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.