US small caps running out of steam? Match feeling lovesick

Summary:

• Potential reversal signal for US2000

• Vix aiming for 3rd daily gain in a row

• Match shares to swoon

The recent trade in US indices has been fairly solid with new highs seen in the major benchmarks and despite a lower close yesterday they remain not far from their record peaks. The US small cap index (US2000 on xStation) has also enjoyed a good run higher in recent weeks but unlike its large cap peers it has failed to move up into uncharted territory. There are signs in the recent price action that this rally may be getting a little weary and running out of steam with the past couple of daily candlesticks printing shooting stars.

There are some signs of a possible top forming in the US2000 with the last 2 candles both showing advances higher intraday before closing back down near their lows. The region around 1620 remains potential resistance. Source: xStation

It’s not the busiest day on the economic calendar with some second tier data from the US coming in better than expected. Preliminary nonfarm productivity Q/Q fell less than expected to -0.3% vs a consensus forecast of +0.9% after a prior reading of +1.0%. At the same time preliminary unit labour costs Q/Q rose to +3.6% vs +2.2% expected with the prior reading revised up to 2.6% after 2.4% previously. The unit labour cost reading is the highest since the first quarter of 2014, driven in part by the fall in productivity and is suggestive of potentially rising inflation. This release isn’t typically a market mover but can be seen as potentially positive for the US dollar due to the perceived impact on inflation and therefore Fed policy.

The volatility index (VOLX on xStation) has been grinding lower for the past month or so as stocks have pushed higher but the past couple of days have seen higher closes with consecutive green candles printed after price dipped to the 14.15 level. Source: xStation

Shareholders in Match will be left feeling a little lovesick this afternoon with the stock called to begin down by around 13% after the company posted its Q3 earnings last night after the closing bell. Earnings per share of $0.51 beat the $0.42 expected but it is some concerns around future business activity that can explain the lower open with Q4 projections of $545-555M lower than the consensus estimate of $559.3.

There’s a possible head and shoulders formation playing out in Match and shares are called to openly sharply lower this afternoon after the latest trading update. Pre-market trade points to a starting price around 60.00. Source: xStation