Thursday, 29 Jan 2015 - AMC

Dow +225.48 at 17416.85, Nasdaq +45.41 at 4683.41, S&P +19.09 at 2021.25

It seems like the market is forming a downtrend. For confirmation we should see a lower highs and lower lows. I think there should be a pullback before the market continues to go down lower...

Direction for Thursday 29 Jan, 2015; Up

Third candle reversal? The market took a rebound and from what I see I think that would probably be a short-covering session.          

Market Summary

Industry Watch

Strong: Consumer Discretionary, Financials, Utilities

Weak: Energy, Health Care, Technology, Telecom Services

Other Market Moving Factor:

• Crude oil sets fresh January low after surrendering early morning gain
• S&P 500 looks to regain 100-day moving average (2,010)

[BRIEFING.COM] The stock market endured a volatile session on Thursday, but a steady rebound off morning lows helped the major averages register their first gain in three days. The Dow Jones Industrial Average paced the advance (+1.3%) while the S&P 500 (+1.0%) reclaimed its 100-day moving average (2,010). 

Equities faced some selling pressure at the start amid continued weakness in crude oil. The energy component set a fresh January low in the $43.60/bbl area, but was able to charge back to unchanged by the pit close. That rebound improved the overall risk tolerance and helped the S&P 500 find support just a point above its January low (1988.12). Dip buyers entered the picture about 90 minutes after the start of the session, which helped all ten sectors rebound off their lows. 

The materials space (+1.4%) finished in the lead thanks to better than expected earnings from Dow Chemical (DOW 45.02, +1.99). The stock spiked 4.6% and gave a boost to its peers. Meanwhile, the other commodity-related sector—energy (+0.2%)—was the weakest performer. 

Elsewhere, the discretionary sector (+1.3%) outperformed throughout the session after several major components reported earnings. Homebuilders surged after PulteGroup (PHM 21.82, +1.24) and Ryland Group (RYL 39.62, +2.95) reported better than expected results with iShares Dow Jones US Home Construction ETF (ITB 25.86, +0.83) spiking 3.3%. Heavily-weighted Ford (F 14.85, +0.39) andMcDonald's (MCD 93.27, +4.49) also rallied after the former beat estimates while the latter announced the retirement of its Chief Executive Officer. The broad strength within the sector overshadowed an 8.8% loss in the shares of Alibaba (BABA 89.81, -8.64) after the company missed revenue expectations. 

Similarly, the industrial sector (+1.2%) outperformed while technology (+1.1%) overtook the broader market into the close. Top-weighted names like Apple (AAPL 118.90, +3.59), IBM (IBM 155.48, +3.93), and Microsoft (MSFT 42.01, +0.82) jumped between 2.0% and 3.1%, which helped overshadow a 10.3% decline in Qualcomm (QCOM 63.69, -7.30) brought on by disappointing guidance for the fiscal year. 

When the dust settled, four of six cyclical sectors ended ahead of the S&P 500 while the utilities sector (+1.3%) represented the only outperformer on the countercyclical side. 

Treasuries spent the day in a steady retreat with the 10-yr yield climbing four basis points to 1.76%. 

Today's participation was a bit above average as 843 million shares changed hands at the NYSE floor. 

Economic data was limited to jobless claims and pending home sales: 

• The initial claims level dropped to 265,000 for the week ending January 24 from an upwardly revised 308,000 (from 307,000) while the Briefing.com consensus expected a decline to 301,000 
  • Not only did the drop break three consecutive weeks above 300,000, but the initial claims level fell to its lowest level since April 2000 o As it has for the past several months, the Department of Labor reported that there were no special factors impacting the report 
  • The continuing claims level declined to 2.385 million from an upwardly revised 2.456 million (from 2.443 million) while the consensus expected a drop to 2.429 million 
• Pending home sales for December fell 3.7% while the Briefing.com consensus expected an increase of 0.6% 

Tomorrow, the advance reading of Q4 GDP (Briefing.com consensus 3.2%) will be released at 8:30 ET alongside the Q4 Employment Cost Index (consensus 0.5%). The Chicago PMI report for January (consensus 58.0) will cross the wires at 9:45 ET while the final reading of the January Michigan Sentiment Index will be reported at 9:55 ET (consensus 98.2). 

