Announcement

My apologies to everyone that DMA will not be online for the next few days and might be dragged to latest next Wednesday, 4th March due to personal reason. Thank you.

Wednesday, 25 Feb 2015 - AMC

Dow +15.38 at 18224.57, Nasdaq -0.98 at 4967.14, S&P -1.62 at 2113.86

Fed Chair Yellen continues her testifying on Wednesday together with ECB President Draghi speech. Looks like we are going to watch out for the swing in the market. We are getting the numbers for crude oil inventories too. That is likely to bring in some volatility too.

I suspect there might be some profit-taking tomorrow. In general, there are too many factors to take in for Wednesday session so I am staying out on this one.

Direction for Wednesday 25 Feb, 2015; Abstain

What a flat session. We saw an increase in buying before the profit taking that took the market back to red. It looks to me that the market is lacking the catalyst to push higher after the testify from Fed Chair Yellen for the past 2 days. Could this be a sign of a correction coming?  

Market Summary

Industry Watch

Strong: Consumer Discretionary, Energy, Financials

Weak: Consumer Staples, Materials, Technology, Utilities

Other Market Moving Factor:

• Fed Chair Janet Yellen continues two-day testimony with appearance before House Financial Services Committee
• Biotechnology outperforms
• Dow component Hewlett-Packard (HPQ) reports uninspiring results

[BRIEFING.COM] The stock market ended the midweek session on a flat note after spending the trading day in a narrow range. The S&P 500 shed 0.1% while the Nasdaq (-0.02%) registered its first loss since February 9. 

Once again, today's session featured below-average activity with only 688 million shares changing hands at the NYSE floor, which was the lowest total registered so far this week. 

Equity indices faced some selling pressure at the start with the top-weighted technology sector (-0.7%) responsible for the early weakness. Specifically, Hewlett-Packard (HPQ 34.67, -3.82) pressured the sector after reporting uninspiring results for the quarter. The former Dow component plunged 9.9% after its one-cent beat was overshadowed by a 4.7% year-over-year decline in revenue and below-consensus guidance. 

Despite the opening weakness, the market was able to reclaim its early loss by midday, but renewed selling in the tech sector sent equity indices to fresh lows during the afternoon. The largest stock by weight—Apple (AAPL 128.73, -3.44)—fell 2.6% to lead the afternoon pullback. Despite today's loss, Apple remains higher by 9.9% since the end of January. 

Meanwhile, the remaining cyclical sectors finished closer to their flat lines. Industrials (-0.1%) and materials (-0.3%) settled in the red while energy (+0.4%), financials (+0.1%), and consumer discretionary (+0.8%) outperformed. 

The energy sector eked out a modest gain while crude oil spiked 3.6% to $51.01/bbl even though today's Energy Information Administration's storage report showed a larger than expected inventory build of 8.427 million barrels (consensus 4.2 million). WTI crude notched a session low under $49.00/bbl after the inventory report before climbing to a fresh high. 

For its part, the discretionary sector received solid support from momentum names like Amazon.com (AMZN 385.37, +6.78), Netflix (NFLX 478.33, +3.45), and Priceline (PCLN 1250.86, +31.07) while homebuilders lagged despite a better than expected New Home Sales report. The iShares Dow Jones US Home Construction ETF (ITB 27.76, -0.39) lost 1.4%. 

On the flip side, the industrial sector settled just ahead of the broader market, but transport stock lagged with the Dow Jones Transportation Average sliding 0.5%. 

Countercyclical sectors ended in mixed fashion with the utilities space (-1.6%) widening its February decline to 6.2%. 

Treasuries settled near their highs after climbing off their intraday lows with the 10-yr yield slipping two basis points to 1.96%. The Treasury market showed little reaction to Fed Chair Yellen's testimony in front of the House Financial Services Committee, which struck a similar tone to remarks made yesterday before the Senate Banking Committee. 

