26 Sep 2014 AMC - Market heading into turbulence state. Massive gyrations last week.

26 Sep 2014 AMC - Market heading into turbulence state. Massive gyrations last week.

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.2%

·         Germany's DAX: -0.2%

·         France's CAC: + 0.9%

·         Spain's IBEX: + 0.6%

·         Portugal's PSI: + 0.7%

·         Italy's MIB Index: + 1.9%

·         Irish Ovrl Index: + 0.2%

·         Greece ATHEX Composite: -0.1%

Before Market Opens 

S&P futures vs fair value: +2.40. Nasdaq futures vs fair value: +9.70.
The S&P 500 futures trade two points above fair value.

Markets fell across most of Asia, responding to yesterday's steep slide on Wall Street. 

·         In economic data: 

o    Japan's National CPI increased 3.3% year-over-year (expected 3.4%; previous 3.4%), while National Core CPI rose 3.1% (consensus 3.2%; last 3.3%) 

o    South Korea's Consumer Confidence held steady at 107 (consensus 108) 

o    Singapore's Industrial Production ticked down 0.2% month-over-month (expected 0.2%; previous 2.4%), while the year-over-year reading rose 4.2% (consensus 5.0%; last 3.0%) 

------ 

·         Japan's Nikkei fell 0.9%, but recovered a large portion of its early decline. Automakers were pressured as Toyota Motor and Honda Motor lost 1.5% and 1.3%, respectively. 

·         Hong Kong's Hang Seng shed 0.4%, pressing to a two-month low. Casino shares finally saw some buying interest as Galaxy Entertainment jumped 3.6% and Sands China climbed 2.8%. 

·         China's Shanghai Composite ticked up 0.1%, gaining for a fourth straight session. Nuclear power names surged for a second day with Shanghai Electric Group rallying the daily limit, 10%. 

·         India's Sensex added 0.6% and held the 50-day moving average. Financials gained for the first time in days as Axis Bank rose 3.1% and State Bank of India lifted 2.8%. 

Major European indices trade higher across the board with Italy's MIB (+1.0%) in the lead. German Bunds have been in demand today, dropping the benchmark 10-yr yield to 0.91%, which represents the lowest level since late August 

·         Economic data was limited: 

o    Germany's Import Price Index ticked down 0.1% month-over-month (expected -0.2%; previous -0.4%), while the year-over-year reading fell 1.9% (consensus -2.0%; last -1.7%). Separately, GfK Consumer Climate ticked down to 8.3 from 8.6 (expected 8.5) 

o    French Consumer Confidence held steady at 86, as expected o Italy's Business Confidence slipped to 95.1 from 95.4 (expected 95.5) 

------ 

·         Germany's DAX trades flat. Infineon Technologies leads with an increase of 1.9%. Allianz is the weakest performer, down 2.4% after Bill Gross announced his departure from PIMCO. 

·         Great Britain's FTSE has added 0.1%. Financials are among the leaders with Admiral Group, HSBC Holdings, and Lloyds Banking up between 1.1% and 1.5%. Consumer names lag with WM Morrison Supermarkets and J Sainsbury both down near 2.0%. 

·         In France, the CAC trades up 0.7%. Bank shares outperform with Credit Agricole and Societe Generale holding gains close to 1.2% apiece. Gemalto lags, down 0.8%. 

·         Italy's MIB leads with a gain of 1.0% thanks to strength among financials. Banco Popolare, Banca di Milano Scarl, UBI Banca, and Intesa Sanpaolo are up between 1.7% and 3.5%.

