Lower Levels

U.S. markets close lower as tech stocks continue to drag down the indexes, and options activity explodes .

Read in Browser   The Market Sum | Insight after the bell By Caleb Silver, Editor in Chief Thursday, September 17, 2020 Headlines 1. US markets sell off as tech leads stocks lower 2. US initial weekly unemployment claims top 860,000  3. The Nasdaq breaks below its 50-day moving average 4. Why Quadruple Witching Day may put a scare into markets Markets Closed Dow 27,901.98 −130.40 (-0.47%) S&P 3,357.01 −28.48 (-0.84%) Nasdaq 10,910.28 −140.19 (-1.27%) VIX 26.5 +0.46 (+1.77%) Bitcoin 10,942.28 −29.00 (-0.26%) US 10-Yr Yield 0.684 −0.003 (-0.44%)     Image courtesy GettyImages/Elena Levchenko/EyeEm Markets Today U.S. markets opened low and stayed that way all day as investors digested the Federal Reserve's message yesterday that the economy is still deeply compromised. We've known that all along, but the Fed's admission may have been taken as a sign that the central bank has done what it can, and we'll be in this low rate and low inflation environment until the employment picture improves.    Volatility jumped higher today, as the VIX climbed 1.4%. Expect more of that tomorrow as Quadruple Witching Day may bring Halloween to us six weeks early (more below).   The U.S. employment picture did improve a little bit in the past week as 860,000 Americans filed for first time unemployment claims, reversing a three-week trend of increases. There are still more than 30 million Americans receiving some form of unemployment insurance, but continuing claims—people who have been out of work for several weeks or more—did fall by nearly 900,000. We still have a long way to go.     PODCAST ALERT! The latest episode of The Investopedia Express is LIVE. On this week's podcast: Why the markets will remain under pressure Why American tech giants are cozying up to India's Reliance Industries A few good minutes with Schwab's Liz Ann Sonders Why you need to know about Quadruple Witching Day Sign up below or wherever you get your audio podcasts and please give it a listen. We'd love you to rate and recommend it if you think it is worthy. Headlines: The U.S. Treasury Department, TikTok owner ByteDance Ltd., and Oracle have tentatively agreed to terms for Oracle's bid for the U.S. operations of the social media service, according to Bloomberg. Treasury Secretary Steven Mnuchin sent Bytedance a revised terms sheet late Wednesday and the company and Oracle accepted it, according to the report. CNBC reported that TikTok may hold an IPO for its U.S. business once the deal is signed, and Oracle and Walmart will be investors. Top executives at major airlines, including American, Southwest, and United, met Thursday with White House officials as the companies and their employees make a final push for more government aid. Airlines agreed not to furlough or lay off employees through the end of September in exchange for $25 billion as part of a broad pandemic relief package last spring. With airline capacity at less than 30%, airlines have threatened mass layoffs in October without more government support. The Securities and Exchange Commission is strengthening protections against fraud and manipulation in the lightly regulated market for over-the-counter stocks. On Wednesday the SEC approved a change to its rules that would largely prevent brokers from quoting prices for OTC stocks unless the companies issuing such shares released up-to-date financial information to the public. The European Automobile Manufacturers Association said sales fell 18.9% in August, following a July decline of 5.7%. A resurgence of the virus over the summer crimped sales as demand for passenger cars tumbled 32%, with 6.1 million new cars registered across the region in the first eight months of the year. That was 2.9 million fewer than the same period a year ago.  The Bank of England left interest rates unchanged and maintained its current level of asset purchases, but it warned that the outlook for the economy remains "unusually uncertain." All members of the Monetary Policy Committee (MPC) voted to keep the main lending rate at 0.1%, with the central bank having cut rates twice from 0.75% since the beginning of the pandemic. The MPC also voted unanimously to maintain target for the total stock of its bond purchases at £745 billion ($960.8 billion). Taiwan's central bank kept borrowing costs unchanged, reflecting confidence in an economy where the stock market is near a record high, exports are booming, and the pandemic is largely under control. Policymakers kept the benchmark interest rate at 1.125%, as expected. The central bank raised its forecast for economic growth this year to 1.6% from the 1.5% it forecast in June.     Photo courtesy FederalReserve Nasdaq Falls Through 50-Day Moving Average The two-week downtrend for technology stocks has pushed the Nasdaq Composite below its 50-day moving average in recent days for the first time since February. It was a remarkable streak for the index, which has produced the best returns of any on the planet since March.    Technical analysts look at moving averages to help smooth out price data by creating a constantly updated average price. You can use any time frame to look at a moving average. Longer-term investors tend to look at 50-day and 200-day moving averages to determine trends.   