MID - Equity Market Insight February 12, 2016

Friday, February 12, 2016, 11:50 AM, EST

As of 11:05 AM EST, Nasdaq Composite:

  • Advancers: 1377
  • Decliners: 756
  • Advance Volume: 83MM shares
  • Decline Volume: 49MM shares
  • New 52 week Highs (prior close): 10
  • New 52 week Lows (prior close): 500

Market Update

Today, the broader market rebounded from sharp losses and equity investors hope that stocks can build on a rally that began in the late afternoon when the Dow was down about 400 points. Ahead of the holiday weekend, the S&P 500 is attempting to close higher for the first day this week. All the major indices are higher this morning, helped by big gains from financial stocks (+2.5%).

  • Gotta get the Milk and Bread? When there is a weather forecast for snow or subzero temperatures, shoppers often flock to stores to buy groceries. It seems the same safety trades are in place with the market racing for bonds and gold and shunning bank stocks on fears rates might see an extended period of “subzero” in many countries. There is even some speculation the US could one day do the same. Whether this turns out to be seen as an overreaction to forecasts or a prudent stocking up on safe things remains to be seen.
  • Investors got their first sign that consumer are putting the money they were saving at the gasoline pumps and their improving wages into the retail market. January’s US Retail Sales (+0.2%) came in higher than expected (+0.1%), during a volatility trading period. Consumers might be spending more, then don’t appear to be confident about the economy as The U of Michigan Sentiment Index fell to a 4 month-low (90.7), and missing expectations for the 4th time out of the past 5 readings.
  • Speaking of OPEC, “everyone is ready to cooperate,” U.A.E. oil minister says in interview on Sky News Arabia. Seems when crude prices dip below $30 we hear chatter of production cuts, prices rise a bit, and nothing happens. Global oversupply remains around 1.7 mbps and onshore storage facilities are nearing capacity, so bearish conditions remain in place. Crude prices are in the green today [WTI +10%, Brent +7.6%], but both WTI & Brent are still down 6% and 5% respectively for the week.

Technical Take

Possibly or at least partially in reaction to a rebound in oil prices on the back of speculation that producers could work together to cut output, stocks are rallying. We find this curious though since the fact that Oil is being used as an economic gauge means that only news on the demand side of the equation should matter, not supply. More likely, the light volume equity bounce we’re seeing is a result of strength in banks as with DB now planning to buyback $5B in debt and reports that Jamie Dimon personally purchased $26.6MM of JPM stock are taken as an indication that world may not be coming to an end via another credit crisis. At the same time, from a technical perspective there are a couple of signs that a sustained rebound may be budding for equities, though next week will tell us a lot more.

  • Yesterday the S&P 500 Index (SPX)held our 1810 support, in this successfully testing the 1/20 lows. Some may also make note of a small RSI divergence as the SPX has made new, lower closing lows this week while daily RSI, a measure of ‘overbought/oversold’ failed to register a new low vs the 1/20 low. This along with extreme bearish sentiment as defined by this week’s 49% bear reading from the American Association of Individual Investors (AAII) survey, matching the levels seen coincident with the 1/20 lows, is encouraging from a contrarian’s point of view. Closing with traction above former support at 1850 would be a modest positive, 1875 more so.
  • On the Nasdaq Composite Index (CCMP) we see that it too roughly held its 1/20 lows yesterday before reversing. Today, with less market cap weighting of financials and energy (the leading sectors on the day), the CCMP is lagging. In terms of breadth though it is nearing 2:1 for the advancers. A confident close today above 4350 would get our attention. Otherwise 4220 – 4210 is support to watch.

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.

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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