Credit: Wednesday, January 10, 2018, 10:50 AM, EST
- NASDAQ Composite -0.55% Dow -0.20% S&P 500 -0.20% Russell 2000 -0.32% S&P MID 400 -0.35%
- NASDAQ Advancers: 816 Decliners: 1389
- Today's Volume (100 day avg) +15%
For the first time in 2018, US equities are moving lower in the early going. A suggestion that China may purchase less U.S. Treasury debt appears to be weighing on sentiment as 10-year Treasury yields broke 2.50% yesterday and are heading higher. Financials and Energy stocks are holding onto gains, while all other sectors are in the red with rate sensitive Real Estate the weakest performer, -2%.
- Bloomberg reported officials in China believe US Treasuries have become "less attractive" and some officials have recommended slowing or halting purchases of U.S. Treasury Bonds. The report suggests trade tension with the United States might be reason behind the comments. China holds the largest foreign exchange reserves so a hiccup in buying might cause additional pressure to the debt markets. Still, the treasury market is deep so a slowing of purchases would not be nearly as disruptive as outright sales. It's interesting to note, the timing behind these comments correspond with a surge of global debt to hit the markets. Yesterday, the BOJ joined other leading central banks, scaling back their asset purchasing stimulus, which caught investors by surprise.
- The EIA said Crude Oil (-4.95m barrels) and Gasoline (+ weekly inventories) were in line with expectations. This morning's report showed the 8 th straight week of Crude Oil declines, as the Energy sector has soared during that period, up ~13% since mid-November. Unseasonably (some would say unreasonably) cold temperatures throughout the US has oil bulls cheering the price per barrel ($63.57) moving to its highest level since May 2014.
- On the economic front, Wholesale Inventories (+0.8%) and Sales (+1.5%) in November were higher than anticipated, but the larger than expected Sales vs Inventories margin might suggest wholesalers are gaining back pricing power. Weekly Mortgage Applications were up 8.3% during the first week of year and marks the 2nd largest weekly jump over the past year.
Technical Take: Semiconductor's Stalling at Secular Highs
The semiconductor industry got off to one of the strongest starts in 2018 with the Philadelphia SOX Index (SOX) gaining 6.9% over the first five sessions. Those gains carried the SOX Index into stiff resistance at its 52-week high, 1,342, and it is now correcting backwards in price. Today the SOX Index is leading to the downside with a decline of (2%) which over the near term appears to be healthy corrective price action, however the longer term outlook may suggest bigger forces are in play. Over the last two years ending 2016 and 2017, the SOX Index gained a phenomenal 36.6% and 38.2%. The high at 1,342 came within 1.5% of the all-time high, 1,362, which was made at the peak of the Dotcom bubble in March 2000. This should be seen as a major pivot level and thus an expected level of resistance which could be in place for more than a period of days or weeks. For comparison the Nasdaq Composite Index also made its Dotcom bubble highs in March 2000 and did not return to that level again until April 2015 (give or take 0.2%). The Composite then spent the next 15 months consolidating before it made its first monthly close above its March 2000 high. While market dynamics are clearly not the same today as they were in mid-2015, from a pure price perspective an argument could be made the semiconductor industry needs a longer period of consolidation, particularly given the gains over the last two years, before breaking through a near 18-year high. The other side of the argument which must also be considered is the long term momentum, as measured by the monthly RSI, which recently peaked at the same time as the price of the index. Thus no bearish divergence which is typically seen, but not always, at major highs. Thus it is certainly possible the long term momentum carries price to a higher high as the RSI makes a lower high. Two very binary outcomes, but this is what makes a market.
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.
