SPX – A Week In Review

While the market takes a tumble the past week, breaking SPX out of the mid-term channel, the major uptrend is still intact. With that said, lets look at the few levels that would invoke a response and more importantly how we can trade this market moving forward.

With a nice base formed in Apr 2017, SPX embarked from an uptrend from 2330 to the higher of 2480 in Aug 2017. We put on a fibonacci retracement for this rally, and thus able to identify the few key fibonacci  levels namely:

78.6% – 2450

61.8% – 2424

50% – 2410

As the chart shows, SPX has already broke out of the mid-term up channel and entered a tighter short term down channel. The bottom of the short term channel coincided with the 61.8% level which translate to SPX possibly stopping the slide and bounce up from this level. Further downside for SPX remains at 2405 level should the slide continues in the coming week.

Price action lately seems to suggest the bears are in control lately; marked by the ferocious bear candles and lack of bullish fight back in the recent cluster of price action.

I am more inclined for a bounce towards 2450 level (both a resistance and 78.6% fib retracement level) in the coming week, then prices continue to test 2425 and then 2410 towards the end of the coming week or early next week.

Jackson Hole remains on Fri/Sat which is going to keep the market in suspension as to what Yellen or other key officials will say. It’s unlikely for SPX to continue sliding in a fiercer fashion early week unless there are external catalysts such as escalated row with North Korea.

In summary, after such a “fierce” session last Thurs, I am expecting SPX to bounce at least to the middle of the channel (2440-2450) and then bearish pressure to continue towards the end of the week.

Trade safe!

Weekly Market Analysis: Week 39 Recap / Week 40 Preview

Weekly Recap

Dow Jones Industrial Average

CNN - DJI

Standard & Poor’s 500

CNN - SPX

Nasdaq Composite

CNN - NDX

The stock market began the new week on a cautious note. The S&P 500 lost 0.3%, but managed to erase more than half of its opening decline. Thanks to the rebound, the benchmark index reclaimed its 50-day moving average (1976.78) after slipping below that level in the morning. Equities slumped at the open amid a couple global developments that dampened the overall risk appetite. Continued student protests in Hong Kong and a potential response from China weighed on the Hang Seng index (-1.9%), while other regional indices held up relatively well with Japan’s Nikkei (+0.5%) and the Shanghai Composite (+0.4%) posting gains. Meanwhile in Europe, participants showed concerns about the Catalan independence referendum scheduled to take place on November 9. However, a twist was introduced to the story during the afternoon when the Spanish Constitutional Court announced it will block the independence vote.

On Tuesday, the market finished the third quarter on a defensive note with small caps leading the retreat. The S&P 500 shed 0.3% to narrow its Q3 gain to 0.6%, while the Russell 2000 (-1.5%) widened its quarterly loss to 7.9%. The retreat represented the second consecutive decline for the benchmark index, which registered a September loss of 1.6%. The S&P 500 displayed modest strength in the early going with help from influential sectors like technology (+0.2%), financials (-0.2%), and industrials (-0.1%), but slid from highs amid significant weakness in the two commodity-related sectors. Most notably, the energy space (-1.2%) widened its Q3 loss to 9.2% and was pressured by a 3.6% decline in crude oil, which fell to $91.16/bbl, registering a 13.6% loss for the quarter.

The stock market began October and the fourth quarter with a retreat. The major averages spent the day in a steady decline with the Nasdaq Composite leading the slide. The tech-heavy index lost 1.6%, while the S&P 500 (-1.3%) sliced through its 100-day moving average (1958) with nine sectors ending in the red. Equities were pressured from the start with a disappointing set of Manufacturing PMI figures from the eurozone weighing on sentiment. The region-wide reading slipped to 50.3 (expected 50.5) and was driven in part by Germany’s decline to 49.9 from 50.3 (consensus 50.3). Once the U.S. session got going, the key indices slumped amid early weakness in the industrial sector (-1.9%). In turn, the growth-sensitive group suffered from notable losses in airlines, stemming from concerns about the first case of Ebola in the United States. Delta Air Lines (DAL) and Southwest Airlines (LUV) both lost near 3.5%, while the Dow Jones Transportation Average tumbled 2.5%.

The major averages ended the Thursday session on a flat note despite showing broad-based weakness in the early going. The S&P 500 ended unchanged with four sectors in the green. Equity indices started the day near their flat lines, but commenced their retreat once European Central Bank President Mario Draghi concluded his press conference without providing much detail about the central bank’s ABS purchases. Furthermore, Mr. Draghi did not hint at plans for sovereign bond purchases, which had been the subject of conversation in recent weeks. To that point, diminished prospects of a full-scale QE program weighed on markets in Italy (-3.9%) and Spain (-3.1%) with bank shares leading the retreat. As for the U.S., equities slumped across the board in the morning, but staged an impressive reversal after reaching short-term oversold conditions just ahead of 12:00 ET. At that time, the S&P 500 hit its session low of 1925.93 and the TICK reading at the NYSE neared -1500—a level typically associated with excessive selling.

On Friday, the major averages finished a defensive week on an upbeat note. The S&P 500 gained 1.1% with nine sectors ending in the green. The rally helped the benchmark index narrow this week’s decline to 0.8% after being down near 3.0% at its lowest point on Thursday. Equities received a morning boost after the Nonfarm Payrolls report for September sailed past expectations. According to the Bureau of Labor Statistics, payrolls grew by 248,000, which was well ahead of the Briefing.com consensus estimate (210,000). The unemployment rate fell to 5.9% from 6.1%, but that resulted from a drop in the labor force participation rate.

Summary

“finally back after a 9 months long hiatus after settling my business and wedding matters”

Direction for Week 38 – DOWN

Week 38-39 is traditionally the end of the jittery Q3. Many would have heard of “sell in may and go away” but truth be told, May is not the most bearish month on the calendar year. Aug and Sept tends to be when “shit” hits the fan and market tends to be shaky; sideways volatile. That has been what we are seeing so far.

Market Internals

VIX

CNN - VIX

BRIEFING WEEKLY WRAP

SPDR ETF

VIX have been near the floor of 12-13 level for the most of the year except for 4 periods where it spiked above 16. Towards the end of the week, where Week 38 heading into Week 39 should be the turn in market momentum, we see a good rally in the market and an expected drop in the VIX, corresponding to the bullish close to the week. VIX hit a high of near 18, and lose 2% to close the week below 15.

In yet another volatile week, all the major indices closed flat to the down side. With the exception of Russell 2000, the major indices lost between 0.6 to 0.8% for the week. RUT is lagging the market, throwing in a performance of -1.3% for the week. Year to date, Nasdaq is still leading the market with a 7.2% gain while RUT is lagging with a 5.1% loss.

With the market in jittery, sideways volatile fashion, the sector breakdown reflects the exact same sentiments. Energy and Materials top the losers with losses of near 4%. On the other hand, Consumer Staples and Utilities led for the week with a 0.75% and 1.87% gain respectively. In a volatile week to the downside, the countercyclical sectors that led reflected the confusion in the market. The leaders and laggards were not as clear cut as it’s supposed to be.

In addition, the daily volumes for the week have been higher than prior week. With the exception of Monday, where volumes are below the 1 month average of 750m, Tues to Friday saw volumes ranging between 800m to 900m shares.

Technical Update

Dow Jones Industrial Average

TOS - DJI

DOW dipped below the crucial 17000 level at the start of the week after getting resisted by the 20D MA. 50D and 100D MA proved to be no support for the falling market until DOW hit the lower bank of a 2 years up-channel. On Thursday, we saw a Dragonfly Doji forming that coincided with the bottom bank of the uptrend channel. On Friday, in anticipation of the bounce, we saw one of the best bullish rally in the recent weeks to see DJI test the 17000 level again.

I dont see the 20D MA as much of a resistance for DJI. I would expect DJI to break 17000 level in the week to come. Any signs of start of the bullish year end rally has to have DJI finding solid support on the 17000 level.

Standard & Poor’s 500

TOS - SPX

Likewise, a Dragonfly Doji was formed on the SPX on Thursday. SPX isnt as clear cut as DJI, having broke down of its 2 years uptrending channel. It fought back on Friday to get itself back to the channel. I will be awaiting a confirmation sign to see if SPX can hold above 1950 level before it goest to test 2000 level again in the weeks to come.

Nasdaq Composite

TOS - NDX

NASDAQ Composite, being the best performer for the year, also threw up a Dragonfly Doji on Thursday. It found support off the bottom bank of the 2 years uptrending channel and its 100D MA. Moving forward, the 50D MA level might see COMPQ getting resisted there, as well as COMPQ testing the 4500 level. Before the traditional year end rally starts, I would love to see COMPQ closing above 4500 level and holding solid support at this level.

VIX

TOS - VIX

Year to date, VIX have been at a record low level with the exception of 4 periods prior to this spike. This week saw VIX went up to near 18 and VIX closed the week below 15. This coincided with the superb bullish rally in the end of the week. I will be paying close attention to VIX, and a possible spike back to 18 or even 21 because I have a gut feel that the worst might not be over.

