14 Nov 2014 AMC - Market ended week in consolidation.

14 Nov 2014 AMC - Market ended week in consolidation.

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: + 0.1%

·         France's CAC: + 0.4%

·         Spain's IBEX: + 0.1%

·         Portugal's PSI: + 0.0%

·         Italy's MIB Index: + 1.0%

·         Irish Ovrl Index: -0.6%

·         Greece ASE General Index: + 0.8%

Before Market Opens 

S&P futures vs fair value: -1.10. Nasdaq futures vs fair value: -4.30.
S&P futures are little changed versus fair value.

Rumors of early elections and a possible delay in the consumption tax hike dropped the yen to 116.50, its weakest since October 2010. 

·         In economic data:

o    China's new loans (CNY548 bln actual v. CNY615 bln expected) and M2 money supply (12.6% YoY actual v. 12.9% YoY expected) both fell short of expectations. 

o    Hong Kong's GDP (2.7% YoY actual v. 2.0% YoY expected) outpaced estimates. 

o    India's WPI Inflation cooled to 1.77% YoY (2.38% YoY previous), its lowest since 2009. 

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·         Japan's Nikkei (+0.6%) gained for a fourth straight day and finished at its best level in seven years. The weaker yen benefited exporters like Canon and Toyota Motor, which added 1.1% and 0.6%, respectively. 

·         Hong Kong's Hang Seng (+0.3%) finished at a two-month high as shares gained for a fifth day. Heavyweight Tencent Holdings provided support, adding 1.9%. 

·         China's Shanghai Composite (-0.3%) saw some light selling during the final day of trade before the connector program launch with Hong Kong.

Markets drift little changed across Europe. 

·         Economic data was heavy:

o    Eurozone Flash GDP (0.2% QoQ actual v. 0.1% QoQ expected) outpaced estimates while Final CPI (0.4%) was in-line.

o    Germany's Preliminary GDP (0.1% QoQ) matched estimates.

o    France's Preliminary GDP (0.3% QoQ actual v. 0.1% expected) beat and Preliminary Nonfarm Payrolls (-0.2% QoQ actual v. 0.2% QoQ expected) missed.

o    Britain's construction output (1.8% MoM actual v. 3.7% MoM expected) data was the latest to miss estimates. 

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·         Germany's DAX (-0.1%) holds small losses. Steelmaker Salzgitter is higher by 9.8% after receiving a couple tier 1 upgrades.

·         France's CAC (+0.2%) clings to small gains. Financials are bid with BNP Paribas and Societe Generale higher by 1.3% and 1.2%, respectively.

·         Britain's FTSE (-0.1%) is slightly in the red. Miners lead to the downside with Lonmin off 3.2%. 

U.S. Equities

·         Equity futures point to little change at the open

·         The DJIA and S&P 500 linger near all-time highs while the Nasdaq sits near its best levels in 15 years

·         The VIX (13.79) holds near two-month lows

·         Retail Sales (0.3% actual v. 0.3% expected)

·         Retail Sales ex-auto (0.3% actual v. 0.2% expected)

·         Export Prices ex-ag (-0.9%)

·         Import Prices ex-oil (-0.2%)

o    S&P Futures +2 @ 2036

o    Dow Futures +12 @ 17,608

o    Nasdaq Futures +4 @ 4209

Asia

·         Markets gained across most of Asia

·         Rumors of early elections and a possible delay in the consumption tax hike dropped the yen to 116.50, its weakest since October 2007 

·         China's new loans (CNY548 bln actual v. CNY615 bln expected) and M2 money supply (12.6% YoY actual v. 12.9% YoY expected) both fell short of expectations

·         Hong Kong's GDP (2.7% YoY actual v. 2.0% YoY expected) outpaced estimates

·         India's WPI Inflation cooled to 1.77% YoY (2.38% YoY previous), its lowest since 2009

·         Japan's Nikkei (+0.6%) gained for a fourth straight day and finished at its best level in seven years

·         Hong Kong's Hang Seng (+0.3%) finished at a two-month high as shares gained for a fifth day

·         China's Shanghai Composite (-0.3%) saw some light selling during the final day of trade before the connector program launch with Hong Kong

·         India's Sensex (+0.4%) closed at an all-time high

·         Australia's ASX (+0.2%) snapped its four-day skid as action held the 200 dma

Market Internals

Market Internals -Technical-
The Nasdaq closed up 8 (+0.18%) at 4689, the S&P 500 closed up 0.5 (+0.02%) at 2040, and the Dow closed down 18 (-0.1%) at 17635. Action came on below average volume (NYSE 689 mln vs. avg. of 784; NASDAQ 1617 mln vs. avg. of 1863), with mixed advancers/decliners (NYSE 1650/1497, NASDAQ 1312/1394) and new highs outpacing new lows(NYSE 134/51, NASDAQ 69/59).

