21 Feb 2014 AMC - Market rallied ahead of long holidays. Dow and S&P500 sets new high

21 Feb 2014 AMC - Market rallied ahead of long holidays. Dow and S&P500 sets new high

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.1%

·         Germany's DAX: + 0.5%

·         France's CAC: + 0.3%

·         Spain's IBEX: + 0.4%

·         Portugal's PSI: + 0.6%

·         Italy's MIB Index: + 1.8%

·         Irish Ovrl Index: 0.0%

·         Greece ATHEX Composite: + 1.8%

Before Market Opens 

S&P futures vs fair value: +1.30. Nasdaq futures vs fair value: +3.00.
The S&P 500 futures trade one point above fair value.

Asian markets ended the week on a mostly higher note, but Thailand's SET opened roughly 2.0% lower following the official coup d'état announcement from the Army; however, the index climbed off its lows, narrowing its loss to 0.6% by the close. 

·         Economic data was limited: 

o    Singapore's CPI rose 2.5% year-over-year (consensus 2.6%, previous 1.2%). 

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·         Japan's Nikkei rallied 0.9% with support from financials. Matsui Securities and Resona Holdings gained 4.3% and 3.3%, respectively. 

·         Hong Kong's Hang Seng eked out a slim gain of 0.1% as property names outperformed. China Overseas Land and China Resources Land posted respective gains of 5.5% and 3.9%. 

·         China's Shanghai Composite climbed 0.7% into the close. Technology names led as China National Software & Service, Insigma Technology, and Inspur Software gained between 8.1% and 10.1%. 

Major European indices trade in mixed fashion ahead of weekend elections across the continent. In addition to the EU Parliamentary elections that are set to take place this weekend, Ukraine will vote in its own presidential election on Sunday. 

·         In economic data: 

o    Germany's GDP rose 0.8% quarter-over-quarter, as expected, while the year-over-year reading increased 2.5% (consensus 2.3%, previous 2.5%). Separately, Ifo Business Climate Index fell to 110.4 from 111.2 (expected 110.9) as Current Assessment slipped to 114.8 from 115.3 (consensus 115.5) and Business Expectations fell to 106.2 from 107.3 (forecast 106.6). 

o    Italy's non-EU trade surplus narrowed to EUR1.65 billion from EUR2.70 billion. Separately, Retail Sales slipped 0.2% month-over-month (consensus 0.3%, previous -0.2%) and Wage Inflation was unchanged month-over-month (prior 0.0%). 

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·         Great Britain's FTSE is lower by 0.3%. Energy names lag with Tullow Oil and Royal Dutch Shell down 1.3% and 0.7%, respectively. On the upside, London Stock Exchange is higher by 1.7%. 

·         In France, the CAC trades up 0.1%. Credit Agricole leads with a gain of 2.1%, while Orange is the weakest performer, down 1.9%. 

·         Germany's DAX holds an advance of 0.2% with utilities providing support. E.ON is higher by 1.2% and RWE trades up 1.6%. Deutsche Bank weighs, trading lower by 1.4%.

U.S. Equities

·         S&P futures point to a firm open as the major averages look for a third straight day of gains

·         Traders will be on alert for record highs amid what is likely going to be a sleepy holiday trade 

·         Of interest will be the action in the Russell 2000 as trade looks to reclaim the 200 dma. The Russell continues to flirt with correction territory as action holds ~8.8% off the March highs

·         Yesterday's late-day rally in the VIX (12.03) avoided the lowest close since March 2013

·         The U.S. Treasury market will close at 2pm ET for Memorial Day

·         Markets will be shuttered on Monday

o    S&P Futures +1 @ 1891

o    Dow Futures +7 @ 16,535

o    Nasdaq Futures +5 @ 3653 

Asia

·         Markets rallied across most of Asia

·         A weaker yen lifted Japan's Nikkei (+0.9%) to its best close in three weeks

·         China's Shanghai Composite (+0.7%) and Hong Kong's Hang Seng (+0.1%) were boosted by gains in property stocks after reports indicated more cities on the Mainland were considering loosening property restrictions

·         India's Sensex (+1.3%) posted another close in record territory 

·         Thailand's SET (-0.6%) slipped in its first trading day amid the military coup

Market Internals

Market Internals -Technical-
The Nasdaq closed up 31 (+0.76%) at 4186, the S&P 500 closed up 8 (+0.42%) at 1901, and the Dow closed up 63 (+0.38%) at 16606. Action came on below average volume (NYSE 543 mln vs. avg. of 709; NASDAQ 1440 mln vs. avg. of 1909), with advancers outpacing decliners (NYSE 2103/1016, NASDAQ 1949/688) and new highs outpacing new lows (NYSE 123/10, NASDAQ 55/37).