Bond Market

BRIEFING BOND

10-Yr: -03/32..2.744%.. USD/JPY: 101.85.. EUR/USD: 1.3698

The Week in Review: 

  • Treasuries booked solid gains as the S&P 500 saw back to back weekly losses for just the third time in 2013.
  • Raising concerns on the macro level was continued economic weakness in both Asia and Europe and a slew of mixed U.S. economic data, not to mentionstudent-led pro-democracy protests in Hong Kong, and ebola fears as the first U.S. case has been confirmed.
  • Continued economic weakness in Japan has many participants expecting the Bank of Japan to up its QE program at some point.
  • Student-led protests for democracy in Hong Kong carried on for an eighth day and saw an escalation as protesters clashed with citizens who support Chinese rule.
  • The European Central Bank outlined its ABS program, indicating asset purchases will take place for at least two years; however, no sovereign bond buying was announced.
  • U.S. economic data was mostly disappointing as pending home sales (-1.0% actual v. -0.2% expected), Case-Shiller 20-city Index (6.7% actual v. 7.4% expected), Chicago PMI (60.5 actual v. 61.5 expected), consumer confidence (86.0 actual v. 92.0 expected), ISM Index (56.6 actual v. 58.5 expected), construction spending (-0.8% actual v. 0.4% expected), and factory orders (-10.1% actual v. -9.3% expected) highlighted the misses.
  • Nonfarm payrolls climbed 248K (210K expected) and the unemployment rate dipped to 5.9% (6.1% previous). Other data to top estimates included personal spending (0.5% actual v. 0.4% expected), PCE Prices – Core (0.1% actual v. 0.0% expected).
  • Friday’s post-nonfarm payrolls action was interesting as selling took place in the belly while buyers were in control at the long end.
  • Yields across the curve hit their lowest levels in a month.
  • Up front, the 2Y slipped -1bp to 0.563%. Action has spent the past month locked in a tight range between 0.500%/0.600% as neither bulls nor bears have been able to gain the upper hand.
  • In the belly, the 5Y eased -7bps to 1.737%. The yield pressed as low as 1.650% amid Thursday’s buying frenzy, but found support at the 200 dma.
  • The 10Y fell -8bps to 2.447%.  the benchmark yield tested support in the 2.400% region before probing the 50 dma (2.471%) in an initial response to Friday’s jobs report.
  • At the long end, the 30Y shed -8bps to 3.134%. Mid-week buying tested the 3.100% area, but so far action has avoid a rendezvous withe September low near 3.050%.
  • A flatter curve took hold as  the 2-10-yr spread narrowed to 188.5bps and the 5-30-yr spread tightened to 139.5bps.

Macroeconomic Data (upcoming)

FF CAL

Market Commentary

Cyclically, Week 39 (end of Sept) will see the sideways volatile movement being muted and early Oct tends to be the inflexion point to see if the market will tank or rally towards the end of year. Technically, most of the indices have hit bottom and this gives me one reason to be bullish in the weeks to come. However, earnings season will be starting soon and we should see further volatility in the market before a “clear sky” can be revealed.

On the horizon, Wed and Thurs should see more volatility as the FOMC Meeting Minutes and the Unemployment Claims will be announced. I am expecting to see Mon and Tues closing bullishly (less any bearish news) before a muted Wednesday till the FOMC minutes are announced. All eyes will be on the “when” the FED will possibly raise interest rates. Given that the Unemployment Rate went bellow 6% in the latest report, should the FED bring forward the date, this should send the market into panic mode.

With all else being equal, we should see a technical bounce and a positive week ahead.

Direction for Week 40 – UP

Weekly Market Analysis: Week 06 Recap / Week 07 Preview

Weekly Recap

Dow Jones Industrial Average

DJIA

Standard & Poor’s 500

SPX

Nasdaq Composite

NASDAQ

The stock market began the week on a subdued note. The Dow Jones Industrial Average, Nasdaq, and S&P 500 posted gains between 0.1% and 0.5% with the Nasdaq Composite ending in the lead. Overall, the session had a ‘wait-and-see’ feel as many participants stuck to the sidelines ahead of Janet Yellen’s testimony on monetary policy. The limited participation was reflected in the trading volume as only 640 million shares changed hands at the NYSE.

On Tuesday, the stock market rallied steadily with the Dow Jones Industrial Average (+1.2%) providing the lead. Thanks to the advance, the Dow narrowed its 2014 loss to 3.5% while the Nasdaq (+1.0%) was able to swing from a loss to a year-to-date gain of 0.4%. The S&P 500 (+1.1%) regained its 50-day moving average with all ten sectors contributing to the climb. Contrary to the expectations of many, Janet Yellen’s testimony before the House Financial Services Committee was uneventful as the Chair struck a tone consistent with remarks made by her predecessor. When asked about the impact of the disappointing jobs reports for December and January on the Fed’s reaction function, Ms. Yellen said it would be premature to alter policy based on a limited sample size. All ten sectors took part in the advance with energy (+1.4%) and materials (+1.2%) ending in the lead. Despite the broad rally, trading volume was below average as less than 700 million shares changed hands at the NYSE.

Equity indices took a bit of a breather on Wednesday after the S&P 500 surged nearly 4.5% in the six sessions since February 3. The benchmark index shed less than a point while the Dow Jones Industrial Average slipped 0.2%. Overall, the session was very quiet as the key averages respected narrow ranges. The S&P 500 spent the bulk of the trading day near its flat line while the Nasdaq (+0.2%) outperformed. Again, participation was well below average with less than 630 million shares changing hands at the NYSE.

Thursday’s session saw the stock market rally steadily throughout the trading day despite starting on a lower note. Small caps led the way with the Russell 2000 climbing 1.3% while the S&P 500 advanced 0.6%. The benchmark index was down as much as 0.6% at the start after overnight weakness in the futures market set the stage for a lower open. The losses in futures coincided with a wave of yen strength that once again stoked fears about potential forced unwinds of the yen-based carry trade. Adding to the early weakness was a disappointing retail sales report for January. Even though stocks opened lower, the S&P 500 found support at its 50-day moving average in the 1810 area. The index also drew strength from the retreat in the yen as the dollar/yen pair climbed off its low just under the 101.75 level.

On Friday, the stock market ended an upbeat week on a positive note. The Dow Jones Industrial Average (+0.8%) paced the advance while the S&P 500 gained 0.5%. The Nasdaq (+0.1%) lagged, but was able to finish at its highest level since late 2000. Friday’s advance capped an impressive week during which the benchmark S&P 500 gained 2.3%. Even though stocks rallied sharply, it is worth noting that all five sessions of the week saw below-average volume while bellwether groups like financials and transports struggled to keep pace with the broader market. The financial sector added just 0.2% on Friday, extending its weekly gain to 1.6%. For its part, the Dow Jones Transportation Average (+0.3%) added 0.9% for the week.

Summary

Cyclically, Week 3 is bearish. And Week 4, is likely to follow suit but to a lesser extent. I am expecting largely sideways movement for this week with a slightly bearish tone. However I would also pay attention to Wednesday where the FOMC statement is released. Given the sentiment-driven market, what the Fed says will have a strong bearing on the performance.

Direction for Week 4 – DOWN

Much has changed since I last published my Weekly Market Analysis. The 4 Weeks of selling we saw throughout Jan changed when the market headed into Feb. Although the 1st trading session of Feb was very bearish, bulls came in quickly to reverse the tide against the bears. Since then, market have been thrown in an outstanding performance for the bulls and major indices are heading towards their pre-sell down levels. Week 5 was the reversal and week 6 saw the bulls took over and resume the bullishness we see throughout 2013.

Market Internals

VIX

VIX

Briefing-Weekly-Wrap

SPDR-Sector-ETFs

Nasdaq has yet again led the market for the week with a near 3% gain. Trailing behind is both the DJIA and SPX with good gains of 2.3% for the week. Year-to-date, Nasdaq broke even with a 1.6% gain while the rest of the major averages are still in negative territory with losses of 0.5% to 2.5%. Lagging the whole market is DJIA with a loss of 2.5% year to date.

In such a bullish week, all the sectors gained between 1.69% to 3.6%. Top performing sectors are Utilities and Materials and Health Care while Financials, Industrials and Consumer Discretionary trailed the overall S&P500 index.

The breakdown of sector performance certainly does not support the bullish week that passed and as 2 counter-cyclical sectors are among the leading sectors of the week. While on the other hand, the lagging sectors are all cyclical sectors. This is a possible sign of fear and cautiousness among the market participants in this stellar bullish week.

In addition, the daily volumes for the week have been below average of 746m. Notably, Friday’s volume was especially low with only 621m shares exchanging hands on the NYSE.

Technical Update

Dow Jones Industrial Average

Prophet-DJIA

DOW gained near 800 points since the reversal in early Feb, and around 400 points for the past week. Moving forward, I am expecting a consolidation after such a stellar bull run for the past week. Without a doubt, DJIA is certainly still on the long term uptrend, having just cleared above it’s 50D SMA. Moving forward, it remains to be seen if DJIA can break 16200 and if it does, next major resistance will be at 16600.

