25 April 2014 AMC -Market profit take after massive bullish run ahead of the weekend

25 April 2014 AMC -Market profit take after massive bullish run ahead of the weekend

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.3%

·         Germany's DAX: -1.5%

·         France's CAC: -0.8%

·         Spain's IBEX: -1.5%

·         Portugal's PSI: -1.4%

·         Italy's MIB Index: -1.7%

·         Irish Ovrl Index: -0.9%

·         Greece ATHEX Composite: -0.6%

Before Market Opens 

S&P futures vs fair value: -4.10. Nasdaq futures vs fair value: -14.50.
The S&P 500 futures trade four points below fair value.

Asian markets finished the week on a mixed note, with Japan's Nikkei (+0.2%) outperforming after the lower-than-expected inflation report fueled speculation about additional easing from the Bank of Japan. Also of note, Japan's Finance Minister Taro Aso said it does not appear the U.S. administration has the ability to push through the Trans-Pacific Partnership agreement until mid-term elections.

Economic data was limited. Japan's National CPI rose 1.6% year-over-year (prior 1.5%), while Tokyo CPI increased 2.9% year-over-year (previous 1.3%). Separately, National Core CPI rose 1.3% year-over-year (expected 1.4%, prior 1.3%) and Tokyo Core CPI increased 2.7% year-over-year (consensus 2.8%, previous 1.0%). South Korea's Consumer Confidence held steady at 108. Singapore's Industrial Production rose 6.1% month-over-month (expected 1.5%, prior 6.5%) 

·         Japan's Nikkei posted a slim gain of 0.2% as growth-sensitive names rallied. Fuji Electric and Kawasaki Heavy Industries both gained near 8.0%. 

·         Hong Kong's Hang Seng lost 1.5%, ending on lows as 47 of 50 components finished in the red. China Resources Land and Sino Land lost 3.2% and 3.6%, respectively. China Resources Power was the top performer, climbing 0.8%. 

·         China's Shanghai Composite slumped 1.0% into the close. Electrical equipment manufacturer Xi'An Shaangu Power was the weakest performer, down 13.8%. 

Major European indices trade broadly lower amid the return of concerns regarding the situation in Ukraine. Since yesterday's closing bell, Ukrainian officials have demand a statement from Russia, explaining the purpose of its troops massed at the border of the two countries. Furthermore, Ukraine claimed it will treat any potential incursion as an invasion. Also of note, Standard & Poor's downgraded Russia for the first time since late 2008, lowering its rating to ‘BBB-‘ from ‘BBB.' In addition, S&P raised the rating of Cyprus to ‘B' from ‘B-‘ and affirmed France at ‘AA.'

Economic data was limited to several items from Great Britain. Retail Sales ticked up 0.1% month-over-month (expected -0.4%, prior 1.3%), while the year-over-year reading increased 4.2% (consensus 3.8%, previous 3.3%). Core Retail Sales slipped 0.4% month-over-month (expected -0.5%, last 1.3%), while the year-over-year reading rose 4.2% (consensus 4.3%, last 3.9%). Also of note, BBA Mortgage Approvals came in at 45,900 (expected 48,900, prior 47,200). 

·         Great Britain's FTSE is lower by 0.3% as financials lag. HSBC, Lloyds Banking, and Standard Chartered are all down between 1.2% and 2.0%. Publisher Pearson outperforms with a gain of 3.7% after reaffirming its guidance. 

·         In France, the CAC trades down 0.4% with banks showing weakness as well. Credit Agricole and Societe Generale are lower by 1.3% and 2.1%, respectively. Alstom is higher by 10.9% as it sees continued strength following yesterday's buyout speculation. 

·         Germany's DAX holds a loss of 1.0% as 24 components hover in the red. Exporters Daimler and Volkswagen are both down near 1.2%, while financials Commerzbank and Deutsche Bank are lower by roughly 2.0% apiece.

