Credit: Shutterstock photoFriday, January 19, 2018, 11:45 AM, EST
- NASDAQ Composite +0.13% Dow -0.15% S&P 500 +0.22% Russell 2000 +0.69% S&P MID 400 +0.68%
- NASDAQ Advancers: 1287 Decliners: 813
- Today's Volume (100 day avg) +42%
A government shut down looms is a partial catalyst behind the US dollar (DXY Index) falling to a 3-year low, while US equities indices are mixed. The market breath suggests a bullish theme with strong shift towards Small/Mid Caps, Financials (90% of S&P Financial are up) and Consumer Staples (94% of S&P Con Staples are up). Declining oil prices are pulling Energy stocks lower and the S&P Energy Index is on pace for its first weekly decline in 2018. Today's elevated trading volume is related to monthly options expiring.
- With a shutdown of the Federal government set for midnight tonight we looked at market performance in the last shutdown, which lasted nearly three weeks back in 2013 from October 1 st - 16 th . At its worst the S&P-500 was down about 2.3% but by the time a deal was reached the index was up by 1.6%. By 45 days after the start of the shutdown the index was up 6% and continued higher through year's end.
- The IEA says US crude oil production should see 'explosive growth' this year due to higher prices. The agency upped is forecast for US production by 240k to 1.35m barrels per day. At a glance that may seem bearish for crude pricing, but the agency comments that Venezuelan production will likely fall by 270k per day this year given their economic troubles. Today crude trades about 1% lower and is set for its first weekly decline since mid-December, and that is partially due to higher US production but also to growing speculation that OPEC may agree to end the production agreement early.
- On the economic front, the University of Michigan Consumer Sentiment (94.4) and Current Conditions (109.2) unexpectedly fell in January. The sentiment indicator dropped to a 6 month low as big-ticket purchases might slow in 2018 by consumer, despite a stronger than expected holiday spending season. 70% of the polled consumer believe the new tax law will be positive for the economy, but they are uncertain when it will start to benefit the economy.
Technical Take: Is Market Breadth too Bullish?
More and more observers are pointing out the risk of a market "melt-up" and who can blame them? Equities are coming off a phenomenal 2017 and they are already off to one of the strongest starts ever so far in 2018. Along with price, long term momentum readings on the large cap Dow Jones and S&P 500 indices are making all-time record highs. And while the small and mid-cap names are "lagging" as a whole, their 15% gains in 2017 and 3.5% gains YTD in 2018 are more than respectable. Breadth measures are constructive with the advance decline lines for the Dow, SPX, and Russell 2000 all confirming the new highs in price. One other measure of breadth, the percentage of members making new 52-week highs , just recently joined the class of near all-time, however is this an indicator that sentiment, in the near term, is too extreme with everyone on one side of the boat? In back to back sessions last Friday and Tuesday, January 12 th and 16 th , the percentage of members within the S&P 500 making new 52-week highs reached 33% and 34%. Bloomberg tracks this statistic going back to August 1990 and there have only been three other occasions where the breadth of new highs reached this extreme level: May 2013 (39%), April 2010 (33%), and June 1997 (36%). In May 2013 the spike to 39% was followed by another week of gains before the SPX then corrected 7.5% over five weeks' time. The April 2010 event spike in new highs occurred right at on the YTD high in price for the SPX, before it then then rolled over and declined 17% over the following two months into early July. Conversely the third and final occasion in June 1997 was followed by a positive outcome where the SPX gained another 9% over the next two months. Thus with a sample size of only three, and the near term "positive/negative" outcomes split 2/1, there is not much of a reliable "signal" to act on in the short term. The common theme all three prior events do have in common is that the spike in new highs occurred in the midst of multi-year bull markets, and not at the end.
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.
