Equity Market Insight from Nasdaq MID - September 11, 2017

Monday, September 11, 2017, 11:40 AM, EST

  • NASDAQ Composite +1.0% Dow +1.03% S&P 500 +0.91% Russell 2000 +0.89%
  • NASDAQ Advancers: 1646 Decliners: 617
  • Today’s Volume (100 day avg) +3.5%

The markets opened higher in a sigh of relief that damage from Hurricane Irma not as bad as initially feared. Also it was a quiet weekend from North Korea; some analyst expected a missile test to commemorate the current regime’s anniversary. Given the more relaxed tone treasuries and gold are soft while the dollar is higher, and that boosts financials (+1.6%) to the top of the sector rankings with all sectors in the green. Otherwise it’s a fairly quiet morning in term ofmarket newswith investors likely focusing on updates from Barclays Global Financial Conference. Later in the week comes PPI and CCI inflation data as well as a look at August retail sales. Lastly, Friday is a quad-witch expiration day where option and future contracts on both equities and indexes expire.

  • The S&P Property & Casualty Insurer Index is up 2.8% today after falling almost 3.5% last week. Last week the speculation called for Irma damage estimates as high as $200 billion, but today the estimate drops to $50B or less. Reinsurers take on much of the risk on policies sold by the primary insurers, so the reinsurers will likely take the biggest hit.
  • China’s inflation measures moved higher in August with Consumer Prince Index coming in at +1.8% versus an expected +1.4%, and their producer prices (PPI) also surged to a four month high, coming in at +6.3% versus July’s +5.5%. The gain in consume prices are attributed to higher food costs, and higher energy and commodity costs let to the higher producer prices. China’s retail sales and industrial production data are set for later in the week.
  • Chinese authoritiesare going to shut down domestic bitcoin exchanges. According to the WSJ, “Chinese authorities are ordering domestic bitcoin exchanges to shut down, delivering a heavy blow to once-thriving trading hubs that helped popularize the virtual currency pushing it to recent record highs.” Bitcoin is a non-governmental regulated digital cryptocurrency that utilizes blockchain technology to record transactions and ownership. The article continued saying that “The ban was surprising for many, given that Chinese authorities have allowed bitcoin exchanges to operate within the mainland for years. The central bank defined bitcoin as a “virtual good” back in 2013 and had banned banks and third-party payment institutions from engaging in bitcoin-related activities.”

Technical Take :

Hurricane Irma is still expected to go down as one of the costliest storms in US history, however the losses are now expected to be dramatically lower than the $200B that some were forecasting. A number of loss estimates are now in the $20B - $60B range and accordingly insurance stocks are leading today’s rally in equities. The S&P insurance ETF (ticker KIE) is currently up +2% following Friday’s 2.8% surge. Friday’s gains obviously occurred before markets knew of the improved loss outcome, but it is not so surprising when looking at the technical setup in the daily period chart. On Friday the KIE ETF bounced off what has proven to be a clearly defined support level throughout March, April, and May and with today’s follow-through it has recovered back above the 200-day sma. But the real test is just above in the $88 – $90 range where a cluster of technical resistance exists at the $89 and $89.50 levels. At $89 is the declining resistance line from the August high (blue line) which coincides with the 61.8% retracement, $88.97. At $89.50 is the horizontal resistance which represents the February pivot high which itself coincides with the 50-day sma, $89.51. Today’s highs came within 0.1% of this first line of expected overhead supply before pulling back 1%. With continued risks from future hurricanes along with the low interest rate environment, investors may realize that headwinds remain for the insurance industry.

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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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