U.S. Equities

·         Equity futures suggest modest losses at the open as lingering uncertainty regarding the situation in eastern Ukraine provides a headwind. 

·         A flurry of overnight activity from the region saw S&P downgrade Russia's foreign currency rating to BBB-/A-3 and the Russian central bank hike its key rate 50 bps to 8.00%, in an unexpected move. 

·         Yesterday, Ukrainian officials gave Russia 48 hours to explain the military exercises taking place on its eastern border. 

·         The VIX (13.32) lingers near three-month lows 

o    S&P Futures -6 @ 1867

o    Dow Futures -55 @ 16,376

o    Nasdaq Futures -19 @ 3566

Asia

·         Markets finished mostly lower across Asia. 

·         Hong Kong's Hang Seng (-1.5%) was pressured following disappointing earnings. 

·         On the Mainland, China's Shanghai Composite (-1.0%) saw a third straight day of losses as traders brace for a jam-packed IPO calender.

·         Japan's Nikkei (+0.2%) outperformed as Tokyo Core CPI posted a cooler than expected 2.7% YoY (2.8% YoY expected). 

·         India's Sensex (-0.8%) slipped off all-time highs. 

·         Australia's ASX was closed in observance of Anzac Day. 

Market Internals

Market Internals -Technical-
The Nasdaq closed down 73 (-1.75%) at 4076, the Dow closed down 140 (-0.85%) at 16362, and the S&P 500 closed down 15 (-0.81%) at 1863. Action came on slightly below average volume (NYSE 678 mln vs. avg. of 721; NASDAQ 1952 mln vs. avg. of 2002), with decliners outpacing advancers (NYSE 1050/2064, NASDAQ 457/2190) and new highs outpacing new lows (NYSE 66/28, NASDAQ 25/61).

Relative Strength: 
Junior Gold Miners-GDXJ +4.41%, Grains-JJG +2.19%, Utilities-XLU +1.68%, Vietnam-VNM +1.66%, Gold-GLD +1.15%, Indian Rupee-ICN +0.75%, Volatility-VXX +0.70%, Indonesia-IDX +0.64%, Middle East and Africa-GAF +0.50%, New Zealand-ENZL +0.19%.

Relative Weakness: 
Social Media-SOCL -5.31%, Coffee-JO -4.28%, Internet Composite-FDN -4.11%, Biotechnology-XBI -3.92%, Semiconductors-SMH -3.16%, Eastern Europe-ESR -3.15%, Russia-RSX -2.95%, Taiwan-EWT -2.44%, Greece-GREK -2.25%, South Korea-EWY -1.70%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: High-Beta Names Lead Stocks Lower
The major averages spent the last session of the week in a steady retreat despite receiving a round of better than expected earnings from the technology sector. The Nasdaq lost 1.8%, widening its April decline to 2.9%, while the S&P 500 fell 0.8%, swinging to a month-to-date loss to 0.5%. The benchmark index notched a session low not far above its 50-day moving average (1858) and closed just north of its 20-day moving average (1862).

Market participants received an avalanche of earnings since yesterday's closing bell, with a large portion coming from companies that belong to the technology sector (-1.4%). Even though 32 of 40 tech companies met or beat expectations, the broader sector was the second-weakest performer, finishing only ahead of the consumer discretionary sector (-1.7%).

In large part, the discretionary space was pressured by the shares of Amazon.com (AMZN 303.83, -33.32), which fell 9.9% after the online retail giant missed earnings estimates by one cent and issued cautious guidance. Amazon.com factored into the underperformance of the Nasdaq, while noteworthy losses in high-beta names like Netflix (NFLX 322.08, -21.99) and Priceline.com (PCLN 1157.24, -59.79) also weighed on the index and the discretionary sector.