Macroeconomic Data

Economic Data

from Briefing.com

• Initial Claims : 265K vs 301K (Prior 308K)
• Continuing Claims : 2385K vs 2429K (Prior 2456K)
• Pending Home Sales : -3.7% vs 0.6% (Prior 0.6%)
• Natural Gas Inventories : -94bcf (Prior -216bcf)

UNEMPLOYMENT CLAIMS

Highlights

• The initial claims level dropped to 265,000 for the week ending January 24 from an upwardly revised 308,000 (from 307,000) for the week ending January 17. The Briefing.com Consensus expected the initial claims level to fall to 301,000.
• The continuing claims level declined to 2.385 mln for the week ending January 17 from an upwardly revised 2.456 mln (from 2.443 mln) for the week ending January 10. The consensus expected the continuing claims level to drop to 2.429 mln.

Key Factors

• Not only did the drop break three consecutive weeks above 300,000, but the initial claims level fell to its lowest level since April 2000.
• As it has for the past several months, the DOL reported that there were no special factors impacting the initial claims level.
• It is still unknown why the initial claims level suddenly and unexpectedly jumped above 300,000. There were reports that low oil prices were causing increased layoffs in the energy sector, but the state-specific data do not support this. For example, even though the national aggregate initial claims level was still above 300,000 for the week ending January 17,  big energy producing states such as Texas and North Dakota reported that their specific initial claims levels declined by more than 1,000.

Big Picture

• The initial claims level supports monthly payroll growth above 200,000.

Market Internals

NYSE:

Higher Volumes than the day before – 863.0M vs 856.6M 


Advancers outpaced Decliners (adv/dec): 2096 / 1000

New Highs outpaced New Lows (highs/lows): 211 / 145

NASDAQ:

Lower Volumes than the day before – 1993.0M vs 2094.7M

Advancers outpaced Decliners (adv/dec): 1820 / 929

New Lows outpaced New Highs (highs/lows): 41 / 115

VOLATILITY S&P500 (VIX)

18.76 -1.68 (-8.22%)

The internals are getting back some bullishness but I am still quite skeptical in fact. Despite VIX closed lower than Wednesday, but it is not convincing enough.   

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,461.85 +225.48 (+1.31%)

Volume: 111,691,735 (above average of 90,149,639)

Range: 17,136.30 - 17,433.13

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,683.41 +45.41 (+0.98%)

Volume: 529,674,055 (above average of 448,407,752)

Range: 4,601.76 - 4,688.41

S&P 500 INDEX (SPX: CBOE)

2,021.25 +19.09 (+0.95%)

Volume: 620,130,000 (above average of 515,720,831)

Range: 1,989.18 - 2,024.64 

The respective support levels are quite significant as the indices rebound after they could not break lower. NASDAQ is forming a symmetrical triangle and S&P is likely to form a flag. It won't be long before another breakout but I reckon the bears are still in control and the market is likely to go down further.  

Commodities

Closing Commodities: Silver Gets Hammered, Falling Over 7%, While Nat Gas Drops 5% Following Inventory Data

• Metals continued to trade lower today and silver futures posted the biggest loss.
• In fact, silver was the worst performing commodity today
• Mar silver ended the day 7.4% lower at $16.76/oz. Feb gold, meanwhile, fell 2.4% to $1254.90/oz
• Crude put in a small rally into the close, finishing up the day 6 cents higher at $44.59/barrel
• Mar nat gas lost 5% to $2.72/MMBtu following bearish weekly storage data

Energy Price Action

• Mar crude oil futures rose $0.06/barrel to $44.59/barrel
• Mar natural gas fell $0.13 cents (or -4.6%) to $2.72/MMBtu
• RBOB Gasoline closed $0.01 higher at $1.39/gallon
• Heating oil closed $0.01 lower at $1.60/gallon

Agricultural Price Action

• Mar corn closed $0.01 lower at $3.73/bushel
• Mar wheat closed $0.03 higher at $5.08/bushel
• Feb soybeans ended $0.02 lower at $9.68/bushel
• Ethanol closed $0.01 lower at $1.38/gallon
• Sugar #11 closed $0.31 lower (or -2%) at 14.85 cents/gallon

Metals Price Action

• Feb gold ended today’s session $30.70 lower at $1254.90/oz
• Mar silver ended $1.33 lower at $16.76 /oz
• Mar copper closed $0.03 lower to $2.45/lb

Currencies

Fed Sends Mixed Signals: The Dollar Index has pulled back from early highs and is attempting to hold the 94.40 area. Markets continue to digest the FOMC Statement from yesterday. There was a little bit for everyone as the Fed provided some dovish commentary on inflation and International Markets. But that was offset on some hawkish commentary on the economy, jobs and consumer spending trends. Economic data was mixed as Initial Claims was better than expected but December New Home Sales fell short of expectations.

