23 June 2014 AMC - Market went flat as expected, awaiting breakout

23 June 2014 AMC - Market went flat as expected, awaiting breakout

Market Summary 

European Markets Closing Price

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

·         UK's FTSE: -0.4%

·         Germany's DAX: -0.7%

·         France's CAC: -0.6%

·         Spain's IBEX: -0.3%

·         Portugal's PSI: -1.1%

·         Italy's MIB Index: -1.3%

·         Irish Ovrl Index: -0.7%

·         Greece ATHEX Composite: -2.7%

Before Market Opens 

S&P futures vs fair value: -1.00. Nasdaq futures vs fair value: -2.30.
The S&P 500 futures trade one point below fair value.

Asian markets ended on a mixed note. 

·         In economic data: 

o    China's HSBC Flash Manufacturing PMI jumped to 50.8 from 49.4 (expected 49.7), reclaiming the expansion line while printing at an eight-month high 

o    Singapore's inflation rate climbed to 2.7% from 2.5% 

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·         Japan's Nikkei added 0.1%, rallying to a five-month high. Names with large exposure to China led as Hitachi Construction added 2.5% and Komatsu rose 1.1%. 

·         Hong Kong's Hang Seng lost 1.7%, seeing its biggest drop in more than three months as trade tumbled off its best levels of 2014. Property shares were hit hard with Sino Land giving up 3.9%. 

·         China's Shanghai Composite slipped 0.1% as the continued wave of new issues weighed. Infrastructure names were hit hard with Daqin Railway giving up more than 1.0%. 

Major European indices hover just below their flat lines, while Italy's MIB (-0.8%) lags. Ukraine's government formally declared a ceasefire in the east, which is expected to remain in effect through Friday. 

·         Economic data was limited: 

o    Eurozone Manufacturing PMI slipped to 51.9 from 52.2 (expected 52.2), while Services PMI fell to 52.8 from 53.2 (consensus 53.3) 

o    Germany's Manufacturing PMI ticked up to 52.4 from 52.3 (expected 52.5), while Services PMI declined to 54.8 from 56.0 (consensus 55.7) 

o    French Manufacturing PMI fell to 47.8 from 49.6 (expected 49.5), while Services PMI slipped to 48.2 from 49.1 (consensus 49.4) 

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·         Great Britain's FTSE is lower by 0.3%. Homebuilders Barratt Developments and Persimmon underperform with respective losses of 3.1% and 2.0%. ARM Holdings is the top performer, up 2.5%. 

·         In France, the CAC trades down 0.3%. Alstom is lower by 2.7% following news that the company's sale of its energy assets to General Electric will be allowed to take place. 

·         Germany's DAX holds a loss of 0.3% as 22 of its 30 components display losses. Adidas, Commerzbank, and Merck are down between 1.0% and 1.9%, while utilities outperform. E.ON and RWE are both up near 1.3%. 

·         Italy's MIB is down 0.8% amid weakness in financials. Banca Popolare dell'Emilia Romagna is lower by 11.3% as it begins raising additional capital.

U.S. Equities

·         Futures point to small losses at the open as a quiet overnight trade drifts towards the cash open

·         The current six-day winning streak has the DJIA and S&P 500 at record highs while the Nasdaq holds at its best levels in over 14 years

·         The VIX (10.85) remains near its lowest levels since February 2007

o    S&P Futures +1 @ 1954

o    Dow Futures -2 @ 16,856

o    Nasdaq Futures -1 @ 3792

Asia

·         Markets ended mixed across Asia

·         China's HSBC Flash Manufacturing PMI jumped to 50.8 (49.7 expected, 49.4 previous), reclaiming the expansion line while printing at an eight-month high

·         Singapore's inflation rate climbed to 2.7% (2.5% previous)

·         Japan's Nikkei (+0.1%) rallied to a five-month high

·         Hong Kong's Hang Seng (-1.7%) saw its biggest drop in more than three months as trade tumbled off its best levels of 2014

·         China's Shanghai Composite (-0.1%) slipped as the continued wave of new issues weighed

·         India's Sensex (-0.3%) fell to an almost three-week low

·         Australia's ASX (+0.6%) nearly erased all of Friday's losses

Market Internals

Market Internals -Technical-
The Nasdaq closed up 1 (+0.01%) at 4369, the S&P 500 closed flat at 1963, and the Dow closed down 10 (-0.06%) at 16937. Action came on below average volume (NYSE 559 mln vs. avg. of 671; NASDAQ 1587 mln vs. avg. of 1749), with decliners outpacing advancers (NYSE 1529/1577, NASDAQ 1163/1503) and new highs outpacing new lows (NYSE 252/18, NASDAQ 104/23).