Staying on the momentum theme, high-beta tech components like Facebook (FB 57.71, -3.16), FireEye (FEYE 41.18, -3.27), LinkedIn (LNKD 158.17, -13.42), and Yelp (YELP 57.63, -5.07) endured a forgettable session, falling between 5.2% and 8.1%.

Today's weakness in high-growth names resembled the aggressive selling that took place at the start of the month, which is likely to invite concerns that the sell-off seen a few weeks ago has not run its full corrective course.

The recent sell-off featured significant weakness in the biotech space and that was the case once again today. The iShares Nasdaq Biotechnology ETF (IBB 223.96, -5.66) lost 2.5%, ending right above its 200-day moving average (221.37), which has acted like a magnet for the past couple weeks. Interestingly, the health care sector (-0.7%) held up relatively well, ending just ahead of the broader market.

While the losses in biotech and other high-beta areas fueled the early selling, dip-buyers were reluctant to step in amid continued worries about the situation in Ukraine. Earlier, Ukrainian officials demanded a statement from Russia, explaining the purpose of its troops massed at the border of the two countries. Additionally, President Obama spoke with his counterparts from France, Germany, Italy, and the UK, agreeing to introduce another round of sanctions against Russia for failure to observe the Geneva accord that was signed last Thursday.

The geopolitical concerns did fuel some safe-haven flows as Treasuries and gold futures posted gains. The 10-yr note added four ticks, pressuring its yield to 2.67%, while gold futures added 0.5% to $1290.80/ozt.

With stocks ending near their lows, the CBOE Volatility Index (VIX 14.12, +0.80) climbed 6.0%, suggesting participants hedged their bets.

Participation was a bit below average as less than 700 million shares changed hands at the NYSE.

Today's economic data was limited to the final reading for the April University of Michigan Consumer Sentiment Index, which was revised up to 84.1 from a preliminary reading of 82.6. The Briefing.com consensus expected the Consumer Sentiment Index to remain at 82.6. Consumer sentiment increased to its highest level since July 2013 when the index reached 85.1. Layoff trends and equity prices both improved over the second half of the month, which contributed to the overall improvement in sentiment. The Current Conditions Index was revised up to 98.7 in the final reading from 97.1 in the preliminary report. That is up from 95.7 in March. The Expectations Index was also revised up, to 74.7 from 73.3.

On Monday, the Pending Home Sales report for March will be released at 10:00 ET. 

·         S&P 500 +0.8% YTD 

·         Dow Jones Industrial Average -1.3% YTD 

·         Nasdaq Composite -2.4% YTD 

·         Russell 2000 -3.3% YTD 

Commodities

Closing Commodities: Gold Gains And Finishes Above $1300/Oz Following Weakness In Dollar Index And Geopolitical Tensions

·         June gold rose above $1300 per ounce today as it gained support from a weaker dollar index and news of continued tension in Ukraine.

·         President Obama spoke with his counterparts from France, Germany, Italy, and the UK, agreeing to introduce another round of sanctions against Russia for failure to observe the Geneva accord singled last week.

·         The yellow metal advanced to a session high of $1305.20 per ounce in morning action and settled with a 0.8% gain at $1300.60 per ounce. Today's advance brought gains for the week to 0.5%.

·         May silver rose to a session high of $19.81 per ounce shortly after floor trade opened but retreated into the red in late morning action. It eventually settled unchanged at $19.69 per ounce, booking a 0.5% gain for the week.

·         June crude oil fell alongside equity markets today.

·         The energy component pulled back from its session high of $101.39 per barrel set in early morning action and eventually settled 1.3% lower at $100.58 per barrel. The decline brought losses for the week to 2.7%.

·         May natural gas also traded in the red, dipping to a session low of $4.63 per MMBtu. Unable to gain momentum, it settled 1.5% lower at $4.64 per MMBtu, declining 2.1% over the week.