Standard & Poor’s 500

Prophet-SPX

Likewise, after a triumphant rally by the bulls for the past 2 weeks, SPX is heading towards its all time high of 1850.84. I am looking for SPX to inch towards this level and I dont think a break up of this resistance level will happen this week. SPX has cleared all its 20D and 50D SMA in the past week, and they will act as important dynamic support should SPX tank this week.

Nasdaq Composite

Prophet-Nasdaq

NASDAQ Composite, being the best performer for the week and year, closed around 4250 (all time high levels). Given the bullish momentum with technology sector lately, I would expect COMP to break through this key psychological level this week. In addition, COMP is the only average that is still long term and short term bullish while DJIA & SPX has a bearish crossover on their respective 20D and 50D SMA. Should COMP be unable to break up of the 4250 levels, it will correct and possibly find support on the 20D/50D SMA.

VIX

Prophet-VIX

Looking at VIX, which is range bounded between 12 and 21 for the whole of last year and this year, is on a short term down trend heading towards the key support level of 12. This is also in line with my expectations of a slightly bullish but consolidating week ahead.

Bond Market

Briefing Bond Chart

10-Yr: -03/32..2.744%.. USD/JPY: 101.85.. EUR/USD: 1.3698

The Week in Review: 

  • Treasuries posted their first weekly loss in six.
  • The complex has seen selling in seven of the past ten sessions.
  • On Tuesday, Fed Chair Janet Yellen testified in front of the House Financial Services Committee. She hinted,“The Committee will likely reduce the pace of asset
    purchases in further measured steps at future meetings.” 
    Thursday’s Senate Banking Committee testimony was postponed due to inclement weather.
  • Congress approved a clean debt ceiling bill that will keep the government funded through March 2015.
  • This week’s data was mostly disappointing as wholesale inventories (0.3% actual v. 0.6% expected), retail sales (-0.4% actual v. 0.0% expected), industrial production (-0.3% actual v, 0.3% expected), and capacity utilization (78.5% actual v. 79.4% expected) all fell short of estimates.
  • Only Michigan Sentiment (81.2 actual v. 80.2 expected) impressed.
  • This week’s auctions were unimpressive, but not terrible.
  • Tuesday’s $30 bln 3y note auction drew 0.715% and a solid 3.42x bid/cover. A solid indirect takedown (42.0%) helped offset the weak direct bid (16.6%). Primary dealers were left with just 41.4% of the supply.
  • Wednesday’s $24 bln 10y note auction drew 2.795% (2.800% when issued) and a light 2.54x bid/cover (12-auction average 2.70x). A strong indirect takedown (49.7%) helped offset the weak direct bid (16.2%).
  • Thursday’s $13 bln 30y bond auction drew 3.690% (3.700% when issued) and a weak 2.27x bid/cover. A solid 45.2% indirect takedown helped offset the disappointing 13.9% direct bid.
  • Selling had the biggest impact on the belly of the curve as the 5y added +7bps to finish the week @ 1.525%. Traders will be watching the 1.550% resistance level over the coming days.
  • The 10y tacked on +7bps, closing the week @ 2.746%. The benchmark yield is +16bps off its February 3 low, and is now contending with resistance in the 2.750% area that is helped by the 100 dma.
  • Outperformance at the long end saw the 30y tack on +4bps, ending the week @ 3.700%. Treasury bears will have a difficult time running the 30y above 3.760/3.800% resistance as both the 50 and 100 dma rest in the area.
  • The front of the curve saw a slight inversion early in the week as debt ceiling fears developed. However the curve normalized once Congress reached a deal.
  • This week’s selling swing the yield curve steeper as the 2-10-yr spread widened to 242.5bps.

Macroeconomic Data (upcoming)

FF-Cal

Market Commentary

Cyclically, Week 7 is as per my expectations for the week; largely consolidation to a bullish tune. Technically, the markets are also inching towards, if not breaking out of, their respective all time high. This will certainly take affirmation from the bulls to pull of such a move in the week (s) to come. With that being said, I am sticking to my market call for the week.

Direction for Week 7 – UP

Daily Market Analysis – 13th Feb 2013 (Thursday) – BMO

Market Recap

ETFC-Overview

16:15 ET Dow -30.83 at 15963.94, Nasdaq +10.24 at 4201.29, S&P -0.49 at 1819.26

Equity indices took a bit of a breather on Wednesday after the S&P 500 surged nearly 4.5% in the six sessions since February 3. The benchmark index shed less than a point while the Dow Jones Industrial Average slipped 0.2%.

Overall, the session was very quiet as the key averages respected narrow ranges. The S&P 500 spent the bulk of the trading day near its flat line while the Nasdaq (+0.2%) outperformed.

Similar to the major averages, most individual sectors never deviated too far from their unchanged levels. The largest S&P 500 sector, technology (+0.3%), finished in the lead thanks to chipmakers. Intel (INTC 24.55, +0.08) added 0.3% while the broader PHLX Semiconductor Index rose 0.9%.

Outside of technology, consumer discretionary (+0.1%) and industrials (+0.2%) were the only other advancers among cyclical groups. Defense contractors outperformed (PHLX Defense Index +0.5%) while Deere (DE 86.90, -0.56) fell 0.6% despite beating on earnings and revenue.

Also of note, two of yesterday’s leaders—energy (-0.4%) and materials (-0.3%)—finished among today’s laggards. However, the pair still fared a bit better than the consumer staples sector, which lost 0.5% as tobacco names lagged after Lorillard (LO 47.47, -2.48) reported disappointing earnings.

Other countercyclical groups were little changed with telecom services (+0.3%) ending modestly higher while health care (-0.1%) and utilities (-0.1%) finished in the red.

Treasuries posted their third day of losses as the 10-yr yield rose three basis points to 2.76%. Interestingly, the retreat in one safe-haven asset was accompanied by an increase in another. Gold futures saw their fourth day of gains, climbing 0.4% to $1294.90/ozt.

Today’s participation was well below average as less than 630 million shares changed hands at the NYSE.

Economic data was limited to just two reports:

  • The weekly MBA Mortgage Index slipped 2.0% to follow last week’s uptick of 0.4%.
  • January Treasury Budget showed a deficit of $10.40 billion, which followed the prior month’s surplus of $2.90 billion. The Briefing.com consensus expected the deficit to hit $10.00 billion.

Among overseas news of note, Italian Prime Minster Enrico Letta held a press conference amid increasing calls for his resignation, making way for the leader of the Democratic Party, Matteo Renzi. In his remarks, Mr. Letta asked for ‘clarity,’ saying, ‘He who wants to replace me must be clear about his intentions.’ Even though the political future of Italy remains uncertain, Italian stocks appeared unconcerned with the situation as the MIB gained 1.3%.

Tomorrow, weekly initial claims and January retail sales will be reported at 8:30 ET while the December Business Inventories report will cross the wires at 10:00 ET. Also of note, Fed Chair Janet Yellen was scheduled to appear before the Senate Banking Committee for the second part of the semiannual testimony on monetary policy, but the hearing has been postponed due to weather.

  • Nasdaq Composite +0.6% YTD
  • S&P 500 -1.6% YTD
  • Russell 2000 -2.5% YTD
  • Dow Jones Industrial Average -3.7% YTD

Market Internals

VIX

NYSE-Data

NASDAQ-DataVolumes were light, with only 640m shares exchanging hands on NYSE compared to the one month’s average volume of 751m. This is also inline with the range bounded market we saw last night. Both DJIA and SPX also dropped below their previous close before lunch and stayed there for the rest of the session.

UVOL and DVOL were largely the same with a ratio of 1:1 on the NYSE and UVOL outpacing DVOL 1.61:1 on the Nasdaq. On the other hand, Advancers and Decliners were also showing similar behaviour, with Advancers outpacing Decliners 1.32:1 on the NYSE and 1.16:1 on the Nasdaq. Without a doubt, we are looking at a consolidated session here.

TRIN was definitely in bearish territory throughout the session while TICK was shuttling between the bullish and bearish territory. This sort of divergence is also expected when we have a consolidated session. VIX was also range-bounded for the trading session with it ranging between 14 and 14.6. VIX also closed with a slight loss of 1.45% to close at 14.30.

Sector Performance

SPDR-Sector-ETFs FinViz-Sector-Heat-Map

Leadership was seen in Industrials, Technology and Utilities with gains of 0.57%, 0.39% and 0.13% respectively. On the other hand, laggards were Consumer Staples, Energy and Materials with losses of 0.43%, 0.24% and 0.18% respectively. The lack of leadership from both the bulls and bear were evident as the leaders and laggards were a mixture of cyclical and counter-cyclical sectors.

Macroeconomic Data (Thursday)

FF-Cal

With Core Retails Sales and Retail Sales numbers on the horizon, today’s session will definitely be more volatile than last night’s. However the highlight of the day would be Unemployment Claims figures to be released at 830am EST.

