7 Aug 2014 AMC - Market headed down as bearishness looms

7 Aug 2014 AMC - Market headed down as bearishness looms

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.6%

·         Germany's DAX: -1.0%

·         France's CAC: -1.4%

·         Spain's IBEX: -1.6%

·         Portugal's PSI: -2.3%

·         Italy's MIB Index: -1.9%

·         Irish Ovrl Index: 0.0%

·         Greece ASE General Index: -0.2%

Before Market Opens 

S&P futures vs fair value: +5.30. Nasdaq futures vs fair value: +9.00.
The S&P 500 futures trade five points above fair value.

Asian markets endured broad pressure, while Japan's Nikkei (+0.5%) outperformed. According to Reuters, Japan's Government Pension Investment Fund plans to invest up to 20% of its funds in domestic equities (currently 12%). 

·         Economic data was limited: 

o    Australia's Employment Change came in at -300 (expected 12,000; previous 14,900), while the Unemployment Rate jumped to 6.4% from 6.0% (expected 6.0%). Separately, AIG Construction Index rose to 52.6 from 52.0 

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·         Japan's Nikkei outperformed with an increase of 0.5% as trade snapped its five-day skid. FujiFilm was a top performer, up 5.4%, on word its U.S. partner, MediVector, has begun discussions to use its drug for treatment of Ebola. 

·         Hong Kong's Hang Seng fell 0.8% to a two-week low. Casino shares were pressured as monthly gaming revenues weakened to their lowest levels in at least four years. Galaxy Entertainment and Sands China tumbled 6.4% and 5.8%, respectively, leading to the downside. 

·         China's Shanghai Composite slumped 1.3% to a one-week low. Financials were weak across the board as Industrial & Commercial Bank of China fell 1.7% and Citic Securities lost 2.9%. 

Major European indices trade lower across the board. Regional indices held near their flat lines, but dropped after the ECB announced no changes to its monetary policy. On a separate note, Russian Prime Minister Dmitry Medvedev said the government will review the use of transportation air routes and consider banning EU and US flights through the Russian airspace. 

·         In economic data: 

o    The European Central Bank made no changes to its policy, keeping all three rates unchanged. 

o    The Bank of England also maintained its policy stance and kept the key rate and the purchasing program unchanged at 0.5% and GBP375 billion, respectively 

o    Germany's Industrial Production ticked up 0.3% month-over-month (expected 1.3%; previous -1.7%) 

o    France's Trade Deficit widened to EUR5.40 billion from EUR5.10 billion (expected deficit of EUR4.80 billion) 

o    Spain's Industrial Production rose 0.8% year-over-year (expected 3.0%; previous 2.5%) 

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·         In France, the CAC is lower by 0.8%. Telecom service provider Orange is the weakest component, down 1.9%. Software company Cap Gemini outperforms with an increase of 1.4%. 

·         Germany's DAX holds a loss of 0.5%. Adidas is the weakest performer, down 4.6%. Commerzbank leads with a gain of 2.0% after reporting earnings. Deutsche Bank follows not far behind with an advance of 2.3%. 

·         Great Britain's FTSE trades down 0.1%. Discretionary names outperform with Carnival and G4S up 1.9% and 2.6%, respectively. Coca-Cola HBC weighs, trading lower by 3.4% in reaction to its cautious outlook.

U.S. Equities

·         Equity futures point to a firm open

·         The DJIA and S&P 500 sit at their lowest levels since mid-May

·         Initial Claims (289K actual v. 308K expected)

·         Continuing Claims (2518K actual v. 2525K expected)

o    S&P Futures +6 @ 1921

o    Dow Futures +37 @ 16,432

o    Nasdaq Futures +11 @ 3880

Asia

·         Markets were pressured across most of Asia

·         Reports out of Japan suggest the Government Pension Investment Fund is considering plans to invest up to 20% (currently 12%) of its funds in domestic equities

·         Australia's unemployment change posted an unexpected -0.3K (13.5K expected), causing the unemployment rate to shoot up to 6.4% (6.0% previous)

·         Japan's Nikkei (+0.5%) outperformed as trade snapped its five-day skid

·         Hong Kong's Hang Seng (-0.8%) fell to a two-week low

·         China's Shanghai Composite (-1.3%) slumped to a one-week low.

