22 Nov 2013 AMC - Market rallied to another high as Biotech and Consumer Discretionary gains

22 Nov 2013 AMC - Market rallied to another high as Biotech and Consumer Discretionary gains

Market Summary 

European Markets Closing Prices

European markets are now closed; stock markets across Europe performed as follows:

·         UK's FTSE: -0.1%

·         Germany's DAX: + 0.3%

·         France's CAC: + 0.6%

·         Spain's IBEX: + 0.8%

·         Portugal's PSI: + 0.4%

·         Italy's MIB Index: -0.1%

·         Irish Ovrl Index: + 0.3%

·         Greece ATHEX Composite: + 2.4%

Before Market Opens 

S&P futures vs fair value: +0.50. Nasdaq futures vs fair value: +5.00.
The S&P 500 futures hover just above fair value.

Asian markets ended mostly higher, taking their cues from yesterday's strong gains on Wall Street. Regional advances were much more modest with Australia's ASX (+0.9%) leading the way following yesterday's comments from Reserve Bank of Australia Governor Glenn Stevens, suggesting the central bank has not ruled out intervention to weaken the Aussie dollar. Elsewhere, Japan's Nikkei (+0.1%) eked out a gain after comments from Bank of Japan Governor Haruhiko Kuroda indicated the yen is not at unreasonably low levels and that CPI could hit the 2% target by 2016. China's Shanghai Composite (-0.4%) was among the laggards as leaked reports showed the People's Bank of China will look to force banks to deleverage. Many continue to watch SHIBOR as the 2w rate spiked nearly 32 basis points to 5.916%. Finally, something to keep an eye on is the political unrest in Thailand, where the government's attempt to form a fully elected Senate was opposed by the Constitutional Court. Thailand's SET (-1.2%) has slumped roughly 3.5% since Wednesday's decision. Data out overnight was light as Taiwan's unemployment rate ticked down to 4.17% (4.18% previous). 

·         In Japan, the Nikkei added 0.1% as action nears its best levels of 2013. Heavyweight Softbank gained 2.3% on word that Dan Loeb's Third Point has taken a $1 billion stake in the company. 

·         Hong Kong's Hang Seng finished higher by 0.5% as trade lingers near nine-month highs. Insurers Ping An and China Life were the top performers, adding 3.0% and 2.7%, respectively. Financials were also strong with China Construction Bank gaining 1.1% to lead the sector higher. 

·         In China, the Shanghai Composite settled lower by 0.4%, but trade managed to hold above the 200-day moving average. Shanghai Fosun Pharmaceutical was in focus with shares shedding 5.7% as the company was forced to shoot down rumors the CEO was being held on corruption charges. 

Major European indices trade modestly higher with France's CAC (+0.6%) in the lead. The first half of the session has been free of market-moving headlines, but the European Central Bank did announce plans to suspend the weekly repayment schedule of the 3-yr LTRO for three weeks during the holidays. Regional economic data was limited to just a handful of releases. Germany's GDP rose 0.3% quarter-over-quarter (0.3% prior) while the year-over-year reading increased 1.1% (1.1% last), as expected. Separately, the Ifo Business Climate Index rose to 109.3 from 107.4 (107.7 expected) as the Business Expectations component improved to 106.3 from 103.7 (104.0 forecast) while the Current Assessment rose to 112.2 from 111.3 (111.6 consensus). Elsewhere, Italian retail sales slipped 0.3% month-over-month (0.4% forecast, 0.0% last) while the year-over-year reading pointed to a decline of 2.8% (0.2% previous). 

·         Great Britain's FTSE trades up 0.1% as ARM Holdings leads with a gain of 3.1%. On the downside, TUI Travel trades lower by 6.1% after a large Norwegian investor sold his 5.0%+ stake in the company. Miners also lag with Anglo American, Fresnillo, and BHP Billiton down between 1.5% and 2.4%. 

·         Germany's DAX is higher by 0.2% as RWE leads with a gain of 2.4%. On the downside, chemical producers K+S and Lanxess hold respective losses of 1.7% and 2.1%. 

·         In France, the CAC trades up 0.6% as exporter Renault leads with a gain of 2.0%. Chemical producer Solvay lags, trading lower by 2.3%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 23 (+0.57%) at 3992, the S&P 500 closed up 9 (+0.50%) at 1805, and the Dow closed up 55 (+0.34%) at 16065. Action came on below average volume (NYSE 607 mln vs. avg. of 729; NASDAQ 1668 mln vs. avg. of 1786), with advancers outpacing decliners (NYSE 1885/1179, NASDAQ 1588/975) and new highs outpacing new lows (NYSE 226/55, NASDAQ 241/23). 