Technical Scans

Briefing-TA-Scans

***Just a temporary addition as a value add to my readers. I certainly hope that this will generate some trading ideas for you.

Market Commentaries

After consolidation last night, I am expecting the market to resume its normal volatility for tonight. Janet Yellen is also slated to testify again tonight before the congress and more details can be found here. All eyes will be on the Unemployment Claims and this testimony. If nothing goes wrong, we should see another bullish session to the tune of around 0.7% gain.

Daily Market Analysis – 12th Feb 2013 (Wednesday) – BMO

ETFC-Overview

Market Recap – 11th Feb (Tuesday)

16:20 ET Dow +192.98 at 15994.77, Nasdaq +42.87 at 4191.04, S&P +19.91 at 1819.75

The stock market rallied steadily throughout the Tuesday session with the Dow Jones Industrial Average (+1.2%) providing the lead. Thanks to the advance, the Dow narrowed its 2014 loss to 3.5% while the Nasdaq (+1.0%) was able to swing from a loss to a year-to-date gain of 0.4%. The S&P 500 (+1.1%) regained its 50-day moving average with all ten sectors contributing to the climb.

Heading into the session, many participants were anxious to hear Janet Yellen’s first testimony as the new Fed Chair, but the lengthy appearance before the House Financial Services Committee was largely uneventful.

Like her predecessor, Ms. Yellen indicated the Fed plans to remain data dependent in its decision making and that measured tapering will continue unless economic data takes a turn for the worse. When asked about the impact of the disappointing jobs reports for December and January on the Fed’s reaction function, Ms. Yellen said it would be premature to alter policy based on a limited sample size.

In other news from Washington, all signs pointed to the House of Representatives being ready to pass an unconditional bill to raise the debt ceiling, which likely contributed to the market’s sunny disposition.

All ten sectors took part in today’s advance with energy (+1.4%) and materials (+1.2%) ending in the lead. The energy sector drew strength from top components like Chevron (CVX 113.58, +1.89) while crude oil ended little changed at $99.95 per barrel.

Elsewhere, the materials space received significant support from miners.Royal Gold (RGLD 65.20, +2.66) and Randgold Resources (GOLD 77.08, +2.55) posted respective gains of 4.3% and 3.4% while the broader Market Vectors Gold Miners ETF (GDX 25.65, +0.95) jumped 3.9% and regained its 200-day moving average. On a related note, gold futures rose 1.2% to $1289.70 per troy ounce.

With regard to other growth-sensitive sectors, technology (+1.2%) and industrials (+1.1%) outperformed while consumer discretionary (+0.7%) and financials (+1.0%) lagged.

On the countercyclical side, health care and telecom services both gained 1.3% while consumer staples and utilities added 1.1% and 0.9%, respectively.

Treasuries ended on their lows with the 10-yr yield up four basis points at 2.72%.

Despite the broad rally, trading volume was below average as less than 700 million shares changed hands at the NYSE.

Today’s economic data was limited to December wholesale inventories, which increased 0.3% after increasing 0.5% in November. The consensus expected an increase of 0.6%. The BEA assumed merchant wholesaler inventories rose 0.6% in December when calculating the advance fourth quarter GDP report. The lower-than-expected increase in wholesale inventories will result in a negative revision to fourth quarter GDP growth.

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the January Treasury budget will be released at 14:00 ET.

  • Nasdaq Composite +0.4% YTD
  • S&P 500 -1.6% YTD
  • Russell 2000 -2.9% YTD
  • Dow Jones Industrial Average -3.5% YTD

Market Internals

VIX

NYSE-Data
NASDAQ-Data
Volumes have picked up steadily in the past weeks to average about 750m shares per day. Volumes on Tuesday was evidently below average with only near 710m shares exchanging hands on the NYSE. But the consolation was that 710m was higher than Monday’s volumes and it coincided with a >1% rally on the market.
UVOL outpaced DVOL 5.09:1 and 2.64:1 on the NYSE and NASDAQ respectively. Similarly, Advancers outpaced Decliners 3.41:1 and 2.26:1 on the NYSE and NASDAQ respectively. This is largely in line with the outstanding bullish performance we see for the trading session.
VIX lost 4.51% to close at 14.51, a stark difference from the 20’s we saw just 2 weeks ago. This loss in VIX was also in line with the bullish performance we see for the day.
TICK & TRIN were largely showing convergence throughout the bullish session, with the exception of the opening bell and mid-day after lunch. With all the market internals pointing at one direction, which is BULL, without a doubt this trading session is definitely a solid bullish run.

Sector Performance

SPDR-Sector-ETFs
FinViz-Heatmap
All sectors gained more than 1% for the day with the exception of Utilities and Consumer Discretionary; which gained 0.94% and 0.73% respectively. With all 3 major averages pulling out a >1% gain, the sector performance is also largely in line with the broader market.
YTD, Utilities is also leading the whole market given the jittery start to the year, with a 4.13% gain. Following behind closely, is Health Care with a 3.88% gain. This is also very similar to what we saw last year with the counter-cyclical sectors leading the market. The only difference was, 2014 saw a decline in Jan while in 2013 the bulls took charge right from day 1.

Macroeconomic Data (Wednesday)

FF-Cal
Nothing worthy of note on tonight’s horizon with the exception of Federal Budget Balance and Crude Oil Inventories. Many bulls have benefited from Yellen’s bullish testimony last night, and more eyes will be on tomorrow’s 2nd session of Yellen’s testimony.

Technical Scans Alert

Capture
 ***This is just a temporary addition to my DMA, value-adding to my readers. So I hope this can generate some trade ideas for you.

Market Commentaries

Had been a long time since I last did my daily analysis due to work schedule, and many things had changed in this market climate. But what has remained was that market is still very sentiment driven and Fed-based. Alot of the rational reasons to rally or tank isnt working any more and what matters more now is what the Fed says. QE, interest rates, tapering are, without a doubt, solid market movers with the usual macroeconomic data not causing as much impact as they used to be.
After a triumph rally from the bulls last night, I am expecting some profit taking and consolidation tonight. Especially with little macroeconomic news on the horizon tonight, there will not be many market moving data or news that will affect the market to a large extent. Many eyes will be on Thursday’s Yellen testimony and “grilling” session before the senate.

Weekly Market Analysis: Week 03 Recap / Week 04 Preview

Dow Jones Industrial Average

DJIA

Standard & Poor’s 500

SPX

Nasdaq Composite

NASDAQ

Week 03 Recap

On Monday, bond and equity markets were closed for Martin Luther King Jr. Day.

Tuesday saw the major averages begin the abbreviated week on a mixed note as the Nasdaq added 0.7% while the Dow Jones Industrial Average shed 0.3%. For its part, the S&P 500 rose 0.3% as eight of ten sectors finished in the green. Stocks began the day with solid gains but the early strength faded quickly when the S&P 500 was unable to extend above the 1850 level during the opening minutes. That rejection emboldened sellers, who promptly drove the indices to their lows. Adding insult to injury was the fact that mostly better-than-expected earnings reported ahead of the opening bell failed to entice buyers.

The market endured an uninspiring Wednesday session, which unfolded in similar fashion to Tuesday’s affair. Once again, the major averages ended mixed with the Dow Jones Industrial Average (-0.3%) coming out on the losing end while the Nasdaq (+0.4%) and S&P 500 (+0.1%) eked out modest gains. The price-weighted Dow spent the entire session in the red as 19 of its 30 components registered losses. Most notably, the second-largest index member, IBM (IBM 179.64, -3.09), plunged 3.3% after beating its Capital IQ earnings estimate by 13 cents on below-consensus revenue. Despite the bottom-line beat, the report was scrutinized due to the company accounting for a lower tax rate than in previous quarters.

On Thursday, the S&P 500 snapped its modest two-day win streak with its second-largest decline of the month. The index lost 0.9% as nine of ten sectors registered losses. Although stocks sold off throughout the day, the weakness actually started during the overnight futures session when three China-related developments began fueling the risk-off sentiment:

  • The HSBC flash PMI reading for January was below expectations at 49.6. The sub-50 reading is indicative of manufacturing activity contracting; and the January reading marked a six-month low for the series.
  • A Financial Times report indicated Chinese authorities are working to prevent a default of a $500 million high-yield investment trust, failure of which could trigger an unnerving fallout in China’s shadow banking system.
  • An SEC administrative law judge issued a ruling that censures the accounting arms of the “Big Four” in China for six months due to their unwillingness to turn over requested documents involving US-listed Chinese companies under investigation for accounting fraud.

The three developments did enough damage to sentiment that a slate of mostly better-than-expected earnings could not halt the day-long slide. The discretionary sector (-0.7%) finished just ahead of the broader market after last year’s top S&P 500 component, Netflix (NFLX 386.08, -2.64), surged 16.5% in reaction to its bottom-line beat and above-consensus guidance.