COMEX Metals Closing Prices

  June gold rose $9.80 to $1300.60/oz

·         Gold rose above $1300 today as it gained support from a weaker dollar index and news of continued tension in Ukraine. President Obama spoke with his counterparts from France, Germany, Italy, and the UK, agreeing to introduce another round of sanctions against Russia for failure to observe the Geneva accord singled last week. The yellow metal advanced to a session high of $1305.20 in morning action and settled with a 0.8% gain. Today's advance brought gains for the week to 0.5%. 

  May silver settled unchanged at $19.69/oz 

·         Silver rose to a session high of $19.81 shortly after floor trade opened but retreated into the red in late morning action. It eventually settled at the unchanged line, booking a 0.5% gain for the week. 

  May copper settled unchanged $3.12/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 3 cents to $5.05/bushel 

·         May wheat rose 10 cents to $7.01/bushel 

·         May soybeans rose 26 cents to $14.99/bushel 

·         May ethanol rose 4 cents to $2.26/gallon 

·         July sugar (#16 (U.S.)) rose 0.16 of a penny to 24.70 cents/lbs

NYMEX Energy Closing Prices

  June crude oil fell $1.37 to $100.58/barrel 

·         Crude oil fell alongside equity markets today. The energy component pulled back from its session high of $101.39 set in early morning action and eventually settled 1.3% lower. The decline brought losses for the week to 2.7%. 

  May natural gas fell 7 cents to $4.64/MMBtu 

·         Natural gas also traded in the red, dipping to a session low of $4.63. Unable to gain momentum, it settled 1.5% lower, declining 2.1% over the week. 

  June heating oil fell 3 cents to $2.98/gallon 

  June RBOB fell 3 cents to $3.02/gallon


Treasuries

30y Closes at 10-Month Low: 10-yr: +02/32..2.667%..USD/JPY: 102.15..EUR/USD: 1.3835
The Week in Review 

·         Treasuries saw a mixed week as a re-escalation in eastern Ukraine provided support to longer dated maturities. Click here to see an intraweek yields chart.

·         Traders sought safety on Friday on following reports Russian troops were conducting exercises on the Ukraine border. 

·         A quiet week of economic data saw durable orders -ex transportation (2.0% actual v. 0.5% expected) and Michigan Sentiment - Final (84.1 actual v. 82.6 expected) outpace estimates while new home sales (384K actual v. 455K expected) provided the lone miss. Leading indicators (0.8%) and existing home sales (4.59M) matched estimates. 

·         Up front, the 2y tacked on +4bps to settle the week @ 0.430%. The yield ended the week near seven-month highs as traders continue to price in the possibility of a Fed taper at next week's meeting. 

·         The 5y edged up +1bp, closing the week @ 1.728%. This week's action produced several tests of 1.700% support, but the level was able to hold. Many participants continue to monitor the 1.800% area, which corresponds with the September/March highs.

·         The 10y shed -3bps on the week, ending @ 2.666%. The benchmark yield pressed back below the 2.680% pivot, causing many to turn their focus towards key support in the 2.600% area. 

·         At the long end, the 30y led, shedding -6bps to 3.439%. Friday's close was the lowest in 10 months, and has the yield off -55bps from its December highs. 

·         This week's auctions saw mixed results.

·         Tuesday's disappointing $32 bln 2y note auction drew 0.447% and an in-line 3.35x bid/cover. Both indirect (23.3%) and direct (18.9%) takedowns were light, leaving primary dealers with 47.8% of the supply. 

·         Wednesday's solid $35 bln 5y note auction drew 1.732% and a 2.79x bid/cover. An in-line indirect takedown (44.9%) was supported by the strong direct bid (18.0%). Primary dealers were left with 37.1% of the supply. 

·         Thursday's $29 bln 7y note auction was in-line. The auction drew 2.317% (WI 2.317%) and a 2.60x bid/cover (12-auction average 2.57x). A solid indirect bid (49.9%) provided support at directs (19.0%) were slightly below average. Primary dealers ended up with 31.1% of the supply.

