Tuesday, 20 Jan 2014 - AMC

Dow +3.66 at 17515.23, Nasdaq +20.46 at 4654.84, S&P +3.13 at 2022.55

Friday ended the losing streak in the market. Even though the week still ended in red. Uncertainty in oil prices, decreasing in copper price, and Swiss shocking cut in interest rate (to negative) made the week hell of a ride. Not to mention it is the start of the earnings season. I am sure the volatility is going to stick around until at least post-earnings period.

Do note that market is closed on Monday, 19 Jan due to Martin Luther King Day.

Direction for Tuesday 20 Jan, 2015; Up

Market suffered another sell off at the start before another rebound during noon to push the market back to the upside. Nothing specifically for the sell-off as I assume it was merely profit-taking. Meanwhile market is feeling nervy as ECB is preparing for their QE programme.        

Market Summary

Industry Watch

Strong: Industrials, Technology

Weak: Consumer Discretionary, Energy, Health Care

Other Market Moving Factor:

• IMF cuts 2015 global GDP forecast to 3.5% from 3.8%: crude oil retreats
• Biotechnology and chipmakers outperform

[BRIEFING.COM] The stock market kicked off the holiday-shortened week with a shaky Tuesday session. The S&P 500 settled higher by 0.2% after finding intraday support near its 100-day moving average (2007/2008). The tech-heavy Nasdaq outperformed, climbing 0.4%. 

Equity indices started the day with modest gains, but continued weakness in crude oil weighed on the overall risk tolerance and contributed to an early retreat. However, a handful of influential sectors were able to withstand the selling pressure, which in turn became a supportive factor during afternoon action. 

As for crude, the energy component retreated after The International Monetary Fund cut its 2015 global growth outlook to 3.0% from 3.5%, and continued sliding throughout the session. WTI crude ended lower by 4.1% at $46.51/bbl while the energy sector (+0.1%) settled near its flat line. On the earnings front, Baker Hughes (BHI 57.26, +0.70) and Halliburton (HAL 39.83, +0.70) posted respective gains of 1.2% and 1.8% in reaction to better than expected results. 

Similar to energy, consumer discretionary (-0.6%) and financials (-0.4%) trailed the broader market throughout the day. The financial sector lagged following disappointing results from Morgan Stanley (MS 34.75, -0.14) while discretionary shares were pressured by homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 24.48, -0.62) and SPDR S&P Retail ETF (XRT 92.23, -1.21) lost 2.5% and 1.3%, respectively. On the upside, Netflix (NFLX 348.80, +11.46) gained 3.4% ahead of its quarterly report. 

Elsewhere among influential sectors, health care (-0.1%) pressured the market in the early going following a revenue miss from Johnson & Johnson (JNJ 101.29, -2.75). However, the sector was lifted off its low by the relative strength in the biotech space. The iShares Nasdaq Biotechnology ETF (IBB 323.23, +5.41) gained 1.7% and settled at a fresh record high. 

The biotech group also bolstered the Nasdaq and helped the index settle ahead of the broader market. To be sure, the Nasdaq received another measure of support from its top-weighted components, including Apple (AAPL 108.78, +2.79), which spiked 2.6%. 

Treasuries notched their highs around 11:00 ET before spending the remainder of the session in a steady retreat. The 10-yr yield ended lower by five basis points at 1.79%. 

Participation was a bit above average with more than 840 million shares changing hands at the NYSE floor. 

Economic data was limited to the NAHB Housing Market Index for January, which slipped to 57 from a revised 58 (from 57) while the Briefing.com consensus expected the reading to hold at 58. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while December Housing Starts (Briefing.com consensus 1.04 million) and Building Permits (consensus 1.06 million) will be reported at 8:30 ET. 

Macroeconomic Data

Economic Data

from Briefing.com

• NAHB Housing Market Index : 57 vs 58 (Prior 58)

Market Internals

NYSE:

Lower Volumes than the day before – 861.0M vs 961.9M 


Decliners outpaced Advancers (adv/dec): 1216 / 1900

New Highs outpaced New Lows (highs/lows): 218 / 99

NASDAQ:

Lower Volumes than the day before – 1828.7M vs 1929.6M

Decliners outpaced Advancers (adv/dec): 1140 / 1653

New Lows outpaced New Highs (highs/lows): 80 / 118

VOLATILITY S&P500 (VIX)

19.89 -1.06 (-5.06%)

The internals are showing some divergence with the price level. It is noticeable that the volume is weaker than usual. VIX manage to close below 21.00 and this shows some confidence from the bulls.  

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,515.23 +3.66 (+0.02%)

Volume: 119,604,468 (above average of 88,565,349)

Range: 17,346.73 - 17,588.70

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,654.85 +20.47 (+0.44%)

Volume: 281.5M (below average of 455,892,967)

Range: 4,601.10 - 4,665.65

S&P 500 INDEX (SPX: CBOE)

2,022.55 +3.13 (+0.15%)

Volume: 605,394,000 (above average of 510,013,123)

Range: 2,004.49 - 2,028.94 

As the indices are still sitting on their support level, they form a long-legged doji candlestick pattern. It seems like market is not having a clear direction still. I suppose any negative news would throw the market to the downside easily.

