21 Feb 2014 AMC - Market facing resistance with tech and Energy lagging

21 Feb 2014 AMC - Market facing resistance with tech lagging

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.4%

·         Germany's DAX: + 0.4%

·         France's CAC: + 0.6%

·         Spain's IBEX: + 0.1%

·         Portugal's PSI: + 0.7%

·         Italy's MIB Index: -0.3%

·         Irish Ovrl Index: + 0.3%

·         Greece ATHEX Composite: 0.0%

Before Market Opens 

S&P futures vs fair value: +1.30. Nasdaq futures vs fair value: +4.00.
The S&P 500 futures trade less than two points above fair value.

Major Asian indices ended higher with the exception of China's Shanghai Composite (-1.2%). Economic data was limited to Hong Kong's CPI, which rose 4.6% year-over-year (4.5% expected, 4.3% prior). 

·         Japan's Nikkei surged 2.9% after the yen weakened during the New York session. Growth-sensitive names led with Showa Shell Sekiyu and Toho Zinc both up near 5.4%. On the downside, real estate name Tokyo Fudosan Holdings fell 0.8%. 

·         Hong Kong's Hang Seng rallied 0.8% as consumer names provided support. Belle International, Cathay Pacific Airways, and Want Want China Holdings gained between 2.8% and 4.0%. 

·         China's Shanghai Composite lost 1.2% amid pressure from producers of basic materials. Sinopec Shanghai Petrochemical and Sinopec Yizheng Chemical both lost near 10.0%.

Core European indices trade just above their flat lines with France's CAC (+0.3%) in the lead. Participants received several economic data points from Great Britain. Retail sales fell 1.5% month-over-month (-1.0% expected, 2.5% prior) while the year-over-year reading increased 4.3% (5.0% consensus, 5.3% previous). Core retail sales fell 1.5% month-over-month (-1.4% forecast, 2.7% last) while the year-over-year reading rose 4.8% (5.0% expected, 6.1% prior). Separately, public sector net borrowing decreased GBP6.40 billion (-GBP9.0 billion forecast, +GBP9.0 billion previous).

In news, German Finance Minister Wolfgang Schaeuble appeared on CNBC overnight, saying European economies should not misuse the time provided by monetary policy. In addition, Mr. Schaeuble said he expects the Outright Monetary Transactions program to be ruled lawful by the European Court of Justice. 

·         Germany's DAX is higher by 0.1% with Infineon Technologies in the lead. The chipmaker trades up 1.8%. Adidas leads the decliners with a loss of 2.1%. 

·         Great Britain's FTSE trades up 0.2% with banks providing support. Barclays and Royal Bank of Scotland hold respective gains of 0.8% and 1.6%. Miners lag with Anglo American down 0.9%. 

·         In France, the CAC holds an advance of 0.3%. Cyclical names lead with Bouygues and Technip up 1.8% and 3.9%, respectively.

Market Internals

Market Internals -Technical-
The Dow closed down 30 (-0.19%) at 16103, the S&P 500 closed down 4 (-0.19%) at 1836, and the Nasdaq closed down 4 (-0.10%) at 4263. Action came on above average volume (NYSE 792 mln vs. avg. of 702; NASDAQ 2000 mln vs. avg. of 1865), with advancers outpacing decliners (NYSE 1759/1328, NASDAQ 1364/1252) and new highs outpacing new lows (NYSE 183/11, NASDAQ 205/19).

Relative Strength: 
Natural Gas-UNG +3.36%, Sugar-SGG +2.57%, Biotechnology-XBI +2.07%, Middle East and Africa-GAF +1.3%, Biotechnology-IBB +1.22%, Turkey-TUR +1.19%, Volatility-VXX +1.1%, Poland-EPOL +1.02%, Indian Rupee-ICN +0.94%, South Africa-EZA +0.93%.

Relative Weakness: 
Heating Oil-UHN -1.56%, Greece-GREK -1.51%, Corn-CORN -1.45%, Clean Energy-PBW -1.44%, Social Media-SOCL -1.27%, Vietnam-VNM -1.27%, Gasoline-UGA -0.96%, New Zealand-ENZL -0.54%, Australian Dollar-FXA -0.49%, Australia-EWA -0.48%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Mixed Week on Cautious Note
The major averages finished the mixed week on a lower note. The Dow Jones Industrial Average and S&P 500 both shed 0.2% while the Nasdaq slipped 0.1%. For the week, the Dow and S&P 500 posted respective losses of 0.3% and 0.1% while the Nasdaq added 0.5%.

