Friday, July 22, 2016, 1:10 PM, EST
- Dow +0.2 S&P 500 +0.4% NASDAQ Composite +0.4% Russell 2000 +.0.8%
- NASDAQ Advancers: 1513 Decliners: 720
- Today’s Volume: +0.2%
US stocks took a breather yesterday after the Dow’s longest daily rally since March 2013. Equities are essentially flat today, and attempting to post weekly gains for the 4th straight week. 8 out of the 10 sectors are advancing as income-paying sectors seeing the biggest upside, as Telecom and Utilities.
- MID Stat: Since the start of 2013, we’ve seen 7 different events of accelerated buying (greater than 7% gain during a 20 trading day span) in the S&P 500, during a short period of time, and we’re currently experience a similar trading pattern. Also worthy to note, during every one of those trading periods, the Technology sector outpaced the broader markets.
- Help from the consumer? According to a Bloomberg story, US consumer spending seems to be strong in the second quarter. As StreetAccount summarized, the Atlanta Fed's GDPNow model suggests personal consumption expenditures will rise in Q2 by an annualized 4.5% compared to 2015’s second quarter - a pace not seen since the first quarter of 2006. The US could use increased GDP growth and time will tell if corporate profits and market valuations can follow suit.
- On tap next week; 195 of the S&P 500 companies will be reporting results, with Apple, Alphabet and Facebook likely grabbing the major headlines.
Nasdaq Biotech Index:
Over the past week as the large cap Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) indices have been making fresh all-time highs, we have been highlighting select areas of the market which have underperformed YTD but could be candidates to take the keys and be the next drivers of the resuming bull market. Specifically we argued that the financial, consumer discretionary, and transportation sectors are each at critical inflection points with the potential to make bullish breakouts above key technical resistance levels.
Another group that fits this bill is the biotech sector which until last summer had been one of the top performing groups over this seven year bull market. After making all-time highs in July 2015, the Nasdaq Biotechnology Index (NBI) declined 40% before bottoming in February 2016. The NBI index is currently down 17% YTD vs. +1.4% for the Nasdaq Composite and +6% for the Russell 2000. Since bottoming the NBI index has been range bound with clearly defined support at the February lows. More importantly the NBI index is fast approaching a cluster of technical resistance represented by (1) the intermediate trend line connecting the April and June highs, (2) the long term trend line connecting highs from July and December 2015, and (3) the declining 200-day simple moving average(SMA), now 2,994.
A breakout above this major resistance range would mark a positive change in character compared to the declining and now “sideways” price action over the prior 12-months, however over the near term the NBI index may have some work to do before realizing that outcome. First off the index has already rallied 17% off its late June lows. Its relative strength Index (RSI) is elevated at 63, close to the 66-67 range that marked the tops of the prior two rallies in April and June. Also the index has not touched its 200-day sma since September 2015 or its major declining resistance line since December 2015. It very likely will meet formidable selling pressure on its initial tests of these levels. Thus a period of consolidation, either through price or time, is likely necessary before a firm breakout through the immediate cluster of resistance can be achieved.
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.
