22 May 2014 AMC - Market gained as Nasdaq broke out

22 May 2014 AMC - Market gained as Nasdaq broke out

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: 0.0%

·         Germany's DAX: + 0.2%

·         France's CAC: + 0.2%

·         Spain's IBEX: -0.1%

·         Portugal's PSI: + 0.3%

·         Italy's MIB Index: -1.1%

·         Irish Ovrl Index: + 0.2%

·         Greece ATHEX Composite: + 1.3%

Before Market Opens 

S&P futures vs fair value: +0.80. Nasdaq futures vs fair value: +3.70.
The S&P 500 futures trade one point above fair value.

Asian markets rallied across the board with only China's Shanghai Composite (-0.2%) seeing losses. In news of note, Thailand's military has seized control of the government in a coup d'état. The announcement came after Thailand's SET was closed. 

·         In economic data: 

o    China's HSBC Flash Manufacturing PMI improved to 49.7 (48.4 expected, 48.1 previous), but remained in contraction for a fifth straight month. 

o    Hong Kong's inflation rate slowed to 3.7% year-over-year from 3.9%. 

o    Taiwan's unemployment rate slipped to 4.0% from 4.1%. 

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·         Japan's Nikkei surged 2.1% to a one-week high, supported by the weaker yen. Exporters gained as Toyota Motor added 0.9% and Sony tacked on 1.2%. 

·         Hong Kong's Hang Seng rallied 0.5% to its best level in five weeks. Casino stocks gained with Galaxy Entertainment and Sands China tacking on 2.0% and 1.8%, respectively. 

·         China's Shanghai Composite shed 0.2%, giving up its early gains. Coal plays weighed with Yanzhou Coal Mining falling 2.0%. 

Core European indices trade little changed, while peripheral markets lag after the release of regional PMI readings that were mixed. 

·         Economic data: 

o    Eurozone Manufacturing PMI fell to 52.5 from 53.4 (expected 53.2), while Services PMI improved to 53.5 from 53.1 (consensus 53.0). 

o    Germany's Manufacturing PMI fell to 52.9 from 54.1 (expected 54.0), while Services PMI rose to 56.4 from 54.7 (consensus 54.5). 

o    Great Britain's GDP rose 0.8% quarter-over-quarter, as expected. Separately, Business Investment increased 2.7% quarter-over-quarter (consensus 2.3%, prior 2.4%) and Public Sector Net Borrowing rose GBP9.63 billion (expected GBP3.50 billion, prior GBP6.07 billion). Also of note, CBI Industrial Trends Orders ticked up to 0 from -1 (expected 4). 

o    French Manufacturing PMI decreased to 49.3 from 51.2 (consensus 51.0), while Services PMI fell to 49.2 from 50.4 (expected 50.2). Also of note, Business Survey slipped to 99 from 100 (expected 100). 

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·         Germany's DAX is flat. Steelmaker ThyssenKrupp outperforms with a gain of 0.9%, while software company SAP sits at the bottom with a loss of 1.4%. 

·         Great Britain's FTSE is lower by 0.1%. Royal Mail is the weakest performer, down 7.8% after issuing a warning. On the upside, miners Antofagasta, Fresnillo, and Randgold Resources hold gains between 1.5% and 2.7%. 

·         In France, the CAC holds a loss of 0.2%. Electricite de France leads the retreat with a loss of 4.1%. Alstom is the top performer, up 2.5%. 

·         Italy's MIB trades down 1.3% amid weakness in financials. Intesa Sanpaolo, Mediobanca, and UnipolSai hold losses between 2.4% and 5.9%.

U.S. Equities

·         Equity futures suggest little change at the open

·         Yesterday's surge ran the S&P 500 to within ~0.6% of its record-high close 

·         The Russell 2000 continues to flirt with correction territory with action just less than 10% off the March highs

·         The VIX (11.91) holds at its lowest levels since August

·         Initial Claims (326K actual v. 305K expected)

·         Continuing Claims (2653K actual v. 2700K expected)

o    S&P Futures +1 @ 1886

o    Dow Futures +11 @ 16,510

o    Nasdaq Futures +3 @ 3636

Asia

·         Markets rallied across most of Asia as only China's Shanghai Composite (-0.2%) saw losses

·         China's HSBC Flash Manufacturing PMI improved to 49.7 (48.4 expected, 48.1 previous), but remained in contraction for a fifth straight month

·         Thailand's military has seized control of the government in a coup. The announcement came after Thailand's SET was closed

·         Hong Kong's inflation rate slowed to 3.7% YoY (3.9% YoY previous). 