On Friday, equities endured a rough end to the abbreviated week with the S&P 500 seeing its largest weekly loss since June 2012. The benchmark index fell 2.1%, extending its January decline to 3.1%. The market spent the entire session in a steady slide amid continued concerns regarding China. Furthermore, participants kept a close eye on the foreign exchange market where emerging market currencies weakened while the Japanese yen saw its second consecutive day of gains. Dollar/yen fell below the 102.50 level after trading near 104.50 on Wednesday. The yen strength came about after Bank of Japan officials said the Japanese economy remains on track and there is no need for additional easing at this time. In turn, this posed a headwind to yen-based carry trades, which played a significant part in last year’s market rally.

Summary

Heading into Week 2 of 2014, this selling might continue. On average, week 2 for the past 5 years has churned out around a loss of 0.5%. I am not betting against this historical statistics for this week.

Direction for Week 2 – DOWN

Week 2 was definitely down with a the bulls and bears almost equally matched. But I would reckon that the bulls are slightly stronger to have closed the week 2 session. In week 3, as predicted, market let down with bearishness that is not seen for almost the whole of 2013. The major averages lost between 1.65% and 3.52% for the week, easily the most bearish week of 2014 thus far. I said “as predicted” because week 3 of any year tends to be bearish in nature.

VIX

VIX

Briefing-Weekly-Wrap

SPDR-Sector-ETFs

For the 5 days trailing period, DJIA lagged the whole market with a loss of 3.52% while Nasdaq Composite lost the least with a loss of 1.65%. Year-To-Date, 2014 has been in bearish territory. This is not seen especially after a solid bullish year in 2013.

The laggards in this bearish week are Materials, Industrials and Financials; losing 4.49%, 3.88% and 3.74% respectively. On the other hand, sectors that lost the least are Utilities, Consumer Staples and Energy; losing 0.21%, 1.4% and 1.95% respectively.

The sector performance is definitely in line with the market performance with the cyclical sectors lagging the market and the counter-cyclical counters “leading” the market. Materials were the worst hit with a near 4.5% loss for the week.

On a side note, volumes on Friday’s sell down was also higher than average, standing at 900m comparing to the 1 month’s average of 660m.

Technical Updates

Prophet-DJIA

Resisted at the high of 16600 made 3 weeks ago, DJIA has been in consolidating phase for the past 3 weeks and the breakdown came on Thursday and Friday. For the week, I am not expecting a selldown that is as strong as what we just seen, but certainly I am not expecting a bullish triumph for the week. Heading forward, 15700 to 15800 levels will be a likely support zone. Moreover, the 100 SMA will also likely to act as dynamic support for DJIA. I am also looking at the 50 SMA and 20 SMA as possible resistances moving ahead this week.

Prophet-SPX

Similarly, a double top is forming on the SPX with the index resisted twice around the 1850 levels. Also similar to the DJIA, SPX was in range bounded action for the past 2 weeks, till the breakdown came on Friday. the 20 SMA and 50 SMA didnt act as support at all. Moving forward, 1760 and 1770 levels will be acting as a support zone while 1810 will act as a resistance zone.

Prophet-NASDAQ

NASDAQ Composite, after closing 2013 as the best performing benchmark, was also behaving in the consolidated phase for the past 3 weeks. It was range bounded between 4100 and 4250 levels. Unlike DJIA and SPX, COMP broke down the 20 SMA and is looking to head down wards to test the 50 SMA which is around the 4100 levels. It’s likely that COMP will get resisted at 4200 moving forward, and will be more likely to head towards the 4050 level.

Bond Market

Briefing Bond Chart

10-Yr: +14/32..2.731%.. USD/JPY: 102.23.. EUR/USD:1.3680

The Week in Review

  • Treasuries saw solid gains this week with maturities finishing at their best levels of 2014.
  • The week got off to a quiet start, but Thursday’s disappointing Chinese HSBC Flash Manufacturing PMI and concerns over the health of the Chinese shadow banking system sparked a strong bid over the latter part of the week.
  • Data was light, and slightly disappointing, with existing home sales (4.87M actual v. 4.90M expected) and leading indicators (0.1% actual v. 0.2% expected) both falling short of estimates.
  • Buying was paced by the long end with the 30y tumbling -11bps over the course of the week. The 30y ended Friday’s session @ 3.651%, more than 30 bps off its late-2013 high, posting its lowest close since Halloween.
  • The 10y shed -8bps on the week, ending @ 2.735%. Participants will be watching the 2.700%/2.750% area over the coming days as support at the level is all that stands in the way of a test of the 200 dma (2.526%).
  • The 5y lagged during the first half of the week as sellers concentrated their efforts on maturities in the belly of the curve, but a steady bid on Thursday and Friday caused it to finish in-line relative to its peers. The yield slipped -6bps to settle @ 1.564%, and finished Friday’s session with its lowest close since December 18, the day the Fed announced its taper.
  • A volatile week up front ended with the 2y -2bps @ 0.356%. Early action saw the yield climb above the 0.410% level, but the safety bid won out in the end. Many traders continue to monitor the front of the curve for any signs of skittishness ahead of the February 7 debt ceiling deadline.
  • This week’s buying flattened the yield curve as the 2-10-yr spread tightened to 238bps.

Macroeconomic Data (Week 4)

FF-Cal

Summary

Cyclically, Week 3 is bearish. And Week 4, is likely to follow suit but to a lesser extent. I am expecting largely sideways movement for this week with a slightly bearish tone. However I would also pay attention to Wednesday where the FOMC statement is released. Given the sentiment-driven market, what the Fed says will have a strong bearing on the performance.

Direction for Week 4 – DOWN

Daily Market Analysis: Week 52/01 Recap / Week 02 Preview

Dow Jones Industrial Average

DJIA

Standard & Poor’s 500

SPX

Nasdaq Composite

COMPQ

Week 52/01 Recap

Monday’s session did not generate much excitement as the S&P 500 ended flat after spending the entire trading day inside of a four-point range. Interestingly, while the S&P 500 was challenged by its flat line throughout the session, the Dow Jones Industrial Average held just above its unchanged level for the duration of the day. The price-weighted Dow saw 19 of its 30 components finish in the green, but shares of Disney (DIS 76.11, -0.16) stood out with a 2.5% gain. The noteworthy strength ensued after Guggenheim upgraded the stock to ‘Buy’ from ‘Neutral.’

On Tuesday, the major averages wrapped up a memorable year with a forgettable final session. The S&P 500 added 0.4%, extending its 2013 price return to 29.6%. Given its banner year, it was appropriate for the index to end 2013 at a fresh all-time high of 1848.35. The Dow Jones Industrial Average soared 26.5% in 2013 and ended at a record high of its own. Although the Dow (+0.4%) and S&P 500 (+0.4%) saw comparable gains on Tuesday, the Nasdaq (+0.5%) fared a bit better. That was the theme throughout the year as the tech-heavy index rallied 38.3%.

Bond and equity markets were closed on Wednesday for New Year’s Day.

On Thursday, the S&P 500 exhibited a bit of a hangover in its first session of 2014. The benchmark index fell 0.9% as all ten sectors registered losses. Stocks were pressured from the opening bell as cautious action in Europe weighed on the early sentiment. In all likelihood, the slide caught a number of participants off guard given the understanding that the first few days of a new year are known to have a favorable bias with inflows into IRA accounts, bonus money being put to work, and new money coming off the sidelines. That did not happen today as sellers maintained control throughout the trading day. Energy (-1.3%), industrials (-1.3%), and technology (-1.1%)—slipped behind the broader market at the open and their underperformance weighed for the remainder of the session.

On Friday, the major averages wrapped up the week on a mixed note as the Dow Jones Industrial Average added 0.2% while the Nasdaq shed 0.3%. For its part, the S&P 500 ended flat. Friday’s mixed finish was an appropriate reflection of a session that featured some mixed signals. On that note, seven of ten sectors ended in the red but market breadth remained positive throughout the trading day. In all likelihood, light volume played a part as some participants were kept away by the winter storm that has encompassed the Northeast. At the end of the day, only 533 million shares changed hands on the NYSE floor.

Summary

With the announcement of dovish tapering in week 50, the bulls are back firmly in charge to close off the year with a solid bang! Indexes gained between 25% to 40% for the year and this is definitely one of the best performance we see from the bulls so far. And with the absence of market moving news, we should see a slight correction for profit taking off long positions early in the week. But nothing is going to keep the bulls charging forward, not at least till Feb.

Hope 2013 has been a stellar year for all of you, and I wish you a very HAPPY 2014. May be “bulls” be with you…

Direction for Week 52 – UP

As expected, market took a correction this week with possible signs of profit taking. 2014 opened with the bears in charge while the second session saw a mixed performance from the bulls and the bears. The bulls seem to be taking a break from their charge since 2 weeks ago and this coincided with  technical charts to be discussed later on in this report.

VIX

VIX

Briefing-Weekly-Wrap

SPDR-Sector-ETfs

The markets lost between less than 0.6% for the past 5 days trailing. In this period, VIX also gained by 10.43%  to close at 13.76. The bull run in the past year had set the VIX to range between 12 to 15 for the past year. If there are any takeover by the bears, I would love to see VIX shooting above 15.