·         Australia's ASX (-0.1%) saw a fifth straight loss

Market Internals

Market Internals -Technical-
The S&P 500 closed down 11 (-0.56%) at 1910, the Dow closed down 75 (-0.46%) at 16368, and the Nasdaq closed down 20 (-0.46%) at 4335. Action came on slightly below average volume (NYSE 656 mln vs. avg. of 667; NASDAQ 1731 mln vs. avg. of 1689), with decliners outpacing advancers (NYSE 1472/1679, NASDAQ 982/1726) and new lows outpacing new highs (NYSE 40/62, NASDAQ 22/94).

Relative Strength: 
Volatility-VXX +2.09%, Gasoline-UGA +1.2%, Egypt-EGPT +1.2%, Utilities-XLU +1.15%, Platinum-PPLT +0.98%, 20+ Year Treasuries-TLT +0.93%, Russia-RSX +0.69%, Indonesia-IDX +0.39%, Thailand-THD +0.2%, Taiwan-EWT +0.06%.

Relative Weakness: 
Coffee-JO -3.8%, Italy-EWI -2.76%, Livestock-COW -2.17%, Spain-EWP -2.12%, Poland-EPOL -1.9%, Copper Miners-COPX -1.86%, Israel-EIS -1.68%, Sugar-SGG -1.56%, France-EWQ -1.52%, Biotechnology-IBB -1.46%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: S&P 500 Settles Below 100-Day Moving Average
The stock market ended the Thursday session on a lower note despite showing strength in the early going. The S&P 500 fell 0.6% with eight sectors registering losses.

Equities climbed out of the gate after the European Central Bank reaffirmed its commitment to the current policy course. In addition, better than expected earnings and economic data also factored into an upbeat start.

Despite the set of positive factors, the S&P 500 could not overtake its opening high at 1928.97. Instead, the index spent about an hour near that level before retreating into the red. An afternoon report from the New York Times concerning potential U.S. airstrikes on militants in Iraq contributed to keeping dip-buyers sidelined.

As a result, the S&P 500 ended the session below its 100-day moving average (1913/1914), while the Dow Jones Industrial Average (-0.5%) settled just above its 200-day moving average (16343) after crossing that level for the first time since February 6.

The health care sector (-1.2%) ended at the bottom of the leaderboard amid weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 248.15, -3.67) lost 1.5% after being rejected by its 50-day moving average (251.88).

Other countercyclical sectors like consumer staples (-0.8%) and telecom services (-1.0%) also underperformed, while the utilities sector (+1.1%) displayed relative strength to narrow its week-to-date loss to 2.0%.

Meanwhile, all six cyclical groups posted losses with the materials space (-0.9%) having the worst showing. Similarly, the other commodity-related sector—energy (-0.7%)—also finished near the bottom of the leaderboard.

Elsewhere, the technology sector (-0.5%) ended just ahead of the S&P 500, but that was a bit misleading as the relative strength in two influential components—Apple (AAPL 94.48, -0.01) and Microsoft (MSFT 43.23, +0.49)—kept the sector from registering additional losses. Chipmakers, however, lagged broadly with the PHLX Semiconductor Index sliding 1.4%.

Also of note, the industrial sector ended little changed after showing relative weakness yesterday. Two heavily-weighted components, Boeing (BA 119.84, +1.50) and General Electric (GE 25.50, +0.06), contributed to the outperformance, while the broader PHLX Defense Index shed 0.1%. Transport stocks displayed strength during the session, but the Dow Jones Transportation Average (-0.2%) slipped into the red during afternoon action.

The retreat in equities boosted the Treasury market, where the 10-yr note added half a point to lower its yield six basis points to 2.41%. This represented the lowest close for the benchmark yield since June 2013. The safe-haven demand was also visible in the foreign exchange market, where the yen jumped and pressured the dollar/yen pair into the 102.00 area.

Participation was below average with fewer than 660 million shares changing hands at the NYSE.

