28 May 2014 AMC - Market started taking profit after rallying

28 May 2014 AMC - Market started taking profit after rallying

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.1%

·         Germany's DAX: 0.0%

·         France's CAC: 0.0%

·         Spain's IBEX: + 0.4%

·         Portugal's PSI: + 1.3%

·         Italy's MIB Index: + 0.9%

·         Irish Ovrl Index: + 0.6%

·         Greece ASE General Index: + 1.0%

Before Market Opens 

S&P futures vs fair value: -0.20. Nasdaq futures vs fair value: -4.00.
The S&P 500 futures trade in line with fair value.

Asian markets rallied broadly, supported by yesterday's advance on Wall Street. Bank of Japan Governor Haruhiko Kuroda spoke in Tokyo, saying current policy remains appropriate and that the recent success shows "it is possible to implement monetary easing even in a situation where the policy rate is around zero percent." 

·         In economic data: 

o    China's industrial profits slowed to +9.6% year-over-year (10.7% previous). 

o    Australia's Construction Work Done (0.3% quarter-over-quarter versus -0.3% expected) topped forecasts. 

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·         Japan's Nikkei added 0.2%, ticking to its best level since early April while retaking the 200-day moving average. Shares of real estate developer Mitsui Fudosan underperformed, tumbling 7.0%, after announcing it would offer up to $3.6 billion worth of new shares. 

·         Hong Kong's Hang Seng gained 0.6%, rallying to a one and a half-month high. Financials saw strong gains as Industrial & Commercial Bank of China and China Construction Bank advanced 1.6% and 1.4%, respectively. 

·         China's Shanghai Composite rose 0.8%, capturing its 50-day moving average as trade ticked to a two-week high. Brokerage shares posted solid gains with Sinolink Securities up 7.1% to lead the way. 

Major European trade mixed after sliding from their earlier highs. The euro has slumped to its lowest level against the dollar in three months (1.3610) following comments from European Central Bank Executive Board member Yves Mersch, who said the ECB could use an array of tools to stimulate the regional economy. Mr. Mersch also said he expects the differential between the three interest rates will be maintained in the event of a rate cut. 

·         Economic data was plentiful: 

o    Eurozone Consumer Confidence improved to -7.0 from -8.6 (consensus -7.0), while the Business and Consumer Survey rose to 102.7 from 102.0 (expected 102.2). Separately, M3 Money Supply expanded 0.8% year-over-year (consensus 1.1%, previous 1.0%) and Private Loans fell 1.8% year-over-year (forecast -2.1%, previous -2.2%). 

o    Germany's Unemployment Count rose 24,000 (consensus -15,000, previous -25,000), while the Unemployment Rate held steady at 6.7%, as expected. Separately, Import Price Index slipped 0.3% month-over-month (consensus 0.1%, previous -0.6%). 

o    Great Britain's CBI Distributive Trends Survey fell to 16 from 30 (expected 35). 

o    French Consumer Spending fell 0.3% month-over-month (consensus 0.3%, prior 0.6%), while PPI decreased 0.1% month-over-month (forecast -0.3%, previous -0.4%). 

o    Italy's Business Confidence held steady at 99.7 (consensus 99.6). 

o    Spain's Retail Sales rose 0.7% year-over-year (consensus -0.3%, prior -0.5%). 

o    Swiss GDP rose 0.5% quarter-over-quarter (consensus 0.6%, previous 0.2%), while the year-over-year reading increased 2.0% (forecast 1.9%, prior 1.7%). 

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·         Germany's DAX is lower by 0.1%. Deutsche Post is the weakest component, down 2.3%. On the upside, chemical producer Lanxess trades higher by 1.4%. 

·         In France, the CAC is flat. Industrials are showing strength with Alstom, Airbus Group, and Legrand up between 0.8% and 1.5%. Consumer names lag as Pernod Ricard and L'Oreal trade lower by 1.3% and 0.6%, respectively. 

·         Great Britain's FTSE trades up 0.1%. London Stock Exchange leads with a gain of 2.3% after Credit Suisse added the stock to its Europe Focus List. Drug maker GlaxoSmithKline lags, down 1.5%. 

·         Italy's MIB outperforms with a gain of 0.7%. Telecom Italia leads, trading higher by 4.3%, after Goldman Sachs added the stock to its Conviction Buy List.