·         A flatter curve persisted as the 5-30-yr spread narrowed to 171bps, its tightest since the fall of 2009. 

The Week Ahead 

·         Monday's data is limited to pending home sales (10). 

·         Tuesday will see the Case-Shiller 20-city Index (9) and consumer confidence (10). 

·         Data picks up Wednesday with the weekly MBA Mortgage Index (7), ADP Employment Change (8:15), GDP-Adv. (8:30), Employment Cost Index (8:30), Chicago PMI (9:45), and the FOMC rate decision (14). 

·         Data continues to flow on Thursday as Challenger Job Cuts (7:30), initial and continuing claims, personal income and spending, PCE Prices - Core (8:30), ISM Index, construction spending (10), and auto/truck sales (14) are due out. Fed Chair Janet Yellen will speak at the Independent Community Bankers of America Annual Washington Policy Summit (8:30). 

·         Friday's data is the most anticipated of the week as nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek (8:30), and factory orders (10) are scheduled to cross the wires.

On other news.... 




Currencies 

Dollar Drifts Little Changed Amid Lackluster Session: 10-yr: +04/32..2.665%..USD/JPY: 102.13..EUR/USD: 1.3838

·         The Dollar Index lingers just below the 79.80 flat line as a quiet session draws to a close. Click here to see a daily Dollar Index chart.

·         Today's sleepy session has seen action limited to a tight 10 cent range as participants await next week's FOMC rate decision.

·         EURUSD is +5 pips @ 1.3835 as light buying continues for fourth day. The current streak as the single currency nearing minor resistance in the 1.3850 area, which guards the March highs. Eurozone data is heavy as M3 money supply, German preliminary CPI, GfK German Consumer Climate, and Spain's unemployment rate are scheduled for release on Monday. 

·         GBPUSD is -5 pips @ 1.6795 as trade presses session lows. Sterling has seen a just 40 pip range during today's lackluster trade, and remains near its best levels since November 2009. British data is limited to preliminary GDP. 

·         USDCHF is -5 pips @ .8810 as trade probes minor support in the area. Action remains a function of the euro thanks to the EURCHF1.20 floor, which was defended today by Swiss National Bank Chairman Thomas Jordan. 

·         USDJPY is -10 pips @ 102.15 as action probes its best levels of U.S. trade. The pair climbed to its best levels of the session near 102.50 following the cooler than anticipated Tokyo CPI before reversing to session lows and probing 102.00 support. Action has spent much of the past three months stuck between 101.50/102.50. Japan's retail sales are due out Sunday evening. 

·         AUDUSD is flat @ .9265 as steady selling over the course of U.S. trade has wiped away the overnight gains. The hard currency has seen a sloppy trade all session long as Australian banks were closed in observance of Anzac Day. 

·         USDCAD is +15 pips @ 1.1035 as trade fights to close at a three-week high. The pair has seen trade trapped at current levels for much of the past two weeks as bulls have been unable to reclaim resistance helped by the 50 dma. Bank of Canada Governor Stephen Poloz will speak Monday in Ottawa.

Weekly Analysis
Week 1



Technical Updates

Briefing's Commentaries


Week in Review: Nasdaq Remains Volatile 

The trading action in the stock market on Monday left a lot to be desired, yet that didn't stop the market from finishing the day higher. Led by the health care (+1.2%), energy (+0.7%), and technology (+0.4%) sectors, the S&P 500 jumped 0.4% and closed the session with its fifth consecutive gain -- a first in 2014. The U.S. market reopened after the three-day Easter weekend, but for all intents and purposes, it continued to operate in holiday mode. Trading conditions were thin, no doubt kept that way by the lack of activity out of Europe where markets remained closed for the Easter holiday. NYSE volume totaled just 591 mln shares, which was well below a recent average of 725 mln shares.