Relative Strength: 
Greece-GREK +2.53%, U.S. Home Construction-ITB +2.12%, Smart Grid Infrastructure-GRID +1.82%, Italy-EWI +1.8%, Homebuilders-XHB +1.6%, Clean Energy-PBW +1.45%, Social Media-SOCL +1.32%, Eastern Europe-ESR +1.26%, Russia-RSX +1.26%, Japan-EWJ +0.98%.

Relative Weakness: 
Cotton-BAL -1.68%, Livestock-COW -1.38%, Junior Gold Miners-GDXJ -1.08%, Platinum-PPLT -1.01%, Volatility-VXX -0.82%, Latin America 40-ILF -0.7%, Sweden-EWD -0.59%, Indonesia-IDX -0.57%, Nordic 30-GXF -0.46%, Malaysia-EWM -0.43%.

Leaders and Laggards

 

Technical Updates

Commentaries 

Closing Market Summary: Stocks Climb Ahead of Memorial Day Weekend
The stock market finished an upbeat weak on a strong note. Small caps paced the Friday rally, which was consistent with the dynamic observed throughout the week. The Russell 2000 advanced 1.1%, extending its weekly gain to 2.1%, while the Nasdaq (+0.8%) followed not far behind, finishing the week higher by 2.3%. Meanwhile, the Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.4%) posted modest gains, ending the week higher by 0.7% and 1.2%, respectively.

Even though high-growth names, which comprise the Russell 2000 and a fair share of the Nasdaq, displayed considerable strength over the course of the week, that outperformance took place against the backdrop of pitiful volume. Entering today, the first four sessions of the week saw an average NYSE floor volume of just 578 million shares (200-day average 702 million), but even that total proved to be insurmountable today as only 543 million shares changed hands. As a result, today's affair saw the second-lowest volume of the year.

The lack of participation was understandable given the upcoming Memorial Day weekend, but the conditions did not stop eight of ten sectors from finishing in the green. Furthermore, the S&P 500 managed to close above the 1,900 level, while the Russell 2000 regained its 200-day moving average.

Overall, cyclical sectors had a better showing than the defensively-oriented groups. Two of the four top-weighted sectors—consumer discretionary (+0.8%) and technology (+1.0%)—spent the session in the lead, which solidified their standing atop this week's leaderboard. The discretionary sector extended its weekly gain to 2.1%, while technology finished the week higher by 2.2%.

Discretionary shares rallied following a set of retail earnings that bucked the recent disappointing trend. Gap (GPS 41.14, +0.28), GameStop (GME 38.43, +1.55), and Foot Locker (FL 48.92, +0.75) posted gains between 0.7% and 4.2% in reaction to bottom-line beats, while Aeropostale (ARO 3.41, -1.11) plunged 24.6% after missing revenue estimates and guiding lower.

Elsewhere, the tech sector received support from social media names and other high-beta components. Facebook (FB 61.35, +0.83) and Yelp (YELP 61.54, +1.04) jumped 1.4% and 1.7%, respectively, while the strength among chipmakers sent the PHLX Semiconductor Index higher by 1.0%. Also of note,Hewlett-Packard (HPQ 33.72, +1.94) surged 6.1%, which likely resulted from a short squeeze after the company's earnings leaked yesterday afternoon, causing the stock to plunge into the close. Today's reversal, however, sent the stock to levels last seen in August 2011.

While most cyclical groups finished ahead of the broader market, the same could not be said about the countercyclical side. Consumer staples (+0.1%), health care (+0.1%), telecom services (+0.2%), and utilities (-0.2%) all ended little changed. Of the four, only the health care sector posted a gain for the week (1.4%), while the other three lost between 0.1% (consumer staples) and 1.2% (telecom services).

Treasuries posted modest gains as the 10-yr note added four ticks, sending its yield lower by two basis points to 2.54%.