Economic data was limited to weekly initial claims and the Consumer Credit report for June: 

·         Initial claims declined to 289,000 from 303,000, while the Briefing.com consensus expected a reading of 308,000 

o    Even though claims have held below the 300,000 mark over the past four weeks that has not translated into payroll growth in the neighborhood of 300,000 jobs per month, which had been the case in the past 

o    Since the relationship hasn't held up, it appears the data has been skewed by seasonal adjustments or monthly volatility in the payroll data. If payroll volatility is the issue, we should see a surge in the August jobs report 

·         Consumer credit increased by $17.30 billion in June, which was higher than the Briefing.com consensus estimate of $15.80 billion 

o    The prior month's credit growth was left unrevised at $19.60 billion 

Tomorrow, productivity (Briefing.com consensus 1.4%) and unit labor costs (consensus 2.0%) data for the second quarter will be released at 8:30 ET, while the Wholesale Inventories report for June (consensus 0.4%) will be reported at 10:00 ET. 

·         S&P 500 +3.3% YTD 

·         Nasdaq Composite +3.8% YTD 

·         Dow Jones Industrial Average -1.3% YTD 

·         Russell 2000 -3.8% YTD

Commodities

Closing Commodities: Crude Shows Modest Gains, Natural Gas Falls 1.3% Following Inventory Data

·         Dec gold extended yesterday's gains despite strength in the dollar index. The yellow metal brushed a session low of $1303.20 per ounce in early morning action but climbed above the unchanged line later in the session. It touched a session high of $1315.50 per ounce and settled at $1312.60 per ounce, or 0.3% higher.

·         Sep silver chopped around in negative territory for most of today's floor session. It dipped as low as $19.88 per ounce and settled with a 0.2% loss at $19.99 per ounce.

·         Sep crude oil dipped to a session low of $96.57 per barrel in morning pit trade but quickly recovered into positive territory. It touched a session high of $97.48 per barrel and settled at $97.34 per barrel, booking a 0.4% gain.

·         Sep natural gas rose to a session high of $3.98 per MMBtu in morning action but gave up the gain after inventory data showed a build of 82 bcf when a build of 83-84 bcf was anticipated. It fell as low as $3.86 per MMBtu and settled with a 1.3% loss at $3.88 per MMBtu.

COMEX Metals Closing Prices

  Dec gold rose $4.30 to $1312.60/oz 

·         Gold extended yesterday's gains despite strength in the dollar index. The yellow metal brushed a session low of $1303.20 in early morning action but climbed above the unchanged line later in the session. It touched a session high of $1315.50 and settled with a 0.3% gain.

  Sep silver fell $0.04 to $19.99/oz 

·         Silver chopped around in negative territory for most of today's floor session. It dipped as low as $19.88 and settled with a 0.2% loss. 

  Sep copper rose 1 cent to $3.18/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn fell 4 cents to $3.59/bushel 

·         Sep wheat fell 6 cents to $5.62/bushel 

·         Nov soybeans fell 3 cents to $10.77/bushel 

·         Sep ethanol rose 3 cents to $2.01/gallon 

·         Sep sugar (#16 (U.S.)) fell 0.33 of a penny to 24.67 cents/lbs

NYMEX Energy Closing Prices

  Sep crude oil rose $0.40 to $97.34/barrel 

·         Crude oil dipped to a session low of $96.57 in morning pit trade but quickly recovered into positive territory. It touched a session high of $97.48 and settled with a 0.4% gain. 

  Sep natural gas fell 5 cents to $3.88/MMBtu 

·         Natural gas rose to a session high of $3.98 in morning action but gave up the gain after inventory data showed a build of 82 bcf when a build of 83-84 bcf was anticipated. It fell as low as $3.86 and settled with a 1.3% loss. 

  Sep heating oil rose 2 cents to $2.90/gallon 

  Sep RBOB rose 3 cents to $2.77/gallon

 


Treasuries

On other news.... 

Currencies 

Dollar Contends with 11-Month Highs: 10-yr: +11/32..2.434%..USD/JPY: 102.08..EUR/USD: 1.3358

·         The Dollar Index holds small gains near 81.55 as trade contends with its best close in 11 months. Click here to see a daily Dollar Index chart.

