20 Dec 2013 AMC - Market broke into the high once again on expiration Friday

20 Dec 2013 AMC - Market broke into the high once again on expiration Friday

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.3%

·         Germany's DAX: + 0.7%

·         France's CAC: + 0.4%

·         Spain's IBEX: + 0.3%

·         Portugal's PSI: + 1.1%

·         Italy's MIB Index: + 0.6%

·         Irish Ovrl Index: + 0.8%

·         Greece ATHEX Composite: -2.7%

Before Market Opens 

S&P futures vs fair value: +2.50. Nasdaq futures vs fair value: +7.50.
The S&P 500 futures (+0.2%) have returned to their pre-market highs following a better-than-expected Q3 GDP report.

Asian markets ended on a mixed note. Japan's Nikkei (+0.1%) eked out a gain after the Bank of Japan held its key interest rate unchanged at 0-0.10%, as expected. Meanwhile Hong Kong's Hang Seng (-0.3%) and China's Shanghai Composite (-2.0%) lagged as money market rates were on the rise again. The one-week Shanghai Interbank Offered Rate (SHIBOR) saw the largest increase, jumping more than 118 basis points to 7.654%.

Economic data was limited to a couple points out of New Zealand. Visitor arrivals increased 2.8% month-over-month (-1.9% prior) while credit card spending rose 6.9% year-over-year (3.3% last). 

·         Japan's Nikkei (+0.1%) closed at a six-year high following the BoJ decision to stand pat. Heavyweight Fast Retailing provided support, adding 2.7%. 

·         China's Shanghai Composite lost 2.0%, falling for the ninth consecutive session as overnight borrowing costs spiked on liquidity concerns. Financials were among the hardest hit as China Citic Bank tumbled 8.7% and China Construction Bank sank 6.2%. 

·         Hong Kong's Hang Seng shed 0.3%, but managed to avoid the heavy selling that developed in the Shanghai Composite. Insurance names were the weakest performers as Ping An and China Life gave up 4.6% and 2.7%, respectively. Elsewhere, Wal-Mart supplier Li & Fung outperformed with a 1.8% gain. 

Most major European indices display modest gains, but France's CAC (unch) and Spain's IBEX (-0.3%) underperform. The weakness in Spain comes after last evening's police raid on the main offices of Mariano Rajoy's People's Party. This was a part of an investigation into alleged party-wide graft that dates back to last year. Spanish debt is on the defensive with the benchmark 10-yr yield higher by four basis points at 4.16%. Elsewhere, Italy's confidence vote on the 2014 budget law has passed the Lower House and will now head to the Senate for a Monday vote. This vote is also being seen as a test of support for Prime Minister Enrico Letta. Italian yields are on their highs with the 10-yr yield up four basis points at 4.12%.

Investors received several economic data points. Germany's GfK Consumer Climate ticked up to 7.6 from 7.4 (7.4 expected) while PPI ticked down 0.1% month-over-month, as expected. In addition, the annualized PPI pointed to a decrease of 0.8%, in-line with expectations. Great Britain's GDP rose 0.8% quarter-over-quarter (0.8% expected, 0.8% prior) while the year-over-year reading pointed to growth of 1.9% (1.5% consensus, 1.5% last). Separately, the current account deficit widened to GBP20.70 billion from GBP6.20 billion (-GBP13.9 billion expected) and business investment increased 2.0% quarter-over-quarter (1.6% consensus, 1.4% prior). Also of note, the Index of Services rose 0.8% (0.4% expected, 0.8% last) and public sector net borrowing came in at GBP14.80 billion (GBP13.40 billion consensus, GBP7.40 billion prior). Italy's industrial new orders fell 2.5% month-over-month (1.1% expected, 1.7% prior) while the year-over-year reading increased 1.2% (7.3% last). Retail sales ticked down 0.1% month-over-month (0.2% expected, -0.3% prior) while the year-over-year reading fell 1.6% (-2.8% last). French Business Survey improved to 100 from 98 (99 expected). 

·         France's CAC is little changed. Industrials are among the laggards with Alstom and Bouygues down 1.2% and 2.5%, respectively. On the upside, financials AXA and BNP Paribas hold respective gains of 0.6% and 0.4%. 

·         Great Britain's FTSE is higher by 0.2%. Carnival leads with a gain of 4.7% after receiving a pair of upgrades. On the downside, miners Anglo American, Antofagasta, and Fresnillo trade with losses between 1.4% and 1.8%. 

