Market Intelligence

MID - Equity Market Insight December 16, 2015

Wednesday, December 16, 2015, 12:53 PM, EST

Investors are counting down to this afternoon’s FOMC rate decision, with equities advancing for the third consecutive day. Crude Oil gapped lower at 10:30am, pulling the energy sector with it. Dividend paying stocks are higher this morning, with the telecom and utility sectors both advancing by more than 1%.

  • It is widely expected that at 2pm the Fed will announce the first tightening of interest rates in nine years, with seven of those at a rate of basically zero. The focus will be on the accompanying statement that traders will parse for clues as to the Fed rationale and, importantly, the intentions for the rate and pace of future increases. A return to a more normal posture and the slowing of potential asset price bubbles is cited as one reason to increase rates, as are improvements in the labor market. Global weakness is a reason to stand pat. If the Fed does not make a move today, this will be a big surprise to the market.
  • Oil price fell again today, dropping below $36 and hitting lows just before noon near $35.60 as a concern about a build in inventories hit markets, which are awash in supply and not being helped by the warm weather, which means the normal December drawdowns of inventories are not happening. The EIA reported the largest build since mid-October of 4.8 million barrels versus expectations of a drawdown of ~ 2.5mbls. Oil may have its own specific dynamics, but falling commodity prices in general usually indicate economic weakness and are not normally tied to an increase in rates. Strange times indeed.
  • First Solar is the best performer in the S&P 500 adding ~9% to its stock price, after Congress reached a fiscal agreement that offered solar and wind energy credits to consumers. The entire solar sector is posting gains on the news.

Technical Take

As of 11:35 AM EST, Nasdaq Composite:

  • Advancers: 1362
  • Decliners: 908
  • Advance Volume: 79MM shares
  • Decline Volume: 53MM shares
  • New 52 week Highs (prior close): 33
  • New 52 week Lows (prior close): 173

Despite what looked like some strong follow-through from the prior rally session, yesterday closed off the highs across the boards in equities and failed to challenge levels of consequence to the upside. Today, much of the same; early promise followed by indecision and anxiety in the form of a fading rally. With 2pm EST today on everyone’s calendars, this makes sense, not wanting to extend yourself too far ahead of the FOMC meeting in the event it doesn’t go exactly as imagined and opined about. We might expect several sharp whipsaws shortly after the announcement followed by a definitive move in one direction or another once traders have interpreted and re-thought the requisite number of times.

  • So far in the session the S&P 500 Index (SPX) has made a run at and subsequently retreat from resistance in the converging 50 and 200 day moving averages around 2060. We would suggest that this rally off of support at 1995 needs to exceed the November highs around 2110 in order to confirm its staying power and a year-end rally. We would note that none of the 10 S&P 500 sectors have thus far been able to challenge their respective November peaks.
  • While the NASDAQ Composite Index (CCMP) was able to retake ground above its 200 day moving average, it didn’t make too much progress during the session, closing only 4 points above its open. Again, no reason to get to extended in either direction in front of such a potentially monumental FOMC meeting as we observe a similar pattern again today. On any big moves and in the coming days traders will be watching critical support at 4905 and resistance at 5160. As a reference to rally staying power we highlight the CCMP’s 52 week highs and lows depicted in the bottom panel of the chart where new lows have generally been increasing since the end of October and a lack of improvement in new highs during this 3 day rally (so far). As we continue to say, the market needs broader leadership in order to sustain itself and keep the 6 year old bull going.
MID Chart 16 December 2015

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.

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