• The euro fell to 1.1262 overnight but has been able to push back above the 1.13 level. Headlines between Greek and EU officials have cooled noticeably over the past 24 hours which has helped provide a small bid in the single currency. Economic data from the region remained poor with German CPI and Jobs remaining light and Eurozone Money Supply and Private Loans. This should not come as a surprise given the ECB embarking on a massive QE program.
• The pound has fallen back to the 1.5050 area this morning. 1.50 has set up as a key support level but it would appear sterling is ready to test it once again.
• The yen has fallen back into the 118 level this morning despite the risk off trade in equities. The yen has been straddling the 118 level for the past few sessions. 118.20 is setting up as a key support level in early intraday trade.

Bonds

A Breather:

• Following the release of the FOMC directive on Wednesday, Treasuries rallied sharply.  On Thursday there wasn't any follow through.  Yields moved up across the curve on modest selling efforts.
  • 2-yr yield +1 bp to 0.50%
  • 5-yr yield +3 bps to 1.27%
  • 7-yr yield +2 bps to 1.55%
  • 10-yr yield +3 bps to 1.75%
  • 30-yr bond +2 bps to 2.31%
• Factors contributing to the price pullback included:
  • A notable bounce in Greek stock and bond markets that cut back on the safe-haven trade
  • Strong initial claims data out of the U.S.
    • Filings fell to 265,000 for the week ending January 24 (Briefing.com consensus 301,000) from 308,000 the week before.  That is the lowest initial claims reading since April 2000.
  • Tepid demand at the $35 bln 5-yr note and $29 bln 7-yr note auction
    • 5-yr note auction drew a high yield of 1.288% on a 2.49 bid-to-cover ratio that trailed the prior 12-auction average of 2.72. Solid demand from indirect bidders, though, which had 63.1% of accepted competitive bids (prior 12-auction average was 51.4%)
    • 7-r note auction drew a high yield of 1.59% on a 2.50 bid-to-cover ratio that was just shy of the prior 12-auction average of 2.56.
  • A broad-based rally effort in the stock market
    • S&P 500, down 0.7% at its morning low, reversed course and was up 0.9% as of this post
• 2-10-yr spread widened to 125 bps from 122 bps at Wednesday's settlement
• Some notable resilience in the oil market today
  • WTI crude futures traded below $44.00/bbl, but found support and jumped 0.2% to $44.55/bbl
  • The turn oil prices helped drive the S&P 500 rally effort.  The S&P 500 energy sector, down 2.0% at its lows of the morning, was unchanged as of this post
• U.S. Dollar Index +0.3% to 94.77, bolstered by weaker yen
• Precious metals hit hard
  • Gold -2.3% to $1257.40/troy oz.
  • Silver -6.6% to $16.91/troy oz.
• Friday's data: Advance estimate for Q4 GDP (Briefing.com consensus 3.2%; prior 5.0%) [08:30 ET]; Q4 Employment Cost Index (Briefing.com consensus 0.5%; prior 0.7%) [08:30]; Chicago PMI (Briefing.com consensus 58.0; prior 58.3) [09:45]; Final January reading for University of Michigan Consumer Sentiment (Briefing.com consensus 98.2; prior 98.2) [09:55]

Treasury Yields:

• 2 Year Note 0.51% +0.01
• 5 Year Note 1.28% +0.03
• 10 Year Note 1.77% +0.04
• 30 Year Bond 2.33% +0.04

2/30 Spread: 182 bps ( +3 ) …  2/10 Spread: 126 bps ( +3 )

