26 Jul 2013 AMC

26 Jul 2013 AMC

Market Summary 

Market Internals

The Nasdaq closed up 8 (+0.22%) at 3613, the S&P 500 closed up 1 (+0.08%) at 1692, and the Dow closed up 3 (+0.02%) at 15559. Action came on below average volume (NYSE 597 mln vs. avg. of 775; NASDAQ 1653 mln vs. avg. of 1667), with decliners outpacing advancers (NYSE 1456/1594, NASDAQ 941/1538) and new highs outpacing new lows (NYSE 109/43, NASDAQ 144/21).

Relative Strength: 
Greece-GREK +1.95%, Peru-EPU +1.45%, Gold Miners-GDX +1.35%, Japanese Yen-FXY +1.01%, Metals and Mining-XME +1.00%, Social Media-SOCL +0.97%, Coal-KOL +0.94%, Thailand-THD +0.90%, Spain-EWP +0.78%, Sugar-SGG +0.77%.

Relative Weakness: 
Copper-JJC -2.71%, Japan-EWJ -2.32%, Natural Gas-UNG -2.22%, Base Metals-DBB -1.87%, Coffee-JO -1.64%, Rare Earths-REMX -1.51%, Chile-ECH -1.47%, Turkey-TUR -1.32%, Pacific Index-VPL -1.03%, Germany-EWG -0.79%.

Leaders and Laggards

Sector Performance (% change of the day): Health Care (+0.65%), Telecom (+0.44%), Consumer Discretionary (+0.37%), Utilities (+0.36%), Tech (+0.12%), Consumer Staples (-0.05%), Financials (-0.12%), Industrials (-0.25%), Energy (-0.28%), Materials (-0.37%).

Technical Updates

Commentaries 

Dow +0%, S&P 500 +0.1%, Nasdaq +0.2%, Nasdaq 100 +0.5%, S&P 400 -0.5%, Russell 2000 -0.5%

It was a tough start to the day, but an otherwise smooth end as the major indices overcame large losses early to end the session little changed but in positive territory.

A 3% decline in the Nikkei set the tone for a negative beginning, as did a series of mixed earnings reports that featured notable misses from Amazon.com (AMZN 312.01, +8.61) and Expedia (EXPE 47.20, -17.80), and a positive earnings surprise from Starbucks (SBUX 73.36, +5.19).

At their lows of the morning, the Dow, Nasdaq, and S&P 500 were down 150, 24, and 14 points, respectively. Those lows were established shortly after a headline crossed saying the IMF felt the interest rate volatility in the US could have an adverse global effect and that economic risks remain tilted to the downside.

Sellers kept control of things through the first 90 minutes of trading, but then ceded their guiding hand just as suddenly to buyers for the rest of the day as the major averages trended higher for the remainder of the session.

There wasn't a specific news catalyst for the turnaround. Buyers simply stepped up to stop the bleeding. Their resolve was on full display in Amazon.com, which came storming back from opening losses to end the day 2.8% higher.

Amazon's about-face seemed to breathe new life into the market, which also keyed off the relative strength of the Dow Jones Transportation Average (+0.5%). The transport stocks had come under fire of late, so, when they turned, it prompted some additional buy-the-dip action in other areas.

The recovery off the lows wasn't necessarily fueled by a single sector that was undeniably strong. Rather, it was paced by every sector getting stronger after an initial bout of weakness. The health care sector (+0.7%) took the honors as the best-performing sector in the S&P 500 today while the materials sector (-0.4%) brought up the rear.

The biggest moves of the day were reserved largely for story stocks of note like the ones mentioned above, as well as others like Activision (ATVI 17.46, +2.28), which issued positive earnings guidance and said it would be buying back 429 mln shares from majority shareholder Vivendi. That move, it said, would make Activision an independent company again. Similarly, momentum favorite Tesla (TSLA 129.39, +5.32) caught a bid on reports that Deutsche Bank upgraded the stock to Buy from Hold.

There was a single economic release today and it was the final reading for the University of Michigan Consumer Sentiment report for July. It was revised up to 85.1 from 83.9. That was better than the Briefing.com consensus estimate of 84.1, although the headline at the time did not help the market, which moved to new session lows 35 minutes after the release.

Notwithstanding the decent-sized trading range today, participation was on the light side with just 597 mln shares traded at the NYSE. The lack of participation was understandable considering next week promises to be an event-filled week with the release of over 100 earnings reports from S&P 500 companies, the advance estimate for Q2 GDP, the FOMC meeting, the ECB meeting, and the July employment report.

