NASDAQ Composite (.IXIC) Leads Market Higher, Remains In Focus
The Nasdaq Composite and S&P 500 clinched closing records on Monday as investors took heart in mostly solid U.S. fourth-quarter corporate earnings and looked beyond concerns about the coronavirus outbreak’s potential disruption to global supply chains.
What drove the market?
“Earnings seem to be the story,” Sahak Manuelian, managing director of equity trading at Wedbush Securities, told MarketWatch. “They have been fairly strong, with numbers coming in slightly better and guidance is looking OK too. This market is really hanging in there.”
The World Health Organization warned Monday that the spread of the coronavirus to people who have not visited China could be “the spark that becomes a bigger fire,” while urging nations to fight the epidemic together.
Expectations for the Federal Reserve to prop up the economy with easy financial conditions if the coronavirus spills over into the U.S., also helped to support stocks. Investors say a continuation of ultraloose monetary policy could explain the disconnect between depressed long-dated bond yields, a sign that investors are piling into haven assets, and records in major equity benchmarks.
“Coronavirus fears remain at the top of investors’ minds,” wrote Arnim Holzer, macro strategist for EAB Investment Group, underscoring that bonds seem to be confirming those concerns more than equities. “The Fed’s liquidity support can help to support valuations,” Holzer said of stock prices. But added that “ultimately muted Asian GDP growth and earnings expectations” will be important to watch.
Chinese factories started to reopen on Monday, but local government efforts to limit the spread of the virus has led some businesses to stay closed. A prolonged closure could exacerbate the nation’s slowdown and upend global supply chains that rely on Chinese manufacturers to keep retailers stocked.
China’s health ministry on Monday said another 3,062 cases had been reported over the previous 24 hours, raising the mainland’s total to 40,171. The death toll grew by 97 to 910, surpassing the 774 attributed to the severe acute respiratory syndrome, or SARS, a 2003 viral outbreak that originated in China.
“As long as investors don’t perceive a threat to corporate earnings and the U.S. economy from the virus, then the market can continue to trade higher on better economic data and better-than-expected earnings,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told MarketWatch in an email.
Meanwhile, the director-general of the World Health Organization warned Sunday that countries outside of China should be prepared for the spread of the coronavirus to accelerate.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 9,855.38.
The projected lower bound is: 9,440.62.
The projected closing price is: 9,648.00.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.
An engulfing bullish line occurred (where a white candle’s real body completely contains the previous black candle’s real body). The engulfing bullish pattern is bullish during a downtrend. It then signifies that the momentum may be shifting from the bears to the bulls.
If the engulfing bullish pattern occurs during an uptrend (which appears to be the case with NASDAQ COMPOSITE), it may be a last engulfing top which indicates a top. The test to see if this is the case is if the next candle closes below the top of the current (white) candle’s real body.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 94.6150. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 12 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 68.67. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 11 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 121.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 12 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
NASDAQ COMPOSITE closed up 107.877 at 9,628.389. Volume was 2% below average (neutral) and Bollinger Bands were 7% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 9,396.58 9,051.85 8,301.67
Volatility: 19 14 19
Volume: 588,516,096 588,250,624 558,428,608
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NASDAQ COMPOSITE is currently 16.0% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .IXIC at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .IXIC and have had this outlook for the last 78 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.