Economic data was limited to April new home sales, which increased 6.4% from an upwardly revised 407,000 (from 384,000) in March to 433,000. The Briefing.com consensus expected new home sales to increase to 415,000. The big story in the new homes sales report is that median home prices fell 1.3% year-over-year. That was the second year-over-year decline in three months. Over the past few years, new home price growth has outpaced existing home price gains. That has led to a large increase in the new home price premium.

Keep in mind bond and equity markets will be closed on Monday for Memorial Day. On Tuesday, Durable Orders for April will be reported at 8:30 ET, while March Case-Shiller 20-city Index and March FHFA Housing Price Index will both be announced at 9:00 ET. The day's data will be topped off with the Consumer Confidence report for May, which will cross the wires at 10:00 ET. 

·         S&P 500 +2.8% YTD 

·         Dow Jones Industrial Average +0.2% YTD 

·         Nasdaq Composite +0.2% YTD 

·         Russell 2000 -3.3% YTD 

Commodities

Closing Commodities: Gold Ends Flat On The Week, Crude Rises 3%

·         June gold chopped around in negative territory today as the dollar index traded slightly higher. The yellow metal touched a session low of $1286.60 per ounce in early morning action and later brushed a session high of $1294.80 per ounce. It eventually settled 0.3% lower at $1291.60 per ounce, booking a 0.1% loss for the week.

·         July silver also traded lower, dipping to a session low of $19.30 per ounce moments after floor trade opened. It chopped around near the $19.40 per ounce level in afternoon action and settled with a 0.6% loss at $19.41 per ounce. Today's weakness cut silver's weekly gain to 0.4%.

·         July crude oil came off its session low of $103.87 per barrel in morning action and advanced as high as $104.57 per barrel. It traded in a consolidative pattern slightly below that level in afternoon pit trade and settled at $104.36 per barrel, or 0.6% higher. The energy component booked a 2.8% gain for the week.

·         June natural gas also traded in positive territory today, climbing as high as $4.41 per MMBtu. It settled 0.9% higher at $4.40 per MMBtu, shaving losses for the week to 0.2%.

COMEX Metals Closing Prices

  June gold fell $3.40 to $1291.60/oz 

·         June gold chopped around in negative territory as the dollar index traded slightly higher. The yellow metal touched a session low of $1286.60 in early morning action and later brushed a session high of $1294.80. It eventually settled 0.3% lower, booking a 0.1 % loss for the week. 

  July silver fell $0.11 to $19.41/oz 

·         Silver also traded lower, dipping to a session low of $19.30 moments after floor trade opened. It chopped around near the $19.40 level in afternoon action and settled with a 0.6% loss, thus cutting the weekly gain to 0.4%. 

  July copper rose 3 cents to $3.17/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Price

·         July corn settled unchanged at $4.77/bushel 

·         July wheat fell 8 cents to $6.52/bushel 

·         July soybeans fell 2 cents to $15.16/bushel 

·         June ethanol rose 1 cent to $2.33/gallon 

·         July sugar (#16 (U.S.)) fell 0.10 of a penny to 24.67 cents/lbs

NYMEX Energy Closing Prices

  July crude oil rose $0.63 to $104.36/barrel 

·         Crude oil came off its session low of $103.87 in morning action and advanced as high as $104.57. It traded in a consolidative pattern slightly below that level in afternoon pit trade and settled with a 0.6% gain. The energy component booked a 2.8% gain for the week. 

  June natural gas rose 4 cents to $4.40/MMBtu 

·         Natural gas also traded in positive territory today, climbing as high as $4.41. It settled 0.9% higher, shaving losses for the week to 0.2%. 

  July heating oil rose 1 cent to $2.96/gallon 

  July RBOB rose 2 cents to $3.01/gallon


Treasuries

Treasuries See Mixed Week: 10-yr: +05/32..2.535%..USD/JPY: 101.95..EUR/USD: 1.3632
The Week in Review

·         Treasuries saw a mixed week as buyers were in control up front while selling weighed on the long end. Click here to see an intraweek yields chart.

·         Week-end action should not be looked at too closely as volumes were light ahead of the holiday weekend.

·         The latest FOMC minutes showed members believe the economy has begun to pick up following the winter doldrums. 

·         Minneapolis Fed President Narayana Kocherlakota, a noted dove, suggested the Fed will likely not hit its 2% inflation target until 2018 and that it should consider introducing price level targeting.

·         A quiet week of data saw existing home sales (4.65M actual v. 4.66M expected) match estimates and new home sales (433K actual v. 415K expected) top forecasts.

