NASDAQ Composite -0.08% Dow -0.39% S&P 500 -0.21% Russell 2000 -0.36%
NASDAQ Advancers: 830 Decliners: 1533
WTI Crude -2.50%, Gold +0.43%, 10yr Treasury 1.73%, VIX 13.46 +0.55
Market Volume (vs. Friday): +8.4%
- U.S. Initial Weekly Jobless Claims reported at 211,000 vs. consensus 214,000
- U.S. Continuing Jobless Claims reported at 1.731 million above consensus of 1.756 million
- DOE inventory showed U.S. crude draw of 405,000 barrels
- DOE inventory showed smaller than expected build in gasoline, but inventory still at record levels
- China quarantined the epicenter of the coronavirus
- British parliament finalized the Brexit withdrawal bill
- ECB left policy unchanged, as expected
- Reaction to earnings: CTXS +8%, KMI + 4%, UNP + 3%, MTB + 1.75%, LUV +1.7%, KMB +1.3%, VFC -7.5%, RJF -7%, FCX -7%, TRV -5%, HBAN -4.5%, TXN -1%, CMCSA -2%
- Midday note format will change tomorrow
U.S. equities hit new highs Wednesday led by Tech. However, stocks slowly pulled back to close at the lows of the day. The S&P 500, Nasdaq Composite and Nasdaq 100 indices finished in the green, while the Dow Jones Industrial Average and Russell 2000 dipped slightly lower.
Today, markets are lower on fears over the coronavirus outbreak in China. Chinese authorities quarantined two cities and called off public gatherings that were planned ahead of the Lunar New Year celebrations. This is giving investors pause as concerns of a widen outbreak could hurt consumer spend in the country in the near term. Oil is also being hurt on these announcements, as concern for future demand could be limited.
Currently, seven of the 11 of the S&P 500 sectors are trading lower with Energy and Financials both down over 1%. Real Estate, Industrials and Utilities are trading in the green. Crude oil trades lower while gold is higher. The dollar is higher while the yield on the 10-yr slips for the third day in a row to 1.73%.
A reminder to our readers that the format for the Midday note will change tomorrow as our partners at Briefing.com will begin to provide content. As always, please do not hesitate to contact our team on the Market Intelligence Desk to discuss trading in your stock and the market overall.
Unemployment numbers released by the U.S. Department of Labor reported a modest increase from last week, but still near record lows and below economist consensus. Reported Initial Jobless Claims rose to 211,000 vs 214,000 consensus. Reported Continuing Claims were also below estimates at 1.731 million claims. Continuing and initial claims were both revised ever so slightly higher for last week. Initial jobless claims continue to linger near all-time lows, indicating that employers are having a hard time finding skilled labor which could bode very well for next month’ jobs report.
Brian’s Technical Take
In yesterday’s session, the S&P 500 made a new all-time on an intraday basis but it closed at the bottom of the range and today gapped lower on the open. It remains just 1% off the highs which is certainly nothing to be concerned about, however, in the rates complex we are seeing the UST 10YR yield, now 1.72%, continue to roll over and is now in a trend of lower highs and lower lows. Given the somewhat extreme melt up in equities over the last three months, some participants are licking their chops in anticipation of a “healthy” correction over the near to intermediate term.
In deciphering where the broader market is headed, it is often helpful to look at the leaders based on the thinking that the generals will lead and the troops will follow. On that note, the semiconductors have been the poster child of this bull market since the lows of 2016. The SOX Index gained 37% and 38% in 2016 and 2017. After a relatively modest 8% decline in 2018, the SOX Index rebounded more than 60% in 2019. Already in 2020 the SOX is +4% and just yesterday made a new intraday and closing high. What’s not to like?
For starters the SOX index closed at the bottom of yesterday’s trading session and thus formed a common reversal pattern (shooting star). Today the SOX is modestly in the red and we simply need to see where it closes in order to determine if there is confirmation that a bearish reversal is underway. Given the short term daily period, it is too early to get concerned however tomorrow’s close could give a better idea if a near to intermediate term top is in.
Price has become stretched from the moving averages. The SOX Index is currently 22% above its 200-day moving average. Over the last eight years, it has never been more than 24% above its 200-day moving average. On this metric, the SOX is still well below the dotcom era when its price was more the 100% above its 200-day sma, bit nonetheless the current spread is still high.
Momentum is a mixed picture. A bearish divergence is emerging with the daily RSI peaking in late December and since has been making lower highs as the SOX index marches higher. On the other hand, the weekly RSI while is at an extreme 77 level, its highest since late 2017, however, overbought could continue to become more overbought.
At the end of the day it is too early to argue a near to intermediate term top is underway in the semiconductor space. Price is king and it remains 1% from all-time highs. The typical warning signs often seen in momentum measures and relative strength are not yet sounding the alarm. More evidence is needed beyond short term price patterns and bearish divergences, as well as the increasing inflows into safe haven treasuries. However, enough is there to keep this potential concern on the radar. Some may already be tightening their stops to protect gains, while others may already be using yesterday’s high as a risk level to for early short entries. There is more than one way to skin a cat and your style may vary from others. With a proper risk management system in place, investors and different time frames and styles can all be winners.
Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen-based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
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.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.