U.S. Equities

·         Equity futures suggest little change at the open

·         The four-day win streak has run the S&P 500 into record territory while the DJIA hovers just below its own all-time peak

·         The recent rally has allowed the Russell 2000 to escape correction territory as action now holds ~6% off the March highs 

·         The VIX (11.51) ticked off its lowest levels since March 2013

·         MBA Mortgage Index (-1.2%) 

o    S&P Futures unch @ 1909

o    Dow Futures +2 @ 16,656

o    Nasdaq Futures -2 @ 3718

Asia

·         Markets gained across Asia, support by yesterday's advance on Wall Street

·         Bank of Japan Governor Haruhiko Kuroda spoke in Tokyo and suggested current policy remains appropriate and that the recent success shows "it is possible to implement monetary easing even in a situation where the policy rate is around zero percent" 

·         China's industrial profits slowed to +9.6% YoY (10.7% YoY previous)

·         Australia's construction work done (0.3% QoQ actual v. -0.3% QoQ expected) topped forecasts

·         Japan's Nikkei (+0.2%) ticked to its best level since early April while retaking the 200 dma

·         Hong Kong's Hang Seng (+0.6%) rallied to a one and a half-month high

·         China's Shanghai Composite (+0.8%) captured its 50 dma as trade ticked to a two-week high

·         India's Sensex (unch) held just off record highs

·         Australia's ASX (+0.3%) nearly missed its best close in more than six years

Market Internals

Market Internals -Technical-
The Nasdaq closed down 12 (-0.28%) at 4225, the Dow closed down 42 (-0.25%) at 16633, and the S&P 500 closed down 2 (-0.11%) at 1910. Action came on below average volume (NYSE 620 mln vs. avg. of 710; NASDAQ 1632 mln vs. avg. of 1900), with mixed advancers/decliners (NYSE 1633/1490, NASDAQ 1029/1607) and new highs outpacing new lows (NYSE 148/27, NASDAQ 74/29).

Relative Strength: 
Natural Gas-UNG +2.58%, Clean Energy-PBW +1.41%, 20+ Year Treasuries-TLT +1.24%, Chile-ECH +1.22%, China 25 Index-FXI +1.22%, Sugar-SGG +1.17%, Oil and Gas Exploration-XOP +1.14%, South Korea-EWY +1.13%, Turkey-TUR +1.02%, Greece-GREK +0.98%.

Relative Weakness: 
Silver Miners-SIL -1.82%, Gold Miners-GDX -1.65%, Metals and Mining-XME -1.55%, Coffee-JO -1.22%, Oil-USO -1.21%, Germany-EWG -0.65%, Sweden-EWD -0.65%, Israel-EIS -0.63%, United Kingdom-EWU -0.6%, British Pound-FXB -0.55%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Slip on Light Volume
The stock market endured a quiet session that had the S&P 500 confined to a seven-point range. The benchmark index shed 0.1%, while the Dow Jones Industrial Average (-0.3%) and Nasdaq Composite (-0.3%) followed not far behind. Small caps, however, saw some additional weakness as the Russell 2000 lost 0.5%.

All in all, it is worth pointing out that today's lack of aggressive selling or buying followed four consecutive advances that sent the S&P 500 higher by 2.1%. Furthermore, there was no concerted leadership as the top-weighted sectors ended the day in the red. On that note, consumer discretionary (-0.1%), financials (-0.3%), health care (-0.3%), and technology (-0.3%) all struggled to keep pace with the S&P 500.

The discretionary sector had the best showing of the four after seeing some volatility among retailers and homebuilders. In the retail space, Brown Shoe (BWS 29.34, +2.90), and Michael Kors (KORS 97.01, +1.27) posted respective gains of 10.8% and 1.3% after beating earnings estimates, whileChico's FAS (CHS 15.14, -0.47) missed estimates. The stock fell 3.0%, while the overall industry group did not fare much better. The SPDR S&P Retail ETF (XRT 82.93, -0.77) lost 0.9%.

Also of note, homebuilders displayed intraday strength following above-consensus quarterly results from Toll Brothers (TOL 36.38, +0.74). Shares of TOL jumped 2.1%, while the iShares Dow Jones US Home Construction ETF (ITB 24.03, -0.04) surrendered its modest gain just ahead of the close.

Elsewhere, a pocket of strength among transports allowed the Dow Jones Transportation Average (+0.7%) to climb to a fresh all-time high. The bellwether complex extended its year-to-date gain to 9.1% and underpinned the industrial sector (+0.1%), which outperformed throughout the session.