Leadership in the week was seen in Financials and Consumer Discretionary, with both cyclical sectors gaining 0.46% and 0.11%. On the other hand, Utilities, Energy and Consumer Staples lost between 1.10% to 1.43% to round up the laggards for the week.

The industries performance were bewildering especially for a week that was bearish in nature, cyclical sectors led while counter-cyclical sectors lagged. This led me to only one conclusion,  that is profit taking on the long positions since 2 weeks ago.

Technical Updates

Prophet-DJIA

After breaking through a trending resistance last week, the last 2 days (the 1st 2 days of 2014) saw the bears rocked the bulls party abit. Going forward, I would love the see the bulls resisted at 16600 and bears supported at 16350 levels. Note that this is still a uptrend for the last 5 years and this is nothing but a small correction after it DJIA got resisted off the top of the channel’s bank.

Prophet-SPX

The SPX was resisted off the historical high of near 1850, to see a bearish session for 2014. Moving foward for the week, should the bulls advance we should see SPX resisted and testing the high of 1850 again. On the other hand, should the selling continues, SPX should see some form of support at the 1815 levels.

Prophet-NASDAQ

NASDAQ Composite saw a correction for the last 5 days after finishing as the leader of the indexes for the bull charge in 2013. It also got resisted at the top of the channel’s bank and the selling doesnt seem to be stopping this week. Moving forward, it’s likely that COMPQ will get supported at the 4075 to 4100 range.

Bond Market

Briefing Bond Chart

10-Yr: -02/32..3.000%.. USD/JPY: 104.78.. EUR/USD: 1.3588
  • Treasuries were little changed for the week asparticipation was light due to the holidays.
  • Mixed economic data saw consumer confidence (78.1 actual v. 77.1 expected) and ISM Index (57.0 actual v. 56.9 expected) beat while pending home sales (0.2% actual v. 1.5% expected) and Chicago PMI (59.1 actual v. 60.0 expected) missed.
  • A flat week for the 30y saw the yield on the long bond settled @ 3.930%.
  • The 10y shed -1bp, closing @ 2.995%. Mid-week selling ran the benchmark yield as high as 3.040%, its highest since July 2011.
  • A flat week in 5s made for a tight 5bp range. The 5y closed @ 1.727% after once again failing to crack 1.750% resistance.
  • This week’s biggest move along the curve came in the 2y, which added +3bps to 0.412%. Current levels match those last seen back in September, shortly after the debt ceiling was resolved.
  • Curve flattening caused the 2-10-yr spread to tighten to 258.5bps.

Macroeconomic Data (Week 2)

FF-Cal

Summary

Heading into Week 2 of 2014, this selling might continue. On average, week 2 for the past 5 years has churned out around a loss of 0.5%. I am not betting against this historical statistics for this week.

Direction for Week 2 – DOWN

Daily Market Analysis: Week 51 Recap / Week 52 Preview

Dow Jones Industrial Average

DJIA

Standard & Poor’s 500

S&P500

Nasdaq Composite

Nasdaq

Week 51 Recap

On Monday, the S&P 500 settled higher by 0.5%, registering its third consecutive gain. The benchmark index extended its December advance to 1.2% as eight of ten sectors ended in the green. Stocks jumped at the open with the technology sector (+1.5%) driving the early surge. The space received considerable support from its largest component, Apple (AAPL 560.09, -3.81), which spiked 3.8% after inking a long-rumored distribution agreement with China Mobile (CHL 52.76, +0.26).

Stocks ended Tuesday’s abbreviated session with modest gains that were paced by cyclical sectors. The S&P 500 added 0.3% as energy (+0.6%), industrials (+0.5%), and materials (+1.0%) outperformed.

On Wednesday, U.S. bond and equity markets were closed for Christmas.

The bullish trend continued on Thursday with little in the way of the major averages. The Dow Jones Industrial Average (+0.8%) logged its sixth consecutive gain while the S&P 500 (+0.5%) posted its fourth advance in a row. Technology (+0.3%) and the financial sector (+0.2%) were the only cyclical groups that could not keep pace with the broader market. The remaining four cyclical sectors—consumer discretionary (+0.6%), energy (+0.9%), industrials (+0.7%), and materials (+0.6%)—all finished ahead of the S&P. Although trading volume finished at a one-year low, Twitter maintained its torrid pace on heaviest volume (82.5 million) since its market debut. The stock surged 4.8%, extending its December gain to 76.4%

On Friday, the major averages did little to distinguish themselves in the final session of the week. The Dow Jones Industrial Average and S&P 500 both ended flat while the Nasdaq underperformed, shedding 0.3%. Today’s trading range was limited to just five points in the S&P 500, but that masks the fact the index rested near its flat line for the vast majority of the trading day. It is understandable that some rest was in order after the benchmark index gained 3.4% during the previous six affairs.
Buyers and sellers alike stuck to the sidelines today, but then again, just about everyone elected to forego today’s session. On that note, NYSE floor volume totaled a paltry 414 million shares. There was no concerted leadership among individual sectors as two cyclical groups—energy (+0.5%) and materials (+0.2%)—and two defensive sectors—consumer staples (+0.3%) and utilities (+0.2%)—posted gains.

Summary

Moving forward, we are approaching Xmas and heading into the last 2 weeks of the year 2013!  This year has certainly be the best year for the bulls with markets gaining 20-30%. Many investors and Wall Street bankers will have fat pockets with their obscene bonuses. Technically, there is no reason or signs for a correction to kick in this week. And on the horizon, there is also no news or macroeconomic data that is likely to rock the confidence of the bulls. I will definitely go with the flow here.

Direction for Week 50 – UP

MR BULL came in to rock the house ever since the dovish tapering started with the announcement of the last FOMC minutes announcement. Prior to the tapering announcement, the markets were confused and heading down south. That put me to wonder if there will be any Santa Claus rally this year.

Since the announcement of the dovish tapering, the market flew straight up to close at record highs for the indices. This was also a sign that the correction that we see in the week prior to the FOMC meeting minutes announcement, that the market has priced in the announcement of the tapering sooner or later.

VIX

VIX

Briefing-Weekly-Wrap

SPDR-Sector-ETFs

While the markets rallied between 1.26% and 1.59%, VIX was showing convergence as a contrarian indicator. VIX slid near 10% after an spike the week before amongst the uncertainty. VIX was back to the 12 levels, to close at 12.33.

Among the leaders for the week; Materials, Energy and Technology gained between 1.77% to 2.45%. On the other hand, Utilities (after a stellar performance in Q1 2013), lagged the week with a modest loss of 0.05%. The rest of the industries all gained between 0.86% and 1.44%. This was indeed a good bull run to close off 2013.

The industry performance was also in line with the bullish performance we saw, with the cyclical industries leading the bull charge while the counter-cyclical industries lagged the overall market.

Heading into the final week of the year, NASDAQ produced a near 40% gain (37.7%) for the year to lead all the other indexes. S&P500 came in 2nd with a near 30% gain while DJIA was 3rd with a 25.8% gain. This has certainly got to be, if not one of the best years in bull’s history.

Technical Updates

Prophet-DJIA

DJIA broke through a trending resistance this week, to close at all time high of 16500 levels. However it’s worthy to note that the rally for this week wasnt exactly supported by the volumes on the DJ30 components. Projecting forward with a uptrending channel, DJIA is likely to carry this bullish momentum forward and break the 16500 mark to close off the year. 16250 should act as a support going forward into the last week of the year.

Prophet-SPX

 

The SPX was showing a similar picture with the prices breaking and closing above its 5 years uptrending channel. This is also in all time high territory as SPX approaches 1850. 1800 zone should act as a strong psychological support area so we shouldnt see SPX breaking this zone as a support with absence of any market moving news. However after such a good performance in Week 51, it’s likely that SPX will correct a little bit this week for profit taking off long positions.

Prophet-Nasdaq

 

NASDAQ Composite made the best gains this year, with a 37.7% gain YTD. This has gotta be one of the best, if not the best years in the history of the market. Closing off last Friday after Christmas, COMPQ was showing some form of profit taking. It also broke through its 5 year uptrending channel since 2009 and the next possible support after correction would be between 4100 and 4150 levels. And if there are no corrections heading into the last few sessions of the year, 4200 levels might be a possible resistance level.

Bond Market

Briefing Bond Chat

Highlight news for the week was 10 yr treasury bills reclaimed 3.000%
10-Yr: -04/32..3.007%.. USD/JPY: 104.17.. EUR/USD: 1.3737
  • Treasuries lost ground this week as the usual appetite for risk into year-end and a sleepy holiday trade favored the bears.
  • Volumes were light all week long as many opted to take vacation instead of subjecting themselves to the sleepy trade.
  • This week’s economic data was mixed. Personal income (0.2% actual v. 0.5% expected) and Michigan Sentiment – Final (82.5 actual v. 83.3 expected) fell short of estimates while durable orders (3.5% actual v. 2.2% expected) and new home sales (464K actual v. 433K expected) saw notable beats.
  • Selling had the biggest impact on the long end as the 30y tacked on +12bps to finish @ 3.943%, its highest since July 2011. However, the selling was unable to run the yield above the December high of 3.976%.
  • The 10y climbed +12bps to end the week @ 3.006%. This week’s action saw the benchmark yield retake the 3.000% mark for the first time since July 2011.
  • A more modest +7bp advance in the 5y saw the yield settle @ 1.744%. Traders continue to monitor resistance in the 1.750% area as it guards the September highs (1.850%).
  • Even the 2y saw an notable uptick of +2bps, which caused the yield to retake 0.400% for the first time in three months.
  • A steeper yield curve developed over the course of the week as the 2-10-yr spread widened to 260.5bps.