Relative Strength: 
Silver Miners-SIL +2.25%, Junior Gold Miners-GDXJ +1.82%, Rare Earths-REMX +1.47%, MLP Index-AMJ +1.46%, Eastern Europe-ESR +1.44%, Sweden-EWD +1.43%, Copper Miners-COPX +1.15%, Vietnam-VNM +1.14%, Turkey-TUR +1.07%, Middle East and Africa-GAF +0.86%.

Relative Weakness: 
Volatility-VXX -2.47%, Natural Gas-UNG -2.33%, Corn-CORN -2.3%, Lithium-LIT -1.74%, Greece-GREK -1.74%, China 25 Index-FXI -1.24%, Hong Kong-EWH -1.18%, Grains-JJG -1.15%, Austria-EWO -0.89%, Italy-EWI -0.83%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Begin New Week on Quiet Note
The major averages started the week on a quiet note with the S&P 500 shedding less than a point. To be fair, the slight downtick was a function of some profit taking after the benchmark index registered six consecutive gains.

Equity indices started the day in the red and maintained narrow ranges throughout the session. The S&P 500 tried to regain its flat line shortly after the open, but could not do so as three influential sectors weighed. Specifically, consumer staples (-0.6%), health care (-0.3%), and industrials (-0.6%) slumped out of the gate and pressured the market throughout the session.

Most notably, the industrial sector finished the trading day at the bottom of the leaderboard due to broad weakness among transport stocks. The Dow Jones Transportation Average lost 0.5% with 17 of 20 components ending in the red. The five airline stocks that comprise a portion of the index all lost more than 1.0% apiece with Southwest Airlines (LUV 26.92, -0.37) leading the retreat. Despite today's loss, the Transportation remained higher by 7.8% for the quarter.

Elsewhere, the health care sector stumbled amid relative weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 252.91, -2.73) lost 1.1%, trimming its quarter-to-date gain to 7.0%.

Like the high-beta biotech space, chipmakers also displayed relative weakness after Advanced Micro Devices (AMD 4.01, -0.09) and NVIDIA (NVDA 18.71, -0.22) were both downgraded to ‘Underperform' at Pacific Crest. The two stocks lost 2.2% and 1.2%, respectively, while the PHLX Semiconductor Index slipped 0.4%.

Meanwhile, large cap tech names held up well with the likes of Microsoft (MSFT 41.99, +0.31), Google (GOOGL 574.29, +7.77), and Oracle (ORCL 41.10, +0.28) climbing between 0.7% and 1.4%. For its part, Oracle rallied after announcing the acquisition of Micros (MCRS 67.98, +2.21) for $68/share.

Similar to the technology sector (+0.3%), five of the other six cyclical groups posted modest gains. Energy (+0.4%) outperformed throughout the session even as crude oil slid 0.6% to $106.18/bbl. The commodity-linked sector extended its June gain to 6.3%, while pushing its quarter-to-date advance to 12.9%.

The slim losses in equities encouraged participants to increase their demand for volatility protection, but the CBOE Volatility Index (VIX 10.97, +0.12), which rose 1.1%, still finished near multi-year lows.

Treasuries, meanwhile, did not indicate safe haven demand as the 10-yr note slipped four ticks, which pushed the benchmark yield higher by one basis point to 2.62%.

Participation remained on the light side with just under 560 million shares changing hands at the NYSE floor.