Relative Strength: 
Biotechnology-IBB +3%, Biotechnology-XBI +2.29%, Natural Gas-UNG +2.13%, Greece-GREK +2.01%, Turkey-TUR +1.69%, Spain-EWP +1.48%, Brazilian Real-BZF +1.42%, Sweden-EWD +1.37%, Health Care-XLV +1.34%, Wind Energy-FAN +1.2%.

Relative Weakness: 
Coffee-JO -3.75%, Junior Gold Miners-GDXJ -1.93%, Cotton-BAL -1.61%, Volatility-VXX -1.48%, Thailand-THD -1.19%, U.S. Home Construction-ITB -1.14%, Peru-EPU -0.69%, Australian Dollar-FXA -0.62%, Indonesia-IDX -0.4%, New Zealand-ENZL -0.36%.

Leaders and Laggards

Technical Updates

Commentaries 

16:20 ET Dow +54.78 at 16064.77, Nasdaq +22.49 at 3991.64, S&P +8.91 at 1804.76 : [BRIEFING.COM] It wasn't the most thrilling ride on Friday, yet the stock market maintained its bullish bias and ended the week on a winning note.  Both the Dow Jones Industrial Average and the S&P 500 registered new record highs.  Additionally, the S&P 500 logged its seventh consecutive winning week.

There was a modicum of profit-taking interest early on after Intel (INTC 23.87, -1.36) issued a warning that its revenue in FY14 is expected to be flat, but it didn't take long at all for the broader market to regain its footing.

Participants just stayed with the trade that got them here, buying the dip and keeping sellers at bay.  They also appeared to draw support from the reminder out of Atlanta Fed President Lockhart before the open that monetary policy is likely to be accommodative for many more years.

Strikingly, there wasn't a lot of conviction behind today's trading.  Volume at the NYSE totaled just 607 mln shares, which was the lowest all week and well below recent averages.  Even so, today's trading was notable more for the lack of selling interest than buying interest.

Following a 9.0% gain in the last three months, there simply wasn't any rush to take profits.  The buying interest seen was fairly broad-based.  Advancers outlegged decliners at the NYSE and Nasdaq by roughly a 3-to-2 margin and seven out of ten sectors ended the day higher.

The health care sector (+1.2%) led the way, fueled by a huge jump inBiogen-Idec (BIIB 285.58, +33.15), which surged 13% after EU regulators approved its treatment for multiple sclerosis.  Buying efforts were more restrained elsewhere as the gains in other sectors ranged from 0.5-0.8%.

The only laggards today were the utilities (-0.04%), telecom services (-0.1%), and technology (-0.2%) sectors, but even their losses were fairly negligible.

Within the Dow, 23 of the 30 components finished higher.  Boeing (BA 135.97, +3.04) had the biggest gain and also some outsized influence on the price-weighted average.  Some of its gain was offset by IBM (IBM 181.24, 2.89), which famous money Stanley Druckenmiller said was a stock to sell short for the company's lack of innovation.

Despite the weakness in IBM and Intel, the Dow and the other major averages closed at, or very near, their best levels of the day.

The same can be said for longer-dated Treasury instruments.  The benchmark 10-yr note added ten ticks, lowering its yield to 2.75%, while the 30-yr bond gained nearly a point and saw its yield come down to 3.84%.

If the market is concerned about the Fed tapering its asset purchases soon, it certainly didn't show it on Friday.    ..NYSE Adv/Dec 1844/1160. ..NASDAQ Adv/Dec 1590/978.

Commodities

Closing Commodities: Gold Books 3.4% Weekly Loss; Natural Gas Outperforms Energy Space
Dec gold chopped around slightly above the unchanged line as the dollar index traded lower. It brushed a session high of $1247.20 per ounce but dipped into the red in afternoon floor action. The yellow metal eventually settled 60 cents higher at $1244.30 per ounce, booking a 3.4% loss for the week. 

Dec silver pulled back from its session high of $20.00 per ounce set in early morning pit action and continued to trend lower. It touched a session low of $19.82 per ounce and settled at $19.85 per ounce, booking a loss of 0.4%. Today's decline brought losses for the week to 4.3%.

