Dow +6.04 at 18030.21, Nasdaq +8.05 at 4773.46, S&P -0.29 at 2074.63
Market remains cautious as it reaches a new high. I think it is likely that market is going to consolidate before we see another breakout. With Christmas coming along the way, I reckon the week is going to be up too.
Do bear in mind tomorrow is a shortened trading session and the market will be closed at 1300 ET.
Wishing everyone a Merry Christmas and a Happy New Year. Cheers.
Direction for Wednesday 24 Dec, 2014; Up
Nothing much expected from a shortened session. Although market started rather strong, I think there was some profit taking before the market closed. Anyway it was a flat day given the lack in volume during Christmas Eve...
Market Summary
Industry Watch
Strong: Health Care, Industrials, Utilities
Weak: Consumer Discretionary, Energy, Materials, Telecom Services
Other Market Moving Factor:
- NYSE will close at 13:00 ET
- Crude oil under pressure
- Biotechnology rebounds from recent weakness
Equity indices started with slim gains and inched higher into the afternoon amid light volume, before a wave of selling interest knocked the indices from their highs. Only 340 million shares changed hands at the NYSE floor, which was a far cry from the average full session total of about 826 million.
Only three sectors finished in the green while energy (-0.8%) played the role of Grinch. The growth-sensitive group could not make it into positive territory as crude oil weighed. The energy component fell 3.6% to $55.08/bbl with a larger than expected inventory build contributing to the weakness.
The benchmark index was kept from following the energy sector into the red by the relative strength in the heavily-weighted health care space (+0.7%). The countercyclical group erased a portion of yesterday's decline and narrowed its week-to-date loss to 2.7% with biotechnology powering the move. The iShares Nasdaq Biotechnology ETF (IBB 299.80, +5.12) spiked 1.7% and reclaimed its 50-day moving average after settling below that level yesterday. Furthermore, the high-beta group was partially responsible for the outperformance of the Nasdaq.
The tech-heavy index owed some of its strength to chipmakers as the PHLX Semiconductor Index added 0.2%. For its part, the broader technology sector (-0.1%) ended just behind the market amid mixed performance in top-weighted listings. Apple (AAPL 112.01, -0.53), Google (GOOGL 536.93, -1.84), and Microsoft (MSFT 48.14, -0.31) lost between 0.3% and 0.6% while Cisco Systems (CSCO 28.30, +0.05),Oracle (ORCL 46.16, +0.15) and Qualcomm (QCOM 74.66, +0.06) posted gains between 0.1% and 0.3%.
Elsewhere among cyclical sectors, industrials (+0.1%) eked out a slim gain while consumer discretionary (-0.2%) and financials (-0.2%) lagged.
On the countercyclical side, the consumer staples sector ended lower by 0.2% while the utilities sector (+1.8%) ended in the lead.
Treasuries climbed into the green as the session neared the end with the 10-yr yield slipping one basis point to 2.26%.
Economic data was limited to initial claims and the MBA Mortgage Index:
- Weekly initial claims fell to 280,000 from an unrevised 289,000 while the Briefing.com consensus expected an increase to 290,000
- Layoff activities have stabilized and claims are holding firmly below 300,000, which is a level that is normally associated with an economy at, or near, full employment
- Continuing claims increased to 2.403 million from an upwardly revised 2.378 million for the week ending December 6 while the consensus expected a decline to 2.358 million
- The weekly MBA Mortgage Index increased 0.9% to follow last week's 3.3% decline
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 0.9% (Prior -3.3%)
- Initial Claims : 280K vs 290K (Prior 289K)
- Continuing Claims : 2403K vs 2358K (Prior 2378K)
- Crude Inventories : 7.267M (Prior -0.847M)
- Natural Gas Inventories : -49 bcf (Prior -64 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level fell to 280,000 for the week ending December 20 from an unrevised 289,000 for the week ending December 13. The Briefing.com Consensus expected the initial claims level to increase to 290,000.
- The continuing claims level increased to 2.403 mln for the week ending December 13 from an upwardly revised 2.378 mln (from 2.373 mln) for the week ending December 6. The consensus expected the continuing claims level to fall to 2.358 mln.
Key Factors
- Layoff activities have stabilized and claims are holding firmly below 300,000. These are levels that are normally associated with an economy at, or near, full employment.
Big Picture
- The overall unemployment claims data are showing an economy at, or near, full employment.
Market Internals
NYSE:
Lower Volumes than the day before – 348.8M vs 692.7M
Decliners outpaced Advancers (adv/dec): 1462 / 1549
New Highs outpaced New Lows (highs/lows): 202 / 21
NASDAQ:
Lower Volumes than the day before – 719.5M vs 1573.2M
Advancers outpaced Decliners (adv/dec): 1585 / 1115
New Highs outpaced New Lows (highs/lows): 99 / 24
VOLATILITY S&P500 (VIX)
14.37 -0.43 (-2.91%)
It's been a flat session and internals are not showing any significance here. VIX is still remaining cautious.