·         In Germany, the DAX trades up 0.5%. Deutsche Boerse is continuing its recent outperformance. The stock leads the index with a solid gain of 2.4%. Defensive stocks lag as Beiersdorf and Fresenius Medical trade lower by 0.2% and 0.8%, respectively.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 47 (+1.15%) at 4105, the S&P 500 closed up 9 (+0.49%) at 1819, and the Dow closed up 42 (+0.26%) at 16221. Action came on above average volume (NYSE 1916 mln vs. avg. of 724; NASDAQ 2869 mln vs. avg. of 1842), with advancers outpacing decliners (NYSE 2363/766, NASDAQ 1911/736) and new highs outpacing new lows (NYSE 281/41, NASDAQ 263/28).

Relative Strength: 
India-INP +3.05%, Biotechnology-IBB +2.62%, Copper Miners-COPX +2.40%, Shipping-SEA +2.33%, Biotechnology-XBI +2.18%, Heating Oil-UHN +2.14%, Australia-EWA +1.61%, Singapore-EWS +1.19%, Japan-EPP +1.17%, Netherlands-EWN +1.13%.

Relative Weakness: 
Greece-GREK -2.82%, Turkey-TUR -2.02%, Indonesia-IDX -1.69%, Emerging Markets Small Cap-EWX -1.60%, Brazilian Real-BZF -1.27%, Steel-SLX -1.26%, Metals and Mining-XME -1.25%, Rare Earths-REMX -1.07%, Coal-KOL -0.66%, Energy-XLE -0.29%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Strong Week on Upbeat Note
The major averages capped a solid week with a broad advance. The S&P 500 added 0.5%, extending its weekly gain to 2.7%.

Equities spent the entire session in a steady climb after the final reading of third quarter GDP sparked a broad-based rally. The report pointed to growth of 4.1%, which was the strongest reading since the economy expanded by 4.9% in the fourth quarter of 2011, and well above the 2.5% gain reported in the second quarter. Real final sales, which exclude inventory growth, increased 2.5%. That was up from a 1.9% gain reported in the second estimate, and was the largest gain since a 3.4% increase was observed in Q4 2011.

Even though all the key indices rallied, the small-cap Russell 2000 (+1.9%) had the best showing. Meanwhile, the S&P 500 posted a more modest gain as nine of ten sectors finished in the green.

The largest S&P 500 sector, technology (+0.9%) played a significant part in the rally. The group received support from large-cap names like Apple (AAPL 549.02, +4.56), Google (GOOG 1100.62, +14.40), and Microsoft (MSFT 36.80, +0.55). Chipmakers also chipped in as the PHLX Semiconductor Index gained 0.8%.

On a related note, the tech sector's strength contributed to the outperformance of the Nasdaq (+1.2%), which also received noteworthy support from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 223.70, +5.71) surged 2.6%.

In turn, biotechnology gave a boost to the health care sector (+0.5%), which kept pace with the S&P 500 throughout the session.

Another influential group, financials (+0.5%) lagged for the majority of the session, but caught up to the broader market in the late afternoon.

Although most sectors had a strong showing, energy (+0.1%) and materials (+0.3%) struggled to gain traction. The energy sector underperformed as two large members, Chevron (CVX 122.78, -0.44) and Exxon Mobil (XOM 98.68, -0.75) spent the day in the red. The pair of Dow components also factored into the underperformance of the Dow Jones Industrial Average (+0.3%).

On the downside, the telecom services sector (-0.6%) was the lone decliner.

Today's participation was well above average as nearly two billion shares changed hands on the floor of the New York Stock Exchange. The final tally was aided by additional activity associated with quadruple witching and quarterly rebalancing that took place today.

Treasuries ended on their highs after staging an intraday reversal. The 10-yr yield tested resistance earlier this morning at 2.95% (September closing high). Despite the stronger-than-expected Q3 GDP revision, the 10-yr came barreling back in a surprising manner that probably stirred some short-covering activity that has exacerbated today's gains. The 10-yr note settled higher by 11 ticks with its yield down four basis points at 2.89%.

On Monday, November personal income, personal spending, and core PCE prices will all be reported at 8:30 ET while the final reading of the Michigan Consumer Sentiment Survey will be released at 9:55 ET. 

·         Nasdaq +35.9% YTD 

·         Russell 2000 +35.0% YTD 

·         S&P 500 +27.5% YTD 

·         DJIA +23.8% YTD 

Commodities

Closing Commodities: Gold Futures Close Above $1200
Precious metals and crude oil rose today, gaining support from a slight decline in the dollar index. Feb gold rose back above the $1200 level today as it lifted from its session low of $1990.40 per ounce set in early morning pit trade.