·         Up front, the 2y slipped -1bp to close @ 0.342%, a two-month low.

·         The 5y lost -2bps, falling to 1.529%. The yield ended at its lowest levels since the middle of March, and finished on support helped by the 200 dma.

·         Light selling ran the 10y up +2bps to 2.536%. Action continues to press key support in the 2.500% area that dates back to June 2013. 

·         At the long end, the 30y climbed +7bps to 3.398% after last week's action dropped the yield to an 11-month low. Trendline resistance off the 2014 highs comes into play in the 3.450% area.

·         Selling in the back end swung the curve steeper as the 5-30-yr spread widened to 187bps.      

The Week Ahead

·         Markets are closed Monday in observance of Memorial Day. 

·         Data kicks off for the week on Tuesday with durable orders (8:30), Case-Shiller 20-city Index, FHFA Housing Price Index (10), and consumer confidence. Treasury will auction $31 bln 2y notes. ATL's Lockhart will speak at LSU's business school (20:10). 

·         Wednesday's data is limited to the weekly MBA Mortgage Index (7). Treasury will hold a $35 bln 5y note auction. 

·         Thursday will see initial and continuing claims, GDP - Second Estimate (8:30), and pending home sales (10). Treasury will auction $29 bln 7y notes. Cleveland's Pianalto makes opening remarks at the Inflation, Monetary Policy, and the Public conference (8:30).

·         Data concludes for the week on Friday with personal income and spending, PCE Prices - Core (8:30), Chicago PMI (9:45), and Michigan Sentiment - Final (9:55). Cleveland's Pianalto makes opening remarks at the Inflation, Monetary Policy, and the Public conference (8:30). Philly's Plosser and SF's Williams take part in a discussion on rules-based policy (17).

On other news.... 




Currencies 

Dollar Tests 200 DMA: 10-yr: +04/32..2.535%..USD/JPY: 101.91..EUR/USD: 1.3630

·         The Dollar Index trades just shy of session highs as a sleepy holiday trade nears the close. Click here to see a daily Dollar Index chart.

·         Today's bid has the Index on track to close at its best level in six weeks, and has action looking to bust through 80.50 resistance that is helped by the 200 dma.

·         EURUSD is -25 pips @ 1.3630 as trade remains on track to post its first sub-200 dma close since September following the German Ifo Business Climate miss. The single currency has been under pressure as of late, trimming off close to 300 pips while sliding in 10 of 13 sessions as traders begin to price in the possibility of ECB easing at the June meeting. GfK German Consumer Climate will cross the wires early Monday. ECB head Mario Draghi will speak Sunday and Monday in Portugal. European parliamentary elections will take place this weekend. 

·         GBPUSD is -40 pips @ 1.6825 as trade slips for a second day. The big news out overnight was the progress made by the UK Independence Party in the local elections as they gained 89 seats. Near-term support rests in the 1.6750/1.6800 area. British banks are closed Monday for Spring Bank Holiday. 

·         USDCHF is +15 pips @ .8955 as the 11th day of gains in the past 13 sessions has the pair looking at its best close in more than three months. Traders will be watching the .8990 area closely as the 200 dma lurks in the vicinity. 

·         USDJPY is +20 pips @ 101.95 as the squeeze of Wednesday's lows continues. The pair has rallied almost 120 pips since early Wednesday after the Bank of Japan failed to implement new easing measures amid a pickup in data. Headlines crossing from the BOJ earlier this morning saw Haruhiko Kuroda do his best Mario Draghi impersonation as he attempted to talk down the strong yen. The latest Bank of Japan minutes will be released Sunday evening.

·         AUDUSD is +10 pips @ .9235 as trade checked up near two-month lows. Many traders have taken note of the 200 dma, which holds at .9170. 

·         USDCAD is -20 pips @ 1.0865 as selling takes hold for a second session. The pair has been under pressure since the in-line Canadian CPI (0.2% MoM) reading, and is contending with minor support in the 1.0850 area.