In some ways, today's session resembled Wednesday's affair, during which the S&P 500 made an unsuccessful run at its 2013 closing high of 1848.36. However, today's rejection unfolded over the course of the afternoon while Wednesday's pushback from the record high occurred in one sharp move.

The opening rally was supported by the largest S&P 500 sector, technology, which outperformed during the first 90 minutes of action. However, the morning leader became an afternoon laggard after the S&P 500's failed run at new record highs. The tech sector lost 0.3% while top components like Apple (AAPL 525.25, -5.90), Facebook (FB 68.59, -1.04), and Intel (INTC 24.48, -0.26) lost between 1.1% and 1.5%. Another tech component, Hewlett-Packard (HPQ 29.79, -0.40), lost 1.3% despite beating on earnings and revenue.

Interestingly, once the technology sector slipped behind the S&P 500, the second largest sector—financials—was there to pick up the slack. The group struggled to keep pace with the S&P 500 since Wednesday and began today among the laggards, but was able to climb ahead of the broader market during the late-morning retreat. Despite today's slight gain of 0.03%, the sector ended the week behind the remaining nine groups with a loss of 0.9%.

Elsewhere, the discretionary sector (+0.2%) finished in the lead thanks to all-around strength. Retailers held up well even after Nordstrom (JWN 59.24, -0.20) issued disappointing guidance.

On the downside, the energy sector (-0.7%) spent the entire session in the red while crude oil slid 0.6% to $102.18/bbl. Elsewhere among commodities, gold remained strong, climbing 0.5% to $1317.30/ozt.

Trading volume was above average, which resulted from options expiration. Nearly 800 million shares changed hands at the NYSE versus a 200-day average of 718 million.

Treasuries posted modest gains with the benchmark 10-yr yield ending lower by two basis points at 2.73%.

Commodities

Closing Commodities: Crude Oil Futures Weaken, Precious Metals Gain

·         Crude oil prices remained in the red all session, but ended the session above $102/barrel.

·         Apr crude fell $0.59 to $012.18/barrel.

·         Apr natural gas sold off this morning and fell as low as $4.82/MMBtu. However, the energy component reversed and ended the day $0.14 higher at $5/MMBtu (Mar nat gas rose $0.10 to $6.15/MMBtu. Apr is new front-month contract)

·         Copper futures ended the day just under its session high. Mar copper closed one cent higher at $3.29/lb.

·         Apr gold gained $6.40 to $1323.70/oz, while Mar silver rose $0.09 to $21.77/oz.

COMEX Metals Closing Prices

·         Apr gold rose $6.40 to $1323.70/oz

·         Mar silver rose $0.09 to $21.77/oz

·         Mar copper rose 1 cent to $3.29/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 3 cents to $4.59/bushel

·         Mar wheat fell 11 cents to $6.05/bushel

·         Mar soybeans rose 2 cents to $13.61/bushel

·         Mar ethanol closed unchanged at $2.07/gallon

·         May sugar (#16 (U.S.)) fell 0.03 of a penny to 21.86 cents/lbs

NYMEX Energy Closing Prices

·         Apr crude oil fell $0.59 to $102.18/barrel

·         Apr natural gas rose 14 cents to $5.00/MMBtu (Front-month was changed to April... Mar contract rose 10 cents to $6.15)

·         Apr heating oil fell 4 cents to $3.04/gallon

·         Apr RBOB fell 2 cents to $3.00/gallon

Treasuries

Treasuries Endure Flat Week: 10-yr: +07/32..2.731%..USD/JPY: 102.55..EUR/USD: 1.3743
The Week in Review

·         Treasuries endured a flat week. Click here to see an intraweek yields chart.

