7 Jul 2014 AMC - Market retraced after pricing in on last Thursday

7 Jul 2014 AMC - Market retraced after pricing in on last Thursday

Market Summary 

 European Markets Closing Prices

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

·         UK's FTSE: + 0.0%

·         Germany's DAX: -1.0%

·         France's CAC: -1.4%

·         Spain's IBEX: -1.1%

·         Portugal's PSI: -1.7%

·         Italy's MIB Index: -1.3%

·         Irish Ovrl Index: -0.9%

·         Greece ASE General Index: -0.1%

Before Market Opens 

S&P futures vs fair value: -5.40. Nasdaq futures vs fair value: -7.80.
The S&P 500 futures trade five points below fair value.

Asian markets drifted little changed to start the week. Bank of Japan Governor Haruhiko Kuroda reiterated current policy will remain in place for as long as it takes to maintain the 2% inflation target. Furthermore, he said year-over-year increase in core inflation is likely to be around 1.25% for ‘some time.' 

·         Economic data was limited: 

o    Japan's Leading Index slipped to 105.7 from 106.5 (expected 106.0) 

o    Australia's AIG Construction Index rose to 51.8 from 46.7, while ANZ Job Advertisements jumped 4.3% month-over-month (previous -5.7%) 

o    Taiwan's trade surplus narrowed to TWD56.90 billion from TWD159.50 billion. 

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·         Japan's Nikkei lost 0.4%, slipping off five and a half month highs as profit-taking set in. Disappointing earnings dropped supermarket giant Aeon 5.1%. 

·         Hong Kong's Hang Seng held at its best levels of 2014. Casino stocks lagged as Sands China and Galaxy Entertainment gave up 2.0% and 1.2%, respectively. 

·         China's Shanghai Composite held at three-week highs. China Vanke added 3.4% and Poly Real Estate gained 2.4% on reports Wuhan city will ease standards for third home purchases. 

Major European indices trade lower across the board amid light volumes. IMF Managing Director Christine Lagarde spoke over the weekend, suggesting the current slow rate of investment could pressure global growth. The IMF chief said the latest growth forecast will differ slightly from the previous outlook, but stopped short of giving specific figures 

·         Participants received several data points: 

o    Eurozone Sentix Investor Confidence improved to 10.1 from 8.5 (expected 8.0) 

o    Germany's Industrial Production fell 1.8% month-over-month (consensus 0.2%, previous -0.3%) 

o    Spain's Industrial Production rose 2.5% year-over-year (expected 3.8%, previous 4.1%) 

o    Swiss Unemployment rate slipped to 2.9% from 3.0%, as expected 

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·         Great Britain's FTSE holds a loss of 0.5% with Tullow Oil leading the retreat. The stock trades lower by 2.1%. Drug maker GlaxoSmithKline outperforms with a gain of 0.4%. 

·         Germany's DAX is lower by 0.5% amid weakness in some of the top index components. Adidas, Bayer, and Siemens are all down near 0.9%. Insurer Allianz outperforms with a gain of 1.2% 

·         In France, the CAC trades down 1.0% as ArcelorMittal and Cie de St-Gobain lead the slide. The two producers of basic materials hold respective losses of 2.7% and 2.1%. Renault is the lone advancer, up 1.2% following better than expected deliveries data.

U.S. Equities

·         Equity futures suggest modest losses at the open as traders return to work following the holiday weekend

·         Friday's holiday shortened session saw both the DJIA and S&P 500 climb to record highs while the Nasdaq closed at its best level in more than 14 years

·         The VIX (10.32) holds at levels last seen in February 2007

o    S&P Futures -5 @ 1972

o    Dow Futures -40 @ 16,936

o    Nasdaq Futures -10 @ 3906

Asia

·         Markets drifted little changed across much of Asia

·         Bank of Japan Governor Haruhiko Kuroda reiterated current policy will remain in place for as long as it takes to maintain the 2% inflation target

·         Australia's ANZ Job Advertisements climbed 4.3% MoM

·         Japan's Nikkei (-0.4%) slipped off five and a half month highs as profit-taking set in