·         Japan's Nikkei (+2.1%) surged to a one-week high, supported by the weaker yen

·         Hong Kong's Hang Seng (+0.5%) rallied to its best level in five weeks

·         China's Shanghai Composite (-0.2%) gave up its early gains and slipped into the red 

·         India's Sensex (+0.3%) narrowly missed a record-high close

·         Australia's ASX (+1.0%) posted its biggest advance in three months

Market Internals

Market Internals
The Nasdaq closed up 23 (+0.55%) at 4154, the S&P 500 closed up 4 (+0.24%) at 1892, and the Dow closed up 10 (+0.06%) at 16543. Action came on below average volume (NYSE 565 mln vs. avg. of 712; NASDAQ 1712 mln vs. avg. of 1925), with advancers outpacing decliners (NYSE 2008/1107, NASDAQ 1784/865) and new highs outpacing new lows (NYSE 119/16, NASDAQ 61/44).

Relative Strength: 
Turkey-TUR +2.73%, Poland-EPOL +2.51%, Biotechnology-XBI +2.41%, Biotechnology-IBB +1.92%, Homebuilders-XHB +1.89%, Indonesia-IDX +1.86%, U.S. Home Construction-ITB +1.82%, Copper Miners-COPX +1.65%, Taiwan-EWT +1.21%, Austria-EWO +0.99%.

Relative Weakness: 
Natural Gas-UNG -2.42%, Italy-EWI -1.42%, Cotton-BAL -1.4%, Thailand-THD -1.09%, Smart Grid Infrastructure-GRID -0.87%, Livestock-COW -0.86%, Vietnam-VNM -0.74%, Sugar-SGG -0.49%, Russia-RSX -0.39%, Japanese Yen-FXY -0.34%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: Russell 2000 Jumps While Blue Chips Lag
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.

The Russell 2000 displayed some volatility this week, but thanks to today's advance, the index will enter the Friday session with a weekly gain of 1.1%. Furthermore, the index will begin tomorrow's affair within five points of its 200-day moving average (1118), which has been presenting a challenge in recent days.

Today, the index rallied out of the gate, which served as an encouraging early signal. The S&P 500, meanwhile, dipped below its flat line at the open, but once that dip was bought, the benchmark index rallied into the afternoon.

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.

Notably, the health care sector was boosted by biotechnology, which in turn rallied in sympathy with small cap stocks. The iShares Nasdaq Biotechnology ETF (IBB 234.15, +4.41) jumped 1.9% to regain its 50-day moving average after falling below that level in late March.

Biotechnology also factored into the outperformance of the Nasdaq Composite (+0.6%), while the traditional tech sector (+0.1%) could not keep pace as top-weighted components displayed relative weakness. The sector slumped from its high during the final 30 minutes of action after Hewlett-Packard's (HPQ 31.78, -0.74) earnings, which were scheduled for an after-hours release, leaked. Shares of HPQ tumbled 2.3% in reaction to a top-line miss on in-line earnings.

Outside of technology, the remaining cyclical groups finished in mixed fashion as consumer discretionary (+0.5%) and financials (+0.4%) outperformed, while energy (-0.2%), industrials (+0.2%), and materials (+0.2%) lagged.

Treasuries settled near their lows after retreating throughout the session. The 10-yr note shed six ticks with its yield climbing two basis points to 2.55%.

Participation has been lacking throughout the week with the Memorial Day weekend on the horizon. Prior to today, Monday's volume (573 million) represented the second-lowest total of the year, but today's session claimed that ‘honor' as 565 million shares changed hands at the NYSE.

Economic data featured weekly initial claims, the Existing Home Sales report for April, and April Leading Indicators: 

·         Weekly initial claims increased from 298,000 to 326,000, while the Briefing.com consensus expected a reading of 305,000. In all likelihood, last week's sharp drop was an aberration rather than a change in labor market conditions, considering levels quickly returned into the 320,000-330,000 range. 

·         Existing home sales increased a modest 1.3% to 4.65 million SAAR in April from 4.59 million SAAR in March. The gain ended three consecutive months of sales declines. The Briefing.com consensus expected existing home sales to increase to 4.66 million. The increase in sales coincided with improvements in mortgage applications and a gain in the pending home sales index. Still, sales are down 6.8% from April 2013. Sales fell 1% in the Midwest and were flat in the Northeast. Gains of 4.9% and 1.0% were seen out West and in the South. 

·         The Leading Indicators report for April increased 0.4%. That followed a revised 1.0% increase in March, and was below the Briefing.com consensus estimate, which called for an increase of 0.5%. 