It touched a session high of $1206.90 per ounce and eventually settled with a 0.9% gain at $1203.80 per ounce. Today's advance shaved losses for the week to 2.5%. Mar silver also advanced in morning pit trade after trading as low as $19.15 per ounce earlier in the session. It brushed a session high of $19.52 per ounce and settled with a 1.4% gain at $19.45 per ounce, booking a 0.8% weekly loss.

Feb crude oil slipped to a session low of $98.54 per barrel but recovered into positive territory in afternoon floor trade. It settled 0.3% higher at $99.33 per barrel, bringing gains for the week to 2.6%.

Jan natural gas spent most of today's session in negative territory. Although rices rose to a session high of $4.48 per MMBtu, they promptly reversed back into the red. Natural gas closed 1.1% lower at its session low of $4.41per MMBtu, booking a 1.1% gain for the week.

COMEX Metals Closing Prices

  Feb gold rose $10.20 to $1203.80/oz 

·         Gold rose back above the $1200 level as it gained support from a drop in the dollar index. The yellow metal lifted from its session low of $1990.40 set in early morning pit trade and touched a session high of $1206.90. It settled the session 0.9% higher, shaving losses for the week to 2.5%. 

  Mar silver rose $0.27 to $19.45/oz 

·         Silver also advanced in morning pit trade after trading as low as $19.15 earlier in the session. It brushed a session high of $19.52 and settled with a 1.4% gain, booking a 0.8% weekly loss. 

  Mar copper rose 2 cents to $3.31/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 3 cents to $4.34/bushel 

·         Mar wheat rose 4 cents to $6.14/bushel 

·         Jan soybeans rose 11 cents to $13.38/bushel 

·         Jan ethanol rose 1 cent to $1.91/gallon 

·         Mar sugar (#16 (U.S.)) fell 0.02 of a penny to 19.39 cents/lbs

NYMEX Energy Closing Prices

·         Feb crude oil rose $0.26 to $99.33/barrel 

·         Jan natural gas fell 5 cents to $4.41/MMBtu 

·         Jan heating oil rose 5 cents to $3.08/gallon 

·         Jan RBOB rose 4 cents to $2.78/gallon

 

Treasuries

The Fed Tapers and the Curve Flattens: 10-yr: +14/32..2.889%..USD/JPY: 104.03..EUR/USD: 1.3675
The Week in Review: 

·         Treasuries mostly lost ground this week as the Fed finally announced the long-awaited taper of its bond-buying program. Click here to see an intraweek yields chart.

·         Wednesday's FOMC Statement indicated the Fed will trim its asset purchases to $75 bln per month ($40 bln Treasury securities, $35 bln MBS) from the previous $85 bln per month ($45 bln Treasury securities, $40 bln MBS) with further reductions to the program being ‘data dependent.' 

·         This week's economic data was mostly better than expected with Friday's GDP - Third Estimate (4.1% actual v. 3.6% expected) being a welcome surprise and Philadelphia Fed (7.0 actual v. 5.0 expected), housing starts (1091K actual v. 950K expected), building permits (1007K actual v. 983K expected), productivity (3.0% actual v. 2.7% expected), and industrial production (1.1% actual v. 0.4% expected) posting notable beats. 

·         Data misses were few and far between as just Empire Manufacturing (1.0 actual v. 5.0 expected) and existing home sales (4.90 mln actual v. 5.00 mln expected) fell short of expectations.

·         Tuesday's strong $32 bln 2y note auction drew 0.345% and a solid 3.77x bid/cover. A light indirect bid (21.5%) was offset by the strong showing from directs (30.2%). Primary dealers were left with 48.3% of the supply. 

·         Wednesday saw a terrible $35 bln 5y note auction. The auction drew 1.600% and a weak 2.42x bid/cover as both indirect (25.8%) and direct (11.8%) bids were well below their 12-auction averages. The disappointing results were expected as it seems no one wanted to step in ahead of this afternoon's FOMC rate decision. 

·         Thursday's $29 bln 7y note auction was average, drawing 2.385% and a 2.45x bid/cover. Primary dealers took down a slightly better than average 41.7%. 

·         Selling up front ran the 2y yield above 0.400% for the first time in three months, but action slipped to 0.374% (+5bps on the week) by Friday's close.