Commodities

Closing Commodities: Nat Gas Collapses On Weather Outlook, Crude Declines More On Broad Market Weakness

• Natural gas and WTI crude oil futures fall sharply today
• WTI crude dropped hard this morning. Buyers attempted to give it some legs, but this didn’t hold and crude hit a new LoD near the close of pit trading
• Mar crude ultimately finished $1.99 lower at $46.51/barrel
• Mar natural gas tanked basically on a continued mild weather outlook.
• Mat NG closed $0.30 lower at $2.83/MMBtu
• Precious metals rose today, but other industrials metals such as copper declined
• Feb gold gained $17.50 to $1293.90/oz today, while Mar silver rose $0.21 to $17.96/oz

Energy Price Action

• Mar crude oil fell $1.99/barrel to $46.51/barrel
• Feb Natural gas fell 30 cents (or -10%) to $2.83/MMBtu
• RBOB Gasoline closed 4 cents lower to $1.31/gallon
• Heating oil fell 7 cents to $1.59/gallon

Agricultural Price Action

• Mar corn closed $0.04 higher at $3.90/bushel
• Mar wheat rose $0.04 cents to $5.36/bushel
• Feb soybeans ended $0.09 lower at $9.82/bushel
• Ethanol closed $0.04 higher at $1.39/gallon
• Sugar #11 rose 0.50 cents (or +3.3%) to 15.83 cents/gallon

Metals Price Action

• Feb gold ended today’s session $17.50 higher at $1293.90/oz
• Mar silver ended $0.21 higher at $17.96/oz
• Mar copper closed $0.03 lower to $2.59/lb

Currencies 

Dollar Retakes 93.00:

• The Dollar Index trades on session highs as trade probes the 93.00 area. 
• Action remains on track to close at its best level in 11 years. 
• EURUSD is -55 pips @ 1.1550 as sellers remain in control despite the improvement in eurozone and German ZEW Economic Sentiment. Today's selling has the single currency printing at levels last seen in November 2003 as sellers continue to hammer away ahead of Thursday's ECB rate decision, which is widely expected to include the announcement of QE-style program. The days ahead will also bring headline risk in the form of the Greek elections on January 25. 
• GBPUSD is +45 pips @ 1.5155. Action has tested the 1.5100 level for the past two weeks, but so far the level has held as it has since July 2010. British data out tomorrow includes the Average Earnings Index, claimant count change, and unemployment rate. The latest MPC votes are also scheduled for release.
• USDCHF is -5 pips @ .8780 after clawing back its early losses. Early selling pressured the pair to a low of .8685, but a steady bid throughout the U.S. session has action fighting to lock in a third day of gains. The pair remains 1400 pips off the January 15 high. 
• USDJPY is +125 pips @ 118.80 as action probes the 50 dma. Tonight's Bank of Japan rate decision will be in focus as some speculate the central bank may up its asset purchase program. 
• AUDUSD is -40 pips @ .8160 as light selling takes hold for a second day. The selling in the hard currency comes as Chinese GDP outpaced estimates, but pointed to a continued slowdown in the Middle Kingdom. Support in the .8100 area is in focus. Australia's Westpac Consumer Sentiment is due out tonight. 
• USDCAD is +150 pips @ 1.2090 as trade rallies to a fresh six-year high following the manufacturing sales (-1.4% MoM actual v. -0.5% MoM expected) miss. Resistance at the 200 mma (1.2323) is now in focus. Canada's wholesale sales will be announced ahead of the Bank of Canada rate decision.

Bonds

30Y Posts Lowest Close on Record:

• Treasuries endured a mixed trade. 
• Maturities were bid ahead of the cash open and pressed to their best levels of the session in response to the small NAHB Housing Market Index (57 actual v. 58 expected, 57 previous) miss. 
• However, selling would emerge as equities pared their losses and eventually reclaimed the unchanged line. 
• Up front, the 2Y ticked up +1bp to 48.6bps. Resistance at the 50bp level is now in focus. 
• In the belly, the 5Y added +1bp to 1.293%. Action is now almost +15bps off Friday's low. 
• The 10Y slipped -0.8bps to 1.807%. The benchmark yield ended within 2.5bps of its lowest close since May 2013. 
• Outperformance at the long end dropped the 30Y -3.7bps to 2.398%. Today's finish was the lowest ever. 
• A flatter curve persisted throughout the day as the 2-10-yr spread narrowed to 132bps. 
• Precious metals went off near their highs as gold rallied +$18 to $1295 and silver added +$0.25 to $18.00. 
• Data: MBA Mortgage Index (7), housing starts, and building permits (8:30).

Treasury Yields:

• 2 Year Note 0.53% +0.04
• 5 Year Note 1.31% +0.02
• 10 Year Note 1.82% -0.01
• 30 Year Bond 2.39% -0.05

2/30 Spread: 186 bps ( -9 ) …  2/10 Spread: 129 bps ( -5 )

Preview for Wednesday 21 Jan, 2015

Earnings Highlights

Wednesday :
BMO - APH, GD, VIVO, NTRS, AMTD
AMC - AXP, BGG, CNS, EGBN, EBAY

Summary

Market is still remaining volatile and there is no clear direction. The flattening of yield curve is showing me that it makes no sense for me to go bullish at the time being.

Direction for Wednesday 21 Jan, 2015; Down

2015 Daily Directional Accuracy: 4/11 (36.36%) 
2015 Weekly Directional Accuracy: 1/2 (50.00%)