5 Aug 2013 AMC

5 Aug 2013 AMC

Market Summary 

 

Market Internals

MKTIN Market Internals
The Nasdaq closed up 3 (+0.09%) at 3693, the S&P 500 closed down 3 (-0.15%) at 1707, and the Dow closed down 46 (-0.3%) at 15612. Action came on below average volume (NYSE 533 mln vs. avg. of 767; NASDAQ 1428 mln vs. avg. of 1646), with mixed advancers/decliners (NYSE 1259/1812, NASDAQ 1425/1065) and new highs outpacing new lows (NYSE 206/111, NASDAQ 226/9).

Relative Strength: 
Cocoa-NIB +3.41%, Clean Energy-PBW +1.88%, Coffee-JO +1.30%, Telecommunications-IYZ +1.14%, Livestock-COW +0.93%, Indian Rupee-ICN +0.82%, Japanese Yen-FXY +0.63%, British Pound-FXB +0.47%, Peru-EPU +0.43%, Sweden-EWD +0.36%.

Relative Weakness: 
Thailand-THD -1.89%, Chile-ECH -1.65%, Gasoline-UGA -1.55%, Indonesia-IDX -1.50%, U.S. Home Construction-ITB -1.45%, Latin America 40-ILF -1.41%, Volatility-VXX -1.40%, Rare Earths-REMX -1.18%, MLP Index-AMJ -1.12%, BRICs-EEB -1.07%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

The S&P 500 ended today's quiet session modestly lower with eight of ten sectors settling in the red. 

Stocks slipped out of the gate after better-than-expected economic data from China and Great Britain was unable to spark an early bid. In China, the Non-Manufacturing PMI rose to 54.1 from 53.9 while Great Britain's Services PMI posted its best reading since 2006, rising to 60.2 from 56.9. 

Equities climbed off their early lows before receiving an additional push following the release of the ISM Non-Manufacturing Index, which posted its best reading since February 2011. The index jumped to 56.0 from 52.2 as business activity and production levels spiked to 60.4 in July from 51.7 in June. Just like the manufacturing report, the jump in production came from a strong gain in new orders (57.7 from 50.8). 

Although today's data provided stocks with a boost, the S&P never made it into the green as comments from Dallas Fed President Richard Fisher knocked the key indices off their highs. Mr. Fisher said the Fed's bond buying program may lay the groundwork for misallocation of resources and fuel future inflation. In addition, he said the market could expect a slowdown in asset purchases later in the year if the economy continues to "improve along the lines envisioned by the Committee." 

These remarks caused the S&P to return to the middle of its range while the tech-heavy Nasdaq briefly slipped into the red before regaining its flat line during afternoon action. On a related note, the technology sector tacked on 0.2% as the largest sector component, Apple (AAPL 469.45, +6.91), rose 1.5% after an International Trade Commission ban on certain devices made by the company was overturned. 

Outside of technology, only the consumer staples sector (+0.1%) managed to eke out an advance. Tyson Foods (TSN 29.69, +1.18) jumped 4.1% after beating on earnings and revenue. 

While the outperformance of technology boosted the Nasdaq, the S&P was kept from turning positive as energy, industrials, and discretionary shares weighed. 

The energy space shed 0.3% as crude oil endured a volatile session. The energy component was down as much as 1.1% at the open before trimming its loss to 0.4% at $106.49 per barrel. 

Elsewhere, industrials lagged amid weakness in transportation companies. The Dow Jones Transportation Average lost 0.8% as 18 of 20 components ended in the red. 

Lastly, broad weakness among home builders pressured the discretionary sector. The iShares Dow Jones US Home Construction ETF (ITB 22.38, -0.33) lost 1.5%. 

Similar to stocks, Treasuries spent the entire session near their lows. The benchmark 10-yr yield added four basis points to end at 2.65%. 

As mentioned earlier, today's volume was well below average as only 533 million shares changed hands on the floor of the New York Stock Exchange. This represented the third lowest total of the year. 

Tomorrow, the June trade balance will be reported at 8:30 ET. The U.S. Treasury will auction $32 billion in 3-yr notes.