Jan crude oil traded lower despite the weaker dollar index. It slipped from its session high of $95.57 per barrel set moments after floor trade opened and fell as low as $94.05 per barrel. The energy component inched higher in afternoon trade and trimmed losses to 0.5% as it settled at $94.83 per barrel. Today's drop reduced the weekly gain to 0.4%. 

Jan natural gas outperformed the energy space as it extended yesterday's gains following the bullish EIA inventory report. It advanced to a session high of $3.83 per MMBtu and settled at $3.81 per MMBtu, booking a 1.9% gain. Today's strength brought gains for the week to 2.7%.

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 1 cent to $4.23/bushel 

·         Dec wheat settled unchanged at $6.49/bushel 

·         Jan soybeans rose 26 cents to $13.19/bushel 

·         Dec ethanol fell 1 cent to $2.04/gallon 

·         Jan sugar (#16 (U.S.)) rose 0.01 of a penny to 20.40 cents/lbs

NYMEX Energy Closing Prices

  Jan crude oil fell $0.51 to $94.83/barrel 

·         Crude oil slipped from its session high of $95.57 set moments after floor trade opened and traded as low as $94.05. The energy component managed to erase some of the loss as it inched higher in afternoon trade and settled 0.5% lower. Today's weakness reduced the weekly gain to 0.4%. 

  Jan natural gas rose 7 cents to $3.81/MMBtu 

·         Natural gas outperformed the energy space today as it extended yesterday's gains following the bullish EIA inventory report. It rose to a session high of $3.83 and settled just below that level, booking a 1.9% gain. Today's strength brought gains for the week to 2.7%. 

  Jan heating oil rose 4 cents to $3.04/gallon 

  Jan RBOB gasoline fell 1 cent to $2.71/gallon

Treasuries

On other news.... 








Currencies 

Dollar Tests Key Support: 10-yr: +08/32..2.750%..USD/JPY: 101.26..EUR/USD: 1.3548
The Dollar Index is pressing session lows near 80.70 as steady selling has persisted throughout the session. Today's weakness has the Index looking at a second day of losses, and has trade testing key support in the area. Click here to see a daily Dollar Index chart. 

·         EURUSD is +65 pips at 1.3545 as action probes the 50 dma. Helping support the single currency was the strong German Ifo Business Climate survey, and comments from European Central Bank head Mario Draghi indicating the European banking system needs more back stops in place before bank stress tests are completed next year. A breakout through resistance at current levels sets up a possible test of the 1.3700 region. 

·         GBPUSD is +15 pips at 1.6210 as action tests the October highs. Today's trade has been rather uneventful as data and news out of the UK have been absent. British data out Monday is limited to BBA Mortgage Approvals. 

·         USDCHF is -55 pips at .9070 with today's selling pushing the pair back below its 50 dma (.9085). The .9060 region remains on many traders' radars as a breakdown of support at the level paves the way for a retest of the October lows near .8900. Switzerland's employment level is due out Monday. 

·         USDJPY is +10 pips at 101.25 as today's advance has action holding at a four-month high. The bid comes as Bank of Japan Governor Haruhiko Kuroda suggested while there are no plans for further easing at this time the central bank stands ready, if needed. A breakout through current levels should produce a retest of 4.5-year highs near 103.00. 

·         AUDUSD is -75 pips at .9160 as sellers remain in control for a third session. Recent commentary from Reserve Bank of Australia Governor Glenn Stevens has ignited the latest slide as he indicated the central bank cannot rule out intervention to weaken the Aussie dollar. Trade has checked up at minor support in the area, but the inability to recapture the .9300 level means a retest of the August lows near .8900 is forthcoming. 

·         USDCAD is +20 pips at 1.0535 as trade remains on track to post its best close since the beginning of September. The pair climbed to almost 1.0570 in early trade, but has given up the bulk of its gains following this morning's mixed CPI and retail sales data. The 1.0600 area remains key.

Weekly Analysis
Week 38



Technical Updates








 Briefing's Commentaries

Weekly Wrap There was a lot of talk about stock market bubbles entering the week, and while there may have still been a lot of talk about stock market bubbles exiting the week, it still didn't stop the S&P 500 from scoring its seventh straight weekly gain.  In the process, it also established a new record closing high, as did the Dow Jones Industrial Average, which had a Sweet 16 party closing above the 16,000 level for the first time ever.

The Nasdaq Composite started the week with a 37-point loss.  That slide was precipitated by a selloff in many of the high-beta momentum stocks that came under fire in a Barron's feature story for having bubble-like valuations.  In a tru sign of the underlying bullish bias in the market, the Nasdaq finished the week nearly six points higher than where it began the week.

