10 Nov 2014 AMC - Market broke the highs once again ahead of Veteran's Day

10 Nov 2014 AMC - Market broke the highs once again ahead of Veteran's Day

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.7%

·         Germany's DAX: + 0.7%

·         France's CAC: + 0.8%

·         Spain's IBEX: + 1.5%

·         Portugal's PSI: + 1.9%

·         Italy's MIB Index: + 0.9%

·         Irish Ovrl Index: -0.1%

·         Greece ASE General Index: -1.1%

Before Market Opens 

S&P futures vs fair value: -0.20. Nasdaq futures vs fair value: +4.00.
The S&P 500 futures trade in-line with fair value.

Asian markets started the week on a mostly higher note. Equities in China (+2.3%) and Hong Kong (+0.8%) rallied after it was confirmed that the Shanghai-Hong Kong exchange link will begin operating on November 17. 

·         In economic data: 

o    China's trade surplus expanded to $45.41 billion from $31.00 billion (expected surplus of $42.00 billion) as imports rose 4.6% year-over-year (consensus 5.5%; previous 7.0%) and exports increased 11.6% (expected 10.6%; prior 15.3%). Separately, PPI fell 2.2% year-over-year (expected -2.0%; last -1.8%) and CPI was unchanged month-over-month (consensus 0.1%; prior 0.5%) while the year-over-year reading rose 1.6%, as expected 

o    Australia's Home Loans fell 0.7% month-over-month (consensus -0.3%; prior -0.9%) 

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·         Japan's Nikkei lost 0.6% after spending the bulk of the session in a narrow range near its low. Exporters struggled with Pioneer falling 7.5% and Olympus surrendering 1.4%.

·         Hong Kong's Hang Seng slumped from highs into the close, but still ended higher by 0.8%. Hong Kong Exchanges led with a solid gain of 4.5%. Property names underperformed as China Resources Land and China Overseas Land fell 4.1% and 0.9%, respectively. 

·         China's Shanghai Composite spiked 2.3%, finishing on its high. Growth-sensitive names led with Luizhou Iron & Steel, China State Construction, and Dalian Port surging the limit, 10.0%. 

·         India's Sensex settled just above its flat line. Tobacco name ITC finished in the lead, up 4.5%. Axis Bank and Hindalco Industries lagged, falling 1.8% and 2.6%, respectively.

Major European indices trade mostly higher with Great Britain's FTSE (+0.5%) pacing the advance. Over the weekend, more than 80.0% voted in favor of Catalonia seceding from Spain in a symbolic vote after the country's Constitutional Court blocked the outcome. In other news of note, reports out of Italy suggest 89-year old President Giorgio Napolitano may step down at year's end due to age-related issues. 

·         Economic data was limited: 

o    Eurozone Sentix Investor Confidence ticked up to -11.9 from -13.7 (expected -6.9) 

o    Italy's Industrial Production fell 0.9% month-over-month (consensus 0.2%; prior 0.2%) while the year-over-year reading declined 2.9% (last -0.7%) 

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·         Germany's DAX is higher by 0.2% with Lanxess and K+S in the lead. The two producers of basic materials are both up near 2.2%. Financials lag with Commerzbank down 1.5% and Deutsche Bank lower by 1.2%. 

·         In France, the CAC has added 0.2% amid strength in growth-sensitive names. Cie de St-Gobain, Technip, and Solvay are up between 1.2% and 1.8%. Financials also lag with BNP Paribas, Credit Agricole, and Societe Generale down between 0.8% and 1.6%. 

·         Great Britain's FTSE leads with a gain of 0.5%. Staple stocks outperform with Marks & Spencer Group, Tesco, and WM Morrison Supermarkets holding gains between 1.9% and 3.5%. 

·         Italy's MIB is lower by 0.2% amid weakness in financials. Banca di Milano Scarl, UBI Banca, and Banco Popolare have given up between 2.5% and 3.8%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 19 (+0.41%) at 4652, the S&P 500 closed up 6 (+0.31%) at 2038, and the Dow closed up 40 (+0.23%) at 17614. Action came on below average volume (NYSE 699 mln vs. avg. of 778; NASDAQ 1702 mln vs. avg. of 1865), with advancers outpacing decliners (NYSE 1794/1364, NASDAQ 1677/1051) and new highs outpacing new lows(NYSE 216/28, NASDAQ 148/45).