Preview for Friday 30 Jan, 2015

Economic Data

• GDP-Adv : 3.2% (Prior 5.0%)
• Chain Deflator-Adv : 1.0% (Prior 1.4%)
• Employment Cost Index : 0.5% (Prior 0.7%)
• Chicago PMI : 58.0 (Prior 58.3)
• Michigan Sentiment - Final : 98.2 (Prior 98.2)

Earnings Highlights

Friday : 
BMO - ABBV MO BZH BERY CVX CNX LLY BEN GHM IDXX IMGN IR INGR KCG LEA LM MGIC MAN MA MAT NWL NS OFG PSTB PFS SAIA SPG TY TSN WY WRX

AMC - TLMR

Summary

I don't see anything that could make me to bullish at the moment. It seems to me that the market is going to experience more volatile and probably a (bearish) breakout soon.

Tomorrow we will see the GDP number and that could give the market some shake up.

Direction for Friday 30 Jan, 2015; Up

2015 Daily Directional Accuracy: 6/17 (35.29%) 
2015 Weekly Directional Accuracy: 2/3 (66.67%)

Wednesday, 28 Jan 2015 - AMC

Dow -195.84 at 17191.37, Nasdaq -43.50 at 4637.99, S&P -27.39 at 2002.16

Watch out for tomorrow as we are expecting the first FOMC meeting of year 2015. I think the market is likely to consolidate prior to the meeting at 2pm ET. I don't think the Fed would probably push back their decision to raise interest rate as the state of economy is not being healthy yet. My guess is that it might drag the market down further? Let's see how it goes then...

Direction for Wednesday 28 Jan, 2015; Abstain

Well the market really went down after the hawkish FOMC statement. Other than that market started out in positive due to the better performance from Boeing and Apple. I still feel the market is rather weak to go higher, perhaps the opposite is more appropriate instead...         

Market Summary

Industry Watch

Strong: Technology

Weak: Consumer Discretionary, Energy, Health Care, Financials, Materials

Other Market Moving Factor:

• Sliding crude pressures energy sector and weighs on overall risk tolerance
• Better than expected earnings from Apple (AAPL) and others
• FOMC policy directive reiterates intent to remain patient

[BRIEFING.COM] The stock market finished the midweek session on a lower note despite showing considerable strength in the early going. The S&P 500 (-1.4%) lost its 100-day moving average (2,010) and settled behind the Nasdaq Composite (-0.9%) while the Russell 2000 (-1.7%) lagged throughout the day. 

Equities appeared to be on solid footing at the start with the Nasdaq up 1.0% after Apple (AAPL 115.31, +6.17) reported better than expected results for the quarter and issued strong guidance. The stock surged 5.7% and helped the technology sector (-0.1%) finish near its flat line while most of the remaining sectors struggled. 

The benchmark index traded little changed ahead of the afternoon release of the latest policy statement from the Fed, but slumped into the close. Once again, the policy directive reiterated the Fed's intent to remain patient in determining the appropriate timing for the first rate hike, which helped send Treasuries to new highs. The 10-yr yield fell ten basis points to 1.73% while the 30-yr yield dropped 11 basis points to register its lowest close on record (2.28%). 

The Fed described U.S. economic growth as ‘solid' while categorizing job growth as ‘strong.' The central bank did not spend much time discussing overseas developments, which could help explain some of the selling that developed after the statement was released. Furthermore, the FOMC showed little concern over low inflation, saying that while the price level is expected to decline in the near term, a gradual return to 2.0% should follow once the ‘transitory effects of lower energy prices and other factors dissipate.' 

Today, however, energy prices deteriorated further with crude oil dropping 3.6% to $44.53/bbl. The energy component continued slipping in electronic trade while the energy sector plunged 3.9% to widen its January decline to 5.7%. 

The energy sector resides near the bottom of the January leaderboard with only financials (-2.0%) showing a larger decline for the month (-6.3%). Together, the underperformance of the pair serves as a reminder of the global growth concerns that have been at the forefront so far in 2015. 

Elsewhere among influential sectors, consumer discretionary (-1.3%) and health care (-1.5%) finished a little behind the market while industrials (-0.9%) outperformed. Retailers and media names pressured the discretionary sector while biotechnology weighed on health care. The iShares Nasdaq Biotechnology ETF (IBB 318.98, -7.00) lost 2.2%. 

