20 June 2014 AMC - Market ended higher as bullish sentiments continues

20 June 2014 AMC - Market ended higher as bullish sentiments continues

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: -0.2%

·         France's CAC: -0.5%

·         Spain's IBEX: -0.3%

·         Portugal's PSI: -1.4%

·         Italy's MIB Index: -1.0%

·         Irish Ovrl Index: -1.0%

·         Greece ATHEX Composite: + 1.5%

Before Market Opens 

S&P futures vs fair value: +2.70. Nasdaq futures vs fair value: +0.50.
The S&P 500 futures trade three points above fair value.

The major Asian bourses ended mostly lower. Bank of Japan Governor Haruhiko Kuroda spoke overnight in Tokyo, reiterating his belief the Japanese economy continues to recover. Also of note, the Bank of Japan is now the largest holder of Japanese Government Bonds. 

·         Japan's Nikkei shed 0.1%, slipping off its best level in almost five months. The flattish session saw Toyota Motor gain 0.4% and Canon dip 0.2%. 

·         Hong Kong's Hang Seng added 0.1%, holding near its best levels of 2014. Casino stocks were among the leaders as Sands China and Galaxy Entertainment rallied 2.3% and 1.8%, respectively. 

·         China's Shanghai Composite climbed 0.2%, gaining for the first time in four days. Property stocks recovered some of their recent losses with China Vanke jumping 1.8%. 

Major European indices trade near their flat lines, while Italy's MIB (-0.6%) lags. In news of note, Russia's Prime Minister Dmitry Medvedev said his country will challenge some of the sanctions imposed by the U.S. at the World Trade Organization 

·         Economic data was scarce: 

o    Eurozone current account surplus rose to EUR21.50 billion from EUR19.60 billion (expected surplus of EUR19.00 billion) 

o    Germany's PPI slipped 0.2% month-over-month (expected 0.2%, previous -0.1%), while the year-over-year reading fell 0.8% (consensus -0.7%, prior -0.9%) 

o    Great Britain's Public Sector Net Borrowing increased to GBP11.48 billion from GBP9.00 billion (expected GBP12.00 billion) 

o    Italy's Industrial New Orders rose 3.8% month-over-month (expected 2.3%, prior 1.4%), while Industrial Sales slipped 0.2% (prior 0.4%) 

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·         In France, the CAC is lower by 0.1%. Financials lag with BNP Paribas, Credit Agricole, and Societe Generale down between 1.0% and 1.8%. Alstom is the leading index component, trading higher by 1.0%. 

·         Germany's DAX trades higher by 0.3%. Health care names are showing strength with Henkel AG and Merck both up near 1.0%. Meanwhile, bank shares are among the laggards. Commerzbank and Deutsche Bank are lower by 3.5% and 3.1%, respectively. 

·         Great Britain's FTSE trades up 0.2%. Shire has jumped 14.9% after rejecting a $46.50 billion takeover bid. 

·         Italy's MIB holds a loss of 0.6%. Banco Popolare, BMPS, and Unicredit are down between 2.0% and 4.1%.

U.S. Equities

·         Equity futures point to a firm open as the DJIA and S&P 500 look for a sixth straight day of gains

·         Yesterday's bid ran the S&P 500 to yet another record high 

·         The DJIA holds just below its record peak while the Nasdaq narrowly avoided its best close in more than 14 years

·         The VIX (10.62) holds at levels last seen in February 2007

o    S&P Futures +5 @ 1955

o    Dow Futures +29 @ 16,862

o    Nasdaq Futures +6 @ 3795

Asia

·         The major Asian bourses ended mostly lower

·         Bank of Japan Governor Haruhiko Kuroda spoke overnight in Tokyo, reiterating his belief the Japanese economy continues to recover

·         The Bank of Japan is now the largest holder of Japanese Government Bonds

·         Malaysia's inflation rate slipped to 3.2% (3.4% previous)

·         Japan's Nikkei (-0.1%) slipped off its best level in almost five months 

·         Hong Kong's Hang Seng (+0.1%) held near its best levels of 2014. 