Interestingly, the recent strength in the transports has not jived with the economic slowdown argument that has been used to explain the continued strength in Treasuries. The Treasury market rallied once again today with the 10-yr note climbing 21 ticks. As a result, the benchmark 10-yr yield fell eight basis points to 2.44%, ending at levels not seen in nearly a year.

Today's participation marked an improvement over last week, but remained below average as 621 million shares changed hands at the NYSE.

Economic data was limited to the weekly MBA Mortgage Index, which fell 1.2% to follow last week's uptick of 0.9%.

Tomorrow, weekly initial claims (Briefing.com consensus 318,000) and the second estimate of Q1 GDP (consensus -0.5%) will be reported at 8:30 ET, while the Pending Home Sales report for April (consensus 1.0%) will be released at 10:00 ET. 

·         S&P 500 +3.3% YTD 

·         Dow Jones Industrial Average +0.3% YTD 

·         Nasdaq Composite +1.2% YTD 

·         Russell 2000 -2.1% YTD

Commodities

Closing Commodities: Crude Oil Sells Off Late In Today's Session

·         Crude oil sold off in the last 45 minutes of pit trading and hit a new low for the day

·         At the end of the session, the July contract lost $1.42 to $102.71/barrel

·         Natural gas, on the other hand, continued to rise during the session, closing just below its high for the day

·         July nat gas ended 11 cents higher at $4.61/MMBtu

·         Gold and silver sold off this morning and gold failed to ultimately recover those losses

·         June gold closed just above its session low, finishing $6.10 lower at $1259.30/oz

·         July silver, however, ended unchanged at $19.06/oz

COMEX Metals Closing Prices

·         June gold fell $6.10 to $1259.30/oz

·         July silver closed unchanged at $19.06/oz 

·         July copper fell 1 cent to $3.17/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Price

·         July corn rose 2 cents to $4.72/bushel

·         July wheat fell 3 cents to $6.39/bushel

·         July soybeans rose 9 cents to $14.98/bushel

·         June ethanol rose 3 cents to $2.35/gallon

·         July sugar (#16 (U.S.)) fell 0.15 of a penny to 25.10 cents/lbs

NYMEX Energy Closing Prices

  July crude oil fell $1.42 to $102.71/barrel

·         Crude oil sold off in the last 45 minutes of pit trading and hit a new low for the day

  June natural gas rose 11 cents to $4.61/MMBtu

·         Nat gas continue to climb higher throughout today's session and ended just below its HoD of $4.63/MMBtu

  July heating oil fell 1 cent to $2.93/gallon

  July RBOB rose 1 cent to $2.989/gallon


Treasuries

10y Breaks 2.50%, Hits 11-Month Low: 10-yr: +19/32..2.440%..USD/JPY: 101.83..EUR/USD: 1.3594

·         Treasuries closed on their highs as a stampede into the complex dropped longer dated yields to their lowest levels in 11 months. Click here to see an intraday yields chart.

·         Yields pressed key support into the cash open and remained at those levels in early U.S. trade.

·         However, support soon gave way, causing a cascade across the curve. 

·         The 5y shed -5.8bps, ending the session at a three-month low of 1.471%. Many traders remain focused on support in the 1.450% area as that level has held up since the beginning of December. 

·         The 10y tumbled -8bps to 2.438%. The benchmark yield broke below the important 2.500% support level early in the session, paving the way for a move to 11-month lows. Curve watchers are taking note of today's as little support exists until the 2.250% level. 

·         At the long end, the 30y lost -7.9bps, finishing at an 11-month low of 3.288%. Trendline support that dates back to November is likely to provide some help in the 3.250% area so a near-term bounce in yield cannot be ruled out; however, the trend remains lower. 

·         Aggressive flattening took hold along the curve as the 2-10-yr spread tightened to 207bps. The 5-30-yr spread also flattened, tightening to 181.5bps. 

·         Precious metals lost ground as gold fell -$7 to $1258 and silver slipped -$0.02 to $19.05. 

·         Data: Initial and continuing claims, GDP - Second Estimate (8:30), and pending home sales (10). 

·         Auction: $29 bln 7y notes. 

·         Fed Speak: Cleveland's Pianalto makes opening remarks at the Inflation, Monetary Policy, and the Public conference (8:30). 