Economic data was limited to the Existing Home Sales report for May: 

·         Existing home sales increased 4.9% in May to a seasonally adjusted annualized rate (SAAR) of 4.89 million from an upwardly revised 4.66 million SAAR (from 4.65 mln SAAR) in April. The Briefing.com consensus expected existing home sales to increase to 4.80 million SAAR. 

o    Mortgage rates, which had been moving higher for most of 2014, fell sharply over the last couple of months and helped boost sales growth, but year-over-year sales are still 5.0% below May 2013 levels. 

o    Purchases by first-time home buyers accounted for only 27% of all sales in May. That was down from 29% in April. First-time home buyers typically account for a third of home purchases during periods of normal sales trends. 

Tomorrow, the Case-Shiller 20-city Index (Briefing.com consensus 11.6%) and FHFA Housing Price Index will both be released at 9:00 ET, while New Home Sales for May (consensus 440K) and June Consumer Confidence (consensus 84.0) 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 +1.9% YTD

Commodities

Closing Commodities: Crude And Nat Gas End Near LoD, Precious Metals And Copper Ended Near HoD

·         Crude oil natural gas futures slid lower today and closed near session lows

·         Aug crude finished today's pit trading session $0.63 lower at $106.18/barrel, while July nat gas ended $0.08 to $4.45/MMBtu

·         Precious metals and copper basically did the opposite

·         After a sell off before floor trading, gold and silver climbed higher after hitting its low for the day there and finished just below its HoD

·         Copper began higher, held gains and closed just near its HoD

·         Aug gold ended $1.80 higher at $1318.40/oz, July lost $0.03 to $20.92/oz and July copper ended $0.03 higher at $3.15/lb

COMEX Metals Closing Prices; all three closed just under highs for the day

·         Aug gold rose $1.80 to $1318.40/oz

·         July silver fell $0.03 to $20.92/oz

·         July copper rose 3 cents to $3.15/lbs

 CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 9 cents to $4.44/bushel

·         July wheat fell 5 cents to $5.80/bushel

·         July soybeans rose 5 cents to $14.24/bushel

·         July ethanol fell 2 cents to $2.07/gallon

·         Sep sugar (#16 (U.S.)) rose 0.17 of a penny to 26.15 cents/lbs

NYMEX Energy Closing Prices

·         Aug crude oil fell $0.63 to $106.18/barrel

·         July natural gas fell 8 cents to $4.45/MMBt

·         July heating oil fell $0.01 at $3.04/gallon

·         July RBOB fell at $0.08/gallon

Treasuries

Treasuries Give Up Early Gains: 10-yr: -04/32..2.618%..USD/JPY: 101.89..EUR/USD: 1.3603

·         Treasuries ended little changed after some late-day selling erased the early gains. Click here to see an intraday yields chart.

·         A choppy trade saw yields locked in a tight 2bp range for much of the session before widening to 3.5bps amid the late-day slide.

·         Action saw little reaction to the existing home sales (4.89M actual v. 4.80M expected) beat. 

·         The 5y lagged, ending up +0.4bps @ 1.704%. Action was unable to break below support in the 1.650%/1.675% area that has held for the past two weeks. 

·         The 10y eased -0.1bp to 2.623%. Early buying provided a test of 2.580%/2.600% support, but the bears were able to successfully defend the level. 

·         At the long end, the 30y led, slipping -0.3bps to 3.449%. Early strength was unable to keep the yield below the 50 dma (3.426%). 

·         A slightly flatter curve developed as the 2-10-yr spread narrowed to 216.5bps.

·         Precious metals finished mixed with gold flat @ $1317 and silver -$0.08 @ $20.87.

·         Data: Case-Shiller 20-city Index, FHFA Housing Price Index (9), new home sales, and consumer confidence (10) 

·         Auction: $30 bln 2y notes. 

·         Fed Speak: 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).

On other news.... 

Currencies 

Dollar Slips Amid Lackluster Trade: 10-yr: unch..2.604%..USD/JPY: 101.89..EUR/USD: 1.3602

·         The Dollar Index presses its worst levels of U.S. trade as action probes the 80.30 level. Click here to see a daily Dollar Index chart.

·         Many traders continue to watch the 80.20 area as support there is guarded by both the 50 and 100 dma. 