Weekly Analysis


Technical Updates

Briefing's Commentaries

Week in Review: Stocks Rally Despite Low Volume Tally 

The stock market began the week on a modestly higher note with small caps coming out on top. The Russell 2000 advanced 1.1%, while the S&P 500 added 0.4% with seven sectors posting gains. The underperformance of blue chip listings was apparent within the Dow Jones Industrial Average (+0.1%), which spent the entire session near its flat line. Generally speaking, the first session of the week set the tone for an uneventful week with no economic data or noteworthy earnings influencing the sentiment. However, M&A activity was in focus even though it did not lift the underlying stocks. Some recent rumors came to fruition as AT&T (T) agreed to acquire DirecTV (DTV) for $95 per share, which represented a 10.2% premium to Friday's closing price. However, shares of DirecTV did not rally amid concerns about potential regulatory hurdles.

The major averages ended the Tuesday session in the red after surrendering their gains from Monday. In fact, the Russell 2000, which led the way on Monday, paced the retreat after being unable to reclaim its 200-day moving average (1117/1118). The small cap index fell 1.5%, while the S&P 500 lost 0.7% with nine sectors ending in the red. Equity indices began the day with modest losses amid general weakness in most cyclical sectors. Most notably, retailers pressured the discretionary sector (-0.9%) after Dick's Sporting Goods (DKS), Staples (SPLS), TJX (TJX), and Urban Outfitters (URBN) all reported disappointing earnings.

Equity indices rallied on Wednesday, which allowed the Dow (+1.0%), Nasdaq (+0.9%), and S&P 500 (+0.8%) to reclaim Tuesday's losses. For its part, the Russell 2000 advanced 0.5% despite a brief dip into the red that took place in the morning. Even though small caps endured an intraday hiccup, that short-lived weakness had little impact on the S&P 500, which rallied at the open before spending the bulk of the trading day in a six-point range. For the most part, the index was unperturbed by the underperformance of small caps, while also showing little reaction to the FOMC minutes from the April 29-30 meeting. To be fair, the lack of a reaction to the minutes reflected the lack of new information within the minutes. The document revealed a discussion of the expected path to an eventual rate hike, but there was no mention regarding the potential timing.

The major averages registered their second consecutive advance on Thursday with the Russell 2000 ending in the lead. The small cap index advanced 1.0%, while the S&P 500 gained 0.2% with eight sectors finishing in the green. For its part, the Dow Jones Industrial Average (+0.1%) underperformed throughout the session as blue chip listings struggled to stay out of negative territory. Overall, countercyclical sectors fared a bit better than their growth-sensitive peers. Of the four defensively-oriented groups, the consumer staples space (-0.2%) was the lone laggard, while health care (+0.5%), telecom services (+0.5%), and utilities (+0.8%) outperformed.

Next Week In View





Economic Commentaries

Economic summary: New Home sales top expectations
Economic Data Summary:

·         April New Home Sales 433K vs Briefing.com consensus of 415K; Last Week was revised to 407K from 384K

o    The big story in the new homes sales report is that median home prices fell 1.3% y/y. That was the second year-over-year decline in three months. Over the past few years, new home price growth has outpaced existing home price gains. That has led to a large increase in the new home price premium. As affordability conditions worsen -- from higher rates and soft income growth -- the drop in the price premium should help new home sales growth.

Upcoming Economic Data:

·         Weekly Durable Goods due out April at Tuesday (Briefing.com consensus of ; Last Week was 2.9%)

·         Weekly Durable Goods Ex-Transportation due out April at Tuesday (Briefing.com consensus of ; Last Week was 2.4%)

·         March Case Schiller 20 City Index due out March at Tuesday (Briefing.com consensus of ; February was 12.9%)

·         March FHFA Housing Price Index due out March at Tuesday (Briefing.com consensus of ; February was 0.4%)

·         May Consumer Confidence due out May at Tuesday (Briefing.com consensus of ; April was 82.3)

Other International Events of Interest

·         China's Shanghai Composite (+0.7%) and Hong Kong's Hang Seng (+0.1%) were boosted by gains in property stocks after reports indicated more cities on the Mainland were considering loosening property restrictions

Jason's Commentaries

Nasdaq did it once again, after breaking out, dragged both Dow and S&P500 into new highs. However, I am very weary about this breakout, whether is it sustainable. The market is showing price to volume divergence which might makes this rally unsustainable. Both tech and materials led the market on Friday despite drag in utilities and energy. There are not much economic news coming out this week. It seems that it might be a technical breakout more than anything else. Market is highly weary of the trend now, standing on the sidelines. For Dow and S&P500 to sustain that high will require more than a technical breakout. We're very likely to correct this week.

Market Call: DOWN

Date: 27 May 2014