·         Data was disappointing as building permits (937K actual v. 980K expected), Empire Manufacturing (4.5 actual v. 7.5 expected), existing home sales (4.62M actual v. 4.70M expected), housing starts (888K actual v.963K expected), NAHB Housing Market Index (46 actual v. 56 expected), and Philly Fed (-6.3 actual v. 7.4 expected) all fell short of estimates.

·         The latest FOMC minutes suggested the economy continues to expand at a moderate pace, and hinted the Committee may alter its forward guidance as the unemployment rate approaches 6.5%.

·         Yields across the curve ended the week little changed as they tested, but could not break resistance.

·         The 5y flirted with resistance in the 1.550% area before ending the week flat @ 1.533%. 

·         The 10y slipped -1bp to 2.734%. Action in the benchmark yield probed resistance at the 2.750% level, but was not able to breakout. 

·         Thursday's action in the 30y ran the yield to a one-month high of nearly 3.750%; however, trade ended the week below the 3.700% mark. 

·         A slightly steeper curve took hold as the 2-10-yr spread widened  to 242bps.  

The Week Ahead 

·         There is no data on Monday.

·         Tuesday will see Case-Shiller 20-city Index, FHFA Housing Price Index (9), and consumer confidence (10). Federal Governor Tarullo gives "A View From the Fed" (10:10). Treasury will auction $32 bln 2y notes. 

·         Wednesday's data includes the weekly MBA Mortgage Index (7) and new home sales (10). Boston's Rosengren discusses his economic outlook (12 noon) and Cleveland's Pianalto gives "Reflections on 35 Years with the Federal Reserve System" (19:30). Treasury will hold a $35 bln 5y note auction. 

·         Data continues to flow on Thursday with initial and continuing claims, and durable orders (8:30). ATL's Lockhart and KC's George take part in a discussion on "The President's Perspective" (15:15). Treasury will auction $29 bln 7y notes.

·         Friday's data is the most anticipated of the week as GDP - Second Estimate (8:30), Chicago PMI (9:45), Michigan Sentiment - Final (9:55), and pending home sales (10) are due out. Minny's Kocherlakota and Fed Governor Stein discuss monetary policy and financial stability (13:30) while Chicago's Evans and Philly's Plosser take part in a panel on "Communications Strategies in a World of Unconventional Monetary Policy" (13:30).

On other news.... 








Currencies 

Dollar Ends Quiet Week Little Changed: 10-yr: +07/32..2.734%..USD/JPY: 102.60..EUR/USD: 1.3740

·         The Dollar Index holds little changed as a quiet week draws to a close. Click here to see a daily Dollar Index chart.

·         The week's action was choppy with trade on track to finish just above last week's closing print. 

·         EURUSD is +20 pips @ 1.3740 as trade readies for its first gain in three days. The single currency saw an early test of 1.3700 support, but that level held, aided by reports out of Ukraine suggesting the country will revert back to its 2004 constitution and that a unity government will be put in place within 10 days. Eurozone data out Monday includes CPI and German Ifo Business Climate. 

·         GBPUSD is -10 pips @ 1.6640 as trade presses lower for a fifth session. The recent slide has not had too big of an impact on the pair, which has surrendered only 100 pips over the course of the week. Support in the 1.6600/1.6650 area will be tracked closely in the days ahead. 

·         USDCHF is -20 pips @ .8875 as action presses session lows. Today's weakness has the pair contending with its lowest close of 2014, and has the pair moving towards a test of the .8840 region. A breakdown of that support would drop trade to levels last seen in November 2011. 

·         USDJPY is +30 pips @ 102.60 as trade remains trapped in the 101.50/102.50 range that has been place for much of the past month. Overnight, the Bank of Japan's minutes showed the country's recovery remains on track with risks still tilted to the downside. Resistance in the 103.00 area remains critical. 

·         AUDUSD is -35 pips @ .8965 as some modest selling takes hold. Action over much of the past two weeks has been locked in a tight range between .8950/9050 as neither bulls nor bears have been able to gain the upper hand. 

·         USDCAD is +30 pips @ 1.1130 as trade looks likely post a third straight gain. The pair tested the 1.1200 level in early trade, but a hotter than expected Canadian CPI report pushed action off the level.

Weekly Analysis
Week 1



Technical Updates

Briefing's Commentaries

Week in Review: Stocks Endure Choppy Week

On Monday, bond and equity markets were closed for Presidents' Day.