For its part, the industrial space ended ahead of the broader market thanks to upbeat earnings and guidance from Dow component Boeing (BA 139.64, +7.16). In other earnings news, Electronic Arts (EA 54.61, +6.20) and Freescale Semiconductor (FSL 31.16, +4.81) surged 12.8% and 18.3%, respectively, after beating estimates. 

The afternoon slide fueled a rush for portfolio protection, evidenced by a 17.9% spike in the CBOE Volatility Index (VIX 20.30, +3.08). The near-term volatility measure returned to last week's levels with the entire move taking place after the FOMC statement. 

Today's participation was a little above average with 835 million shares changing hands at the NYSE floor. 

Economic data was limited to the weekly MBA Mortgage Index, which fell 3.2% to follow the prior week's surge of 16.1%. 

Tomorrow, weekly Initial Claims will be reported at 8:30 ET (Briefing.com consensus 301K) while the Pending Home Sales report for December (consensus 0.6%) will be released at 10:00 ET. 

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : -3.2% (Prior 14.2%)
• Crude Inventories : 8.874M (Prior 10.071M)
• FOMC Rate Decision : 0.25% vs 0.25% (Prior 0.25%)

FOMC POLICY UPDATE & COMMENTARY

The Federal Open Market Committee (FOMC) started 2015 with neither a bang nor a whimper. It was more like a resolute sigh.

Its latest directive began with an emphasis on the improvement in the U.S. economy, noting that information received since it last met in December suggests economic activity has been expanding at a solid pace. At the December meeting, it noted economic activity is expanding at a moderate pace.

The latest directive also stretched to point out that household purchasing power has been boosted by recent declines in energy prices. There wasn’t any acknowledgment of improved purchasing power in the prior directive even though oil prices had declined roughly 50% from their June highs at the time of the December FOMC meeting.

The strongest statement, though, about the goings-on in the U.S. economy was perhaps embedded in what the FOMC didn’t say. To that end, there was no mention of global developments currently having any impact on the U.S. economy.

To be fair, “international developments” was added to the wide range of information the FOMC will look at regarding its assessment of how it is progressing toward meeting its objectives of maximum employment and 2 percent inflation. The December directive did not include that language on “international developments.”

The absence of any mention of what is currently going on abroad implies to us that the FOMC is not overly concerned about a spillover effect to the U.S. economy; accordingly, we suspect its tacit aim is to keep the market vested in the possibility (but not the guarantee) that a hike in the fed funds rate could still take place in mid-2015.

For that matter, it could happen sooner. We say that only because the directive reiterated the FOMC’s position that increases in the fed funds rate could occur sooner than now anticipated if incoming information indicates faster progress toward meeting its dual mandate than the Committee now expects. They could come later, too, if that progress proves slower than expected.

As of now, the FOMC thinks the underutilization of labor resources continues to diminish, yet it acknowledges that market-based measures of inflation compensation have declined substantially in recent months. The FOMC thinks that inflation over the medium term will rise gradually toward 2 percent as the labor market improves and the transitory effects of lower energy prices and other factors dissipate.

The latest directive has dropped the “considerable time” language and has been streamlined to acknowledge the FOMC’s judgment that it can be patient in beginning to normalize the stance of monetary policy.

The Fed of course left the 0 to ¼ percent target range for the fed funds rate unchanged. The vote for the monetary policy action was unanimous.

What wasn’t unanimous was the response of the capital markets to the latest Fed directive. Treasuries rallied, stocks sold off sharply, and the U.S. Dollar Index advanced after the FOMC decision.

That was deemed by some to mean the Fed’s directive wasn’t clear cut, having offered a little something for both the hawks (economic activity expanding at a solid pace and improved household purchasing power) and the doves (substantial decline in market-based measures of inflation compensation and concession that international developments will factor into its policy assessment).

In the end, the disparate reactions point to confusion in the market. That’s not what anyone wants to see. It breeds increased volatility, which has been a featured happening so far in 2015 due, among other things, to the suspect policies of central banks around the globe.