U.S. Equities

·         Futures point to modest gains at the open as the major averages look to repair the damage from yesterday's steep slide

·         The S&P 500 is now -2.6% from record highs

·         The VIX (15.64) closed yesterday's session at a one and a half-month high

·         Q2 GDP - Third Estimate (4.6% actual v. 4.6% expected)

·         Q2 GDP Deflator - Third Estimate (2.1% actual v. 2.1% expected)

o    S&P Futures unch @ 1962

o    Dow Futures +20 @ 16,920

o    Nasdaq Futures +4 @ 4012

Asia

·         Markets fell across most of Asia, responding to yesterday's steep slide on Wall Street

·         Japan's Tokyo Core CPI (2.6% YoY actual v. 2.7% YoY expected, 2.7% YoY previous) posted a cooler than expected reading

·         Japan's Nikkei (-0.9%) recovered a large portion of its early losses, but action was hampered by a large number of holdings going ex-dividend

·         Hong Kong's Hang Seng (-0.4%) pressed to a two-month low

·         China's Shanghai Composite (+0.1%) gained for a fourth straight session

·         India's Sensex (+0.6%) held the 50 dma

·         Australia's ASX (-1.3%) tumbled to a six-month low

Market Internals

Market Internals -Technical-
The Nasdaq closed up 45 (+1.02%) at 4512, the Dow closed up 167 (+0.99%) at 17113, and the S&P 500 closed up 17 (+0.86%) at 1983. Action came on slightly below average volume (NYSE 617 mln vs. avg. of 637; NASDAQ 1522 mln vs. avg. of 1615), with advancers outpacing decliners (NYSE 2307/851, NASDAQ 1851/870) and new lows outpacing new highs (NYSE 22/143, NASDAQ 30/96).

Relative Strength: 
Sugar-SGG +2.95%, Coffee-JO +2.47%, Italy-EWI +2.13%, Egypt-EGPT +1.8%, Latin America 40-ILF +1.79%, Oil Services-OIH +1.71%, Livestock-COW +1.56%, Biotechnology-XBI +1.4%, BRICs-EEB +1.33%, India-INP +1.31%.

Relative Weakness: 
Volatility-VXX -3.13%, Junior Gold Miners-GDXJ -2.77%, Gasoline-UGA -1.87%, Indonesia-IDX -1.87%, Gold Miners-GDX -1.66%, Silver Miners-SIL -1.53%, Austria-EWO -0.73%, Japanese Yen-FXY -0.57%, Swiss Franc-FXF -0.47%, British Pound-FXB -0.44%.

Leaders and Laggards

 

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Down Week on Upbeat Note
Equity indices finished a cautious week on an upbeat note. The S&P 500 (+0.9%) and Nasdaq (+1.0%) reclaimed their 50-day moving averages, while the Dow Jones Industrial Average (+1.0%) was able to turn positive for the month (+0.1%). However, today's rally did not feature the same conviction as yesterday with just fewer than 620 million shares changing hands at the NYSE floor versus Thursday's above-average total of 720 million.

The stock market received an early boost from heavily-weighted consumer discretionary (+1.1%) and technology (+1.2%) sectors. Both groups were underpinned by better than expected earnings with discretionary shares rallying behind Nike (NKE 89.50, +9.75), which surged 12.2%.

Elsewhere, the technology sector drew strength from chipmakers following an earnings beat from Micron (MU 33.84, +2.14). The stock jumped 6.8%, while the broader PHLX Semiconductor Index rose 1.3% to narrow its September loss to 0.3%. To be sure, large cap components also displayed strength with Apple (AAPL 100.75, +2.88) spiking nearly 3.0%.

Stocks were briefly pressured from their morning highs by the underperforming health care sector (+0.3%). The group could not catch up to the broader market amid weakness in hospital names like Tenet Healthcare (THC 60.75, -1.09), but biotechnology rallied with the iShares Nasdaq Biotechnology ETF (IBB 276.41, +2.44) advancing 0.9%.

The relative weakness in the health care space did not stand in the market's way during afternoon action as other influential groups like financials (+0.9%), industrials (+0.9%), and energy (+1.3%) picked up the slack. In the financial sector, Janus Capital (JNS 15.89, +4.78) soared 43.0% after it was announced Bill Gross will be joining the company following his departure from PIMCO.

