Traders Strike Hesitant Tone Before Next Week's Expected Rate Hike

Friday, March 16, 2018, 10:55 AM, EST

  • NASDAQ Composite +0.32% Dow +0.44% S&P 500 +0.44% Russell 2000 +0.61%
  • NASDAQ Advancers: 1377 Decliners: 833
  • Today’s Volume (100 day avg) +18.5%

The market opened modestly higher this morning same as it has each day this week. We seem to be in a pattern of positive opens that fade by the close, so perhaps that changes today. It is a quad-witch expiration day so volumes are elevated. The hesitant tone comes amidst an expected rate hike next week, looming tariffs on China, and growing uncertainty in DC, and that is reflected in the market with the R2K index outperforming the other major indices for the week and MTD. All sectors are higher except for REITs (-0.2%), and for the week most sectors are in the red with Materials (-2.8%) and Industrials (-2.0%) notably underperforming on the stalled infrastructure plan. The dollar is flat, gold off 0.1%, WTI crude oil up 0.1% and the yield on the 10-yr rises to 2.85%.

  • Is it Halloween or St. Patrick’s Day? Today is a “quad-witch” options expirations day during which stock futures, stock options, index futures & index options contracts expire. Also S&P rebalances certain of its funds including the S&P 500 (large cap), S&P 400 (mid cap) and S&P 600 (small cap). Quad witch Fridays tend to be among the busiest trading days of the year and S&P Dow Jones predicts the rebalancing could force $23.1 billion in trades, up from around $18.6 billion at this time last year. The last quad witch on December 15th was the highest volume trading day for equities in 2017 with 10.7 billion shares trading on the consolidated tape!
  • Housing starts slowed in February, but the data is a little misleading. Construction on single-family homes rose 2.9% and fell 26.1% on multi-family homes, but that decline comes on the heels of an unusually strong January. Taken together the data points to a healthy construction market with the number of completed homes reaching 1.32 million the highest in 10 years.
  • Industrial output gained momentum in February with Factory Order jumping 1.2% after a revised +0.2% decline in January, and Industrial production surged 1.1% after a revised -0.3% drop. Automobiles, oil & gas drilling, and mining all gained with utility output fell 4.7%.
  • Nasdaq welcomes three IPOs today: Zscaler (ZS) trades with a 65% gain, Senmiao Technology (AIHS) trades with a 45% gain, and Tiberius Acquisition (TIBRU). Congratulations to all!

Technical Take: Green and Gold Marching in Opposite Directions

Spring time is near, March Madness is here, and St. Patrick’s Day is less than a day away. So put on your green’s, root for your teams, the good weather is soon here to stay. In the capital markets good fortune has recently returned to the greenback which we noted in yesterday’s BLOG was carving out a potentially large bullish reversal pattern. Today the greenback has broken out above its 50-day sma, on pace for its first close above it in three months, and is now headed towards the more important 90.57 resistance line. Above there and the double bottom reversal is “officially” triggered which measures a minimum upside move to 92.56. A strengthening dollar has big implications in global markets, in particular spot gold where there is a strong inverse correlation of -0.77 between the two asset classes. As the greenback is on the verge of its upside breakout, gold conversely is tested critical support at $1,312 – 1,316 which has been a clearly defined support zone over the prior nine weeks. A breakdown below this support carries a minimum measured move down 3.5% to 1,267. While that percentage decline may seem modest to some, the impact on the gold miners ETF (ticker GDX) could be far greater given the bearish TECHNICAL SETUP we highlighted back on March 1.

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.

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.

Brian Joyce, CMT is a 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).

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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