·         China's Shanghai Composite (+0.2%) gained for the first time in four days

·         India's Sensex (-0.4%) fell for a third straight day

·         Australia's ASX (-0.9%) was rejected by the 50 dma 

Market Internals

Leaders and Laggards

Technical Updates

Commentaries 

WRAPX Closing Market Summary: Stocks End Strong Week on Upbeat Note

The major averages posted modest Friday gains to punctuate an upbeat week that saw relative strength among small-cap stocks. Fittingly, the Russell 2000 (+0.3%) settled just ahead of the S&P 500 (+0.2%). The two indices extended their weekly gains to 2.2% and 1.6%, respectively. The S&P 500 spent the entire session in the green, but was limited to a four-point range as top-weighted sectors traded in mixed fashion. The modest gains were supported by the relative strength among groups like energy (+1.0%), health care (+0.8%), industrials (+0.4%), and financials (+0.3%), but the underperformance of consumer discretionary (-0.4%), technology (-0.3%), and consumer staples (-0.4%) kept the index from pulling too far away from its flat line. The energy sector seized the lead shortly after the open and held that spot into the close. The group locked in a 2.7% gain for the week, which was driven in part by oil supply concerns following the escalation of sectarian tensions in Iraq. For its part, crude oil rose 0.7% to $106.81/bbl. Commodities in general enjoyed a strong week with gold and silver futures adding to yesterday's big gains. Gold futures added $2.30 to $1316.60/ozt, bringing their total weekly advance to 3.3%. Silver, meanwhile, tacked on another 1.1% today to settle at $20.95/ozt, which represented a 6.6% gain for the week. Interestingly, miners were not boosted by the strength in metals as the Market Vectors Gold Miners ETF (GDX 25.82, -0.27) fell 1.0%. Elsewhere, the health care sector made a noteworthy contribution to the advance with biotechnology powering the move. The iShares Nasdaq Biotechnology ETF (IBB 255.64, +5.08) rose 2.0%, extending its June gain to 6.7%. On the flip side, the top-weighted sector—technology—kept the lid on the market as Oracle (ORCL 40.82, -1.69) weighed. The stock fell 4.0% after missing earnings and revenue estimates. High-beta chipmakers lagged for the better part of the session, but climbed into the close (PHLX Semiconductor Index +0.2%). Also of note, the consumer discretionary space was pressured by quick-service restaurants following disappointing quarterly results from Darden Restaurants (DRI 47.58, -1.94). The modest gains in the market did not stop some participants from demanding volatility protection as the CBOE Volatility Index (VIX 10.67, +0.05) rose 0.5% after marking a new low for the year. On the fixed income side, the 10-yr note edged up one tick with its yield ending at 2.62%. Participation was well above average, but that was a function of today's quadruple witching and S&P rebalancing. As a result, more than 1.7 billion shares changed hands at the NYSE floor. On Monday, the Existing Home Sales report will be released at 10:00 ET.  ·         S&P 500 +6.2% YTD  ·         Nasdaq Composite +4.6% YTD  ·         Dow Jones Industrial Average +2.2% YTD  ·         Russell 2000 +2.1% YTD

Commodities

 COMEX Metals Closing Prices

  Aug gold rose $2.30 to $1316.60/oz 

·         Gold dipped to a session low of $1310.50 moments before equity markets opened but recovered into positive territory later in morning action. It rose as high as $1320.50 and settled 0.2% higher, booking a gain of 3.3% for the week. 

  July silver rose $0.28 to $20.95/oz 

·         Silver traded in positive territory today, climbing to a session high of $20.99 in morning action. It settled 1.4% higher, bringing gains for the week to a solid 6.6%. 

  July copper rose 4 cents to $3.12/lbs

 CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn rose 3 cents to $4.53/bushel 

·         July wheat fell 9 cents to $5.85/bushel 

·         July soybeans fell 2 cents to $14.19/bushel 

·         July ethanol rose 5 cents to $2.09/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.13 of a penny to 25.98 cents/lbs

NYMEX Energy Closing Prices

·         Aug crude oil rose $0.76 to $106.81/barrel

·         July natural gas fell 5 cents to $4.53/MMBt

·         July heating oil settled unchanged at $3.05/gallon 

·         July RBOB settled unchanged at $3.13/gallon

Treasuries

Curve Steepens as Fed Remains Dovish: 10-yr: unch..2.615%..USD/JPY: 102.11..EUR/USD: 1.3593
The Week in Review

·         Treasuries lost ground this week. Click here to see an intraweek yields chart.

·         A hot CPI print (0.4% actual v. 0.2% expected) got the selling started on Tuesday, but Wednesday's dovish FOMC Statement and accompanying Yellen press conference trimmed those losses.