Economic data was limited to New Home Sales and MBA Mortgage Index: 

• New home sales fell 0.2% in January to 481,000 from an upwardly revised 482,000 (from 481,000) while the Briefing.com consensus expected a drop to 470,000 
  • For most of 2014, home sales hovered near 430,000 and showed little volatility. Over the last two months, however, sales have broken out of their doldrums. 
  • The move correlates with improvements in the NAHB Home Builders Index, which showed increasing strength in both current and expected sales. It also comes during a time when the average conventional mortgage rate fell below 4.00% 
• The weekly MBA Mortgage Index fell 3.5% to follow last week's 13.2% plunge 

Tomorrow, weekly Initial Claims (Briefing.com consensus 290K), January CPI (consensus -0.6%), and Durable Orders for January (expected 1.7%) will be reported at 8:30 ET while the December FHFA Housing Price Index will be released at 9:00 ET. 

Global Market

ASIA

Asian Markets Close: Nikkei -0.1%, Hang Seng +0.1%, Shanghai Composite -0.6%
Asian markets were all back in business on Wednesday after many had been closed for an extended period to celebrate the Lunar New Year. The action produced only modest gains or losses for Asian markets. China’s Shanghai Composite (-0.6%) was among the biggest decliners, failing to advance despite a stronger than expected flash HSBC PMI reading for February.

• Economic data:
  • China
    • February HSBC Manufacturing PMI 50.1 (expected 49.5; prior 49.7)
  • Hong Kong
    • Q4 GDP +0.4% quarter-over-quarter (expected 0.9%; prior 1.4%); Q4 GDP +2.2% year-over-year (expected 1.6%; prior 2.7%)
  • Australia
    • Q4 Wage Price Index +0.6% quarter-over-quarter (expected 0.6%; prior 0.6%); Q4 Wage Price Index +2.5% year-over-year (expected 2.5%; prior 2.6%)
• Japan’s Nikkei declined 0.1%, ending a five-session winning streak that had seen the Nikkei gain 3.3%. A weak showing from the industrial (-1.0%) sector held things back, along with weakness in the consumer cyclical (-0.4%) and communications (-0.4%) spaces. Central Japan Railway (-3.7%) was the biggest decliner while Nippon Paper Industries (+4.8%) led all gainers.
• Hong Kong’s Hang Seng added 0.1% following the Q4 GDP report. A strong showing from the utilities sector (+1.3%) and modest gains for the financial sector (+0.2%) helped keep the index in positive territory despite a 3.3% drop in the consumer cyclical sector. Sands China (-5.8%) and Galaxy Entertainment (-5.1%) were the main drag on the consumer cyclical sector as they felt the brunt of reports that Macau is planning to limit the number of mainland tourists coming to Macau.
• China’s Shanghai Composite declined 0.6% in its first day of trading following the extended closure to celebrate the Chinese New Year. That drop occurred despite a better than expected flash HSBC PMI report for February. A weak financial sector (-2.4%) acted as a drag. The biggest individual decliner was metals and mining company Zhejiang Huayou Cobalt Co., which dropped 10.0%.
• India’s Sensex was basically flat in Wednesday’s trade, surrendering early gains in an afternoon retreat. Strength in the technology (+0.4%) and financial (+0.3%) sectors was offset by weakness in the consumer staples (-1.7%) sector. Dr Reddy’s Laboratories (-2.4%) led the losing issues while Housing Development Finance Corp. (+2.3%) led the winners.
• Australia’s S&P/ASX 200 increased 0.3% and closed in on a seven-year high, led by strength in the gold (+1.6%), materials (+1.3%), and metals and mining (+1.2%) sectors. Southern Cross Media Group (+18.8%) was the biggest percentage gainer in the index while Worleyparsons (-12.2%), which reported a disappointing first half net profit, led the losers.
• Regional advancers: Taiwan +0.7%, South Korea +0.7%, Indonesia +0.5%, Singapore +0.1%, Philippines +0.1%
• Regional decliners: Malaysia -0.2%, Thailand -0.6%, Vietnam -0.7%
• FX: USD/CNY +0.1% at 6.2595, USD/INR +0.02% at 61.980, USD/JPY -0.1% at 118.82

EUROPE

Major European indices trade lower across the board with Italy’s MIB (-0.7%) showing the largest decline. Elsewhere, Germany is expected to vote on the four-month loan extension for Greece tomorrow, but some members within Chancellor Merkel’s coalition have voiced concerns over the proposal’s perceived leniency.