Relative Strength: 
Junior Gold Miners-GDXJ +6.81%, Silver Miners-SIL +6.08%, South Africa-EZA +3.26%, Metals and Mining-XME +2.63%, Poland-EPOL +2.85%, Gasoline-UGA +2.43%, Oil and Gas Exploration-XOP +2.4%, Greece-GREK +2.22%, Eastern Europe-ESR +2.21%, Middle East and Africa-GAF +2.08%.

Relative Weakness: 
Biotechnology-XBI -2%, Biotechnology-IBB -1.95%, Cocoa-NIB -1.32%, Grains-JJG -1.21%, Sugar-SGG -1.19%, South Korea-EWY -0.81%, Egypt-EGPT -0.56%, Columbia Index-GXG -0.49%, Latin America 40-ILF -0.46%, Japanese Yen-FXY -0.44%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Summary: Another Mixed Day
The stock market followed the script on Friday of making a big statement by doing very little. The major indices held to tight trading ranges and didn't venture that far from where they began the session.

The market's meandering disposition was a function of offsetting considerations that it is due for a pullback after its big run, yet in the midst of a typically favorable period that is causing some angst about the possibility of missing out on further gains.

Accordingly, it was a bit of a chopfest as far as Friday's trading action was concerned, but true to recent form, a closing burst of buying interest materialized that helped the S&P 500 eke out a positive finish.

The energy (+0.8%), technology (+0.6%), and consumer discretionary (+0.4%) sectors were the heavily-weighted sectors showing gains while the health care (-0.8%), consumer staples (-0.6%), and financial (-0.4%) sectors were the heavily-weighted sectors showing offsetting losses. The industrials sector finished up fractionally, the telecom services sector added 0.6%, the materials sector advanced 0.3%, and the utilities sector dipped 0.4%.

Much of the more scintillating trading action took place away from the stock market. To that end, the Treasury market experienced a seesaw day that featured early weakness and later strength. The yield on the 10-yr note swung from a high of 2.38% to a low of 2.32%, where it settled its technically-driven session.

The commodities arena was a focal point throughout the day, primarily because oil prices bounced back to the doorstep of $76.00/bbl ($75.98) after dropping below $73.50 in overnight action. The turnaround was helped along presumably by some short-covering activity, yet it proved instrumental in driving the outperformance of the energy sector. On a related note, it was reported that the House of Representatives passed a bill allowing for the construction of the Keystone XL oil pipeline.

The metals, in turn, saw some big gains with gold jumping 2.5% to $1191.00/troy ounce, silver popping 4.5% to $16.33/troy ounce, and copper gaining 1.8% to $3.05/lbs.

Those recovery efforts helped underpin the S&P 500 materials sector, which also benefited from better-than-feared GDP data out of the eurozone, a 0.3% increase in retail sales in the U.S. in October, and the highest reading for consumer sentiment in November (89.4), as measured by the University of Michigan, since July 2007.

Within the stock market, the health care sector was the worst-performing area on Friday thanks in large part to profit-taking efforts in the biotech stocks. Celgene (CELG 104.01, -3.42), Biogen-Idec (BIIB 305.43, -12.55), and Amgen (AMGN 157.68, -3.17) all declined between 2.0% and 4.0%.

There wasn't a single sector, though, that finished up or down at least 1.0%, which fit the template of being a mixed day of trading. Similarly, 16 of the Dow's components ended higher while 14 ended lower. IBM (IBM 164.16, +1.37) led the winners while Visa (V 248.84, -2.08) paced the decliners.

Elsewhere, the Russell 2000 finished down 0.1% while the S&P Midcap 400 Index suffered a fractional loss. 

·         DJIA +6.4% YTD

·         Nasdaq Composite +12.3% YTD

·         S&P 500 +10.4% YTD

·         Russell 2000 +0.8% YTD

Commodities

Closing Commodities: Commodities Rally, Especially Metals And Crude; Crude Near $76

·         In afternoon trading, WTI crude oil, gold and silver all hits new highs for the day as dollar index remained near LoD

·         In electronic trade, this continues to be the case

·         Dec crude oil closed the day +2.4% at $75.90/barrel, but temporarily rose above $76

·         Dec natural gas rose modestly, ending +1.3% at $4.02/MMBtu

·         Dec gold rally big, closing 2.1% higher at $1186.20/oz, while Dec silver +2.1% at $16.28/oz

·         Dec copper gained +1.7% at $3.05/lb

Metals price action

  Gold rose $24.50 (+2.1%) to $1186.20/oz

·         Gold is breaking out from recent lows, hitting a HoD of 1192.9 on volume. 