Market Internals

NYSE:

Higher Volumes than the day before – 856.6M vs 711.2M 


Decliners outpaced Advancers (adv/dec): 825 / 2306

New Highs outpaced New Lows (highs/lows): 327 / 97

NASDAQ:

Higher Volumes than the day before – 2094.7M vs 1914.8M

Decliners outpaced Advancers (adv/dec): 679 / 2093

New Highs outpaced New Lows (highs/lows): 83 / 79

VOLATILITY S&P500 (VIX)

20.44 +3.22 (+18.70%)

It is almost similar to Tuesday as the internals are not entirely bearish as we still continue to see more New Highs vs New Lows. Meanwhile the huge spike in VIX to above 20.00 is indicating the lack of confidence or maybe the increasing in hedging which either are saying market is weak... 

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,191.37 -195.84 (-1.13%)

Volume: 115,982,628 (above average of 89,664,872)

Range: 17,189.00 - 17,484.41

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,637.99 -43.51 (-0.93%)

Volume: 535.4M (above average of 448,200,093)

Range: 4,637.48 - 4,742.06

S&P 500 INDEX (SPX: CBOE)

2,002.16 -27.39 (-1.35%)

Volume: 648.5M (above average of 514,057,569)

Range: 2,001.49 - 2,042.49 

A bearish breakout in DOW and the indices continue to close below their 20 and 50 MAs. However they are approaching support/resistance level and maybe we should see a pullback. 

Commodities

Closing Commodities: WTI Crude Oil Gets Hit Again

• Energy futures traded lower today, led by losses by oil futures
• Mar crude oil ended the day -3.6% lower at $44.53/barrel
• Mar nat gas lost 8 cents to $2.85/MMBtu
• Precious metals finished the day mixed.
• Mar gold lost $6.50/oz to $1285.60/oz, while Mar silver rose $0.01 to $18.09/oz

Energy Price Action

• Mar crude oil futures fell $1.68/barrel (or -3.6%) to $44.53/barrel
• Mar natural gas fell $0.08 cents to $2.85/MMBtu
• RBOB Gasoline closed unch at $1.38/gallon
• Heating oil closed $0.03 lower at $1.61/gallon

Agricultural Price Action

• Mar corn closed $0.07 lower at $3.74/bushel
• Mar wheat closed $0.14 lower at $5.05/bushel
• Feb soybeans ended $0.05 lower at $9.70/bushel
• Ethanol closed $0.03 lower at $1.39/gallon
• Sugar #11 closed unchanged at 15.16 cents/gallon

Metals Price Action

• Feb gold ended today’s session $6.50 lower at $1285.60/oz
• Mar silver ended $0.01 higher at $18.09/oz
• Mar copper closed $0.02 higher to $2.48/lb

Currencies

Fed Sees Economy on 'solid pace' and inflation heading lower; Watching 'International Developments': The Dollar Index is rally to session highs as the market digests the latest Fed statement. Expectations for any meaningful additions were low and overall the statement did provide few changes to the December commentary. But there were two items that were added, one hawkish and one dovish. So there was a little bit for everyone. When describing the economy the FOMC said it was expanding at a solid pace, an uptick in language from the prior 'moderate'. And then the Fed added in 'international developments' as factors in its decision. A hint that it was closely watching overseas markets. The DXY has rallied to 94.45 after some initial whippy action.

• The euro is giving up some of its recent gains following the release of the statement. The euro was trading at 1.1360 in immediate reaction but has fallen about 60 pips to challenge the 1.13 level for support. German jobs numbers (4am ET), CPI (2-7am), Eurozone Money Supply and Private Loans (4am) and an Italian 10-year Bond Auction (4am) will all be on trader's radars tomorrow morning. 
• The pound has slipped back below the 1.52 level on the dollar strength. Just prior to the FOMC, Bank of England Governor John Carney spoke and provided dovish commentary as he noted that the ECB could not fight stagnation by itself. Mr. Carney said the country would eventually get back to more normal rates but his concern over weak inflation and growth suggested that was not until 2016 at the earliest. The pound is trading at 1.5140.
•  The reaction in the yen has been pretty muted. Perhaps the ambiguity in the statement has kept the carry trade at bay while the markets bounce around the commentary. The yen does remain strong overall as it has been able to hold 118 support.

