Finally a rebound in the market. I will have to look into the next few days to see if we are getting back the bullish trend. If we are, it is quite possible that we will be having a Santa Claus rally.
Just for an update, we are still in red for the month of December. Not to mention that we still have to pay attention to the oil prices as it remains volatile and Russia's problem. Nevertheless, I think tomorrow session is going to be up.Direction for the Thursday 18 Dec, 2014; Up
Another record session! Market continues to rally post-FOMC meeting as the US economy gets optimistic with better unemployment claims data. It does seem like we might get a Santa Claus coming from the current situation. Meanwhile crude oil price remains volatile and went down below $55.00.
Market Summary
Industry Watch
Strong: Health Care, Financials, Industrials, Technology, Telecom Services
Weak: Energy
Other Market Moving Factor:
- Swiss National Bank imposes negative deposit rate of -0.25%
- Crude oil surrenders overnight gain
The key indices started the Thursday session on a sharply higher note after equity futures received an early morning boost, which took place after the Swiss National Bank imposed negative deposit rates (-0.25%). The central bank said the move is aimed at lowering the three-month LIBOR below zero and European investors viewed the announcement as a prelude to a sovereign QE program from the European Central Bank.
European equities, U.S. futures, and commodities rallied following the news, but crude oil fell victim to renewed selling interest after climbing above the $58.50/bbl level in the early morning. The energy component ended near its worst level of the day, down 4.0% at $54.19/bbl.
For its part, the energy sector (+2.1%) displayed relative strength at the start, but was pressured from its high by the intraday weakness in crude. Marathon Oil (MRO 27.56, +0.89) finished ahead of the sector, adding 3.3%, after lowering its 2015 capital, investment, and exploration budget by about 20.0% from this year's levels due to the recent plunge in the price of crude. The energy sector was the only group that could not climb above its morning high.
Outside of energy, consumer discretionary (+1.6%) and materials (+2.3%) were the only other cyclical groups that could not finish ahead of the broader market. A handful of quick-service restaurant names contributed to the underperformance of discretionary shares after Dunkin Brands (DNKN 43.05, -3.17) issued below-consensus guidance for fiscal year 2015. Shares of DNKN tumbled 6.9% while peers Krispy Kreme (KKD 18.98, -0.75) and Starbucks (SBUX 80.03, -0.41) lost 3.8% and 0.5%, respectively.
Elsewhere among cyclical sectors, technology (+3.0%) did some heavy lifting with a sizable assist from Oracle (ORCL 45.35, +4.19). The stock surged 10.2% in reaction to better than expected results while other large cap names like Apple (AAPL 112.65, +3.24), Microsoft (MSFT 47.52, +1.78), and IBM (IBM 157.68, +5.75) rallied between 3.0% and 3.9%.
Over on the countercyclical side, consumer staples (+2.0%), telecom services (+1.8%), and utilities (+2.0%) lagged while the health care sector (+2.8%) ended ahead of the broader market with help from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 313.97, +10.59) spiked 3.5%.
Treasuries ended the day just above their lows with the 10-yr yield higher by seven basis points at 2.21%.
Participation was well ahead of average with more than 950 million shares changing hands at the NYSE floor.
Economic data included Initial Claims, Leading Indicators, and the Philadelphia Fed Survey:
- Initial jobless claims fell to 289,000 from a revised rate of 295,000 (from 294,000) while the Briefing.com consensus expected a decline to 292,000
- Continuing claims fell to 2.373 million from 2.520 million
- The Philadelphia Fed's Business Outlook fell to 24.5 in December from 40.8 in November while the Briefing.com consensus expected a decline to 26.0
- While the index deteriorated across the board, it was coming off a high point that was simply not sustainable
- The Conference Board's Leading Economic Index increased 0.6% for a second consecutive month in November after a downward revision (from 0.9%) to the October data
- The Briefing.com Consensus expected an increase of 0.5%
from Briefing.com
- Initial Claims : 289K vs 292K (Prior 295K)
- Continuing Claims : 2373K vs 2510K (Prior 2520K)
- Philadelphia Fed : 24.5 vs 26.0 (Prior 40.8)
- Leading Indicators : 0.6% vs 0.5% (Prior 0.6%)
- Natural Gas Inventories : -64bcf (Prior -51bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level fell to 289,000 for the week ending December 13 from an upwardly revised 295,000 (from 294,000) for the week ending December 6. The Briefing.com consensus expected the initial claims level to fall to 292,000.
- The continuing claims level fell to 2.373 mln for the week ending December 6 from an upwardly revised 2.520 mln (from 2.514 mln) for the week ending November 29. The consensus expected the continuing claims level to fall to 2.510 mln.
