- NASDAQ Composite -0.06% Dow +0.11% S&P 500 -0.10% Russell 2000 +0.38%
- NASDAQ Advancers: 1295 Decliners: 1025
- WTI Crude +1.2%, Gold -1.4%, 10yr Treasury 1.873%
- Market Volume (First Hour): +11.3%
- ISM Non-Manufacturing unexpectedly rose from 52.6 to 54.7
- JOLTS Job Openings decline from 7301 to 7024
- Market US Services PMI falls from 51.0 to 50.6
- Market US Composite PMI falls falls from 51.2 to 50.9
- US September Trade Balance falls from $55.0 billion to $52.5 billion
The Nasdaq, S&P and Dow set new record highs yesterday and the Russell 2000 closed within 8% of its record. Along with the new highs are higher volumes, for the first time in several weeks market volumes have been above average for three consecutive sessions. With the markets higher for three and a half weeks or so come some concerns that the market could be getting overbought, and that is a factor today with the opening slightly positive. The major indices moved to session highs immediately following better than expected ISM data but quickly reverted to flat/slightly positive. Optimism surrounding US-China trade is get credited with improving investor sentiment and overnight various news reports suggested the both the September and December tariffs could get cancelled, although not confirmed.
The market got a lift from ISM Non-Manufacturing data, which rose to 54.7 in October. That beat the expected 53.5 and shows a nice turnaround after hitting a three-year low in September. The gauge of new orders improved as did supplier deliveries, which rose to an eight-month high. Not all is perfect though, new export orders fell to a two-year low and the import index fell deeper into contraction at 48.5. Prices paid, inventories and backlogs also declined. Today’s ISM data suggested a stable to slightly improved business environment although growth remains sluggish. The ISM data contrasts to Markit’s US Service and Composite PMI, both of which declined. Services fell to 50.6 in October from 51.0 in September, and the Composite index fell to 50.9 from 51.2. As with ISM, the new orders gauge declined as did the new business component. Taken as a whole, the ISM and Markit data reflect a tenuous economic climate neither in recession or strongly growing, and recently lowered interest rates have simply not had enough time to change that narrative.
Crude oil is trading higher for a third day, that despite in its annual World Oil Outlook OPEC lowering both its short and long term demand outlook. Demand will still grow, albeit at slower “relatively healthy rates” due to a softer global economy and trade barriers. Still, OPEC’s Secretary-General Barkindo says “the picture is looking brighter…2020 has an upside potential.” However the bigger issue facing the oil market is supply, or the potential for oversupply. The cartel cut expected demand for its oil by 16% through 2023 amid surging supply from the US, which it expects will grow by about 40% by 2025. Adding to the supply pressure is growing output from Brazil, Guyana and Kazakhstan. OPEC officials are set to meet next month to discuss among other things further output reductions amid reports that some OPEC+ members including Russia have not met their pledged cutbacks. It should make for an interesting 2020 in that the Saudi’s want higher prices to support Saudi Aramco’s IPO, yet if prices inch higher OPEC+ production seems likely to grow regardless of any agreements for the opposite.
The sectors are mixed at midday with REITs (-1.7%), Healthcare (-.08%), Utilities (-0.6%) and Technology (-0.3%) the laggards. Energy (+0.4%) and Financials (+0.4%) are leading. Elsewhere, gold is down 1.5%, extending a three-day slide. The dollar index is 0.4% higher and treasuries are firmer.
Brian’s Technical Take
After gaining 2.3% in each of the prior two sessions, the Dow Jones Transportation Index (TRAN) is up another 1.6% today due in part to the better than expected PMI services data. The trannies have now rebounded +15% off last month’s lows, a clearly defined five-month support level, and today is just the latest industry to register a new 52-week high.
This week’s gains have broken out from a cluster of technical resistance representing (1) a declining trend line originating from the all-time high made in September 2018, and (2) ten month, horizontal resistance at the ~11,000 level. The corrective price pattern over the prior 13-months has a similar look to the pattern it formed during the 2015-2016 correction (inverse head & shoulder), reaffirming the fractal nature commonly evident throughout the markets.
Momentum is strong with the daily and weekly RSI’s at 67 and 61. The latter weekly RSI is on the cusp of breaking out above its own six month resistance level.
The S&P 500 is on pace to register its third consecutive quarter of negative earnings growth, however it is said that price leads fundamentals. Over the last few weeks we have seen bullish breakouts in the primary large cap equity benchmarks (INDU, SPX, NDX); financials, healthcare/biotechs, materials, industrials, communications, and technology; as well as numerous global benchmarks (Brazil, Germany, Japan, Russia).
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.