Tuesday's session saw equity indices kick off the abbreviated trading week on a relatively quiet note. Small caps finished in the lead (Russell 2000 +1.0%) while the S&P 500 added 0.1%. The benchmark index saw a brief dip at the open, but the weakness was erased promptly thanks to the early strength of the health care sector (+0.9%). The group surged out of the gate after Actavis (ACT 218.41, -1.96) agreed to acquire Forest Laboratories (FRX 96.88, -0.42) for $25 billion. Biotechnology also factored into the sector's strength as the iShares Nasdaq Biotechnology ETF (IBB 268.71, +3.25) jumped 2.6%.

On Wednesday, stocks ended on their lows with the S&P 500 snapping its three-day win streak. The index fell 0.7% while the Nasdaq (-0.8%) lagged throughout the session. The trading day began with slim losses, but the Dow and S&P 500 were quick to erase the early weakness. For its part, the Nasdaq was unable to make a sustained move into the green. Eight of ten sectors ended in the red with financials registering the largest decline. Citigroup (C 48.26, +0.13) was the weakest performer among the majors while regional banks also endured significant losses. The SPDR S&P Regional Banking ETF (KRE 38.15, +0.31) fell 2.8%.

Equities ended the Thursday session on their highs with small caps in the lead. The Russell 2000 gained 1.1% while the S&P 500 rose 0.6% with all ten sectors posting gains. Prior to the open, the market appeared to be headed for a lower start as disappointing data from China, Japan, and the eurozone weighed on index futures. Specifically, China's HSBC Manufacturing PMI fell to 48.3 from 49.5 (49.4 expected), Japan posted a record trade deficit of JPY1.82 trillion (JPY1.56 trillion expected), and the Manufacturing PMI for the eurozone (53.0 versus 54.0 expected) disappointed. Despite the weak data from overseas, equity futures were able to find support when a better-than-expected Markit Manufacturing PMI for the U.S. was released (56.7 actual versus 53.0 expected). Historically, the data point has not been known for eliciting a noteworthy reaction in the market, but today's number likely fueled some short covering activity that sent futures back to their flat lines by the opening bell. In addition, buying ahead of Friday's options expiration likely factored into the morning rebound and the daylong rally. 

·         Nasdaq Composite +2.1% YTD 

·         Russell 2000 +0.3% YTD 

·         S&P 500 -0.7% YTD 

·         Dow Jones Industrial Average -2.9% YTD

Next Week In View



Economic Commentaries

Economic Summary: Existing Home Sales miss expectations
Economic Data Summary:

·         January Existing Home Sales 4.62 M vs Briefing.com consensus of 4.70 M ; December was 4.87 M

Upcoming Economic Data:

·         February Empire Manufacturing due out Tuesday at 8:30 (Briefing.com consensus of 7.5; January was 12.5)

·         December Net Long Term TIC Flows due out Tuesday at 9:00 (Briefing.com consensus of ; November was -$28.0 bln)

·         February NAHB Housing Market Index due out Tuesday at 10:00 (Briefing.com consensus of 56; January was 56)

Upcoming Fed/Treasury Events:

·         Saint Louis Fed President (non a voting FOMC member, typically dovish) to speak Friday at 13:10

Other International Events of Interest

·         Britain's FTSE (+0.2%) clings to small gains despite the disappointing retails sales (-1.5% MoM actual v. -0.9% MoM expected) and public sector net borrowing (-GBP6.4 bln actual v. -GBP9.3 bln expected) figures 

Jason's Commentaries

The market started the session with some bullish bias which found resistance by the early session at 10am ET. After attempting to break above the resistance level, it failed to break and got pulled down by the Tech segment which ended the day with a flat day. Without any catalyst, it seems that it's tough to break that all time high resistance. Volumes were at 789.2m shares traded on the NYSE and the internals were showing a mixed sentiment. Of the sectors, Tech and Energy were the biggest laggard which dragged the market down together with them. With Feb coming to an end soon, I reckon the market will likely go down a little more before breaking up higher. However, I highly doubt we got much upside to go anymore.

Market Call: FLAT to upside

Date: 24 Feb 2014