·         The Fed tapered its current QE program another $10 bln, dropping its monthly purchases to $35 bln ($15 bln of MBS, $20 bln of Treasury securities) while also indicating "growth in economic activity has rebounded in recent months."

·         Thursday's tailing $7 bln 30y TIPs auction sparked heavy selling at the long end that persisted into Friday's open.

·         Economic data mostly topped estimates as Empire Manufacturing (19.3 actual v. 12.8 expected), industrial production (0.6% actual v. 0.5% expected), capacity utilization (79.1% actual v. 78.9% expected), and the Philly Fed (17.8 actual v. 13.4 expected) all topped estimates. Only housing data was weak as starts (1001K actual v. 1028K expected) and permits (991K actual v. 1050K expected) fell short of expectations

·         Selling weighed heaviest on the long end as the 30y tacked on +6bps to 3.452%. Trade flirted with the 3.500% resistance level into week's end before slipping into the close. Bulls will have their work cut out in the week ahead as they hope to drop action back below the 50 dma and trendline resistance near 3.400%.

·         The 10y rallied +3bps to 2.624%. Action saw several tests of key resistance near 2.650%, but the bulls put up a fierce defense and the level held. Trendline resistance and the 50 dma near 2.600% remain in focus. 

·         Outperformance in the belly saw the 5y edge up +1bp to 1.700%. Action remained trapped in the 1.650%/1.750% range that is now carrying over into a third week. 

·         Up front, the 2y ended little changed @ 0.460%. The hot CPI reading sparked some rate hike concerns and propelled the yield to 0.500%, a level last seen in September on fears of a debt ceiling breach. However, action back off the level into the end of the week. 

·         Selling swung the curve steeper as the 2-10-yr spread widened to 216.5bps and the 5-30-yr spread climbed to 175bps. 

The Week Ahead

·         Monday's data is limited to existing home sales (10). 

·         Data picks up on Tuesday with Case-Shiller 20-city Index, FHFA Housing Price Index (9), new home sales, and consumer confidence (10). Treasury will auction $30 bln 2y notes. Philly's Plosser gives his economic outlook (8:05). NY's Dudley travels to Puerto Rico to speak on business conditions and the economy (14). SF's Williams takes part in a discussion at Stanford University on "The Global Economy, the Budget, and the Board" (18:30).

·         Wednesday's data is the most anticipated of the week as the weekly MBA Mortgage Index (7), durable orders, and GDP - Third Estimate (8:30) are due out. Treasury will hold a $35 bln 5y note auction. 

·         Data continues to flow on Thursday with initial and continuing claims, personal income and spending, and PCE Prices - Core (8:30). Treasury will auction $29 bln 7y notes. Richmond's Lacker discusses "Investing in People as an Economic Strategy" (8:30) and STL's Bullard takes part in a Q&A about monetary policy (13:05). 

·         Data concludes for the week on Friday with Michigan Sentiment - Final (9:55).

On other news.... 




Currencies 

Dollar Holds Slim Gains: 10-yr: -01/32..2.624%..USD/JPY: 102.12..EUR/USD: 1.3593

·         The Dollar Index holds slim gains near 80.40. Click here to see a daily Dollar Index chart.

·         An early bid provided a test of the key 80.50 area, but trade was unable to reclaim the level. 

·         EURUSD is -15 pips @ 1.3590 as light selling has wiped away yesterday's gains. The single currency saw early selling pressure action to 1.3560, but a steady bif has persisted throughout U.S. trade. Support in the 1.3500 area remains key. Eurozone data scheduled for Monday is heavy as Flash Manufacturing and Services PMI readings from across the region are released. 

·         GBPUSD is -30 pips @ 1.7010 as trade presses the lows. An early bid threatened the best levels since October 2008, but trade was unable to clear yesterday's highs. British data out Monday includes BOE Credit Conditions and BBA Mortgage Approvals. 

·         USDCHF is +15 pips @ .8955 as action battles to reclaim the 200 dma. An absence of news and data out of Switzerland has left the pair at the mercy of the euro. Switzerland's trade balance is scheduled for release on Monday. 

·         USDJPY is +20 pips @ 102.15 as trade drifts amid a lackluster session. Trade has spent much of the past four months locked in a tight range, mostly between 101.25/102.75. Bank of Japan Governor Kuroda will speak Monday in Tokyo. 

