- FOMC Meeting announcement at 2pm has everyone on the sidelines
- U.S. Q3 Advance GDP was 1.9%, beating the 1.6% consensus estimate.
- Chile cancelled the APAC summit at which Trump and Xi were expected to sign a trade deal.
Stocks are flat as a pancake on light volume which is no surprise to anyone since almost all investors are waiting for the FOMC’s announcement on rates later. Even though the market implied probability of a 25 basis point rate cut shows 99.5% odds today, investors want confirmation from the committee itself.
Keep in mind that these rate cut odds move around quite a bit due to economic news. A month ago, the market assigned a 40% chance to an October 25 bp cut Also, the accompanying statement and subsequent press conference will contain the “real” news related to future Fed policy on rates.
The next Fed meeting is in December for those keeping score and the CME’s FedWatch tool indicates a roughly one in four chance of an additional 25bp cut. At the beginning of October, the same cut was a 50/50 proposition. With three rate cuts already in 2019 and some improving market sentiment and economic data, the market seems to be saying the Fed will pause in December to evaluate the data going forward.
In other news that surprisingly has not moved the market, Chile cancelled the upcoming APEC summit due to social unrest in the country. The summit was the expected location for Trump and Xi to sign a “Phase One” trade deal. The possibility of this signing has helped the market in recent weeks. My guess is that the market figures they can meet someplace else. Mar-a-Lago maybe?
Earnings season continued apace with results from Yum Brands, C.H. Robinson, GE and others. J&J is trading higher after news that tests on its baby powder show no asbestos. This presumed relief from litigation has JNJ up about 2%, adding roughly 19 points to the Dow.
In economic news Mortgage Applications rose 0.6% vs. a decline of 11-9% last week in what is generally a “noisy” data series. ADP showed in increase of 125,000 workers, better than the 110,000 estimated and possibly a positive signal going into the jobs report Friday. The big daddy of releases today was Q3 Advance GDP, which showed the economy expanded at a 1.9% rate, which was higher than the 1.6% consensus. A growth rate of 1.9% is certainly not amazing but even though the economy is slowing it does not appear to be tipping into recession. Slow growth and low rates seem to be OK as far as stocks are concerned.
Economically sensitive sectors like Energy, Materials, Industrials and Financials are all lagging today, with Utilities and Healthcare leading. HealthCare has had a pretty good month, up 4.7% with much of that gain occurring in the past two weeks.
Brian’s Technical Take
All eyes are on today’s FOMC so naturally we will take a look at what’s going on in Russia. Full disclosure: I couldn’t come up with a better intro so there you have it. Russia stands out today simply because the VanEck Vectors Russia ETF (ticker RSX) is October's top performing international benchmark (+6% MTD) on my screen of 32 global equity markets. I would add that 47% of the list (15/32) is trading at or within 1.5% of 52-week highs including Taiwan, Japan, Russia, Germany, France, and Australia. Not the type of performance you would expect to see in a global recession.
Like many global benchmarks, the RSX ETF peaked in January 2018 before then entering a prolonged period of consolidation. The 2018 top took place at the $24 - $24.50 range which previously acted as a clearly defined support level on numerous occasions spanning 2011 through 2014. As often is the case, prior support turned into resistance (see chart 1, monthly period).
It took 18 months but the RSX revisited the scene of the crime this past July only to be turned back again. That pullback bottomed at the 40-week sma and has formed what looks to be the “handle” of a common “cup and handle” continuation pattern, best seen on the weekly period chart (chart 2 below). Now for the third time in as many months the RSX is retesting the $24 - $24.50 “neckline” of the pattern. A breakout above this major resistance projects a minimum measured move to the $30 level, a gain of more than 23% from last sale.
The global economy has had a rough two years but price seems to be telling us that a recovery is well underway. With the extensive list of global benchmarks at or near 52-week highs, Russia looks poised to be the next breakout.
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.