• UK’s BBA Mortgage Approvals came in at 36,400 (expected 36,200; previous 35,800)
• French Consumer Confidence ticked up to 92 from 90 (expected 91)
• Spain’s PPI fell 2.8% year-over-year (previous -3.7%)

CLOSING PRICES

• UK’s FTSE: -0.2%
• Germany’s DAX: + 0.0%
• France’s CAC: -0.1%
• Spain’s IBEX: -0.2%
• Portugal’s PSI: 0.0%
• Italy’s MIB Index: -1.0%
• Irish Ovrl Index: 0.0%
• Greece ASE General Index:  -1.6%

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : -3.5% (Prior -13.2%)
• New Home Sales : 481K vs 470K (Prior 482K - Up)
• Crude Inventories : 8.427M (Prior -7.716M)

NEW HOME SALES

Highlights

• New home sales fell 0.2% in January to 481,000 from an upwardly revised 482,000 (from 481,000) in December. The Briefing.com Consensus expected home sales to fall to 470,000.

Key Factors

• For most of 2014, home sales showed hovered around 430,000 and showed little volatility.  Over the last two months, however, sales have broken out of their doldrums.
• The move correlates with the improvements in the NAHB Home Builders Index, which showed increasing strength in both current and expected sales. It also comes during a time when the average conventional mortgage rate fell below 4.00%.
• The question going forward is whether sales growth can continue at this rates even if mortgage rates inch higher. The February data should provide some clues when it is released next month.
• There are some problems concerning the underlying fundamentals. At a 5.4 months' supply at current sales rates, inventory levels are constrained. Normally builders try to keep inventories at roughly a 6 months' supply. 
• Prices are also a potential problem. The median home price increased 9.1% y/y to $294,300. The built in price premium of a new home versus the median existing home remains at historical highs.

Big Picture

• After a pretty flat 2014, new home sales are showing signs of acceleration.

Market Internals

NYSE:

Lower Volumes than the day before – 704.7M vs 715.7M 


Advancers outpaced Decliners (adv/dec): 1703 / 1374

New Highs outpaced New Lows (highs/lows): 149 / 14

NASDAQ:

Higher Volumes than the day before – 1839.9M vs 1828.7M

Advancers outpaced Decliners (adv/dec): 1499 / 1252

New Highs outpaced New Lows (highs/lows): 138 / 20

VOLATILITY S&P500 (VIX)

13.84 +0.15 (+1.10%)

Internals are also reflecting the lack in direction in the market. I am getting a little bit concern as the volume is not picking up. VIX remained below 14.00 which still indicates a certain degree of confidence, but is this some sign of complacency instead?           

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,224.57 +15.38 (+0.08%)

Volume: 80,483,121 (below average of 92,912,278)

Range: 18,182.76 - 18,244.38

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,967.14 -0.99 (-0.02%)

Volume: 422,943,946 (below average of 443,061,709)
Range: 4,956.00 - 4,984.24

S&P 500 INDEX (SPX: CBOE)

2,113.86 -1.62 (-0.08%)

Volume: 481,020,000 (below average of 524,091,846)

Range: 2,109.89 - 2,119.59 

From the technicals we can see that the indices are reaching a top at the moment. MACD continues to show the slowing in momentum. I think we might see a slight correction if the market continues to rally.    