To be sure, the buy-the-dip trade was alive and well once more, prevailing in the face of concerns about the suggestion in the minutes from the October FOMC meeting that the Fed could slow the pace of its asset purchases in coming months if the data proved consistent with its outlook for ongoing improvement in labor market conditions.

The aforementioned acknowledgment caused a bit of a hiccup on Wednesday, yet the market wasted little time making up the losses that followed the release of the FOMC Minutes.  Its resilience was attributed generally to two reasons: (1) the idea that the Fed didn't really tell the market anything in the minutes it didn't already know and (2) the notion that the market is perhaps growing more comfortable with the Fed's position that a tapering isn't a tightening and that the fed funds rate target is apt to stay at the zero bound even well after the Fed ends its asset purchase program.

Separately, some weak inflation data this week in the form of the CPI and PPI reports seemed to support the market's thinking that the Fed won't curtail its asset purchases before the end of the year.  That thinking has the potential to change with the November employment report (out on Nov. 6), but with total CPI up 1.0% over the last 12 months -- the smallest rate of increase since October 2009 -- it is clear that the Fed is still falling well short of meeting the inflation side of its dual mandate.

Another key happening related to the Fed is that Janet Yellen's confirmation as the next Fed chairman appears imminent after the Senate Banking Committee gave her a thumbs up this week.  The market likes the thought of continuity in leadership, so it wasn't lost on participants that Fed Chairman Bernanke told the National Economists Club that he agreed with the views Ms. Yellen expressed in her testimony at her confirmation hearing.

Notably, only four out of the ten economic sectors closed the week higher; however, they were four of the market's most influential sectors by weight.  The winners of note included the financial (+1.7%), health care (+1.6%), energy (+0.7%), and industrials (+0.6%) sectors.  The week's biggest laggard was the rate-sensitive utilities sector (-1.8%).

Longer-dated Treasury securities enjoyed a positive session on Friday as stocks rose, but the yield on the benchmark 10-yr note climbed five basis points on the week to 2.75%.  Another loser of note this week was gold, which dropped 3.40% to $1243.00/oz., broadsided both by the weak inflation readings and rumblings about a tapering.

The week ahead will be a short week due to the Thanksgiving holiday on Thursday.  So, allow us in advance to wish you a good weekend and a happy Thanksgiving. 

Next Week In View



Economic Commentaries

Economic Summary: JOLTS Job openings improve versus last month; Pending home sales out Monday at 10:00; Lockhart said Fed tapering should begin when market/economy are prepared
Economic Data Summary:

·         September JOLTS- Job Openings 3.9 mln (August was 3.883 M)

Fed/Treasury Events Summary:

·         Atlanta Fed's Lockhart on CNBC (non voter, moderate) said tapering should happen when market is prepared and when economy is ready. He said Fed will likely remain accommodative for many years.

Upcoming Economic Data:

·         October Pending Home Sales due out Monday at 10:00 (September was -5.6%)

Upcoming Fed/Treasury Events:

·         The Treasury is scheduled to auction off $96 bln in new debt next week. Results for each auction will be announced at 13:00

o    Monday $32 bln in 2 year notes

o    Tuesday: $35 bln in 5 years notes

o    Wednesday $29 bln 7 year notes

Other International Events of Interest

·         Japan's Nikkei (+0.1%) eked out a gain after comments from Bank of Japan Governor Haruhiko Kuroda indicated the yen is not at unreasonably low levels and that CPI could hit the 2% target by 2016. 

Jason's Commentaries

Market broke another high once again as the consumer discretionary and the biotech led the market on Friday night. Market started with a little volatility but held its footing and managed to rallied all the way to the closing. Volumes remained weak as we're entering the holiday season where the Implied Volatility of the market is likely to remain very low. The Biotech sector was being led by Biogen, where its treatment for multiple sclerosis were being approved by EU regulators. The Discretionary was being led by Comcast, Direct TV and Time Warners as there are rumors that Comcast and Charter will consider to bid for Time Warners. The strength from these 2 sectors managed to shrug off the drag on Intel where it shedded more than 5%. The internals were not showing a lot of strength and commitments from the market as well.

While we're in the Thanksgiving week, this week is likely to be flat to the upside. The market will be closed on Thursday and market will be closed at 1pm ET on Friday. Have fun shopping!

Market Call:FLAT to upside

Date:25 Nov 2013