Commodities

Treasuries

Treasuries Fall Amid Lackluster Trade: Treasuries saw modest losses with trade ending just off the lows amid a rather uneventful day. The complex treaded just below the flat line ahead of the U.S. open, and drifted lower into this morning’s ISM Services number (56.0 actual v. 53.1 expected) sparked another round of selling, pushing Treasuries down to their worst levels of the session. Trade hovered in a tight range for most of the day before trimming a portion of its losses ahead of the cash close. Losses were most severe at the long end as the 30-yr bond gave up 22/32, running its yield up more than 4 bps to 3.730%. Meanwhile, the 10-yr yield climbed just less than 4 bps and finished the day at 2.640%. Bear steepening took hold along the yield curve as the 2-10-yr spread widened to 232.5 bps. Elsewhere, precious metals resumed their downtrend as gold shed $7 to $1304 and silver gave up $0.20 to near $19.70. Tuesday will see just the trade balance (8:30). Treasury will auction $32 bln 3-yr notes. 

Next Day In View 

Currencies 

The Dollar Index holds little changed near 81.90 amid a rather uneventful session. The greenback spiked to session highs near 82.05 following this morning's better than expected ISM Services data, but has slowly surrendered its gains over the course of the day. 

·         EURUSD is -15 pips at 1.3260 as trade slips despite this morning's better than expected ISM Services data from across the region. The inability of the single currency to take the 1.3300 level has been problematic for the bulls as trade has tested and failed at the level each day over the past two weeks. Near-term support comes into play near 1.3200. Eurozone data includes Italian preliminary GDP and German factory orders. Click here to see a daily EURUSD chart.

·         GBPUSD is +65 pips at 1.5350 as trade outperforms following today's better than anticipated ISM Services reading. The pair has tacked on close to 250 pips over the past two sessions thanks to an improvement in data, and traders must now consider a breakout above resistance in the 1.5375 area. Britain's BRC Retail Sales Monitor, Halifax Home Price Index, manufacturing production, and NIESR GDP Estimate will cross the wires. 

·         USDJPY is -45 pips at 98.45 as sellers remain in control for a second session. A slow day for news from Japan has allowed the downtrend off the July highs to remain in place as trade nears a test of 98.00 support. Traders are expecting a quiet week until this week's Bank of Japan rate decision on Wednesday evening. 

·         USDCHF is flat at .9285 as an uneventful trade nears the finish line. Action over the past week and a half has found a home near .9280 support as bulls look to retake the 200-day moving average (.9355). 

·         AUDUSD is +5 pips at .8910 after early selling pushed the pair down to a fresh three-year low. Traders remain skeptical of the hard currency ahead of tonight's Reserve Bank of Australia meeting where analysts expecting a 25 bp cut to 2.50%. Australia's trade balance, ANZ Job Advertisements, and Home Price Index are due out tonight. 

·         USDCAD is -20 pips at 1.0365 as trade probes the 50-day moving average. The pair saw a test of 1.0400 resistance fail, but trade has been rather lackluster as Canadian banks are closed for Civic Day. Canada's trade balance is scheduled for release tomorrow.  

Jason's Commentaries
Pretty much flat last night, Nasdaq was the only leader last night which pretty much shows the strength in Tech recently. Nasdaq was mainly held up by Apple which made a 1.45% gain. However, the majority of the market was down. Market started with a bearish bias with no data coming out last night. After the initial drop at the opening bell, market quickly bounced back at 10am ET and unable to hold the retracement at 1040am ET and started losing its gain. Towards the closing bell, we can start to see that there is some notable short covering after 2am ET, which got back some losses for the market. Internals were showing a mixed day while the broader market shows a pretty red day in the market. The Tech and Consumer Staples were the only gainers in the market last night at 0.22% and 0.07% while the utilities were the biggest loser with -0.66% loss. Looking at the technicals, it seems that the market has somewhat found a top and is likely to retrace or consolidate for a while before heading up more. Volumes in the market has been dropping like a brick and many people are ready to cash out from this rally. I reckon we will be going through a sideways bounded for 1-2weeks. Stay safe in this volatile market =D

Market Call: Flat to upside

Date: 6 Aug 2013