Market Analysis

Russell 2000: Opened lower as Huawei executive got arrested but bounced back ahead of non-farm payrolls

US stocks plunged at open on yesterday, as the arrest of a top executive of Chinese tech giant Huawei for extradition to the United States generated worries of a rise in US-China tensions and potentially clouding China trade truce while sliding oil prices added to the pressure.

The arrest of the top executive at the Chinese technology giant Huawei threatens to open a gap between the United States and China only days after they agreed on a 90-day trade war truce in Argentina on Saturday.

The initial jobless claims in the US fell by 4K to 231K in the week ending December 1 compared to the previous week’s upwardly revised number of 235K and missing analysts’ estimates of a 225K drop. This indicator provides a measure of strength in the labour market. A larger than expected number indicates weakness in this market, which influences the strength and direction of the US economy.

The US ADP National Employment Report showed that the private sector employment fell to 179K jobs in December, comparing to the downwardly revised 225K registered in November and coming up short of 195K forecasted be market analysts. A higher than expected reading should be seen as positive for the US economy, while a lower than expected reading should be taken as negative for the US economy. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally adjusted basis. The data can also be considered as a prelude of tomorrows’ government nonfarm payrolls numbers.

Top Russell 2000 Gainers and Losers yesterday:

Remark Holdings Inc. (31.39%), Mdc Partners Cl A (31.20%), Klx Energy Services Holdings Inc. (27.42%) among the top Russell 2000 for the session.

Mimedx Group Inc. (-59.32%), Sanchez Energy Corp. (-42.32%), Tronox Inc. (-23.18%) were among the worst Russell 2000 performers of the session.

Since the beginning of 2018 until last Thursday close, the US index remains underwater with more than 4.0% loss and since the start of December, is taking a beating in excess of 4.5% loss. Nonetheless, the week is approaching the end with Russel 2000 registering a loss of 4.7% and on a daily basis closed in the red with almost 0.9% drop. Furthermore, the index remains in a bearish phase since mid-November.

On yesterday session, the Russell 2000 initially fell but found enough buying pressure near a daily support level at 1,442.3 to reverse and managed to close near the high of the day, however, closed within Wednesday range, which suggests being slightly on the bullish side of neutral.

The daily stochastic is showing a strong bearish momentum and crossed below the 50 midline.

November can be seen as a month of a sideways correction that managed to disrupt the strong downward trend that began in early October. The Russel 2000 began December with the left foot and slipped downward toward a daily support at 1,442.3 that is very close to the current year-to-date low at 1,409.8. However, yesterday price action developed a hammer pattern that occurs after a downtrend, possibly suggesting the market is attempting to determine a bottom. The signal does not mean bullish investors have taken full control but simply indicates that the bulls are strengthening.


UsaRus Dec ’18 Daily Candlestick Chart

UsaRus Dec ’18 Daily Candlestick Chart 


Watch out Today:

On Friday, December 07 at 13:30 GMT (08:30 ET) the US Department of Labour is scheduled to release the nonfarm payrolls for November, which are estimated by marker analysts to decrease to 205K from 250K registered in the previous month. Generally, a high reading is seen as positive for the USD, while a low reading is seen as negative, although previous months reviews and the unemployment rate are as relevant as the headline figure, and therefore market’s reaction depends on how the market assets them all.

At the same time on Friday, the US Department of Labour is scheduled to release the unemployment rate for November, which is forecast by marker analysts to come in at 3.7% unchanged compared to the previous month. A decrease of the figure is seen as positive for the USD, while an increase is seen as negative, although by itself, the number can’t determinate the markets move as it depends on the headline reading, the nonfarm payroll.


Written by Hugo O’Neill, External Analyst


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