·         Hong Kong's Hang Seng (UNCH) held at its best levels of 2014

·         China's Shanghai Composite (UNCH) held at three-week highs

·         India's Sensex (+0.5%) climbed to an all-time high ahead of Budget 2014

·         Australia's ASX (-0.1%) stalled near six year highs

·         Indonesia's Jakarta Composite (+1.7%) saw strong gains ahead of the July 9 election

Market Internals

Market Internals -Technical-
The Nasdaq closed down 34 (-0.77%) at 4452, the S&P 500 closed down 8 (-0.39%) at 1978, and the Dow closed down 44 (-0.26%) at 17024. Action came on below average volume (NYSE 581 mln vs. avg. of 675; NASDAQ 1567 mln vs. avg. of 1717), with decliners outpacing advancers (NYSE 996/2186, NASDAQ 554/2174) and new highs outpacing new lows (NYSE 99/9, NASDAQ 76/14).

Relative Strength: 
Indonesia-IDX +3.55%, Volatility-VXX +2.21%, Vietnam-VNM +1.95%, Turkey-TUR +1.58%, Egypt-EGPT +0.92%, Poland-EPOL +0.9%, 20+ Year Treasuries-TLT +0.73%, Utilities-XLU +0.47%, Livestock-COW +0.39%, Realty Majors-ICF +0.37%.

Relative Weakness: 
Biotechnology-XBI -3.28%, Natural Gas-UNG -3.11%, Austria-EWO -2.89%, Cotton-BAL -2.79%, Biotechnology-IBB -2.61%, Italy-EWI -2.48%, Clean Energy-PBW -2.47%, Spain-EWP -1.71%, Israel-EIS -1.65%, France-EWQ -1.4%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Small Caps Lead Stocks Lower
The stock market began the first full week of July on a cautious note with small caps pacing the retreat. The Russell 2000 and Nasdaq Composite posted respective losses of 1.7% and 0.8%, while the S&P 500 fell 0.4% with seven sectors ending in the red.

Equities spent the duration of the trading day in negative territory with the opening weakness taking place amid cautious action in Europe. A disappointing Industrial Production report from Germany (-1.8% versus expected 0.2%) weighed on sentiment, which contributed to the profit-taking.

Back in the U.S., profit-taking was also the theme of the day with some of the recent leaders seeing larger losses than the broader market. Specifically, the Nasdaq and Russell 2000 led the slide after entering the session with respective gains of 9.9% and 6.3% over the last three months.

The tech-heavy Nasdaq underperformed even as its top-weighted component—Apple (AAPL 95.97, +1.94)—rallied throughout the session. Chipmakers, however, pressured the index with the PHLX Semiconductor Index falling 0.7%. Similarly, biotechnology proved to be a drag on the index as the iShares Nasdaq Biotechnology ETF (IBB 259.09, -6.93) lost 2.6%.

In turn, the relative weakness of the biotech space pressured the health care sector (-0.8%), while the remaining countercyclical groups fared a bit better than the broader market. Telecom services (+0.3%) and utilities (+0.4%) held gains throughout the session, while the consumer staples sector (+0.1%) climbed out of the red during the afternoon.

Meanwhile, just about every cyclical sector struggled to keep pace with the market. The technology sector (unch) was the lone outperformer, while the other five registered losses between 0.5% and 0.8%.

Notably, the industrial sector (-0.7%) was pressured by widespread losses among transportation stocks. Airlines like Delta Air Lines (DAL 36.90, -1.70) and United Continental (UAL 38.62, -1.26) registered respective losses of 4.4% and 3.2%, while the Dow Jones Transportation Average (-1.0%) surrendered its July gain.

With stocks ending on their lows, participants did show some increased demand for volatility protection, which sent the CBOE Volatility Index (VIX 11.43, +1.11) from seven-year lows into the middle of its range from June.

Treasuries saw overnight losses, but a daylong rally resulted in the 10-yr note adding five ticks to send its yield lower by two basis points to 2.61%.