Relative Strength: 
Biotechnology-XBI +2.64%, Biotechnology-IBB +1.74%, Cocoa-NIB +1.6%, Russia-RSX +1.54%, New Zealand-ENZL +1.44%, Social Media-SOCL +1.36%, Taiwan-EWT +1.35%, Transportation-IYT +1.34%, Spain-EWP +1.07%, Hong Kong-EWH +1.04%.

Relative Weakness: 
Junior Gold Miners-GDXJ -7.14%, Silver Miners-SIL -5.34%, Volatility-VXX -3.93%, Metals and Mining-XME -2.93%, Cotton-BAL -2.83%, Greece-GREK -1.66%, Peru-EPU -1.44%, Indonesia-IDX -1.25%, Vietnam-VNM -1.12%, Latin America 40-ILF -1.1%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Small Caps Lead Stocks Higher
The stock market began the new trading week on an unassuming note with the key indices registering modest gains. The S&P 500 added 0.3% while Russell 2000 (+0.5%) outperformed.

Equity indices began the trading near their flat lines after the overnight session did little to change investor sentiment. China's Shanghai Composite stood out, soaring 2.3%, after it was confirmed that the Shanghai-Hong Kong exchange link will begin operating on November 17.

Domestically, the S&P 500 resisted some mild selling efforts during the opening hour, but was able to advance alongside the biotechnology group. The iShares Nasdaq Biotechnology ETF (IBB 295.20, +5.06) gained 1.7% while the health care sector (+1.0%) settled in the lead despite starting among the laggards. Dow component Merck (MRK 58.81, -0.53) lost 0.9% after reporting disappointing trail data, but that had little impact on the sector.

Like health care, the remaining countercyclical groups started in the red, but ended with gains. The consumer staples sector added 0.4% with Dean Foods (DF 16.40, +1.98) surging 13.7% after beating bottom-line estimates and guiding Q4 earnings above consensus.

Elsewhere, the six cyclical sectors ended mixed with respect to the market. Technology (+0.3%) struggled at the start, but was able to end in-line with the S&P 500 amid strength in chipmaker names. The PHLX Semiconductor Index settled higher by 0.8% with just four names registering losses.

Similarly, industrials (+0.5%) and financials (+0.5%) finished ahead of the market while consumer discretionary (-0.1%) and energy (-0.8%) spent the bulk of the session in the red.

The discretionary sector was sent to lows during morning action after President Obama said the Federal Communications Commission should regulate the internet like a utility. The news pressured internet service providers with Charter Communications (CHTR 146.62, -9.75), Comcast (CMCSA 52.95, -2.20), and Time Warner Cable (TWC 136.50, -7.10) losing between 4.0% and 6.2%.

Meanwhile, homebuilders prevented the sector from registering additional losses. The iShares Dow Jones US Home Construction ETF (ITB 24.79, +0.24) rose 1.0% with Toll Brothers (TOL 32.96, +0.74) jumping 2.3% after issuing strong guidance for the fourth quarter.

For its part, the energy sector started in the lead, but slid to the bottom of the leaderboard with crude oil adding pressure. The energy component fell 1.4% to $77.26/bbl. Greenback strength presented a headwind with the Dollar Index (87.81, +0.16) erasing its overnight loss to end higher by 0.2%.

Treasuries retreated throughout the session, sending the 10-yr yield higher by six basis points to 2.36%.

Participation was in-line with long-term averages as 700 million shares changed hands at the NYSE floor.

Investors did not receive any economic data of note and tomorrow's session will also be quiet on the economic front. Also of note, the bond market will be closed for Veterans Day.

·         Nasdaq Composite +11.4% YTD 

·         S&P 500 +10.3% YTD 

·         Dow Jones Industrial Average +6.3% YTD 

·         Russell 2000 +1.4% YTD

Commodities

Closing Commodities: Crude oil, natural gas, gold, silver and copper all remain trading near today's lows

·         Oil remains at depressed levels, falling overnight on concerns that OPEC is not in any hurry to cut output. WTI hit its HoD of 79.85 in GLOBEX trading overnight, and then seems to have found a bottom for the session at of 77.31.

·         In electronic trade, Dec crude oil remains near its LoD

·         Natural gas gapped higher upon GLOBEX session open on Sunday hitting a high of 4.544 before trending downward. Weakness is due to the developing cold in gas consuming regions due to Typhoon Nuri, rather than a sustained change in weather patterns.

