Market Intelligence

MID - Equity Market Insight April 21, 2016

ECB Moves Currencies as Equities Take a Breather

Thursday, April 21, 2016, 12:19 PM, EST

  • Dow -0.3% S&P 500 -0.15%, NASDAQ Composite +0.1%, Russell 2000 +0.15%
  • NASDAQ Advancers: 1187/Decliners: 992
  • Advance Volume: 75MM shares/Decline Volume: 67MM shares
  • New 52 week Highs (prior close): 86
  • New 52 week Lows (prior close): 22

Market Update:

US stocks have been able to post slight gains every day this week, as the S&P 500 slowly approaching it all-time (2134). Midway through the session, equites are hovering around flat territory, on 30% higher than normal volume. Telecoms and Utilities are the weakest this morning, while the Energy sector is outperforming.

  • Comments from ECB president Draghi says the low growth and low inflation environment will keep interest rates low for the time being, sending the Euro/Dollar rate to its biggest advance in April. The committee believes the $80 billion euros ($90 billion USD) a month of asset purchasing stimulus is working but may take some time before the inflation gets back on track.
  • U.S. jobless claims dropped unexpectedly to the lowest levels since 1973. Initial jobless claims came in at 247,000, lower than the previous week and well below Bloomberg consensus of 265,000 filers. Continuing claims also came in better at 2.137 million also lower than the previous week and well below consensus of 2.171 million. As a contrarian measure as to the health of the U.S. economy, the April U.S. Philadelphia Fed Index posted a disappointing result, giving up the gains made in March. The index fell to -1.6 in April from a +12.4 in March which was well below the +9.0 economists’ consensus. Again, diverging data points for the Fed to digest ahead of their April 27th meeting.
  • We’re ~25% through earnings season, and results have been better than expected (S&P 500 Beat Rate: Revenue: 60%, EPS: 85%) but the bar was set very low. The Nasdaq is outperforming the other major indices this morning after an earnings beat from Biogen (+3.75%), and Citrix System (+5.8%). Also on the upside, Microsoft is higher by 1.0% after a Wall Street Journal statedtheir quarterly results (released at 4pm today) could help the stock sustain its rally (+35% YoY) and test its all-time high.

Technical Take:

After many gyrations stocks ultimately closed little changed yesterday and are similarly hovering around unchanged as of 11AM EST. Such action is typical when an overbought market meets important resistance. At a minimum, stocks would typically bounce off resistance, pull-back and make another run at it from a less overbought position. Volume has been heavy the last several days, including today, yet the major indices are struggling to make real progress. This indicates big supply coming on line at resistance and could ultimately end the 2+ month advance if it overwhelms the demand for shares.

  • The S&P 500 500 Index, while it closed marginally above 2100 the last two days, is having difficultly making its final push through the critical 2110 resistance representing the November highs. A continuation of the 7 year bull cannot be confirmed unless we see consecutive weekly closes above 2110.
  • On the Nasdaq Composite Index today is showing relative strength on the back of earnings results related up moves from large biotech. Apart from that, it remains stuck in neutral in the near term at what we see as overbought levels technically. In today’s chart we examine this from the perspective of percentage of stocks above their 50 day moving averages and what current levels may confirm in other technical indicators in the near and intermediate terms. Presently as depicted in the lower panel, 76.2% of the stocks in the index are trading above their respective 50 day moving averages. While we are encouraged from a breadth perspective we also see this level as further evidence of overbought conditions in the near term and possibly even an intermediate-term exhaustion signal as seen in prior peaks. While it’s too early to tell if this is a peak, it warrants caution in the near term.

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.

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.

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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