  Silver rose 6.5 cents (+2.1%) to $16.28/oz

·         Silver is also breaking out on volume reaching a HoD of 16.38, although it remains trading at 4.5 year lows

  Copper rose 5.2 cents (+1.7) to $3.0465/MMBtu

Agricultural price action

·         Corn fell 4 cents to $3.82/bushel

·         Wheat rose 7 cents $5.61/bushel

·         Soybeans fell 35 cents to $10.20/bushel

·         Ethanol fell 1 cent to $1.83/gallon

·         Sugar #11 was down 0.11 to 15.90 cents/lb

Energy price action; Big rally in WTI crude oil, in electronic trade, crude rose above $76/barrel

·         Crude oil rose $1.75 (+2.4%) to $75.90/barrel

·         Natural gas rose 5 cents (+1.3%) to $4.02/MMBtu

·         Heating oil fell 6 cents (+2.5%) to 2.42/gallon

·         RBOB was rose 2 cents (or 2%) to $2.04/gallon

Treasuries

Yields Range Bound Amid Choppy Trade: 10Y: +06/32..2.320%..USD/JPY: 116.28..EUR/USD: 1.2523
The Week in Review

·         Treasuries endured a relatively quiet holiday-shortened week. Click here to see an intraweek yields chart.

·         Macro data pointed to a continued weakening of the global economy as China's industrial production and new loans missed and the Bank of England warned inflation was likely to dip below 1% by mid-2015, pushing back rate hike expectations. Possible early elections and a potential delay to the consumption tax hike in Japan provided further uncertainty.

·         A choppy trade in Treasuries kept yields in tight ranges as they tested resistance, but were unable to breakout. 

·         Economic data was mixed. 

·         Wholesale (0.3% actual v. 0.2% expected) and business (0.3% actual v. 0.2% expected) inventories posted slightly larger than expected builds while Michigan Sentiment (89.4 actual v. 87.5 expected) outpaced estimates. Retail sales (0.3%) matched expectations and both initial (290K actual v. 280K expected) and continuing (2392K actual v. 2353K expected) claims disappointed.

·         This week's auctions were disappointing. 

·         Monday's $26B 3Y note auction drew 0.998% and a weak 3.18x bid/cover. A solid showing from indirect bids (37.7%) helped offset the weak direct (15.1%) demand. Primary dealers took in 47.2% of the supply.  

·         Wednesday's $24B 10Y note auction drew 2.365% and a light 2.52x bid/cover. Indirect (44.7%) and direct (13.4%) bids missed their 12-auction averages, but primary dealers ended up with just 41.9% of the supply. 

·         Thursday's $16 bln 30Y bond auction was tepid, drawing 3.092% (WI 3.078%) and a weak 2.29x bid/cover. Indirect (43.8%) and direct (13.8%) bids were short of their 12-auction averages, but primary dealers were left with just 42.4% of the supply.  

·         Up front, the 2Y ticked up +1bp to 0.512%. The yield spent the entire week between 0.500%/0.550% as action tested resistance dating back to the beginning of October. 

·         In the belly, the 5Y added +2bps to 1.604%. Action flirted with 1.650% resistance, but the 50, 100, and 200 dma offered a headwind. 

·         The 10Y gained +2bps to 2.320%. The benchmark yield has spent the past two weeks locked between 2.300% and 2.400%. 

·         Light selling at the long end caused the 30Y to edge up +1bp to 3.042%. A torturous trade over the past three weeks has kept action between 3.000% and 3.100%. 

·         Little change along the yield curve saw the 2-10-yr spread hold @ 181bps.    

The Week Ahead 

·         Data kicks off for the week on Monday as Empire Manufacturing (8:30), industrial production, and capacity utilization (9:15) are due out. Chicago's Evans makes opening remarks at the "Annual Agriculture Conference: Farm Income's Impact on the Midwest" (9). 

·         Tuesday will see PPI (8:30), NAHB Housing Market Index (10), and Net Long-Term TIC Flows (16) cross the wires. Minny's Kocherlakota discusses "Clarifying the Objectives of Monetary Policy" (13:30). 

·         Wednesday's slate includes the weekly MBA Mortgage Index (7), housing starts, building permits (8:30), and the FOMC minutes (14).

·         Data concludes for the week on Thursday with initial and continuing claims, CPI (8:30), existing home sales, Philly Fed, and leading indicators (10). Fed Governor Tarullo speaks at the ClearingHouse Annual Conference Kickoff Breakfast (7:45). SF's Williams will be in Seoul, Korea to take part in a panel at the "Macroeconomic Rebalancing for Sustainable Growth Conference." 