On other news.... 




Currencies 

Dollar Nears Best Levels Since February: 10-yr: +21/32..2.434%..USD/JPY: 101.82..EUR/USD: 1.3595

·         The Dollar Index lingers on session highs near 80.55 as trade fights for its best close in three and a half months after reclaiming the 200 dma. Click here to see a daily Dollar Index chart.

·         EURUSD is -40 pips @ 1.3595 as action presses to its lowest levels since the middle of February. The single currency has been offered over the course of today's session following dovish comments from ECB member Yves Mersch and another batch of disappointing data. Mr. Mersch spoke of the potential for the ECB to lower rates at next week's meeting while suggesting a cut to all three key rates would likely occur, if at all. Also impacting trade was the trio of disappointing data in the form of M3 money supply, French consumer spending, and German unemployment change. French and German banks are closed tomorrow for Ascension Day. 

·         GBPUSD is -105 pips @ 1.6705 as trade sees its biggest slide in fourth months. A weak CBI Realized Sales print got the selling started with a breakdown of 1.6750 support making for another leg lower. The 1.6650 support level is now in focus as the 100 dma also lurks in the vicinity. 

·         USDCHF is +15 pips @ .8980 as buyers remain in control for the 13th time in 16 sessions. The recent one-way move in the pair comes amid euro weakness as action remains heavily correlated to the single currency thanks to the Swiss National Bank's EURCHF1.20 floor. Swiss banks are closed tomorrow in observation of Ascension Day.

·         USDJPY is -20 pips @ 101.80 as sellers regain control following five days of gains. The pair struggled near 102.00 in early action as bulls were unable to retake the key pivot. Japan's retail sales are due out this evening. 

·         AUDUSD is -35 pips @ .9225 as action contends with its lowest close in two months. The hard currency is seeing selling today despite the better than expected construction work done as a slowdown in China's industrial profits weighs. The .9150 area is home to key support and the 200 dma. Australian data is limited to private capital expenditures. 

·         USDCAD is +20 pips @ 1.0880 amid another uneventful session. The 1.0850 level has seen several tests during the month of May, but has so far held its own. Canada's current account balance will be released tomorrow.

Next Week In View





Economic Commentaries

Economic Summary: Mortgage Applications decline; Q2 GDP (second estimate) tomorrow at 8:30
Economic Data Summary:

·         Weekly MBA Mortgage Applications -1.2%. Last Week was revised to from 0.9%

Upcoming Economic Data:

·         Weekly Initial Claims due out Weekly at 8:30 (Briefing.com consensus of 318K; Last Week was 326K)

·         Weekly Continuing Claims due out Weekly at 8:30 (Briefing.com consensus of 2.650 M ; Last Week was 2.653 M )

·         First Quarter GDP - 2nd Estimate due out First Quarter at 8:30 (Briefing.com consensus of -0.5%; Fourth Quarter was 0.1%)

·         First Quarter GDP Deflator - Second Estimate due out First Quarter at 8:30 (Briefing.com consensus of 1.3%; Fourth Quarter was 1.3%)

·         April Pending Home Sales due out April at 10:00 (Briefing.com consensus of 1.0%; March was 3.4%)

Upcoming Fed/Treasury Events:

·         The Treasury is scheduled to auction off $35 bln in 5 year notes Today at 13:00

·         The Treasury is scheduled to auction off $29 bln in 7 year notes Thursday at 13:00

·         Fed's Mester to speak tomorrow at 8:30

Other International Events of Interest

·          Bank of Japan Governor Haruhiko Kuroda spoke in Tokyo and suggested current policy remains appropriate and that the recent success shows "it is possible to implement monetary easing even in a situation where the policy rate is around zero percent" 

Jason's Commentaries

Market finally started taking profit off the breakout caused by the Nasdaq after S&P500 broke into higher highs as Apple, Google, BoA and other banks started rallied on Tuesday. Internals were showing sideways trend last night. It seems that the market do not want to stay into the trade towards the closing bell. The main leader last night was the Utilities Sector while Healthcare lagged the most with 0.29% loss. IBM, Google were the main issues that dragged most of the indices down last night. While we do not have much reports coming out, I reckon the market is likely to stay on the sidelines for the rest of the week that is going to end May in the positive note. However, June may be a vicious month to trade as well. Stay safe people =D 

Market Call: FLAT

Date: 29 May 2014