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Markets

U.S Equities: Relief Rally Has Some Legs

Thursday, February 15, 2017, 12:00 PM, EST

  • NASDAQ Composite +0.7% Dow +0.3% S&P 500 +0.4% Russell 2000 +0.09% S&P MID 400 +0.15%
  • NASDAQ Advancers: 1219 Decliners: 965
  • Today's Nasdaq Volume (100 day avg.) +11%

Nine out of eleven S&P 500 sectors are higher this morning, as US Equities are on pace for their 5 th consecutive day of upside and showing signs the relief rally has some legs. Halfway through the session, the major indices are seeing another day of wider than normal swings. At 11am, stocks had erased nearly all of their initial gains, only to bounce back 45 minutes later on elevated volume. US 2-year Treasury yield are slightly higher while longer termed notes are ticking down while the US Dollar Index has fallen to a 3 year low.

  • Technology stocks have been blazing a trail higher for US stocks over the past week, up 7% from last Thursday's close, helped by strong quarterly results. Cisco (+3.4%) has moved to a 17 year high, on the heels of strong guidance for sales and profit. The company has seen a strong demand by corporations to upgrading their out-of-date system/software, and Cisco's management believes they are in a good position to capitalize on that trend.
  • Today's economic data was inline with expectations and didn't appear to move the needle very much. January's PPI Index was up 0.4%, supported by a boost in energy prices and a weak US Dollar. These are also the main factors behind the YoY PPI surge, which is moving at its strongest clip since 2012. Unemployment numbers released by the U.S. Department of Labor continue to show demand in the U.S. Reported Initial Jobless Claims were in-line with expectations at 230,000 vs expectations of 228,000. Prior week was revised up slightly to 228,000 vs 221,000. Reported Continuing Claims were slightly worse than expected at 1.942 million claims vs estimates of 1.925 million.
  • Sentiment for U.S. manufacturing growth is still showing positive signs, though the 2 reports released today showed diverging numbers by region. The Philly Fed manufacturing survey increased to 25.8 in February from a January reading of 22.2 which is higher than expectations of 21. And the Empire State manufacturing survey posted a positive 13.1 which is down from both the January posting of 17.7 and below economist expectation of 17.5. Improving conditions are seen when the postings are above zero, a sign of growth in this sector.

Technical Take: Looking at the squiggles of the S&P 500

In the early part of today's session the S&P 500 gained as much as 19 points while moving well above the psychologically significant 2,700 level to a high of 2,719. However just as the bulls appeared to be gaining the upper hand, the morning exuberance has quickly faded as the large cap index has given back all its gains and is now flat. Today's high stalled just shy of the high made by the counter-trend rally (circled on the 30-min period chart) proceeding the first leg of the correction which began two weeks ago. This resistance level is today reinforced by the 50-day sma, now 2,722, and thus is now a key test in determining whether or not equities are in the early stages of resuming the prior uptrend, or if there is more corrective price action ahead. The 20-day and 50-day sma's are the near term battlegrounds for bulls to win before then marching on to fight it out at the prior all-time highs. Conversely bears could push prices lower setting up the possibility for a larger inverse head & shoulder pattern on a pullback to 2,600, or a double bottom pattern to retest the February lows, or possibly even lower lows. There are simply too many possible outcomes at this time before either bulls or bears can put a stake in the ground. This is what makes a market. Knowing your risk levels and time frame are critical for successfully navigating through the squiggles.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.