Technical Updates
18,030.21 +6.04 (+0.03%)
Volume: 42,865,704 (below average of 94,626,239)
Range: 18,027.78 - 18,086.24
4,773.47 +8.05 (+0.17%)
Volume: 195,599,382 (below average of 500,968,631)
Range: 4,768.67 - 4,787.58
S&P 500 INDEX (SPX: CBOE)
2,081.88 -0.29 (-0.01%)
Volume: 224,945,000 (below average of 558,101,785)
Range: 2,081.86 - 2,087.56
DOW has a doji while S&P and NASDAQ seem to form a reversal pattern here. Given the lack in volume, I suppose market is neither going up or down but the latter seems to be more imminent.
Commodities
- Shortly after U.S. markets closed yesterday, API oil inventory data was released, reporting a build of 5.4 million barrels.
- This sent WTI crude oil futures trading lower to around $56.50/barrel (Feb crude closed at $57.09/barrel yesterday, up $1.71).
- This morning, crude oil extended those losses ahead of the weekly EIA storage
- Following the oil data crude fell even further and is now -3.2% at $55.28/barrel
- Jan nat gas extended lower in recent trade as well and is now -2.5% at $3.09/barrel
- Metals are mixed with Feb gold -0.4% at $1173.90/oz, Mar silver -0.2% as $15.73/oz and Mar copper -0.6% at $2.85/lb
Currencies
Dollar Slips in Quiet Trade:
- The Dollar Index has slipped back below the 90.00 level and holds small losses near 89.95.
- The 90.00 area remains a headwind as the 200 mma converges with the 38.2% retracement of the 2001-2008 decline.
- Action will be lackluster as banks across much of the world are closed in observance of Christmas Eve.
- EURUSD is +20 pips @ 1.2190 as trade works its way off 28-month lows. Overnight action has been choppy, limited to a 35 pip range, as banks across the region are shuttered for Christmas Eve.
- GBPUSD is +20 pips @ 1.5540 as action ticks off its worst levels since September 2013. Sterling found early support at the 1.5500 level amid the holiday-shortened session.
- USDCHF is -15 pips @ .9860 as trade piggybacks the action in the euro. Today’s KOF Economic Barometer (98.7 actual v. 99.2 expected, 98.9 previous) has been largely overlooked.
- USDJPY is -25 pips @ 120.40 as selling emerges for the first time in five days. The seven-year highs near 122.00 remain under close watch.
- AUDUSD is +10 pips @ .8115 as action checks up at 54-month lows. Support at the level dates back to the summer of 2009. USDCNY slid to 6.2163.
- USDCAD is -15 pips @ 1.1600 as light selling takes hold for a second session. The 1.1550 area provides near-term support.
Bonds
Treasuries End Mixed in Holiday-Shortened Trade:
- Treasuries finished mixed.
- The complex drifted little changed into the cash open and press to new lows following the mixed initial (280K actual v. 290K expected) and continuing (2403K actual v. 2358K expected) claims data.
- Light selling would persist into this morning's disappointing $29B 7Y note auction. The auction drew 2.125% (WI 2.119%) and a light 2.39x bid/cover. A strong indirect bid (56.5%) provided support as directs (5.9%) were light. Primary dealers ended up with just 37.6% of the supply.
- A post-auction bid developed at the long end, dropping the 30Y -1.8bps to 2.834%. The squeeze came as the 30Y was unable to pierce the 2.900% resistance level.
- The 10Y ticked up +0.7bps to 2.264%. The benchmark yield hit a two-week high of 2.300% before ending on the 50 dma (2.258%).
- Modest selling in the belly ran the 5Y up +3.2bps to 1.759%. Action approached the important 1.800% level before tapering off into the close.
- Up front, the 2Y slipped -0.3bps to 0.735%. Early selling caused the yield to hit 0.762%, its highest since April 2011.
- A slightly steeper curve took hold as the 2-10-yr spread widened to 153bps.
- Precious metals slipped as gold fell -$4 to $1174 and silver lost -$0.01 to $15.76.
- Markets are closed Thursday in observance of Christmas Day.
- There is no data on Friday.
Treasury Yields:
- 2 Year Note 0.73% UNCH
- 5 Year Note 1.76% UNCH
- 10 Year Note 2.27% +0.01
- 30 Year Bond 2.83% -0.02
2/30 Spread: 210 bps ( -2 ) … 2/10 Spread: 154 bps ( +1 )
Preview for Friday 26 Dec, 2014
- No Economic Data
Summary
Market seems to have a mixed leadership. That is why it is likely to consolidate. There are going to have some profit-taking along as market continues to go higher. At this point in time, the likelihood of Santa Claus rally somehow daunted by the January Barometer (FYI January ended in red).
I am still cautious on the momentum. Let's see if the market is able to hold on to the bullishness...
I am still cautious on the momentum. Let's see if the market is able to hold on to the bullishness...
Direction for Friday 26 Dec, 2014; Down
Daily Directional Accuracy (from 25 November 2014): 11/18 (61.11%)
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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