Friday, January 27, 2017, 11:30 AM, EST
- NASDAQ Composite -0.03% Dow -0.10% S&P 500 -0.17% Russell 2000 -0.6%
- NASDAQ Advancers: 847/ Decliners: 1246
- Today’s Volume (100day avg): -1%
US stocks are slightly lower this morning, but poised to close out with weekly gains. Materials, Financials and Information Technology have supported the rally, while Healthcare has been weaker during Trump’s 1st week in office. Crude has edged lower from its 3 week high, but the promised OPEC 1.8 million/day production cuts remains intact and likely the driver behind the ~5% gain over the past 7 sessions.
- Annualized quarterly US GDP rate rose by 1.9%, missing expectations (+2.2%), and falling short of the 3rd quarter rate of 3.5% (highest read in 2 years). The monthly figure suggested expansion, as President Trump has taken office, and set an aggressive 4.0% GDP annual rate, spurred by tax code adjustments and infrastructure spending. Separately, Durable Good Orders in December unexpectedly fell by 0.4%, and missed analyst consensus (+2.5%) by it largest margin since Feb15. Bookings on military items were the leading drag on the past month’s read, which fell by 33% from November number.
- Emerging Markets have seen a robust open to 2017, with the MSCI EM Index on pace (+7%) to snapped its 3rd consecutive month of declines and on pace for its best monthly performance since March (+13%). Nasdaq-listed, JD.com and Baidu have been two of leading components gaining more than 11%, and 6%, respectively YTD. Despite the strong start to the year, US listed EM ETFs have seen investors pulling money out stock and bond funds. The biggest change was in China and Hong Kong, where funds shrank by $46.3 million, compared with $244.2 million of inflows the previous week.
The yen is at a key inflection point
The USDJPY currency pair peaked on January 3rd at 118.60 forming a double top pattern with the 118.66 high made on December 15th. The major pair quickly reached the downside measured move of 113.50, and then some, when it bottomed last week on the 17th at 112.57. After a brief two day rally the USDJPY rolled over the following two sessions bottoming on Monday of this week at 112.53. Potentially a bullish double bottom reversal pattern is in the making which would be triggered on a move above the neckline, 115.62. For stocks this scenario would be like throwing gasoline onto a fire as a weakening yen often coincides with bullish sentiment and the major equity indices are already in melt-up mode. Another possibility however is that an intermediate top was made in early January and the recent strength is simply a retracement of the more dominant trend lower. Note that the 115.64 neckline, first reached last week and being retested today, is a near perfect 50% retracement of the entire January downtrend. In Elliott Wave Theory this could be labeled a textbook ABC, flat correction which has a downside measured move to 109.55, assuming wave 3 = wave 1. This scenario would likely drive a “risk-off” correction in stocks as the large cap Dow and S&P 500 indices have just reached key psychological milestones at 20,000 and 2,300.
In a nutshell watch the 112.53 – 115.62 range in the USDJPY pair. Whichever side it emerges from could be the canary for the broader move in equities.
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.