Tomorrow, the New Home Sales report for April will be released at 10:00 ET. 

·         S&P 500 +2.4% YTD 

·         Dow Jones Industrial Average -0.2% YTD 

·         Nasdaq Composite -0.5% YTD 

·         Russell 2000 -4.0% YTD

Commodities

Closing Commodities: Gold Closes Below $1300/Oz, Crude Falls 0.3%

·         June gold and July silver rallied to their respective session highs of $1304.10 per ounce and $19.83 per ounce moments after pit trade opened. However, both metals pulled back from the highs and trended lower in morning action.

·         Gold trimmed gains to 0.5% as it settled at $1295.00 per ounce while silver settled at $19.52 per ounce, or 1.0% higher.

·         July crude oil chopped around near the unchanged line in early morning floor trade, touching a session high of $104.21 per barrel. It slipped into the red in late morning action and eventually settled 0.3% lower at $103.73 per barrel.

·         June natural gas brushed a session high of $4.51per MMBtu just before the EIA reported that inventories for the week ending May 16 showed a build of 106 bcf when a smaller build of 100-103 bcf was anticipated.

·         It then sold-off sharply into negative territory and continued to trend lower. Unable to regain momentum, it settled with a 2.5% loss at $4.36 per MMBtu.

COMEX Metals Closing Prices

·         June gold rose $6.90 to $1295.00/oz

·         July silver rose $0.19 to $19.52/oz

·         July copper rose 2 cents to $3.14/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Price

·         July corn rose 3 cents to $4.77/bushel 

·         July wheat fell 4 cents to $6.60/bushel 

·         July soybeans rose 11 cents to $15.18/bushel 

·         June ethanol rose 4 cents to $2.32/gallon 

·         July sugar (#16 (U.S.)) rose 0.19 of a penny to 24.77 cents/lbs

NYMEX Energy Closing Prices

·         July crude oil fell $0.34 to $103.73/barrel

·         June natural gas fell 11 cents to $4.36/MMBtu

·         July heating oil settled unchanged at $2.95/gallon

·         July RBOB rose 1 cent to $2.99/gallon

Treasuries

Treasuries Slip Amid Sleepy Session: 10-yr: -05/32..2.558%..USD/JPY: 101.79..EUR/USD: 1.3653

·         Treasuries slipped amid a quiet trade as a sleepy session took hold ahead of the extended holiday weekend. Click here to see an intraday yields chart.

·         Maturities drifted little changed into the cash open and saw some light selling ahead of the mixed initial (326K actual v. 305K expected) and continuing (2653K actual v. 2700K expected) claims data. 

·         The complex would then rally back to the unchanged line where action lingered until the in-line existing home sales (4.65 mln actual v. 4.66 mln expected) and leading indicators (0.4% actual v. 0.5% expected) data. 

·         However, steady selling would take hold shortly after the data was released as equity markets continued their ferocious rally off Tuesday's lows. 

·         A change in leadership saw light selling run the 30y up +1.1bps to 3.429%. Traders continue to monitor the 3.450% area as trendline resistance off the 2014 highs rests in the vicinity. 

·         A modest +1.8bp uptick saw the 10y settle @ 2.555%. Today's selling caused the benchmark yield to close at a one-week high, setting up a possible test of 2.580%/2.600% resistance. 

·         The belly of the curve lagged with the 5y climbing +2.8bps to 1.549%. Support in the area remains under close watch as it is aided by the 200 dma. 

·         Curve flattening saw the 5-30-yr spread tighten to 188bps. 

·         Precious metals saw solid gains with gold +$6 @ $1294 and silver +$0.15 @ $19.49. 

·         On Friday, the U.S. Treasury market will close at 2pm ET in observance of Memorial Day. 

·         Data: New home sales (10). 

·         Fed Speak: SF's Williams speaks in front of the Association of Trade and Forfaiting conference (16).

On other news.... 




Currencies 

Dollar Probes Key 80.25 Level: 10-yr: -06/32..2.562%..USD/JPY: 101.79..EUR/USD: 1.3648

·         The Dollar Index trades on session highs near 80.25 as action flirts with trendline resistance that is guarded by the 100 dma. Click here to see a daily Dollar Index chart.

·         EURUSD is -40 pips @ 1.3645 as trade readies for its lowest close in three months. Today's weakness comes following the mostly disappointing Flash Manufacturing and Services PMI data from the region, which has increased expectations the European Central Bank will introduce some sort of easing at the June policy meeting. Current levels are being watched closely as key support and the 200 dma lurk in the vicinity. Eurozone data is limited to German Ifo Business Climate. 