For its part, the energy sector rebounded from its recent underperformance amid a 1.1% rise in crude oil. The energy component ended the pit session at $93.55/bbl to register a 2.2% gain for the week.

Treasuries slumped in the morning, but the rest of the session saw a divergence among different maturities. The 10-yr note settled near its low with its yield up three basis points at 2.53%, while the long bond returned to its flat line with its yield at 3.22%.

Also of note, the Dollar Index (85.63, +0.43) continued charging higher to extend this week's gain to 1.1%. The index will enter the final two sessions of the month after surging 3.6% so far in September.

On Monday, Personal Income (Briefing.com consensus 0.3%) and Spending (consensus 0.4%) data for August will be reported at 8:30 ET alongside core PCE Prices (expected 0.0%). The day's data will be topped off with the Pending Home Sales report for August (consensus -0.2%). 

·         Nasdaq Composite +8.0% YTD 

·         S&P 500 +7.2% YTD 

·         Dow Jones Industrial Average +3.2% YTD 

·         Russell 2000 -3.8% YTD 

Commodities

Closing Commodities: Crude Rises on Economic Data; Gains 2.2% for the Week
Dec gold traded lower as the dollar index rose on economic data released this morning. Q2 GDP was revised up to 4.6% in the third estimate from 4.2% in the second estimate, which was in-line with the Briefing.com consensus. This marked the best quarterly increase in GDP since 4Q2011. The yellow metal brushed a session low of $1212.80 per ounce in morning action and eventually settled with a 0.5% loss at $1215.50 per ounce. Gold touched $1206.60 per ounce yesterday, its lowest level since January 2, and booked a 0.1% loss for the week. 

Dec silver chopped around in positive territory. It rose as high as $17.58 per ounce and settled with a 0.6% gain at $17.54 per ounce. Despite today's advance, silver booked a weekly loss of 1.7%, having traded at four year lows earlier in the week. 

Nov crude oil gained strength on the GDP data. The energy component rose as high as $93.86 per ounce and settled 1.1% higher at $93.55 per ounce. Today's advance brought gains for the week to 2.2%. 

 Nov natural gas spent most of today's pit trade chopping around in the red. It brushed a session low of $3.97 per MMBtu but gained steam in afternoon action and broke into positive territory. Natural gas settled 0.5% higher at $4.03 per MMBtu, booking a gain of 3.3% for the week.

COMEX Metals Closing Prices

  Dec gold fell $6.20 to $1215.50/oz 

·         Gold traded lower as the dollar index rose on economic data released this morning. Q2 GDP was revised up to 4.6% in the third estimate from 4.2% in the second estimate, which was in-line with Briefing.com consensus. This marked the best quarterly increase in GDP since 4Q2011. The yellow metal brushed a session low of $1212.80 in morning action and eventually settled with a 0.5% loss. Gold touched $1206.60 yesterday, its lowest level since January 2, and booked a 0.1% loss for the week. 

  Dec silver rose $0.10 to $17.54/oz

·         Unlike gold, silver chopped around in positive territory. It rose as high as $17.58 and settled with a 0.6% gain. Despite today's advance, silver booked a weekly loss of 1.7%, having traded at four year lows earlier in the week. 

  Dec copper rose 1 cent to $3.04/lb

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 4 cents to $3.23/bushel 

·         Dec wheat rose 1 cent to $4.75/bushel 

·         Nov soybeans fell 13 cents to $9.10/bushel 

·         Nov ethanol fell 2 cents to $1.55/gallon 

·         Nov sugar (#16 (U.S.)) rose 0.73 of a penny to 26.07 cents/lb

NYMEX Energy Closing Prices

  Nov crude oil rose $1.06 to $93.55/barrel 

·         Crude oil climbed higher despite a stronger dollar index. The energy component gained strength on this morning's Q2 GDP data that showed the best quarterly increase in GDP since 4Q2011. Prices rose as high as $93.86 and settled 1.1% higher. Today's advance brought gains for the week to 2.2%. 