·         This week's selling had the biggest impact on the belly of the curve. The 5y surged +16bps to end the week @ 1.670%. Early selling on Friday ran the yield up to 1.700%, but buyers emerged as the yield tested resistance dating back to the September highs. The yield is +18bps from Tuesday's pre-taper close. 

·         The 10y tacked on 5bps this week, closing @ 2.887%. The benchmark yield tested 2.950% resistance early in the day on Friday, but ended considerably below that level. 

·         The 30y bond was the lone advancer this week as buyers moved aggressively into the long end following Wednesday's taper. The 30y slipped -3bps for the week, and ended Friday's session -13bps from Wednesday's post-taper high. 

·         A flatter curve developed as the 2-10-yr spread tightened to 251.5bps. 

The Week Ahead 

·         Monday's data includes personal income and spending, PCE Prices - Core (8:30), and Michigan Sentiment - Final (9:55). 

·         Tuesday will see the weekly MBA Mortgage Index (7), durable orders, durable orders -ex transportation (8:30), FHFA Housing Price Index (9), and new home sales (10). U.S. equity markets will close at 1pm ET and the U.S. Treasury market will close at 2pm ET for Christmas Eve. 

·         Markets are closed Wednesday in observance of Christmas Day. 

·         Thursday's data is limited to initial and continuing claims (8:30). 

·         There is no data on Friday.

On other news.... 








Currencies 

Dollar Hovers Little Changed: 10-yr: +11/32..2.903%..USD/JPY: 104.09..EUR/USD: 1.3670
The Dollar Index tested session highs near 80.80 following this morning's strong Q3 GDP - Third Estimate, but was unable to pierce and then reversed to session lows at 80.40. The greenback has recovered most of its losses, and now holds little changed near 80.60.Click here to see a daily Dollar Index chart.

·         EURUSD is +10 pips @ 1.3670 as trade has been able to shake off S&P's downgrade of the European Union to ‘AA+' from ‘AAA.' The rating agency cited ‘overall weaker creditworthiness of the EU's member states' for the decision. Post-announcement selling dropped action to 1.3625, but the pair found support at the level and managed to recover most of its losses. 

·         GBPUSD is -25 pips @ 1.6345 as trade pushes lower for a second session. Today's selling comes after both the current account balance (-GBP20.7 bln actual v. -GBP13.9 bln expected, -GBP6.2 bln previous) and public sector net borrowing (GBP14.8 bln v. GBP6.6 bln expected) fell short of estimates. The 1.6250 area is home to some important support, and is helped by the 50 dma (1.6182). 

·         USDCHF is -25 pips @ .8955 as trade has given up its early gains. The pair climbed probed the .9000 level following this morning's strong U.S. GDP report, but has reversed to session lows. Many will continue to watch .8850 as that area corresponds with levels last seen in November 2011. 

·         USDJPY is -15 pips @ 104.05 as trade pulls back for a second day. The pair touched a session high of 104.65 even after the Bank of Japan opted to keep its asset purchase program unchanged, and has run into a wave of selling throughout the U.S. session. Minor support rests in the 103.50 area. Japanese banks are closed for the Emperor's Birthday. 

·         AUDUSD is +55 pips @ .8920 as buyers remain in control for a second session. A quiet day for data and news down under has favored the bulls as action looks at another test of the key .8950 level. 

·         USDCAD is +5 pips @ 1.0670 as action has given up virtually all of the early gains. The pair surged to almost 1.0740 in the wake of today's mostly disappointing CPI and retail sales data, but is now holding just off the lows. Today's developments do not bode well for the bulls. The 1.0575/1.0600 area provides the first level of meaningful support. Canada's GDP will cross the wires on Monday.

Weekly Analysis
Week 38



Technical Updates













Briefing's Commentaries

Week in Review: Taper Arrives But Stocks Party On 

On Monday, the S&P 500 settled higher by 0.6%, snapping its four-day losing streak. The bulk of the advance occurred shortly after the open as the Dow, Nasdaq, and S&P 500 notched their highs during the initial 30 minutes. Small-caps were a notable exception as the Russell 2000 (+1.2%) climbed throughout the day, trimming its month-to-date loss to 2.0%. Nine of ten sectors registered gains with cyclical groups maintaining their lead throughout the session. The energy sector (+1.0%) displayed strength from the open after its largest component, Exxon Mobil, was upgraded to ‘Buy' from ‘Neutral' at Goldman Sachs. Crude oil, which added 0.9% to $97.47/bbl, also played a part in the sector's strength.

