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.