Bonds

Another Day, Another Treasury Rally:

• Wednesday started on a good note for the Treasury market and it ended on one, too. "International developments" had plenty to do with the buying interest on both ends of the day.
  • Early interest was triggered by rising concerns over the anti-austerity/debt restructuring posture of Greece's new government
    • Greek banks led a 9.2% decline in Greece's stock market
    • Greek 10-yr bond yields surged 103 basis points to 10.51%
  • Late buying interest was triggered by the FOMC's acknowledgment that it will now be looking at international developments in its assessment of how it's progressing toward its objectives of maximum employment and 2 percent inflation
    • With market participants cognizant that international developments are far from ideal, buying interest picked up on the belief that the FOMC may indeed hold at the zero bound past the middle of the year
• The market's dovish interpretation was reflected across the curve as all securities hit their highs in price and lows in yield following the release of the FOMC directive
  • 2-yr yield -3 bps to 0.48%
  • 5-yr yield -9 bps to 1.25%
  • 7-yr yield -10 bps to 1.53%
  • 10-yr yield -10 bps to 1.73%
  • 30-yr bond -11 bps to all-time low yield of 2.28%
• 2-10-yr spread flattened to 122 basis points from 131 basis points at Tuesday's settlement
• A further drop in oil prices (-4.0% to $44.41/bbl) following a bearish inventory report from the Energy Information Administration also supported buying at the inflation-sensitive back end of the curve
• Up front, there was strong demand for the $26 billion 2-yr note auction.  
  • Auction drew a high yield of 0.54% on a 3.74 bid-to-cover ratio that exceeded the prior 12-auction average of 3.37
• A disappointing sell-off in the stock market after the FOMC decision helped underpin the Treasury market into the cash settlement
  • The S&P 500, up 0.6% at its high, was down 0.8% as of this post
• Strikingly, the U.S. Dollar Index (+0.5% at 94.46) extended its gains after the FOMC decision
• There was no economic data of note on Wednesday.  Thursday will feature the Initial Claims report (08:30 ET) and the Pending Home Sales report for December (10:00 ET).
• Auctions on Thursday include the $35 billion 5-yr note auction (delayed due to Northeast snowstorm) and the $29 billion 7-yr note auction

Treasury Yields:

• 2 Year Note 0.50% -0.04
• 5 Year Note 1.25% -0.09
• 10 Year Note 1.73% -0.10
• 30 Year Bond 2.29% -0.11

2/30 Spread: 179 bps ( -7 ) …  2/10 Spread: 123 bps ( -6 )

Preview for Thursday 29 Jan, 2015

Economic Data

• Initial Claims : 301K (Prior 307K)
• Continuing Claims : 2429K (Prior 2443K)
• Pending Home Sales : 0.6% (Prior 0.8%)
• Natural Gas Inventories : (Prior -216bcf)

Earnings Highlights

Thursday :
BMO - ABT, APD, ALXN, BABA, ALLY, AIT, ALV, BAX, BEAV, BMS, BX, BC, CCMP, CAM, CRR, CAH, CSH, CELG, CHKP, CMS, CL, CMCO, COP, DHX, DOW, DST, EPD, F, GLOP, HOG, HAR, HP, HSY, HGG, IVZ, ITG, JBLU, LRN, KEM, KMT, LLL, LANC, LSTR, MMYT, HZO, MJN, MD, MTH, NDAQ, NOK, NOC, OXY, PENN, PSX, PSXP, POT, PHM, DGX, RTN, RGS, RCI, RCL, RGLD, RYL, SHW, SILC, SWK, TCB, TMO, TWC, TKR, VLO, VLY, VIAB, WCC, XEL, ZMH

AMC - ABAX ALGN AMZN AVNW EPAY BRCM BCR ELY CPHD CB COHR CPSI CTCT CORT DECK EMN EFII ELX FCB FICO FFBC GIMO GOOG GDOT GSIT HBI HLIT HA INFA INVN ISBC IXYS JDSU KFX LEGMTW MATW MBFI MCRL MTX MITK NBHC NFG NATI NGVC N NEU PCCC PKI PMCS PFG PFPT QLGC RHI SCSC SIGI SWI SFG SRDX SYNA TFSL TMST TUES UIS VR V WSFS

Summary

It seems like the market is forming a downtrend. For confirmation we should see a lower highs and lower lows. I think there should be a pullback before the market continues to go down lower...

Direction for Thursday 29 Jan, 2015; Up

2015 Daily Directional Accuracy: 5/16 (31.25%) 
2015 Weekly Directional Accuracy: 2/3 (66.67%)