Equities spent the bulk of the Tuesday session in the red, but afternoon buying interest helped the major averages end just below their respective flat lines. The S&P 500 shed 0.3% as eight of ten sectors registered losses. Meanwhile, the Dow (-0.1%) traded ahead of its peers all session long as some of its top components provided support. 3M (MMM 136.72, +0.31) and Boeing (BA 136.67, +1.50) posted respective gains of 2.9% and 0.9% after both increased their quarterly dividends. The price-weighted index also received notable support from its top member, Visa (V 215.97, -0.11), which advanced 2.7%.

Wednesday saw equities settle on their highs after dovish forward guidance from the Federal Reserve offset the immediate impact of a tapering announcement. Although the Federal Open Market Committee reduced the size of its monthly asset purchases from $85 billion to $75 billion, it pledged to keep the target Fed Funds Rate near its current levels ‘well past the time that the unemployment rate declines below 6.5%.' The dovish guidance was also the likely reason for Treasuries retracing all of their post-announcement losses. The benchmark 10-yr yield ended with a five basis point gain at 2.89%, which is essentially where it traded before the afternoon announcement.

The stock market followed the Wednesday surge with a quiet Thursday session, which featured the added news that the Senate passed the two-year budget agreement. After some early gyrations, the major indices held to pretty tight trading ranges throughout the session and ended the day little changed. All in all, it was a pretty good showing given the scope of Wednesday's advance and considering the yield on the 10-yr note went as high as 2.95% before settling back down to 2.93%. A lack of concerted leadership and some buying exhaustion were to blame for the inability to log another record closing high for the S&P 500. It challenged Wednesday's high on two occasions, but each time it was greeted with renewed selling interest that held it in check. The Dow, though, eked out another record close.



Next Week In View



Economic Commentaries

Economic Summary: Q3 GDP revised higher to 4.1% from 3.6%; Personal Income & Spending out Monday at 8:30
Economic Data Summary:

·         Third Quarter GDP - Third Estimate 4.1% vs Briefing.com consensus of 3.6%; Second Quarter was 3.6%

·         Third Quarter GDP Defaltor - Third Estimate 2.0% vs Briefing.com consensus of 2.0%; Second Quarter was 2.0%

o    Unlike the second estimate, which was revised up on volatile stronger inventories, the increase in the third estimate was solid from an economic standpoint. Real final sales, which exclude inventory growth, increased 2.5%. That is up from a 1.9% gain reported in the second estimate and is the largest gain since increasing 3.4% in Q4 2011. If these trends hold, the economic progress in 2014 could be much stronger than the 2.0 -- 2.5% new normal-type growth that many economists are projecting. Most of the upward revision was a result of stronger consumption numbers. Real personal consumption spending was revised up to 2.0% from 1.4%. That revision added 0.4 percentage points to Q3 2013 GDP growth

Upcoming Economic Data:

·         November Personal Income due out Monday at 8:30 (October was -0.1%)

·         November Personal Spending due out Monday at 8:30 (October was 0.3%)

·         November PCE Prices - CORE due out Monday at 8:30 (October was 0.1%)

·         December Michigan Sentiment due out Monday at 9:55 (October was 82.5)

Other International Events of Interest

·         Japan's Nikkei (+0.1%) eked out a gain to close at a six-year high after the Bank of Japan held its asset purchase program unchanged. 

Jason's Commentaries

The breakout came earlier than I expected. The market broke into the higher highs once again on the expiration Friday after the Central Bank decides to taper. The market started with a bullish bias which carried through to 2pm ET where the market decides to take back some gains. Nasdaq and Russell are the 2 main leaders on Friday night where Russells gained 1.87% and Nasdaq gaining 1.15%. There are some divergence in the market as well. Despite have 1668m shares traded on the NYSE, we can see some divegence from TRIN on Friday night. The Utilities and the industrials were the 2 main leaders amongst the sectors which gained 0.99% and 0.8% respectively. It seems that the market is likely to continue to break even higher once again since the strength in Nasdaq and Russells are so strong. We're likely to rally through the new year where the market will likely to be shakened by the debt ceiling talk once again. On the Technical side, it's definitely a breakout from the consolidation, and i'm gonna change my short term perspective to a bullish one. Since we're heading towards the Christmas week, i reckon the market will be very weak, with increased volatility ahead of the next week. If you're still in your position, make sure you keep your stop tight.  

Market Call: FLAT to UPSIDE

Date: 23 Dec 2013