Equity indices strung together a daylong rally on Tuesday, giving the S&P 500 its sixth consecutive advance. Some selling during the final hour of action pressured the indices from their highs, but they still ended with the bulk of their gains. The benchmark index added 0.4% with eight sectors finishing in the green, while the Nasdaq (+1.0%) outperformed throughout the session. Although the stock market began the day on a flat note, the major averages quickly took the lead from two heavily-weighted sectors—consumer discretionary (+0.8%) and health care (+1.0%)—that displayed strength out of the gate. The health care sector spent the entire session in the lead due, in part, to the relative strength of biotechnology. M&A activity also contributed to the sector's outperformance as Allergan surged 15.3% after Valeant proposed a merger for $48.30 in cash and 0.83 shares of Valeant for each share of Allergan.

The stock market finished the Wednesday session on a modestly lower note, but it is worth mentioning the retreat took place after six consecutive gains. The Dow Jones Industrial Average (-0.1%) and S&P 500 (-0.2%) settled not far below their flat lines, while the Nasdaq Composite (-0.8%) lagged throughout the session. Equity indices started the day in the red, with the Nasdaq showing early weakness as large cap tech names and biotechnology weighed. The technology sector (-0.9%) slumped amid profit-taking in listings like Apple , Google, Microsoft, and Intel, while biotech names retreated following quarterly reports from three major industry players.

On Thursday, the major averages posted modest gains, but not before enduring a morning dip into the red, which took place in reaction to reports indicating Russia has commenced military exercises on the Ukrainian border. The news from Europe knocked the key indices from their early highs, while giving a boost to safe-haven assets like gold futures (+0.5% to $1290.80/ozt), Treasuries (10-yr yield -1 bps to 2.69%), and the Japanese yen (102.30 vs USD); however, the morning spike in safety flows was retraced partially, while equities rallied off their lows with the technology sector (+1.1%) setting the pace. Tech shares (and the Nasdaq) received significant support from the shares of Apple, which surged 8.2% after the top-weighted tech company handily beat earnings expectations. In addition, Apple increased its share buyback to $90 billion and announced a 7:1 stock split, which will go into effect on June 2.

Next Week In View





Economic Commentaries

Economic Summary: Michigan Sentiment tops expectations
Economic Data Summary:

·         April Michigan Sentiment Final 84.1 vs Briefing.com consensus of 82.6; April Prelim was 82.6

o    Consumer sentiment is at its highest level since July 2013 when the index reached 85.1. Layoff trends and equity prices both improved over the second half of the month, which contributed to the overall increase in sentiment. The Current Conditions Index was revised up to 98.7 in the final reading from 97.1 in the preliminary report.

Upcoming Economic Data:

·         March Leading Indicators due out Monday at 10:00 (Briefing.com consensus of 0.8%; February was 0.5%)

Other International Events of Interest

·         A flurry of overnight activity from the region saw S&P downgrade Russia's foreign currency rating to BBB-/A-3 and the Russian central bank hike its key rate 50 bps to 8.00%, in an unexpected move. 

Jason's Commentaries

As expected, market decided to take its profit after a massive run for the past 2 weeks. Now that the market has hit the high once again for Dow and S&P500, i believe the market is starting to get shakey already. Especially big names are missing their earnings and MAY IS COMING. This coming week is the week of employment numbers once again and We are going to have Fed Statement and Fed Fund Rate once again. It seemed to me that if the employment numbers are doing fine, the Fed will likely continue to trim their asset purchase program. Volumes is standing at 675m shares traded on the NYSE. It was a clear bear day on  the market. However I reckon that is likely to be a profit taking session. The Tech and the Industrials were the heaviest laggard in the session on Friday as names like Visa, Google sunk more than 1.5%. Once again, on the weekly perspective, both Nasdaq and Russells are facing resistance entering back into my channel once again. Maybe that could kick start the sell in May?  

Market Call: FLAT

Date: 28 April 2014