·         GBPUSD is -45 pips @ 1.6855 as sellers take control for the first time in six sessions. The selling comes after Q1 Second Estimate GDP posted an in-line 0.8%, and has wiped away virtually all of yesterday's gains. Support in the 1.6750/1.6800 area is helped by the 50 dma.

·         USDCHF is +15 pips @ .8945 as action looks likely to close at its best level in three months. The pair is now higher for the tenth time in twelve session as the bulls set their sights on resistance at .9000 that is guarded by the 200 dma. 

·         USDJPY is +35 pips @ 101.75 as trade continues to squeeze off yesterday's three-month lows. The pair has rallied 100 pips off yesterday's bottom, and is now on track to close at its best level in a week. 

·         AUDUSD is -30 pips @ .9215 as trade closes in on two-month lows. The hard currency saw an early test of the 100 dma (.9272) following the uptick in MI Inflation Expectations (4.4% actual v. 4.2% previous), but has seen a steady slide off those levels after China's HSBC Flash Manufacturing PMI (49.7 actual v. 48.4 expected, 48.1 previous) remained in contraction for a fifth straight month.

·         USDCAD is -20 pips @ 1.0890 as action probes session lows. The pair has been pressured despite Canada's retail sales (-0.1% MoM actual v. 0.2% MoM expected) falling short of estimates. Canada's CPI will cross the wires tomorrow.

Next Week In View





Economic Commentaries

Economic Summary: Jobless Claims rise faster than expected; Existing Home Sales in line with estimates
Economic Data Summary:

·         Weekly Initial Claims 326K vs Briefing.com consensus of 305K; Last Week was revised to 298K from 297K

·         Weekly Continuing Claims 2.653 M vs Briefing.com consensus of 2.700 M ; Last Week was revised to 2.666 M from 2.667 M

o    The drop in claims for the week ending May 10 seems to have been a bout of volatility rather than a change in labor market conditions. Levels quickly returned to the 320,000 -- 330,000 range, where we expect them to stay for some time. These levels are indicative of payroll growth in the neighborhood of 200,000, but not the 300,000 gains that would have likely come if the initial claims level stayed below 300,000 for an extended period.

·         April Existing Home Sales 4.65 M vs Briefing.com consensus of 4.66 M ; March was 4.59 M

o     The increase in sales coincided with improvements in mortgage applications and a gain in the pending home sales index. Still, sales are down 6.8% from April 2013. Sales fell 1% in the Midwest and were flat in the Northeast. Gains of 4.9% and 1.0% were seen out West and in the South. Total inventories increased 16.8% to 2.290 mln. That represents 5.9 months of supply at the current sales rate and is in-line with historical normal levels. The story in the existing home space has not changed much over the past few years. 

·         April Leading Indicators 0.4% vs Briefing.com consensus of 0.5%; March was 0.8%

o    . In this case, orders of nondefense capital goods excluding aircraft for April have been estimated to fall more than the consensus expected. The April gain was driven primarily by a large rebound in building permits, which contributed 0.24 percentage points to the 0.4% gain. Improvements in claims in May will likely contribute positively to the index next month. 

Upcoming Economic Data:

·         April New Home Sales due out Friday at 10:00 (Briefing.com consensus of 415K; Last Week was 384K)

Upcoming Fed/Treasury Events:

·         San Fran Fed President John Williams (not a voting FOMC member, typically moderate) to speak tomorrow at 16:00

Other International Events of Interest

·         Eurozone Flash Manufacturing PMI slipped to 52.5 (53.2 expected v. 53.4 previous) while Flash Services PMI expanded to 53.5 (53.0 expected, 53.1 previous).

·         China's HSBC Flash Manufacturing PMI improved to 49.7 (48.4 expected, 48.1 previous), but remained in contraction for a fifth straight month

Jason's Commentaries

it seems that Nasdaq had a breakout after the FOMC minutes, leading the whole market higher last night. While Russells is still facing some lagging action. I believe the Russells will be reacting to Nasdaq's strength soon. While the Dow and S&P500 remains at their highs. There is a potential that S&P500 and Dow may break into the higher highs. However, this breakout seems to be rather unsustainable as the volumes were too weak at the NYSE. 577.4m shares traded on the NYSE. It seems that the market is still very cautious able to the Sell in May. Utilities surprisingly led the sectors today with consumer staples and energy lagging. The main reason why Nasdaq broke the high was because Google gained 1.14% which provided the index enough strength. However with such divergence in the market, i reckon this is likely to be a false breakout. 

Market Call: DOWN

Date: 23 May 2014