  Nov natural gas rose 2 cents to $4.03/MMBtu 

·         Natural gas spent most of today's pit trade chopping around in the red. It brushed a session low of $3.97 but gained steam in afternoon action and broke into positive territory. Natural gas settled 0.5% higher, booking a gain of 3.3% for the week. 

  Nov heating oil settled unchanged at $2.70/gallon 

  Nov RBOB fell 5 cents to $2.49/gallon


Treasuries

'

Treasuries See Mixed Week: 10Y: -09/32..2.534%..USD/JPY: 109.30..EUR/USD: 1.2679
The Week in Review

·         Treasuries saw a mixed week as selling took hold up front while buyers were in control in the rear. Click here to see an intraweek yields chart.

·         The choppy trade came as the Dollar Index raced to its best levels since July 2010.

·         This week's economic data was mixed as existing home sales (5.05M actual v. 5.2M expected), durable orders (-18.2% actual v. -16.3% expected), and Michigan Sentiment - Final (84.6 actual v. 85.0 expected) missed estimates while new home sales (504K actual v. 435K expected) beat. Q2 GDP - Third Estimate improved to an in-line 4.6%,   

·         Philly Fed President Charles Plosser announced he will retire from his post on March 1, 2015.

·         The complex saw some selling Friday morning after Bill Gross announced he was leaving Pimco, but the weakness had more to do with maturities rubbing up against key resistance levels.

·         Auctions got off to a good start, but turned sloppy as the week progressed.

·         Tuesday's $29 bln 2Y note auction was the strongest of the week. The auction drew 0.589% (WI 0.595%) and a solid 3.56x bid/cover. A large indirect (40.9%) takedown provided support as the direct bid (16.1%) came in light. Primary dealers ended up with 43% of the supply. 

·         Wednesday's $35 bln 5Y note auction was sloppy, drawing 1.800% (WI 1.793%) and a light 2.56x bid/cover. A strong indirect bid (50.3%) partially offset the weak direct bid
(8.8%). Primary dealers were left with 40.9% of the supply. 

·         Thursday's $29 bln 7Y note auction was disappointing as the complex saw a ferocious rally going into the offering. The auction drew 2.235% (WI 2.225%) and a 2.48x bid/cover.
A solid indirect bid (48.3%) provided support as direct bids (10.0%) were half the 12-auction average. Primary dealers ended up with 41.7% of the supply.

·         Up front, the 2Y rallied +4bps to 0.594% and posted its highest close since May 2011. 

·         Light selling in the belly ran the 5Y up to +2bps to 1.802%. The yield tested support in the 1.750% area, but managed to hold the level. 

·         A modest bid pushed the 10Y down -4bps to 2.535%. Action slipped below the 100 dma and pressed the psychologically important 2.500% level, but was unable to hold below either. 

·         Outperformance at the long end dropped the 30Y -6bps to 3.216%. The yield on the long bond finished near a three-week low and on key support in the area. 

·         A flatter curve won out as the 2-10-yr spread narrowed to 194bps and the 5-30-yr spread tightened to 141.5bps. 

The Week Ahead 

·         Data begins to flow on Monday as personal income and spending, PCE Prices - Core (8:30), and pending home sales (10) are due out. Chicago Fed head Evans will appear on CNBC's "Squawk Box" to discuss the economy (8) before taking his show to the National Association for Business Economics annual meeting (9). 

·         Tuesday's data includes Case-Shiller 20-city Index (9), Chicago PMI (9:45), and consumer confidence (10).

·         Data remains heavy on Wednesday as the weekly MBA Mortgage Index (7), ADP Employment Change (8:15), ISM Index, construction spending (10), and auto/truck sales (14) are scheduled for release. 

·         Thursday will see Challenger Job Cuts (7:30), initial and continuing claims (8:30), and factory orders (10) cross the wires. STL's Bullard participates in a discussion on monetary policy and the economy (18:30). The Richmond Fed's two-day conference on "The Labor Market After the Great Recession" begins. 