Macroeconomic Data (Week 52)

FF-Calendar

Summary

With the announcement of dovish tapering in week 50, the bulls are back firmly in charge to close off the year with a solid bang! Indexes gained between 25% to 40% for the year and this is definitely one of the best performance we see from the bulls so far. And with the absence of market moving news, we should see a slight correction for profit taking off long positions early in the week. But nothing is going to keep the bulls charging forward, not at least till Feb.

Hope 2013 has been a stellar year for all of you, and I wish you a very HAPPY 2014. May be “bulls” be with you…

Direction for Week 52 – UP

Daily Market Analysis: Week 49 Recap / Week 50 Preview

Dow Jones Industrial Average

DJIA

Standard & Poor’s 500

S&P500

Nasdaq Composite

Nasdaq

Week 49 Recap

Like Maxwell Smart used to say, “Missed it by that much.”  Less than a point separated the S&P 500 from its ninth straight winning week, but what a finish to the week it was.  Sparked by an encouraging employment report for November, the S&P 500 jumped 20 points, or 1.1%, on Friday.

The week in review pretty much begins and ends with Friday since the market was preoccupied all week with the question of whether the November employment report would prompt the Fed to make a tapering decision at its December meeting.  The answer to that question was basically yes, no, and maybe.

The report, which featured a 203,000 increase in nonfarm payrolls and a drop in the unemployment rate to 7.0% from 7.3% that was not driven by a decline in the labor force participation rate, was solid enough to convince participants that the labor market is improving but not strong enough necessarily to force the Fed’s hand into tapering this month.

Whatever unfolds, the overriding message of the market on Friday was either that it didn’t believe there would be a tapering this month or that it doesn’t fear a tapering this month (or next month).  Both the 10-yr note and the stock market pushed higher on Friday while gold prices and the US Dollar Index were little changed.

They were moves that stood in contrast to the tapering angst that existed earlier in the week after the release of the better-than-expected ISM Index, higher-than-expected auto sales, a 25% increase in new home sales for October, lower-than-expected initial claims, and an upwardly revised 3.6% GDP growth rate for the third quarter (more on that in a bit).

Every sector finished higher on Friday and so did every Dow component.  For the week, the best-performing sectors were the utilities (+0.8%), technology (+0.7%), consumer staples (+0.1%), and energy (+0.04%) sectors, so a bit of a cyclical and counter-cyclical mix, which probably reflected some hedging with respect to the tapering idea and the thinking that the market is due for a pullback of some kind after its extraordinary rally.

Still, it was clear that money wasn’t in a hurry to leave the stock market this week.  That may have been owed to the thinking that another buy-the-dip run would be seen — and sure enough that ended up being the case.

Now, in terms of the GDP report, it wasn’t as robust as it appeared to be at first blush.  The change in inventories accounted for 1.68 percentage points of the change in GDP; moreover, personal consumption expenditures were up just 1.4% (lowest since Q4 2009) while real final sales, which exclude the change in inventories, were revised down to 1.9% from 2.0% in the first estimate.

It is almost certain that there will be some inventory payback in the fourth quarter that will act as a big drag on fourth quarter GDP.  Briefing.com’s current forecast calls for growth of just 0.8%.

The Fed will be cognizant of that inventory drag (New York Fed President Dudley spoke about it in a speech a few weeks ago), which is one reason why there is still room to think it will hold off on a tapering decision for the time being.  Another reason embedded in the November employment report is the fact that the number of people unemployed for 27 weeks or more accounted for 37.3% of the unemployed, up from 36.1% in October, demonstrating the ongoing difficulty of finding a new job after being out of work for so long.

Emergency unemployment benefits are due to expire January 1 if Congress doesn’t strike an agreement to extend them.  On a related note, there were reports this week that negotiators are close to striking a budget agreement that will prevent another government shutdown, but that emergency unemployment benefits are creating a sticking point in those talks.

The budget negotiations promise to be a focal point in the week ahead along with the Retail Sales report for November and Q3 GDP data for Europe.

Summary

After the past 2 weeks with alot of FOMC member’s speeches and testimony, the market is getting increasing fearful. A sign of fear would be the counter-cyclical counters leading the week and the low volumes for the past week.

I made the wrong market call one after another for the DMA, this are just signs of the market getting irrational and sentiment driven. I could no longer draw on rational factors to deduce the direction. This market is sentiment and news driven, I shall let them decide the direction and do day trades on them. My gut feel is that the bulls will continue to push the market higher by abit this week.

Direction for Week 48 – UP

I called a UP week for the week leading up to Black Friday plainly because for Thanksgiving and a short week tends to be traditionally bullish. I was right but the short trading session on Friday saw sell down in the last hour. This came as a shock as investors are not holding their positions over the weekend for the fear of  god knows what factor.

Then came Cyber Monday, where the bullishness of the stock market was supposed to be felt and this was supposed to be the turning point and the traditional starting bell of the bull run up to next year. But we didnt have the rally. What followed Cyber Monday was a continuous sell down with sideways volatility mid week and the week ended with a strong rally on Friday to bring the indexes to nearly breakeven.

VIX

VIX

Briefing-Weekly-Wrap

SPDR-Sector-ETFs

VIX climbed throughout the week amidst the bearish and volatile market. It made as high as near 12% on Wednesday and lost majority of the gains on Friday where the market rallied beyond 1%. VIX close the week at 13.79, almost similar to the close of last week.

Leadership was seen in Utilities, Technology and Consumer Staples. They made 1.08%, 0.37% and 0.16% respectively for the week. On the other hand, Laggards were Consumer Discretionary and Financials. They lost 0.72% and 0.42% respectively. As with the market, the rest of the sectors ended almost flat, losing between 0.03% and 0.16%.

This week, bears took over the market. And it was also showing signs of bearish leadership to see Utilities and Consumer Staples (both counter-cyclical sectors) to lead the market while the cyclical sectors lagged. This is unfounded because this period is supposed to be the arrival of bulls to kick start the best 6 months of the market.

For the week, Nasdaq was leading with a slight gain of 0.06%. Following closely behind was S&P 500 with a small loss of 0.04%. DJI was lagging behind the other 2 indexes with a loss of 0.41%. With almost the same observation for the past weeks, Technology is really the domain of the bulls recently.

Technical Updates

Prophet-DJIA

Dow Jones Industrial Average slid for the 1st for days of the week, and wipe out 3 days of losses with a solid bull session on Friday. While the volumes are supporting the decline, it’s not doing the same for the rally on Friday where volumes dipped. Looking at this, it does seems more to me of a short covering and profit taking for the short sellers, coupled with the bullish season in play now. Moving forward, it remains to be seen if the 20D SMA will be able to act as support for the uptrend to come. And the intraday high of 16174.51 made last Black Friday will be tested and acting as a resistance should the bulls continue their advancement this week. Going just by the technicals, I believe we do have some upside in the week to come.

Prophet-S&P

 

Likewise on the S&P 500, it found support of its 20D SMA and bounced off it to wipe out almost 3 days of losses in Friday’s bullish session. Moving forward, if it rallies and advance, it’s likely to meet a resistance of the intraday high of 1813.55 made last Friday. And should it correct, it’s likely to find support off the 1770 levels. Having said this, there is no technical reason nor economic reason for it to tank, especially in this season of the bulls. I would like to see it breaking the high and continuing rallying.

Prophet-NASDAQ

Of the 3 major averages, Nasdaq sports a different look. It has broke out of its 5 year channel, and seemed to found support and closed outside of its 5 year channel. It’s also trending steeping upwards in it’s past 6 months channel. Should it correct this week, it should find support off its recent support level of 4004.76. The upside to NASDAQ is also limited to the upper bank of its 6 months channel at the 4125 level. With NASDAQ leading the 2 other averages in the year of 2013, I believe we are not going to see any form of correction soon, at least not in this season of the bulls.

