Market Intelligence Desk - Equity Market Insight December 3, 2015

Thursday, December 3, 2015, 1:15 PM, EST

US equities were poised to erase yesterday’s declines, but disappointing news by the ECB sent the Euro spiking higher, while pushing stocks across the globe lower. Mario Draghi’s press conference was followed by Janet Yellen speaking to congress about the economic outlook and the condition needed for an interest rate hike. Consumer Staples (+0.5%) are the only sector trading higher this morning, while oil declines are once again pressuring Energy stocks (-1.0%). DOW -0.5%, S&P 500 -0.4%, Nasdaq -0.7%, R2000 -0.2%

  • The Euro spiked by the most in 3 months vs. the Dollar in response to the ECB’s decision to extend quantitative easing through March 2017 and drop the deposit rate to negative 0.3% from 0.2%. The currency parity in 2015 seems very unlikely at this point, despite the likely rate hike by the FOMC later this month. Additional stimulus was expected and generally would weaken the Euro, but some of this was priced in already. Traders believe that Draghi over promised and under delivered, and the news sparked some volatile trading this morning.
  • November’s ISM of 55.9 fell short of expectations (58.0), dropping to its lowest level since May. The headline number still indicates growth, but compared to the October reading of 59.1 the decline is the biggest monthly disappointment in seven years so was seen as a disappointment to some. The ISM release also continues to highlight the strong US dollar, weak demand from overseas, and oil declines as the leading headwinds US manufacturing.
  • Also on the economic front, Weekly Initial Jobless Claims (269k) remained at historic lows, but tomorrow’s Nonfarm Payroll (Survey: 200k) number and Unemployment Rate (Survey: 5.0%) will be a better indicator of the jobs environment. The payrolls release will be closely watched by the Fed and is broadly believed to be the final hurdle for the Fed to have an all-clear to raise rates in December - so long as it is not terrible.
  • Avago is the best performer on the S&P 500, jumping more than 10% after the company announced that iPhone demand helped the chip-maker beat quarterly expectations. The company plans to close its acquisition of Broadcom during 1Q16, which also seeing green today, up 4.7%.
  • Crude oil is trading higher this afternoon, recovering about half of yesterday losses. Although crude and distillate inventories rose more than analysts expected last week according to the EIA reports, its Friday’s OPEC meeting that’s getting the attention. Iran’s OPEC delegate commented that most OPEC members support production cuts while Saudi Arabia and the Persian Gulf countries do not. Read another way, members under the most financial strain support overall cuts (but not for themselves), while the more financially sound members remain focused on gaining market share. WTI +1.9%; Brent +2.7%, NatGas +0.4%.

Technical Take

As of 11:55 AM EDT

  • Nasdaq Composite:
  • Advancers: 1047
  • Decliners: 1199
  • Advance Volume: 59MM shares
  • Decline Volume: 86MM shares
  • New 52 week Highs (prior close): 97
  • New 52 week Lows (prior close): 78

Yesterday the market degenerated post Chairwoman Yellen’s commentary (more today in case you missed the first showing Wednesday). Nothing has changed, but that doesn’t stop market participants from getting antsy and making excuses. Today of course we had Uncle Mario in the EU shaking up global markets across asset classes, causing the Euro to rip higher and the USD to fall dramatically as well as some bedlam in the bond pits. Though it is premature to call, we’re beginning to observe potentially negative technical signals for the near term in a seeming loss of momentum in domestic equities. The next couple of days closes will be important.

  • After making an early attempt to advance above resistance of 2100 yesterday, the S&P 500 Index (SPX) reversed down and closed just below the support at 2080 cited in our note yesterday. Today, after being deflated by EU commentary in the futures, the index has continued to weaken and is on track for a test of more important support in the form of the 200 day moving average at 2065. After that there would be minor support in the rising 50 dma around 2040, while 2020 support would be pivotal. Closes below 2020 would likely indicate the most recent peak marked a lower high and could beget more selling.
  • The NASDAQ Composite Index (CCMP) is having struggles of its own, also unable to confirm what would have been its respective break-out above resistance at 5160. Minor support around 5100, but the pivotal levels would be 4975/4945 the 200 day and 100 day moving averages which had acted as support on the mid November decline. We again feel that watching the small caps is important to the market on the whole as represented in today’s chart of the Russell 2000 Index (RTY), where we may have once again failed to break above key resistance around 1200. Despite an improvement in relative strength defined in the bottom panel, the longer term trend still represents significant lagging. Still too early to make the failure call affirmatively, but something to monitor closely.

The 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.

Vincent Randazzo, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 13 years of experience in equity markets having served in equity research sales and desk analyst roles at major banks. Vincent’s specific expertise is in technical analysis and has been a Chartered Market Technician (CMT) since 2007.

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.