·         The dollar index continues to sit near its HoD (now +0.2%), which is helping weigh on commodities

·         Crude oil, natural gas, gold, silver and copper all remain trading near today's lows.

·         Dec gold lost -0.9% to $1159.30/oz, while Dec silver fell -0.4% to $15.65/oz

Metals price action

  Gold fell $10.50 (-0.9%) to $1159.30/oz

·         Gold has trended lower since its GLOBEX open on Sunday afternoon, with another leg lower coming around 11. Gold continues to trade around an important an level around 1170. 

  Silver fell 6.4 cents (-0.4%) to $15.65/oz

·         Silver remains at depressed levels, still trading at 4.5 year lows. Like gold, it too has trended lower since its open on Sunday afternoon, reaching a LoD 15.53 just before the lunch hour. 

  Copper fell 1.75 cents (-0.6%) to $3.021

Agricultural price action

·         Corn rose 2 cents (+0.5%) to $3.695/bushel

·         Wheat rose 4.5 cents (+0.9%) to $5.19/bushel

·         Soyrbeans fell 12.25 cents (-1.25%) to $10.245/bushel

·         Ethanol rose 4 cents (+2.1%) to $1.92/gallon

·         Sugar #11 fell 0.3% to 15.64 cents/lb

Energy price action

  Crude oil fell $1.38 (-1.4%) to $77.26/barrel

·         Oil remains at depressed levels, falling overnight on concerns that OPEC is not in any hurry to cut output. WTI hit its HoD of 79.85 in GLOBEX trading overnight, and then seems to have found a bottom for the session at of 77.31. Futures have gone back and tested that level two more times, and has now settled right in that range.

  Natural gas fell 13.6 cents (-3%) to $4.274/MMBtu

·         Natural gas gapped higher upon GLOBEX session open on Sunday hitting a high of 4.544 before trending downward. One analyst believes weakness is due to the developing cold in gas consuming regions due to Typhoon Nuri, rather than a sustained change in weather patterns. Futures settled near the LoD of 4.246. 

  Heating oil fell 3 cents (-1.2%) to $2.469/gallon

  RBOB fell 3.1 cents (-1.5%) to $2.104/gallon 



Treasuries

Overnight Gains Give Way to Steady Selling Pressure

·         The Treasury market performed on Monday a lot like the Chicago Bears performed on Sunday night. That is, they looked pretty good during pre-game warm ups, but when the real action started, they got clobbered. 

·         The trading action favored sellers from 6:00 a.m. ET onward and was as lopsided as Aaron Rodgers' six, first-half passing touchdowns 

·         There wasn't a specific news catalyst for the reversal of early fortune, yet it had the semblance of being an exit trade as every instrument from the 2-yr note to the 30-yr bond saw their highs for the day around 6:00 a.m. ET and remained under steady selling pressure the rest of the session, finishing at their lows for the day 

o    2- yr note saw a six basis point swing in yield from 0.48% to 0.54% 

o    5-yr note swung from 1.55% to 1.64% 

o    10-yr note pivoted from 2.28% to 2.36% 

o    30-yr bond moved from 3.01% to 3.09% 

·         Selling activity picked up for a variety of reasons 

o    The lack of follow-through from Friday's post-employment report rally 

o    The 10-yr note could not maintain a posture below the 2.30% level 

o    Weak response to seemingly supportive macro factors (China CPI near 5-yr low; China PPI -2.2% year-over-year; falling oil prices; and Moody's saying it does not expect much change in global GDP growth the next two years) 

·         A relatively weak $26 billion 3-yr note auction didn't help matters 

o    High yield of 0.998% 

o    Bid-to-cover ratio 3.18x (prior 3.42x; 12-auction average of 3.34x) 

o    Indirect bidders 37.7% (prior 35.5%; 12-auction average of 33.0%) 

·         Selling activity in commodities space picked up as the dollar rebounded from early weakness 

o    Crude futures pushed $80/bbl overnight, but were trading at $77.38/bbl (-1.6%) as of this writing 

o    Gold futures held above $1170/troy ounce overnight, but were trading at $1149.00/troy ounce (-1.8%) as of this writing 

·         There was no economic data out of the U.S. today 

·         Boston Fed President Rosengren (a non-FOMC voter) gives 5:10 p.m. ET speech tonight on "Implications of Low Inflation Rates for Monetary Policy"

·         **Note: The Treasury market is closed on Tuesday, November 11, in observance of Veterans Day

On other news.... 

