Market Intelligence

Equity Market Insight from Nasdaq MID - October 26, 2016

Wednesday, October 26, 2016, 11:59 AM, EST

  • NASDAQ Composite -0.07% Dow +0.3% S&P 500 +0.05% Russell 2000 -0.1%
  • NASDAQ Advancers: 1116 / Decliners: 946
  • Today’s Volume: +1%

US stocks reversed their original losses, as earnings and a weak Crude Oil morning session weighed on equities out of the gate. 50% of the S&P 500 and 7 out of 11 sectors are in the red, with Information Technology (-0.2%) and Real Estate (-1.3%) stocks the largest decliners.

  • On the earnings front, Apple is off by 2.8%, pushing the S&P 500 Information Tech Index lower by 0.3%. The leading index point supporters to the Nasdaq Composite are Mondelez (1.84pts), Biogen (+1.82pts), and Cisco (+1.6pts). Also, strong earnings and guidance from Akamai (+15%) is helping the stock post its largest gain since February. This afternoon we’ll be watching results from Texas Instrument, Western Digital, Buffalo Wild Wings and Tesla.
  • Bloomberg noted how the markets have become unusually quiet lately ahead of the presidential election. We note that there has been only one day in the past month when the S&P 500 moved more than 1% (close to close). The CBOE VIX ”Volatility index” is also trading near two-year lows. The WSJ had a similar article last week, referencing low trading volumes and low conviction. Long periods of narrowing trading ranges often are followed by sharp moves in markets. One recent example is the pre-Brexit S&P range of 2050-2100 that was in place for most of the spring.
  • StreetAccount also notes an FT article that concludes that volatility in the Treasury market has hit a nearly two-year low according to the BofA Merrill Lynch’s MOVE volatility index, and that declining interest-rate volatility has been echoed across equity and currency markets. The article draws similar conclusions to those made in the equities markets: That the relative quiet comes ahead of major potential catalysts such as the US presidential election and a possible interest-rate hike in December.

Technical Take:

When the small cap Russell 2000 Index (RTY) made its YTD high on 9/22 at 1,264, it was still 2.5% below its highs from 2015. This is in stark contrast to the large cap Dow Jones Industrials and S&P 500 indices which made to new all-time highs this summer. The Russell is now within 0.5% of a key support zone in the 1,198 – 1,206 range which represents the lows of July and September 2016. A break below this range would trigger a double-top reversal pattern which has been forming over the prior three months. The pattern has a measured move to 1,150 which is 5% lower from here. Whether or not a breakdown happens remains to be seen, but the battle lines are clear and the bulls have their backs up against the wall.

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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