Commodities

Treasuries

10-Yr:+06/32..2.558%.. USD/JPY:98.20.. EUR/USD:1.3279
Treasuries Post Weekly Losses: Treasuries fell as a light week of data once again favored the bears. The complex posted its first weekly loss in three as new home sales (497K actual v. 483K expected), durable orders (4.2% actual v. 0.6% expected), and Michigan Sentiment -- Final (85.1 actual v. 84.1 expected) all topped estimates while new home sales (5.08M actual v. 5.28M expected) and durable orders --ex transportation (0.0% actual v. 0.3% expected) missed expectations. Traders also had to grapple with next week's FOMC meeting, where it is expected the Committee will provide further clues as to if/when the tapering of the Fed's asset purchase program will begin. Currently, it is anticipated the September meeting will be the point at which the Fed begins to scale back its program. 

 Selling had the biggest impact on the belly of the curve, with the 7-yr yield climbing 11 bps to 1.982%. A 9 bp advance over the course of the week ran the 10-yr yield up to 2.561% at Friday's cash close, and has the benchmark yield equidistant between key support and resistance. Traders continue to watch 2.450% in the 10-yr while also keeping a close eye on resistance in the 2.650% region. The wings of the curve fared better with the 2-yr yield ticking up 1 bp to 0.316% and the 30-yr yield climbing 7 bps this week to 3.618%. This week's selling swung the yield curve steeper, with the 2-10-yr spread widening to 225 bps. Precious metals saw weekly advances as gold rallied $12 to $1332 and silver climbed $0.10 to $20.00. Monday's data is limited to pending home sales (10).






On other news.... 



Nikkei slides 3.0% and sets negative tone for the open

Amazon.com overcomes early losses and invites buy-the-dip action for the broader market

Participants showing reserve in front of big week next week that includes the advance Q2 GDP estimate, the FOMC meeting, and the July employment report

IMF notes economic risks remain tilted to the downside and that interest rate volatility in US could have an adverse global effect

Transports exhibit relative strength




Currencies 

The Dollar Index holds on session lows near 81.55, and remains on track to post its lowest close in over a month. Today's weakness has the greenback testing its 200-day moving average, and off almost 4.0% from its early July highs. Click here to see a daily Dollar Index chart.

·         EURUSD is +10 pips at 1.3285 as trade rallied for the fifth time in six days. Early reports out of the region suggest Greece will receive its next EUR2.5 bln in aid, which is due on Monday, as the country continues to live bailout check to bailout check. The single currency has added roughly 500 pips since its early July lows with 1.3400 setting up as key resistance. 

·         GBPUSD is +10 pips at 1.5390 as sterling looks for its eighth gain in nine sessions. Today's bid has action probing resistance in the 1.5400 region, with a breakout leading to a possible test of the 200-day moving average (1.5570). British data out Monday includes net lending to individuals and CBI Realized Sales. 

·         USDCHF is -25 pips at .9270 with trade breaking down to a five-week low. Participants will be watching the .9200 area over the coming days as trade is destined to test key support in the region. 

·         USDJPY is -120 pips at 98.05 with today's selling pushing the pair below both its 50- and 100-day moving averages. Today's slide has broken the 99.00/101.00 range that had been in place since the beginning of July with trade now on track to post its lowest close in a month. Japan's retail sales will cross the wires Sunday evening. 

·         AUDUSD is +20 pips at .9255 as trade continues to struggle near .9300 resistance. The hard currency has pressured that level several times over the past month, but has been unable to post a close above the mark. Further resistance should come into play near the 50-day moving average (.9375). 

·         USDCAD is -10 pips at 1.0275 as trade probes the 100-day moving average. Traders continue to monitor this key support level, which should see additional help near 1.0200 from the trendline off the September lows. The pair has shed close to 350 pips since crossing 1.0600 at the beginning of the month.   

Weekly Analysis
Week 38



Technical Updates




 

 
Briefing's Commentaries

Weekly Wrap
The S&P 500 staged a notable comeback effort on Friday, but missed its fifth straight winning week by the hair of its chinny chin-chin.  Specifically, it came up 0.45 points shy of closing the week higher.  The Dow Jones Industrial Average, on the other hand, eked out a 0.1% gain for the week while the Nasdaq added 0.7%.

It was a huge week for earnings reporting as 157 S&P 500 companies and eight Dow components reported their quarterly results.  Per usual, there were a plethora of positive earnings surprises, but once again, it was made clear that companies are still finding it difficult to grow their top line.

The latter point notwithstanding, the S&P 500 did not bow to selling efforts.  At the same time, it did not launch to new highs above 1700.  It essentially went sideways in a consolidation trade after gaining nearly 9.0% over the preceding four weeks.  The best-performing sectors this week were the health care (+1.1%) and the information technology (+0.9%) sectors while the worst-performing sectors were the industrials (-1.0%) and energy (-0.8%) sectors.