·         Friday's data is the most anticipated of the week with the release of nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, trade balance (8:30), and ISM Services (10). The Richmond Fed's two-day conference on "The Labor Market After the Great Recession" concludes.

On other news.... 




Currencies 

Dollar Marches Higher: 10Y: -10/32..2.537%..USD/JPY: 109.43..EUR/USD: 1.2680

·         The Dollar Index drifts on session highs near 85.65 and remains on track to close at its best level since July 2010. Click here to see a daily Dollar Index chart.

·         The greenback has been bid throughout the U.S. session propelled by the upward revision to Q2 GDP (4.6%). 

·         EURUSD is -70 pips @ 1.2680 as trade presses 22-month lows. The single currency has been offered since the disappointing German GfK Consumer Climate reading crossed the wires, and would close at a two-year low with a finish below 1.2660. Eurozone data scheduled for Monday includes German preliminary CPI and Spanish Flash CPI.

·         GBPUSD is -75 pips @ 1.6240 as sellers remain in control for a third day. Sterling has been unable to mount a bid despite yesterday's comments from Bank of England Governor Mark Carney, which indicated a rate hike is drawing closer. That has caused many participants to turn their focus back towards the September lows in the 1.6050/1.6100 area. Britain's net lending to individuals is set to cross the wires Monday.

·         USDCHF is +45 pips @ .9510 as trade readies for its best close in 14 months. Action continues to remain in tight correlation with the euro with many looking for a retest of the July 2013 highs near .9750. 

·         USDJPY is +65 pips @ 109.40 as the pair flirts with six-year highs. Buyers have been in control throughout the day after Tokyo Core CPI missed estimates.

·         AUDUSD is -30 pips @ .8760 as trade flushes to a seven-month low. The hard currency has been under significant pressure over the past three weeks, tumbling more than 600 pips. The .8700/.8800 support band remains in focus. 

·         USDCAD is +40 pips @ 1.1155 as action nears six-month highs. A move through the 1.1250 area would produce levels last seen in July 2009.

Weekly Analysis




Technical Updates

Briefing's Commentaries


Week in Review: Stocks Endure Broad Retreat 

The stock market began the trading week on the defensive note with small-cap stocks pacing the retreat. The Russell 2000 (-1.4%) and Nasdaq Composite (-1.1%) displayed relative weakness, while the S&P 500 lost 0.8% with all ten sectors ending in the red. Global equities began showing some cracks overnight after China's Finance Minister Lou Jiwei poured cold water on hopes for new stimulus measures. Specifically, Mr. Lou said the government has no plans to change policies despite the recent string of disappointing data. A somewhat similar hawkish tone was conveyed by comments from Japan's Economy Minister Akira Amari, who said his country's government remains on track to implement another consumption tax hike.

Stocks finished the Tuesday session on the defensive after spending the entire day in a steady retreat. The S&P 500 (-0.6%) posted its third consecutive decline, while the small-cap Russell 2000 (-0.9%) slipped behind the broader market during afternoon action. Equity indices were pressured from the start following some overnight developments that weighed on sentiment. The market tried to overcome the early weakness, but could not stage a sustained rebound, which resulted in follow-through selling in the afternoon. Mixed PMI data from the eurozone combined with an announcement from the U.S. Treasury concerning tax inversion deals factored into the cautious action. Fittingly, the news caused early weakness in the health care sector (-0.6%), which has been at the center of recent M&A deals. The sector was able to cut its early loss in half.

The stock market ended the midweek session on an upbeat note despite enduring a shaky start to the day. The S&P 500 rose 0.8% with nine sectors posting gains, while the Nasdaq Composite (+1.0%) outperformed. Equity indices spent the initial 90 minutes of action near their flat lines with the S&P 500 briefly pressured to its 50-day moving average (1976.58) by the early weakness in the energy sector (+0.04%). The growth-sensitive group was down in excess of 1.0% in the early going, but charged into positive territory during afternoon action. Crude oil went along for the afternoon ride, climbing 1.6% to $93.03/bbl. The test of the 50-day moving average invited dip buyers into the fold, while the relative strength of high-beta areas like biotechnology and chipmakers emboldened their efforts. Furthermore, a well-timed report from the Wall Street Journal indicating China may replace the People's Bank of China Governor Zhou with someone more dovish provided an added measure of support.