·         There is no data scheduled for Friday.

On other news.... 




Currencies 

Dollar Fails to Hold 88.00: 10Y: +05/32..2.322%..USD/JPY: 116.12..EUR/USD: 1.2541

·         The Dollar Index dove into the red around the lunchtime hour, and now holds small losses near 87.50. Click here to see a daily Dollar Index chart.

·         Early strength had the greenback testing the 88.20 level and on track for its best close in since October 2010. 

·         EURUSD is +50 pips @ 1.2525 as action holds near session highs. The single currency tested the 1.2400 level in response to this morning's better than expected U.S. economic data, but it was able to hold as buyers defended key support. A move back above 1.2600 would be welcoming to the bull case. On Monday, Germany's Bundesbank will issue its monthly report and ECB President Mario Draghi will speak in Brussels. 

·         GBPUSD is -25 pips @ 1.5685 as trade looks likely to close at a fresh 14-month low. Sterling saw early selling after construction output missed estimates and tumbled to a low of 1.5595 following the strong U.S. data. However, buying over the remainder of the session has wiped away most of those losses. The 1.5900/1.6000 area is setting up as an important level. 

·         USDCHF is -45 pips @ .9585 as trade presses to a two-week low. EURCHF is garnering some attention as it holds @ 1.2010, just above the Swiss National Bank's 1.2000 floor.

·         USDJPY is +40 pips @ 116.15 as action readies for its best close in seven years. Trade has been whipped around in recent days amid confusion over the possibility of early elections and a delay to the consumption tax hike. Japan's Q3 preliminary GDP is due out Sunday evening. 

·         AUDUSD is +30 pips @ .8750 after reversing its early losses. The hard currency saw overnight selling after China's new loans missed estimates, but has seen a steady bid over the course of U.S. trade. Today's advance has the Aussie higher for the fifth time in six days and testing resistance in the .8750/.8800 area. Australia's new motor vehicle sales will be released Sunday night.

·         USDCAD is -90 pips @ 1.1275 as trade flushes to a two-week low. A move into meaningful support and the 50 dma near 1.1200 cannot be ruled out. Canada's foreign securities purchases will cross the wires on Monday.

Weekly Analysis




Technical Updates

Briefing's Commentaries

Next Week In View





Economic Commentaries

Economic Summary: Retail sales solid, but not spectacular; the increase in Michigan Sentiment wasn't much of a surprise, while the upward surprise in business inventories should result in a positive revision to 3Q GDP growth
Economic summary: Economic Data Summary:

·         October Retail Sales 0.3% vs Briefing.com consensus of 0.3%; September was -0.3%

·         October Retail Sales Ex-Auto 0.3% vs Briefing.com consensus of 0.2%; September was revised to 0.0% from -0.2%

o    Overall, the report was solid but not spectacular. According to the employment data, aggregate earnings increased 0.6% in September. The lack of matching sales growth suggests another increase in the savings rate. 

·         October Export Prices Ex-Ag -0.9%; September was -0.2%

·         October Import Prices Ex-Oil -0.2%; September was -0.1%

·         November Michigan Sentiment Prelim 89.4 vs Briefing.com consensus of 87.5; October was 86.9

o    Sentiment trends follow changes in equity prices, employment, and gasoline prices. Thus, the sharp increase in sentiment in November wasn't much of a surprise since the stock market is running at record highs, layoff activities are below pre-recession levels, and gasoline prices have fallen to their lowest point in four years.

·         September Business Inventories 0.3% vs Briefing.com consensus of 0.2%; August was revised to 0.1% from 0.2%

o    The BEA assumed business inventories were flat in September. The upward surprise should result in a positive revision to third quarter GDP growth

Fed/Treasury Events Summary:

·         Fed's Bullard spoke at 9:10 ET

·         Fed's Powell will speak at 16:00 ET

Upcoming Economic Data:

·         Empire Manufacturing due out Monday at 8:30 ET (October was 6.2)

·         Industrial Production due out Monday at 9:15 ET (September was 1.0%)

·         October Capacity Utilization due out Monday at 9:15 ET (September was 79.3%)

Jason's Commentaries

Seems like i was right about the volatility in the market right now. The market has been sideways for a few sessions already, ending last week in a consolidation. Right now, all it takes one catalyst to push the market down or up through the consolidation. Meanwhile, based on all the economic news coming this week is too weak to drive the market. It is likely to be a technical indicator or other global economic indicator. Japan has officially slipped into a recession and that dragged the Nikkei down quite a bit today. That caused the US futures to drop significantly in the Asia hours. Right now, the US futures are gaining strength and we're likely to end flat again today.

Market Call: FLAT to downside

Date: 17 Nov 2014