·         AUDUSD is -10 pips @ .9385 as light selling has trade slipping off two-month highs. Today's trade has many trades looking towards the 50 dma (.9320). China's HSBC Flash Manufacturing PMI is due out late Sunday.

·         USDCAD is -70 pips @ 1.0750 as trade dives to a five and a half-month low. Today's selling comes following the hot Canadian CPI (0.5% actual v. 0.2% expected) reading, and has action looking at its first sub-200 dma close since February 2013.

Weekly Analysis
Week 1



Technical Updates

Briefing's Commentaries

Week in Review: The Beat Goes On 

Equity indices pretty much ran in circles on Monday, having closed the session close to where they began. The indecisive nature was attributed to some worrisome-sounding headlines on the geopolitical front, yet the market action suggested it may have been owed more to a case of wait-and-see in front of Wednesday's FOMC meeting. Oil prices were little changed despite the news that the militant group, Islamic State of Iraq and Syria, took over yet another city in northern Iraq. The 10-yr note, gold prices, and the US Dollar Index, meanwhile, were also little changed, signaling that there wasn't a flight to safety on those headlines or the news that Russia cut off its gas supply to Ukraine after the two countries failed to agree on pricing.

The stock market ended the Tuesday session on a modestly higher note with participants gearing up for the latest policy directive from the FOMC. Small- and mid-cap stocks led the way with the Russell 2000 and S&P Mid Cap 400 climbing 0.7% and 0.8%, respectively. Meanwhile, the S&P 500 added 0.2% with five sectors posting gains. Overall, cyclical groups did the bulk of the grunt work as five of six growth-sensitive sectors advanced. Financials (+0.9%) seized the lead at the start of the session and never looked back. Top-weighted components like Bank of America (BAC) and Morgan Stanley (MS) posted respective gains of 2.0% and 2.5%, while the entire sector extended its June advance to 1.9%.

The major averages posted modest gains on Wednesday after the Federal Open Market Committee announced another $10 billion taper, which was widely expected. The S&P 500 added 0.8% with all ten sectors posting gains. Equity indices spent the first half of the session near their flat lines as market participants held pat ahead of the afternoon statement from the Fed. The $10 billion reduction lowered the size of monthly asset purchases to $35 billion, while the remainder of the policy statement struck a familiar tone. The Fed reiterated its commitment to the current level of interest rates, saying rates are likely to remain low for a considerable time after quantitative easing ends. Furthermore, the FOMC released its economic projections, but those were not too different from the prior forecast either. According to the projections, the Fed expects the jobless rate to be between 6.0% and 6.1% at the end of the year after calling for a rate between 6.1% and 6.3% in its last set of projections.

On Thursday, the major stock indices managed to hold fairly steady in what was a seesaw day of trading; longer-dated Treasuries experienced a notable reversal that left the 10-yr note down 12 ticks and yielding 2.63% while the front of the curve remain propped up with buying interest; commodity prices were higher with precious metals prices moving up sharply; and the US Dollar Index was down 0.3%. A 3.6% jump in gold prices to $1318.00/troy ounce and the weakness at the back end of the Treasury curve were cited as expressions of inflation concerns with market participants acting uneasy about the Fed's seemingly complacent view of inflation. The explanation was not entirely out of bounds, but it also wasn't above reproach given that the dollar failed to bounce and the front of the Treasury curve held up just fine. Accordingly, it is too early to say whether the action on Thursday reflected genuine inflation concerns.

Next Week In View





Economic Commentaries

Economic Summary: No US data today; Existing home sales Monday at 10:00

Upcoming Economic Data:

·         May Existing Home Sales due out Monday at 10:00 (April was 4.65 M )

Other International Events of Interest

·         Bank of Japan Governor Haruhiko Kuroda spoke overnight in Tokyo, reiterating his belief the Japanese economy continues to recover

·         The Bank of Japan is now the largest holder of Japanese Government Bonds.

Jason's Commentaries

it seems that the market is not ready to sell off or take profit yet. Dow now faced it's previous high and S&P500 is at the new high... Volumes were at 1115m shares traded on the NYSE due to expiration Friday. Internals were consistent with the market movements. Leading the sector was Energy gaining 0.53% while most of other sectors were down with Utilities down at 1.45% and Staples 0.99% loss. The market is likely to exit their defensive position which such a big drop in the defensive sectors. Looking at the technicals, I believe the bullish sentiments are still here and we're likely to hold up high for Monday.

Market Call: FLAT to upside

Date: 23 June 2014