Equities endured a broad-based retreat on Thursday that pressured the Nasdaq (-1.9%) and the S&P 500 (-1.6%) below their 50-day moving averages, while the Dow (-1.5%) notched a session low just above that mark. All ten sectors were encompassed in the slide with eight groups posting losses of 1.0% or more. The indices began the day with modest losses and continued heading lower through the first 90 minutes of the session. Interestingly, dip-buyers showed very little interest in getting involved, which resulted in new session lows during the afternoon. The reluctance to step into the fold was driven in part by the lack of notable leadership. To that point, all six cyclical sectors ended in-line or behind the S&P 500 with high-beta areas like biotechnology and chipmakers finishing among the laggards. The iShares Nasdaq Biotechnology ETF and the PHLX Semiconductor Index both lost 1.9%.

Next Week In View





Economic Commentaries

Economic Summary: Q2 GDP revised higher to 4.6%; Michigan Sentiment roughly in line with estimates
Economic Data Summary:

·         Second Quarter GDP Third Estimate 4.6% vs Briefing.com consensus of 4.6%; Q2 - Second est was 4.2%

·         Second Quarter GDP Deflator-- Third Estimate 2.1% vs Briefing.com consensus of 2.1%; Q2 - Second est was 2.1%

o    Surprisingly, the gains from the third revision did not come from the consumption sector. The second quarter Quarterly Services Survey, released earlier in the month by the Census Bureau, showed much stronger services spending growth than what was reported in the GDP data. The BEA, however, viewed the services data as a very slight upgrade in overall services spending growth (0.9% from 0.8%). As a result, overall consumer spending was left virtually unrevised at 2.5%.

·         September Michigan Sentiment - Final 84.6 vs Briefing.com consensus of 85.0; Sep Prelim was 84.6

o    The overall improvement in sentiment in September was a result of strengthening employment conditions, historically high stock prices, and slightly lower gasoline prices. Geopolitical problems, such as ISIS and the Ukraine/Russia conflict, have not had much of a negative impact on the consumer's outlook. 

Upcoming Economic Data:

·         August Personal Income due out Monday at 8:30 (Briefing.com consensus of ; July was 0.2%)

·         August Personal Spending due out Monday at 8:30 (Briefing.com consensus of ; July was -0.1%)

·         August PCE Prices - Core due out Monday at 8:30 (Briefing.com consensus of ; July was 0.1%)

·         August Pending Home Sales due out Monday at 10:00 (Briefing.com consensus of ; July was 3.3%)

Upcoming Fed/Treasury Events:

·         Chicago Fed President Charlie Evans (not a voting FOMC member, dovish) to speak tomorrow at 8:00

Jason's Commentaries

The massive volatility in the market is definitely killing a lot of people.Triple digits day being fuled by the following issues
1) Apple iPhone Bend
2) Alibaba IPO
3) Hong Kong Protest
4) US's assault on ISIS in Syria

These news came in just at the right time to gyrate the market in a massive way and I suppose the market is up for these gyration as Volumes were already pathetically low. It's essentially a market much easy to manipulate.

Volumes remain as low as before, with 621m shares traded on the NYSE and being led by Apple on Friday as it was being thrashed down on Thursday for iPhone bend news. Apple being such a huge component in the market makes it such a huge impact in the market. On top of that, we are having the employment data coming out this week. Hong Kong market was down massively and dragged the US futures down as well. By 5pm ET, the US futures were down 0.4% on average. This such things going on in the market, the volatilty is going to get worst. Embrace yourself =D

Market Call:sideways and volatile.

Date: 29 Sep 2014