Color on USDA WASDE report; corn now +1.8% at $3.74/bushel, wheat +1% at $5.20/bu, soybeans +0.4% at $10.45/bu (All Dec contracts)

·         Global 2014/15 wheat supplies are lowered 1.1 mln tons with decreased production offsetting higher beginning stocks.

·         U.S. wheat supplies for 2014/15 are decreased 10 mln bushels based on updated production estimates for the states resurveyed following the Sept 30 Small Grains report.

·         U.S. feed grain production for 2014/15 is lowered this month as lower corn, barley, and oats output more than offsets a small increase for sorghum.

·         Corn production is forecast 68 mln bushels lower, but still a record at 14,407 mln bushels.

o    The national average corn yield is reduced 0.8 bushels per acre to 173.4 bushels. U.S. corn use for 2014/15 is projected slightly higher with a 5-mln-bushel increase in expected food, seed, and industrialuse.

·         Corn used in ethanol production is projected 25 mln bushels higher with a reduction in expected sorghum use for ethanol and the strong pace of weekly ethanol production reported so far for the marketing year.

o    Mostly offsetting this increase is a 20- mln-bushel reduction in other food and industrial use.

·         Global oilseed production for 2014/15 is projected at a record 528.9 mln tons, up 0.5 mln from last month. Soybean production is forecast at 3,958 mln bushels, up 31 mln on higher yields.

·         The soybean yield is projected at a record 47.5 bushels per acre, up 0.4 bushels mainly on gains for Iowa and South Dakota. S

Currencies

Currency Commentary: DXY Climbs in Dull Session

·         The Dollar Index has been drifting higher over the course of a quiet day. The DXY slipped to 87.25 in early trade but has recovered most of its losses to push back to 87.80. As a reminder, U.S. Bond markets are closed tomorrow in observance of Veteran's Day. 

·         The euro has been trending lower but so far has been able to hold the 1.24 level. The single currency rallied early to push to 1.25 but was rejected at that level and has been on the decline for most of the day. The pound is testing LoD as we head into the close of U.S. equities trade. 

·         Sterling has been showing signs of holding 1.58 the past two sessions but has been weaker over the course of the day after getting rejected at 1.59. 

·         The yen has been treading just above the 115 level over the course of the day. While it has held the 115 level it has shown little signs of being able to move of that area. As we head towards the close yen is sliding towards a retest of the session lows (BONDX, FOREX).

Next Week In View




Economic Commentaries

Economic Summary: No US econ data today; Rosengren to speak tonight at 17:10

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -2.6%)

·         September Wholesale Inventories due out Wednesday at 10:00 (Briefing.com consensus of 0.2%; August was 0.7%)

Upcoming Fed/Treasury Events:

·         Boston Fed President Eric Rosengren (voting FOMC member) to speak tonight at 17:10

·         The Treasury is expected to auction off new debt this week.

o    $26 bln 3 year Treasury Note Auction  -- Monday

o    $24 bln 10 year Treasury Note Auction -- Tuesday

o    $16 bln 30 Year Treasury Bond Auction -- Wednesday

Other International Events of Interest

·         China's trade surplus expanded to $45.41 billion from $31.00 billion (expected surplus of $42.00 billion) as imports rose 4.6% year-over-year (consensus 5.5%; previous 7.0%) and exports increased 11.6% (expected 10.6%; prior 15.3%). Separately, PPI fell 2.2% year-over-year (expected -2.0%; last -1.8%) and CPI was unchanged month-over-month (consensus 0.1%; prior 0.5%) while the year-over-year reading rose 1.6%, as expected 

Jason's Commentaries

At such a session where the countercyclical are leading, like healthcare and utilities, while the internals are pointing to a divergent side, it would seem to me that the rally might not be really sustainable. However, with the volumes looking healthy, the participation is likely to be back in the market. VIX hit 12.67 last night as Healthcare led with 1.01% gain. There are not much economic reports coming out this week, so I believe that the market is likely to lead in a technical fashion

Note: Treasuries market are closed in observant of Veteran's Day; However stock market is still open as usual.








Market Call: FLAT to upside

Date: 11 Nov 2014