdings for $965 million and the WSJ reports that Verizon (VZ) has approached Charter Communications (NASDAQ: CHTR) about a possible combination. YTD we have seen $411.5 billion of announced or proposed deals globally.
  • On the economic front, December’s New Home Sales appeared to be hurt by the jump in mortgage rates, as the annualized figure fell to 536k (lowest since February). The dip in monthly sales, helped the inventory of homes climbed to its highest mark since November. Going forward, we’ll be watching to see if an increasing inventory figure will cause the average home sale price pull back from the highest level since 2007.
  • Have large-cap stocks hit an “overbought” condition? Not according to Michael Block from Rhino Trading Partner, “As of last night, 12.5% of the names in the Russell 1000 look overbought on a relative strength basis. That gives us plenty of names to shoot against here, but that number needs to be closer to 30% to get me all in short term bearish.”
  • Crude oil rises about 2% and trades at a two-week high as traders focus on lower OPEC production. Comments from a Kuwaiti Oil Minister suggest that the oil market will come into balance early this year while Algeria’s counterpart says the targeted reduction will be reached within a few weeks.

Technical Take:

As equity markets continue their run to new highs, naturally the VIX, aka the Fear Index, is trending in the other direction. Yesterday the VIX reached an intraday low of 10.51, its lowest level since July 2014. At that time the VIX did not stay down for long as it climbed more than 40% in less than two weeks. During this spike in volatility, the S&P 500 saw a steep decline of 4.3%. While the VIX has returned to its 2014 lows, yesterday the Dow reached the 20,000 milestone and now today the S&P500 has today reached 2,300 for the first time in its history. While breakouts to new highs are absolutely, positively bullish, often times milestones at big round numbers result in short term tops. Thus while euphoria is growing throughout the marketplace, be mindful about complacency as a natural pullback is arguably overdue. However such corrections often result in a rotation of leadership so it would be wise to look at what groups outperform in the event of any pullback.

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.

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