Participation was well below average with less than 600 million shares changing hands at the NYSE.

Tomorrow, the Job Openings and Labor Turnover Survey will be released at 10:00 ET, while the May Consumer Credit report will cross the wires at 15:00 ET (Briefing.com consensus $16.20 billion). 

·         S&P 500 +7.0% YTD 

·         Nasdaq Composite +6.6% YTD 

·         Dow Jones Industrial Average +2.7% YTD 

·         Russell 2000 +2.1% YTD

Commodities

Closing Commodities: Natural Gas Loses 4.1%, Commodities Mostly Lower

·         Precious metals spent the entire floor session trading in negative territory today.

·         Aug gold dipped to a session low of $1312.10 per ounce in morning action and settled with a 0.3% loss at $1317.10 per ounce, just below its session high of $1317.50 per ounce.

·         July silver touched a session high of $21.06 per ounce moments after pit trade opened but slipped to a session low of $20.86 per ounce in mid-morning action. It eventually settled at $21.01 per ounce, or 0.6% lower.

·         Aug crude oil traded in the red today. It pulled back from a session high of $104.01 per barrel set at floor trade open and touched a session low of $103.19 per barrel. It then consolidated near the $103.40 per barrel level and settled with a 0.5% loss at $103.49 per barrel.

·         Aug natural gas was also weak today. It retreated from its session high of $4.29 per MMBtu set in early morning pit trade and dipped as low as $4.20 per MMBtu. Unable to find buying support, it settled at $4.23 per MMBtu, or 4.1% lower.

COMEX Metals Closing Prices

  Aug gold fell $3.50 to $1317.10/oz 

·         Gold traded in the red today, dipping to a session low of $1312.10 in morning action. It settled just below its session high of $1317.50, booking a loss of 0.3%. 

  July silver fell $0.13 to $21.01/oz 

·         Silver also spent its entire floor session in negative territory. It touched a session high of $21.06 moments after pit trade opened but slipped to a session low of $20.86 in mid-morning action. It eventually settled with a 0.6% loss. 

  July copper fell 2 cents to $3.26/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 7 cents to $4.02/bushel 

·         July wheat fell 22 cents to $5.58/bushel 

·         July soybeans fell 26 cents to $12.74/bushel 

·         July ethanol fell 1 cent to $1.99/gallon 

·         Sep sugar (#16 (U.S.)) fell 1.25 of a penny to 24.50 cents/lbs

NYMEX Energy Closing Prices

  Aug crude oil fell $0.57 to $103.49/barrel 

·         Crude oil traded in negative territory today. It pulled back from its session high of $104.01 set at floor trade open and touched a session low of $103.19. It then consolidated near the $103.40 level and settled with a 0.5% loss. 

  Aug natural gas fell 18 cents to $4.23/MMBtu 

·         Natural gas also spent its entire floor session in negative territory. It retreated from its session high of $4.29 set in early morning pit trade and dipped as low as $4.20. Unable to find buying support, it settled with a 4.1% loss. 

  Aug heating oil fell 2 cents to $2.91/gallon 

  Aug RBOB fell 3 cents to $2.99/gallon


Treasuries

Treasuries Gain Amid Sleepy Session: 10-yr: +06/32..2.615%..USD/JPY: 101.83..EUR/USD: 1.3606

·         Treasuries booked modest gains amid a sleepy session. Click here to see an intraday yields chart.

·         The complex held small gains ahead of the cash open and saw a steady climb higher as equities came under pressure. 

·         Up front, the 2y finished unchanged @ 0.512%. Early selling provoked a run up to 0.540%, but action was rebuffed near the September highs.

·         In the belly, the 5y eased -0.6bps to 1.734%. Traders will be watching the 1.750% area over the coming sessions as any close above the level would be the highest since the beginning of April. 

·         The 10y slipped -3.1bps to 2.617%. The benchmark yield remains below 2.650% resistance and the 100 dma. 

·         Buying had the biggest impact on the long end as the 30y ended -4.3bps @ 3.440%.

·         A flatter curve took hold as the 2-10-yr spread narrowed to 210.5bps. 