A moving average can also act as support or resistance. In an uptrend, a 50-day, 100-day, or 200-day moving average may act as a support level. This is because the average acts like a floor (support), so the price often bounces up off of it. In a downtrend, a moving average may act as resistance; like a ceiling, the price may hit the level and then start to drop again.   That's starting to happen with the Nasdaq Composite. We've seen it bounce off of support levels in the past two weeks, but the 50-day moving average trend has been broken, and that has a lot of investors paying attention.     This is Not Uncommon—Especially for the Nasdaq High flying indexes and stocks are rife with volatility, even during less-volatile times. But they are even more prone to this kind of behavior during recoveries from corrections. As Justin Timmer of Fidelity points out, the 1998–2000 parabolic period for the Nasdaq was chock full of with corrections of 10–15%. As the chart above shows, there were seven of them from the October low to the 2000 peak. The 2009–2010 recovery also had its share of corrections amid the rebound.   Growth investors need to have the stomach for the downturns if they want to bask in the upside. Beware the Witches Tomorrow Tomorrow is a Quadruple Witching Day, which always brings some excitement to the markets. Quadruple witching refers to a date on which stock index futures, stock index options, stock options, and single stock futures expire simultaneously. While stock options contracts and index options expire on the third Friday of every month, all four asset classes expire simultaneously on the third Friday of March, June, September, and December.   Investors either close out those positions or roll them forward. As a result, quarterly expirations of options create huge volume in the stock market as brokers on the other side of the options buy or sell securities into the expiration.     Chart courtesy OCC The Options Market Is on Fire As we've mentioned, the equity options market is on fire right now. You can see it in recent volatility measurements, and you can also see it in individual equities. The Options Clearing Corporation reported that Aug. 2020 total cleared contract volume was 615,972,402 contracts—the third highest month on record and up 28.7% from Aug. 2019. It was also the highest August monthly volume in OCC's history. Year-to-date average daily cleared contract volume through August was 28,466,064 contracts, up 44.7% from Aug. 2019.   Expect a lot more contracts to clear tomorrow when the witches come out. More News: Investing in Apple Stock (AAPL) How Starbucks Makes Money: Most Revenue Comes From Americas, Beverages Top Casino Stocks for Q4 2020 SPONSORED BY FIDELITY INVESTMENTS Fidelity's Unique Career Opportunities With extensive training and rewarding work, Fidelity stands out when it comes to career development. Here are some of the key benefits they offer employees. Learn More  > (charts courtesy YCharts)     Shares of General Electric are up by over 4% on momentum from yesterday's assurance by the technology company's CEO that the Q2 earnings results were the worst GE would experience in 2020. Hologic's stock price rose by 4% after the medical technology company received a consensus recommendation of Buy.     Shares of Illumina are down by over 7% as the biotech company remains in talks to acquire its spinout company Grail, a cancer blood test startup now worth $8 billion. Southwest's stock price fell by over nearly 4% after the airline grounded 130 planes upon discovering discrepancies in aircraft weight data. Word of the Day Moving Average In statistics, a moving average is a calculation used to analyze data points by creating a series of averages of different subsets of the full data set. In finance, a moving average (MA) is a stock indicator that is commonly used in technical analysis. The reason for calculating the moving average of a stock is to help smooth out the price data by creating a constantly updated average price. By calculating the moving average, the impacts of random, short-term fluctuations on the price of a stock over a specified time frame are mitigated.     Photo Credit: Georges De Keerle/Contributor Today in History Sept. 17,1998:  Stock markets took a worldwide pounding after Federal Reserve Chairman Alan Greenspan told Congress that there are no plans for coordinated global interest rate cuts. Despite the Russian debt crisis, Greenspan said he sees no immediate need to relieve the "peripheral gusts" of "financial turmoil." The Dow Jones Industrial Average slumped 216.01 points, or 2.67%, to close at 7873.77; the NASDAQ loses 2.58%, while Japanese stocks fell 2.4%, German stocks dropped 3.9%, and the French market slumped 5.5%. Analysts were uniformly pessimistic, but in three weeks the U.S. stock market bottomed out and then headed straight up. The Wall Street Journal, Sept. 18, 1998, pp. C1, C2, C7. Want more Investopedia market news? Sign Up for 'The Express' Get more market insights and financial headlines before the opening bell. Make your mornings more enjoyable, for free. Check it out » How can we improve the Market Sum? Tell us at marketsum@investopedia.com Enjoy the Market Sum? Copy and share the link below to invite friends to sign up https://link.investopedia.com/join/53o/00-fwd-marketsum CONNECT WITH INVESTOPEDIA Email sent to:  mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.   114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC. All Rights Reserved | Privacy Policy