Key Factors
- Over the past several weeks, the initial claims level has stabilized below 300,000, and there has been very little volatility. This level is often associated with an employment sector that is at, or very near, full employment.
- The DOL did not provide any explanation for the sharp up-and-down move in the continuing claims level. Considering the stability in the initial claims level, the volatility of that magnitude in the continuing claims data seemed very unusual. At this point, we will chalk it up to normal, but unexpected movements, and not the start of a new trend.
Big Picture
- The overall unemployment claims data are still showing an economy at, or near, full employment.
PHILADELPHIA FED
Highlights
- The Philadelphia Fed’s Business Outlook fell to 24.5 in December from 40.8 in November. The Briefing.com Consensus expected the index to fall to 26.0.
Key Factors
- While the index deteriorated across the board, it was coming off a high point that was simply not sustainable. The overall trends continue to point toward a solid manufacturing expansion in the Philadelphia region. That compares favorably to the most recent New York Fed’s Empire Manufacturing Survey, which showed an unexpected contraction in activities in December.
- The Shipments Index fell to 16.1 in December from 31.9 in November. The pullback was in response to a sharp deceleration in new orders growth, 15.7 in December from 35.7 in November. Unfilled orders remained positive, moving to 1.5 from 7.1, which should contribute toward stronger shipments growth in case of another pullback in new orders.
- The Number of Employees Index declined to 7.2 in December from 22.4 in November. The average workweek also decelerated, dropping from 7.8 in November to 6.2 in December.
Big Picture
- The pullback in the index was only natural after the outsized gain in November.
LEADING INDICATORS
Highlights
- The Conference Board’s Leading Economic Index increased 0.6% for a second consecutive month in November after a downward revision (from 0.9%) to the October data. The Briefing.com Consensus expected the Leading Indicators Index to increase 0.5%.
Key Factors
- Since 8 of the 10 components of the index are known prior to the release, the difference between the actual and consensus is generally small. In this case, the Conference Board likely estimated a stronger increase in orders of nondefense capital goods excluding aircraft than the consensus did.
- The only negative contributors this month were from the initial claims level and building permits.
Big Picture
- The Leading Indicators Index points toward a generally improving economy.
Market Internals
NYSE:
Lower Volumes than the day before – 976.1M vs 1050M
Advancers outpaced Decliners (adv/dec): 2547 / 585
New Highs outpaced New Lows (highs/lows): 189 / 21
NASDAQ:
Lower Volumes than the day before – 2156.5M vs 2259.7M
Advancers outpaced Decliners (adv/dec): 2100 / 669
New Highs outpaced New Lows (highs/lows): 130 / 44
VOLATILITY S&P500 (VIX)
16.81 -2.63 (-13.53%)
Internals are on the bullish side. VIX gaps down and broke below 17.00. This shows to me that the bullishness is starting to gather its momentum back.
Technical Updates
17,778.15 +421.28 (+2.43%)
Volume: 123,977,104 (above average of 94,835,849)
Range: 17,367.85 - 17,778.40
4,748.40 +104.09 (+2.24%)
Volume: 554.2M (above average of 504,499,456)
Range: 4,697.09 - 4,748.40
S&P 500 INDEX (SPX: CBOE)
2,061.23 +48.34 (+2.40%)
Volume: 667.2M (above average of 555,790,891)
Range: 2,018.98 - 2,061.23
Market regains most of the losses from the correction last week. Nothing much to say besides market starts to rally again. If the MACD gets into the positive area, I suppose market is likely to make a new high soon as more buyers start to come in.
Commodities, Currencies and Bonds
Closing Commodities: Oil Collapses Off Today’s High
- Oil prices continue to be very volatile
- Jan crude oil surged as high as $58.73/barrel, but completely lost steam and it sailed back down to finish the day at $54.19/barrel
- Natural gas rose 8 cents to $3.70/MMBtu
- Precious metals closed unchanged today, both gold and silver, while copper fell 2 cents to $2.85/lb
Energy price action
- Jan crude oil slid $2.25/barrel, closing today’s pit session at $54.19/barrel
- Crude pulled back notably off of its $58.73/barrel HoD
- Natural gas fell 6 cents to $3.64/MMBtu
- RBOB Gasoline fell 3 cents to $1.54/gallon
- Heating oil fell 12 cents to $1.89/gallon
Agricultural price action
- Mar Corn rose 3 cents higher to $4.11/bushel
- Jan wheat rose 4 cents to $6.53/bushel
- Jan soybeans rose 8 cents at $10.36/bushel
- Ethanol rose 6 cents higher at $1.65/gallon
- Sugar #11 rose 0.27 cents to 14.99 cents/gallon
Metals price action
- Feb gold ended today’s session unchanged at $1194.90/oz
- Mar silver also ended unchanged at $15.93/oz
- Mar copper fell 2 cent to $2.85/lb
Currency: Dollar Flirts with Best Close Since March 2009
- The Dollar Index holds slim gains as trade probes the 89.30 level and flirts with its best close since March 2009.
