Market Intelligence

Equity Market Insight from Nasdaq MID - January 5, 2017

Thursday, January 5, 2017, 12:40 PM, EST

  • NASDAQ Composite -0.22% Dow -0.6% S&P 500 -0.26% Russell 2000 -1.1%
  • NASDAQ Advancers: 700 / Decliners: 1505
  • Today’s Volume (100day avg): +2%

For the 3rd consecutive day, the Nasdaq composite is outperforming the S&P 500 and DOW. On the economic front, US jobless claims fell to a 2 month low during the final week of 2016, while several large-cap Department Stores are under heavy pressure this morning. Crude Oil moved lower in response to a US inventory report, while Gold (+1.7%) is advancing by it largest margin since June.

  • Unemployment numbers came in at the lowest levels in 8 weeks and near the lowest reported levels in 43 years according the U.S. Department of Labor. Initial Jobless Claims came in at 235,000 vs polled expectations of 260,000. Reported Continuing Claims were slightly higher at 2.112 million vs expectations of 2.045 million. Last week’s initial and continuing claims were reduced down by nearly 0.75% each as well. Initial jobless claims have come in below 300,000 for the past 96 weeks, a threshold number associated with a healthy and tightening labor market.
  • The ADP National Employment Report showed less job creation in the U.S. than expected with 153,000 workers added to the payroll in December versus polled expectations of 175,000 according to Bloomberg. Private payroll gains in November were revised down slightly to 215,000 jobs created versus a reported 216,000 jobs. While this number is negative, the ADP report correlates with the Labor Department’s initial jobless claims report today showing a tightening labor market and a move to full employment.
  • Crude oil dropped following positive inventory data from API, which last night reported crude stockpiles fell by 7.4M barrels. This morning the DOE which says stockpiles fell ~ 7.1M barrels in the largest drop since September. However distillates as gasoline inventories rose far more than analyst expected and in reaction crude prices fell to near unchanged. There is other encouraging data for the bulls - OPEC production fell by about 310k bpd in December according to reports, and Iraq says it has begun to lower output in keeping with OPEC targets. Natural gas (-2.3%) is lower on a lower than expected inventory draw.
  • The S&P Department Store Index has experienced it largest intraday ever (-14.5%) and to its lowest level since August. Macy’s (-15%) and Kohls (-19%) reported weaker than expected holiday sales and a soft outlook for the upcoming year. Alexion Pharma (+7%) is the best performer on the S&P 500, as the company reassured their investors and removed some key overhangs.

Technical Take:

During Q4 the rate-sensitive financials captured the majority of headlines by meaningfully outperforming all other sectors with a 20.5% gain. One of the drivers of this outperformance was the dramatic rise in interest rates which themselves saw historic moves higher. Conversely rising rates are a negative for the bond proxy REIT sector which in turn was the quarter’s worst performing sector with a (5.5%) decline culminating in a (17%) decline from its mid-summer highs. As rates continued their rise into mid-December, interestingly the REIT sector bottomed a month earlier in mid-November and has since been showing a number of improving technicals. During December the S&P 500 REIT Index made two higher lows and two higher highs after bottoming on November 10th. It now appears to have formed an inverse head & shoulders bottoming pattern over the course of Q4. Yesterday’s 1.24% gain broke above both the neckline of this pattern (dotted white line), as well as the clearly-defined declining resistance line (red line) connecting the 2016 high in August and the two highs in September. Initially today the index retraced 100% of yesterday’s gains, but it quickly bounced off the neckline (read: prior resistance turned support) and has recovered more than 2/3 of this morning’s decline. The highs of yesterday and today stalled at the 100-day simple moving average (green line), now $194.30, which should now be seen as the next test of resistance. While there are additional resistance levels above to first get through, the size of the Q4 bottoming pattern has a measured move towards $207 which is more than 7% higher from here.

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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