There were some barriers-to-buyer entry if you will.  The lackluster top-line growth was just one of them.  Other restraints included:

·         The report that existing home sales declined 1.2% from May

·         A report that durable orders, excluding transportation, were unchanged

·         A federal indictment of SAC Capital Advisors that raised fairness issues for retail investors

·         Increased chatter, and a building sense of uncertainty, regarding who will succeed Ben Bernanke as Chairman of the Federal Reserve

·         A bump in long-term interest rates

·         The underperformance of the Dow Jones Transportation Average, which declined 1.7% for the week

·         The weak showing by the SPDR S&P Homebuilders ETF, which dropped 3.8% despite the report that new home sales hit their highest level in June (497,000) since May 2008

·         A 3.2% decline in Japan's Nikkei 225; and

·         Ongoing concerns about a slowdown in China

Trading volume was not particularly heavy this week, although there was an exception on Thursday when more than 2.0 bln shares traded at the Nasdaq following Facebook's (FB) blowout earnings report, which sent that stock soaring 30%.  Facebook alone accounted for 18% of the share volume at the Nasdaq that day.

The overall lack of conviction was understandable, though, considering the week ahead is going to be filled with market-moving items, including the advance estimate for Q2 GDP, the FOMC meeting, the ECB meeting, and the July employment report.  In the midst of all of that, over 100 S&P 500 companies will be reporting their results.

The market may have looked and acted somewhat lazy this week, but that shouldn't be the case in the week ahead as the aforementioned items should dictate whether the S&P 500 breaks out above 1700 or gives way to more concerted profit-taking interest. 

Next Week In View

Monday

·         Gartner Catalyst Conference

o    Scheduled to appear:  IBM, NFLX, AMGN, XRSC, INTC, CTXS, SPLK

·         CompTIA ChannelCon

o    Scheduled to appear: ALTV

·         Japan Jobless Rate at 18:50

Tuesday

·         Eurozone Consumer Confidence & CPI data (released overnight)

·         Keefe, Bruyette and Woods (KBW) Community Bank Investor Conference

o    Scheduled to appear: FBNC, DCOM, CNBC, MBVT, WBCO, PPBI, PEBO, CPF, WSFS, CTBI, MBWM, HTBK, LBAI, FCF, WASH, FDEF, RNST, FBP, CCBG, ABCB, SBSI, TCBK, ORIT, FCBC, FLIC, SNBC, FBNK, UBSH, SCBT, SYBT, NBBC, MSL, EVER, ANCX, COLB, UBNK, EVBS, PRK, FISI, VPFG, MCBI, EBSB, UCBI, CVBF, GABC, BBCN, OCFC, FRME, LKFN, BMRC, FFBC, BMTC, COBZ, EFSC, GBNK, BANR, WSBC, PBNY, STL, SBCF, STSA, HBNC, SFNC, BNCN, AMNB, BOFI, CHFC, STBA, BBNK, HFWA, FIBK, CFNL, RCKB, FFIC, BHLB, BANC, OKSB, FBIZ, UMPQ, PB, SFST, PCBK, CRFN, STBZ, YDKN, HBOS, MFSF, LION

·         Tri-State Telecommunications Conference

o    Scheduled to appear: CLFD

Wednesday

·         Eurozone Unemployment Rate (released overnight)

·         Credit Suisse Gaming, Lodging, Leisure and Restaurants Conference 

·         FOMC Policy Update (No Press Conf or Econ Projections) at 14:00

Thursday

·         Eurozone & China PMI released overnight)

·         BoE Rate Decision at 7:00

·         ECB Rate Decsision at 7:45

Friday

·         Mylan (MYL) Investor Day

·         ACOG Wisconsin Annual Meeting

o    Scheduled to appear: VRML

·         Dell (DELL) Shareholder Meeting

Jason's Commentaries

Market ended also flat on Friday, Dow ended just 3 points above the close while Nasdaq Composite led the day again. Seems that I was right for Friday.. Volumes were below 600m shares traded on Friday and the internals were showing a slight bearish sign with DVOL outpacing UVOL and TRIN staying above 1 for most of the session. Market started with a massive sell but reversed at 11am ET. I believe there was quite a number of shorts in the market which started covering their positions before 11am which caused the initial rally. However, the 2pm rally was in fact the sign of bullishness in the market. While looking at the heatmap and the sector leaders, Healthcare was the main leader while materials were the biggest laggard with 0.65% gain and -0.37% loss respectively. There was not much stocks performing above or below 1% on Friday.

On the weekly perspective, the market is starting its gyration as the earnings season continues. It seems to me that the market is not behaving normal as there's not much 100-200points range in the market. As the volume as constantly reducing, i believe the market is seeking other form of leadership in order to continue to push the market up higher. As the market is hooked on QE, we're definitely bullish in the near term, but things much change drastically if there's any change to the monetary policy. As we're heading towards the week of employment data, perhaps.. we might have a change to see a potential retracement before the market breaks up higher?

Market Call: FLAT to upside

Date: 26 Jul 2013