·         EURUSD is flat @ 1.3600 as steady buying throughout the U.S. session has erased the losses that developed following the disappointing Flash Manufacturing and Services PMI data from across the region. Today's reversal has the single currency flirting with its best close in two weeks as action continues to climb off the important 1.3500 support level. German Ifo Business Climate is due out tomorrow. 

·         GBPUSD is +10 pips @ 1.7020 as trade lingers near its best levels since October 2008 amid today's inside range day. Sterling has seen little reaction to the Bank of England Credit Conditions Survey, which suggested tighter lending rules are likely to hamper loan growth in the months ahead. Britain's Inflation Report Hearings and BBA Mortgage Approvals are schooled for tomorrow. 

·         USDCHF is flat @ .8940 as action presses session lows. An early bid correlated with weakness in the single currency and managed to run the pair back above the 200 dma, but a reversal to the lows now has trade flirting with a fourth day of losses. Swiss data out tomorrow is limited to the trade balance.

·         USDJPY is -20 pips @ 101.85 as trade holds just off the lows. The pair has spent the day in a tight 30 pip range following overnight comments from Bank of Japan Governor Haruhiko Kuroda, suggesting the economic recovery remains on track. Support resting just below current levels is helped by the 200 dma.

·         AUDUSD is +35 pips @ .9415 as buyers regain control for the first time in three days. An early boost following the strongest Chinese HSBC Flash Manufacturing PMI in eight months had the hard currency on track for its best close since November, but some light selling has dropped action off its best levels and below the June 12 close. A breakdown of the .9400 level puts the 50 dma (.9320) in play. 

·         USDCAD is -30 pips @ 1.0725 as trade slides to levels last seen at the beginning of 2014. Support near 1.0700 is now in focus.

Next Week In View




Economic Commentaries

Economic Summary: Existing Home Sales top expectations; Plosser (hawk) and Dudley (dove) to speak tomorrow
Economic Data Summary:

·         May Existing Home Sales 4.89 M  vs Briefing.com consensus of 4.80 M ;April was revised to 4.66 M from 4.65 M

o    The biggest concern is that first-time home buyers continue to sit on the sidelines.  Purchases by first-time home buyers accounted for only 27% of all sales in May.  That was down from 29% in April. First-time home buyers typically account for a third of home purchases during periods of normal sales trends.

Upcoming Economic Data:

·         April Case Schiller 20 City Index due out Tuesday at 9:00 (Briefing.com consensus of 11.6%; March was 12.4%)

·         April FHFA Housing Price Index due out Tuesday at 9:00 (March was 0.7%)

·         May New Home Sales due out Tuesday at 10:00 (Briefing.com consensus of 440K; April was 433K)

·         June Consumer Confidence due out Tuesday at 10:00 (Briefing.com consensus of 84.0; May was 83.0)

Upcoming Fed/Treasury Events:

·         Philadelphia Fed President Charles Plosser (2014 voter, hawkish) to speak tomorrow at 8:05

·         NY Fed President William Dudley (2014 voter, dovish) to speak tomorrow at 14:00

Other International Events of Interest

·         Eurozone Flash Manufacturing (51.9 actual v. 52.2 expected, 52.2 previous) and Services (52.8 actual v. 53.4 expected, 53.2 previous) PMI readings both missed estimates

·         China's HSBC Flash Manufacturing PMI jumped to 50.8 (49.7 expected, 49.4 previous), reclaiming the expansion line while printing at an eight-month high

Jason's Commentaries

As expected, the market decided to end sideway last night. However, only the small caps decided to head down. Given the strength in the small caps, they might be the dragging factor behind the drop for the broader market. The small caps has been pretty strong for the past few weeks, alongside with the technology stocks, mainly being led by Apple as it splits it stocks. The internals suggested the market was really flat, while industrials, healthcare, staples and Utilities were the laggards of yesterday's session. That might suggest the market is moving away from the defensive play. With that aside, the VIX remained below 12 for quite a while already. Seems that the market is getting really complacent. While i'm not expecting the market to turn down big, i'm expecting some correction to come after such a huge rebound.








Market Call: FLAT to downside

Date: 24 June 2014