·         Precious metals were soft, but went off on their highs, as gold fell -$1 to $1319 and silver slipped -$0.10 to $21.03.

·         Data: JOLTS -- Job Openings (10) and consumer credit (15). 

·         Auction: $27 bln 3y notes. 

·         Fed Speak: Richmond's Lacker gives his economic outlook (13) and Minny's Kocherlakota discusses monetary policy and the economy (13:45). 

On other news.... 

Currencies 

Dollar Hovers Little Changed: 10-yr: +05/32..2.619%..USD/JPY: 101.87..EUR/USD: 1.3606

·         The Dollar Index hovers little changed near 80.20 amid a subdued session. Click here to see a daily Dollar Index chart.

·         Today's lack of news and data from around the globe has made for a sleepy session with trade in the Index confined to a tight 10 cent range.

·         EURUSD is +10 pips @ 1.3605 as buyers take control for the first time in five days. The single currency has checked up on minor support in the area amid the lackluster trade. A climb back towards 1.3675 resistance will be met by both the 50 and 200 dma. Germany's trade balance will be released tomorrow. 

·         GBPUSD is -30 pips @ 1.7130 as trade slips off its best levels since October 2008. A breakdown of minor support in the 1.7100 area puts the more important 1.7000 in the crosshairs. Britain's manufacturing production and NIESR GDP Estimate are due out tomorrow. 

·         USDCHF is -10 pips @ .8930 as sellers gain the upper hand for the first time in five sessions. Early buying caused the paor to probe the 200 dma (.8946), but trade has slipped back below the level. The 50 dma provides some help near .8915 support while a move into the .8870 area is met by the 100 dma and more solid support. Switzerland's CPI and retail sales data are scheduled for tomorrow. 

·         USDJPY is -20 pips @ 101.85 as light selling develops for a second session. Today's losses have pushed the pair back below its 50 dma, and has action testing the key 101.80 area that is also home to the 200 dma. Japan's current account balance will cross the wires tonight.

·         AUDUSD is +5 pips @ .9370 as trade ticks higher for a second session. The hard currency has held support in the .9340 area over the past couple of sessions as trade looks to recover last week's losses. Australian data is limited to NAB Business Climate. 

·         USDCAD is +20 pips @ 1.0670 as trade sees a second day of bids. Today's advance comes following despite the strong building permits (13.8% actual v. 3.1% expected) data as Ivey PMI (46.9 actual v. 51.3 expected, 48.2 previous) posted its worst reading since January. The 1.0600/1.0700 support band remains under close watch.

Next Week In View




Economic Commentaries

Economic summary: May JOLTS, Consumer Credit and some Fed speakers out tomorrow
Economic Data Summary:

·         None today

Fed/Treasury Events Summary:

·         None

Upcoming Economic Data:

·         May JOLTS Job Openings Tuesday at 10:00 (April: 4.455 mln)

·         May Consumer Credit Tuesday at 15:00 (Briefing.com consensus of $16.3 bln vs. $26.8 bln in April)

Upcoming Fed/Treasury Events:

·         Fed's Lacker tomorrow at 13:00

·         3 Year $27 bln Treasury Note Auction tomorrow at 13:00

·         Fed's Kocherlakota tmrw at 13:45

International data:

·         Japan Trade Balance at 19:00

·         Germany Trade tomorrow at 4:00

Jason's Commentaries

The market retraced as expected as the market took profit off the table after they have pushed the market higher after the outstanding jobs report on Thursday. And of cause, the market loves to rally ahead of holidays. But i believe a rally based on that is unlikely to be sustainable. Looking at the volumes and internals last night, it looks more like a profit taking to me despite the fact that the small caps are leading the drop last night as Russells lost more than 1% last night. On the technical perspective, all indices are forming a bearish reversal candle stick pattern and it's looking quite scary. Given the bullish of the market right now, i believe the market might head into some sort of consolidation for a while below breaking out.... It's going to be a flat day today...








Market Call: FLAT to upside

Date: 8 Jul 2014