·         EURUSD is -25 pips @ 1.3355 as action threatens it lowest close since September. The single currency hovered little changed into the European Central Bank rate decision (unchanged at 0.15%), and has been pressured throughout the remainder of the session as ECB head Mario Draghi took the mic for the accompanying press conference. Mr. Draghi suggested that dropping the negative rate into negative territory has been a success and that the U.S. and eurozone policies will remain on a different path for a ‘long time.' Eurozone data includes the French industrial production and the German trade balance. 

·         GBPUSD is -20 pips @ 1.6830 as sellers remain in control for the 14th time in 17 sessions. Sterling drifted flat into the Bank of England rate decision and remained little changed after the BOE announced no change to its key rate (0.50%) and asset purchase program (GBP375 bln). However, sellers managed to gain the upper hand U.S. trade as risk assets came under pressure. Britain's trade balance is due out tomorrow.

·         USDCHF is +15 pips @ .9090 as action flirts with its best levels of 2014. The small bid comes amid a clean calendar in Switzerland as trade remains a derivative of the euro.

·         USDJPY is -5 pips @ 102.05 as trade hovers little changed ahead of tonight's Bank of Japan rate decision. Traders continue to monitor support in the 102.00 area as the 50, 100, and 200 dma lurk in the vicinity. Japan's current account balance is scheduled to cross the wires tonight. 

·         AUDUSD is -75 pips @ .9275 as trade flushes to its lowest level in two months. Weighing on the hard currency was the disappointing Australian jobs report, which caused the unemployment rate to spike to 6.4% (6.0% previous). This evening, Australia's home loans accompany the latest RBA Statement. China's trade balance is tentatively scheduled for release tonight. 

·         USDCAD is +5 pips @ 1.0920 as trade holds little changed despite today's impressive data. Canada's housing starts climbed 13.5% MoM and the Ivey PMI improved to 54.1 (46.9 previous). Support rests in the 1.0900 area. Canada's employment data will be released tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: Jobless Claims fall below 300K and were lower than expected; Consumer credit out today at 15:00
Economic Data Summary:

·         Weekly Initial Claims 289K vs Briefing.com consensus of 308K; Last Week was revised to 303K from 302K

·         Weekly Continuing Claims 2.518 M vs Briefing.com consensus of 2.525 M ; Last Week was revised to 2.542 M from 2.539 M

o    Over the last four weeks, the average initial claims level has dropped below 300,000 to 293,500. That level is normally associated with an economy that is running near full employment. Since that's obviously not the case today, it would imply strong payroll growth in the neighborhood of 300,000 new jobs per month. 

Upcoming Economic Data:

·         June Consumer Credit due out Thursday at 15:00 (Briefing.com consensus of $15.8 bln; May was $19.6 bln)

·         Q2 Productivity - Prel due out Friday at 8:30 (Briefing.com consensus of 1.4%; First Quarter was -3.2%)

·         Q2 Unit Labor Costs due out Friday at 8:30 (Briefing.com consensus of 2.0%; First Quarter was 5.7%)

·         June WholeSale Inventories due out Friday at 10:00 (Briefing.com consensus of 0.4%; May was 0.5%)

Other International Events of Interest

·         Australia's unemployment change posted an unexpected -0.3K (13.5K expected), causing the unemployment rate to shoot up to 6.4% (6.0% previous)

Jason's Commentaries

Well... the market headed down slightly more than what I've expected. The market started the day with some bullishness which got quickly wiped out at 1030am ET. Internals were having a convergence in the market. VIX spiked to 16.66. Surprisingly, the industrials and Utilities did not head down and held up. Utilities managed to gain 1.15% while industrials held flat. On the contrary, healthcare and materials were the biggest laggard of 1.29% and 0.88% respectively. On the technicals standpoint, we're either at the support or resistance. It seems that it's going to take quite a bit to break down from these levels. With no news coming out, I supposed the market will be waiting things out.

Happy Birthday Singapore ;)








Market Call: FLAT to upside

Date: 8 Aug 2014