- The Index tested 88.90 in early action, but has spent almost the entire U.S. trade trapped between 89.20/89.40.
- EURUSD is -65 pips @ 1.2275 as trade contends with its worst finish since August 2012. Aiding today's decline was a disappointing German Ifo Business Climate survey as sellers remain in control after action over the past two days failed at the 50 dma. GfK German Consumer Climate is due out tomorrow.
- GBPUSD is +90 pips @ 1.5665 as action rallied off key support near 1.5600. Sterling was been boosted by this morning's strong retail sales figure, but remains stuck in the 1.5600/1.5800 range that has been in place over the past month. Britain's public sector net borrowing and CBI Realized Sales are scheduled for tomorrow.
- USDCHF is +75 pips @ .9805 as trade presses to its best level in over two years after the Swiss National Bank announced it would charge banks 25bps on their deposits. The announcement comes as the SNB attempts to get out in front of a potential announcement of QE-type program by the European Central Bank in early-2015.
- USDJPY is +20 pips @ 118.80 as trade remains on hold ahead of tonight's Bank of Japan policy meeting. Expectations are for nothing new to be announced at tonight's meeting; however, there has been some rumblings the government is in the process of putting together a stimulus package to support the economy.
- AUDUSD is +35 pips @ .8155 as action ticks off 54-month lows. The rebound in the hard currency comes despite further weakness in Chinese home prices, and is likely tied to action checking up on key support. Today marked just the third gain in sixteen sessions.
- USDCAD is -25 pips @ 1.1600 as trade continues to slide off its best levels since July 2009. The pair will be in focus tomorrow as Canada's CPI and retail sales will be released.
Bonds: Treasuries See Second Day of Selling
- Treasuries finished off their worst levels, but still booked modest losses as sellers remained in control for a second session.
- The complex held small losses into the cash open and put in fresh lows as initial (289K actual v. 292K expected) and continuing (2373K actual v. 2510K expected) claims outpaced expectations.
- Selling pushed maturities to new lows after the mixed Philly Fed (24.5 actual v. 26.0 expected) and leading indicators (+0.6% actual v. +0.5% expected) data before drifting in a tight range over the remainder of the session.
- Up front, the 2Y added +4.8bps to 0.633% and finished just shy of its best close since April 2003.
- In the belly, the 5Y tacked on +4.7bps to 1.659%. The yield reclaimed both its 100 and 200 dma and ended at a two-week high.
- The 10Y rallied +5.6bps to 2.204%. The benchmark yield reclaimed the important 2.200% level that was early fingered as a potential bottom by bond guru Jeff Gundlach.
- Selling at the long end ran the 30Y up +6bps to 2.812%. A test of resistance in the 2.900% area is looking possible.
- Curve steepening continued as the 2-10-yr spread widened to 157bps.
- Precious metals ended mixed as gold gained +$3 to $1197 and silver slipped -$0.01 to $15.91.
- Data: None.
- Fed Speak: Chicago's Evans will make opening remarks at the Second Annual Summit on Regional Competiveness (10). Richmond's Lacker discusses the economy (12:30).
Treasury Yields:
- 2 Year Note 0.67% +0.05
- 5 Year Note 1.68% +0.07
- 10 Year Note 2.22% +0.08
- 30 Year Bond 2.82% +0.08
2/30 Spread: 215 bps ( +3 ) … 2/10 Spread: 155 bps ( +3 )
Preview for Friday 19 Dec, 2014
- No Economic Data
Summary
Two record bullish session consecutively. I think that pretty much sums up how the week is going to be like. Early session tomorrow I reckon to have some profit-taking. Friday is quadruple witching so it is going to bring in more volatility to the market. On top of that, there is no major economic data releasing so it should be a quiet session.
Looking at the market sentiment, chances of having a Santa Claus rally is quite possible. And with that to wrap up year 2014 does seems like a good thing after all...
Looking at the market sentiment, chances of having a Santa Claus rally is quite possible. And with that to wrap up year 2014 does seems like a good thing after all...
Direction for the Friday 19 Dec, 2014; Up
Daily Directional Accuracy (from 25 November 2014): 7/14 (50.00%)
Weekly Directional Accuracy (from 31 October 2014): 2/6 (33.33%)
Weekly Directional Accuracy (from 31 October 2014): 2/6 (33.33%)
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