Bond Market

Briefing Bond Chart

10-Yr: +03/32..2.874%.. USD/JPY: 102.86.. EUR/USD: 1.3703

The Week in Review: 30y Hits Highest Level Since August 2011  

  • Treasuries were pressured this week as mostly better than expected data ignited fears the Fed may begin to scale back its bond-buying scheme as early as the December meeting.
  • Friday’s strong nonfarm payroll report (203K actual v. 188K expected) saw the unemployment rate fall to 7.0% (7.2% previous), and capped off a strong week of data.
  • ISM Index (57.3 actual v. 55.5 expected), construction spending (0.8% actual v. 0.3% expected), new home sales (444K actual v. 420K expected), GDP – Second Estimate (3.6% actual v. 3.0% expected), and Michigan Sentiment (82.5 actual v. 75.1 expected) all topped forecasts.
  • ISM Services (53.9 actual v. 55.0 expected) and personal income (-0.1% actual v. 0.3% expected) were the only notable misses.
  • The latest Fed Beige Book suggested, “The economy continued to expand at a modest to moderate pace from early October through mid-November.”
  • This week’s selling had the biggest impact on the belly of the curve, where yields climbed as much as +12bps.
  • The 5y jumped +11bps, and managed to breakout above the 1.450% area that had acted as a lid since the middle of September. Friday’s early selling ran the yield up to 1.545% before settling the day @ 1.505%.
  • Aggressive selling in 10s ran the benchmark yield through key resistance in the 2.800% area. On the week, the 10y climbed +12bps to finish @ 2.883%. Traders continue to monitor the 3.000% area that corresponds with the September highs.
  • Outperformance at the long end made for a +7bp move in the 30y. The yield on the long bond hit a high of 3.976%, its highest since August 2011, in response to the jobs report; however, it fell to 3.917% by Friday’s cash close.
  • A steeper curve developed over the course of the week as the 2-10-yr spread widened to 258bps.

The Week Ahead

  • There is no data on Monday. Fed Chairman Ben Bernanke will attend a meeting of the Financial Stability Oversight Committee (14:30). Richmond’s Lacker will give his economic outlook in Charlotte, NC (12:50); STL’s Bullard will be on his home turf discussing monetary policy and the economy (13:05); Dallas’ Fisher will be in Chicago, IL to speak on “U.S. and Regional Economic and Banking Trends” (13:15) and to discuss Fed policy and the economy (18:30).
  • Data kicks off for the week on Tuesday with wholesale inventories and JOLTS – Job Openings (10). Treasury will auction $30 bln 3y notes.
  • Wednesday’s data is limited to the weekly MBA Mortgage Index (7) and the Treasury budget (14). Treasury will hold a $21 bln 10y note reopening. Treasury Secretary Lew will testify on the IMF in front of the House Financial Services Committee (10).
  • Data picks up on Thursday with initial and continuing claims, retail sales, retail sales ex-auto, import/export prices (8:30), and business inventories (10). Treasury will reopen $13 bln 30y bonds.
  • Friday will see PPI and core PPI (8:30).

Macroeconomic Data (Week 50)

FF-Cal

With the exception of Tuesday and Wednesday, we have some form of important news and data scheduled to be released. Monday will see FOMC’s Bullard speaking about economic outlook and monetarty policy at the CFA Society of St. Louis. Questions will be expected and I am expecting her to give a neutral view of tapering if it comes into question.

Thursday will have the Core Retail Sales and Retail Sales figures, as well as the Unemployment Claims numbers. Unemployment Claims numbers is expected to come in at around 321K while any number lower than this should send a mix feel to the market. If UN rate continues to fall, which stands at 7% now, there is a real possibility that the FED will announce tapering in Jan.

Friday will have the PPI numbers where the change in the price of finished goods and services sold by producers are measured. It’s likely to stay flat.

Summary

Moving forward, we are approaching Xmas and heading into the last 2 weeks of the year 2013!  This year has certainly be the best year for the bulls with markets gaining 20-30%. Many investors and Wall Street bankers will have fat pockets with their obscene bonuses. Technically, there is no reason or signs for a correction to kick in this week. And on the horizon, there is also no news or macroeconomic data that is likely to rock the confidence of the bulls. I will definitely go with the flow here.

Direction for Week 50 – UP

Daily Market Analysis – 3rd Dec 2013 (Tuesday) – BMO

Yahoo-Finance

Market Recap – 2nd Dec (Monday)

16:10 ET Dow -77.64 at 16008.77, Nasdaq -14.63 at 4045.26, S&P -4.91 at 1800.9

Equity indices finished the first December session on a lower note as the S&P 500 shed 0.3%. Small caps endured steady selling throughout the session as the Russell 2000 fell 1.2%.

The benchmark index spent some time on each side of its flat line, but ultimately ended near its lows. The index attempted to build on the relative strength of financials (-0.2%) and materials (-0.2%), but the underperformance of technology (-0.3%), industrials (-0.5%) and discretionary shares (-0.5%) short-circuited the rally.

The discretionary sector was pressured by homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 22.69, -0.45) lost 1.9% as Treasury yields climbed throughout the session. The benchmark 10-yr yield added five basis points to 2.80%.

Meanwhile, retailers slumped after the National Retail Federation said Thanksgiving weekend sales were down 3.0% year-over-year. The SPDR S&P Retail ETF (XRT 87.87, -0.59) lost 0.7%. However, eBay (EBAY 51.35, +0.83) outperformed its brick-and-mortar peers amid indications holiday online sales have gotten off to a strong start.

Elsewhere, Dow component 3M (MMM 127.68, -5.83) pressured the industrial sector, falling 4.4% after Morgan Stanley downgraded the stock to ‘Underweight.’ Transports withstood the bulk of the selling as the Dow Jones Transportation Average added 0.3%.

The Nasdaq also contributed to the afternoon weakness as top-weighted components and momentum names lagged. Apple (AAPL 551.23, -4.84), Google (GOOG 1054.48, -5.11), andIntel (INTC 23.70, -0.14) lost between 0.5% and 0.9% while LinkedIn (LNKD 220.39, -3.64) and Tesla (TSLA 124.17, -3.11) fell 1.6% and 2.4%, respectively.

A pocket of strength could be found inside the tech-heavy index as biotechnology outperformed. The iShares Nasdaq Biotechnology ETF (IBB 224.73, +0.57) added 0.3%, which helped the health care sector finish with a slim gain of 0.1%.

The remaining countercyclical groups lagged across the board as consumer staples, telecom services and utilities lost between 0.4% and 0.9%.

Today’s participation was well below average as 667 million shares changed hands on the floor of the New York Stock Exchange.

Investors received just two economic data points today. After increasing a downwardly revised 0.1% (from 0.6%) in August, construction spending fell 0.3% in September before rebounding and increasing a solid 0.8% in October. The Briefing.com consensus expected construction spending to increase 0.4% and 0.3% in September and October, respectively.

The big gain in October spending came entirely from the government sector. Spending rose 3.9% in October, namely from an 8.5% gain in educational and a 5.9% gain in transportation. Private construction spending fell 0.5% in October after increasing 0.4% in September.

Separately, the November ISM Manufacturing Index increased to 57.3 from 56.4. That was the highest reading since the index reached 59.4 in April 2011. The Briefing.com consensus expected the index to fall to 55.5. For the past several months, regional manufacturing surveys have hinted at a slowdown in manufacturing activities, but the national ISM has shrugged those off and continued its trek higher.

  • Nasdaq +34.0% YTD
  • Russell 2000 +32.9% YTD
  • S&P 500 +26.3% YTD
  • DJIA +22.2% YTD

Market Internals

VIX

NYSE-Data
NASDAQ-Data
Since last week, light volumes have been the talk of town. This is possibly a sign of distribution (not accumulation) at the market top. Volumes were below average again, with only 666m shares exchanging hands on the NYSE.
DVOL outpaced UVOL 2.07:1 and 1.39:1 on the NYSE and NASDAQ respectively. Similarly, Decliners outpaced Advancers 2.58:1 and 2.43:1 on the NYSE and NASDAQ respectively. This is largely in line with the bearish session we have for the day.
VIX rose above previous session’s close, gaining near 4% to close at 14.23. This is also in line with the bearish session we see for the day.
TICK & TRIN was showing divergence throughout the session, with the TICK in bearish territory and the TRIN in bullish territory. This sort of divergence is also getting increasingly frequent.

Sector Performance

SPDR-Sector-ETFs
FinViz-Heatmap
Most sectors lost between 0.2 to 0.55% yesterday. Among the losers, Consumer Staples and Consumer Discretionary lost the most. On the other hand, counter-cyclical sectors led the session with Energy and Health Care making modest gains. Seasonally, Energy and Health Care tends to have a nice seasonal run towards the end of the year.

Macroeconomic Data (Tuesday)

FF-Cal
Nothing much on the horizon tonight, except for IBD/TIPP Economic Optimism and Total Vehicle Sales. the IBD/TIPP Economic Optimism is a level of diffusion index based on surveyed consumers. This is a tell tale sign of optimism or pessimism in the economy from the surveyed participants.

Market Commentaries

After Black Friday and Cyber Monday, it’s kinda weird to get both sessions facing a sell down in the closing hours. Traditionally in a long weekend, equity will tend to rally and hold the high. However this year, with stellar gains from the market, rally was muted and what we have was a sell down towards the close. The implication of this is greater as it seems as there is an increasing amount of fear in the market participants. This is notable in the reluctance of the participants to hold long positions over a long weekend. I have a feeling that it’s going to bounce tonight but the day will be decided by the last hour action.