Commodities

Closing Commodities: WTI Crude Rallies Above $51/Barrel

• Apr crude oil futures rallied for most of the day
• The initial reaction in oil prices was lower following the weekly EIA data
• However, this was short-lived and crude oil began to rally
• By the end of pit trading, Apr crude was up $1.75 at $51.01/barrel
• Apr natural gave up gains today and finished $0.04 lower at $2.85/MMBtu
• Metals ended the day higher today
• Apr gold rose $4.20 to $1201.50/oz, while Mar silver rose $0.24 to $16.43/oz

Energy Price Action

• Apr crude oil futures rose $1.75/barrel to $51.01/barrel
• Apr natural gas fell $0.04 to $2.85/MMBtu
• RBOB Gasoline rose $0.04 to $1.91/gallon
• Heating oil closed $0.12 higher to $1.94/gallon

Highlight:

• Crude Oil: EIA petroleum inventory data was released for last week (ending Feb 20)Crude oil inventories had a build of 8.427 mln vs. consensus estimate of 4.2 mln
• Gasoline inventories had a draw of 3.118 mln
• Change in refinery utilization of -1.3%

Agricultural Price Action

• Mar corn closed $0.02 lower at $3.76/bushel
• Mar wheat closed $0.04 lower at $4.97/bushel
• Feb soybeans closed $0.08 lower at $10.07/bushel
• Ethanol closed $0.01 lower at $1.36/gallon
• Sugar #11 closed 0.38 cents lower at 13.79 cents/lb

Metals Price Action

• Apr gold ended today’s session $4.20 higher at $1201.50/oz
• Mar silver ended $0.24 higher at $16.43/oz
• Mar copper closed $0.02 higher at $2.66/lb

Currencies

Commodity Currencies Follow Through:

• With the story in Greece taking a backseat to Fed Chair Yellen's remarks yesterday, commodity currencies were the big movers against the US Dollar
  • The Canadian Dollar, the Aussie Dollar, and the New Zealand Dollar all bottomed shortly after Yellen spoke yesterday before the Senate Banking Committee, and all three currencies followed through with gains against the US Dollar today
    • CAD/USD: +23 pips (+0.29%) to $0.8046
    • AUD/USD: +37 pips (+0.47%) to $0.7897
    • NZD/USD: +35 pips (+0.47%) to $0.7550
• The EUR/USD pair continues to coil, frustrating both bulls and bears. It has now spent 21 days in a 250-pip range. It ended up 7 pips (+0.05%) to $1.1356
• The Japanese Yen's initial reaction to Fed Chair Yellen's remarks yesterday was very similar to those of the loonie, the Aussie, and the Kiwi, but $/Yen failed to follow through on the downside today. $/Yen ended up 20 pips or +0.16% to 118.95
• The US Dollar Index (pictured below) remains in a consolidating pattern. 

Bonds

Yield Curve Flattens:

• Long-dated US Treasuries continued their rally today that began Tuesday with Fed Chair Yellen's remarks to the Senate Banking Committee. The New Home Sales data was a non-event, as was day-two of Yellen's testimony before the House Financial Services Committee, but some concerns about the 5-year auction sent the Treasury complex to test its lows. 5's, 10's, and 30's roared out of those lows, however, with 10's and 30's finishing near their highs of the day
• Yield check:
  • 2-yr: +1 bp to 0.61%
  • 5-yr: unch at 1.45%
  • 10-yr: -2 bps to 1.96%
  • 30-yr: -3 bps to 2.56%

• The yield curve continued to flatten, with 10's and 30's being strongly bid. The 2-yr note remains in its range from before Yellen's remarks Tuesday
• The Yellen testimony seems to be the dominant theme affecting equity, bond, and currency markets. Most of the Treasury rally has occurred in the 5, 10, and 30-year maturities. If Yellen's testimony was really driving the trade, one would expect the 2-yr note to at least keep pace. 
  • Fed Chair Janet Yellen said nothing significant Wednesday about monetary policy today or the economic outlook. She spent most of her time defending the Fed as an institution and its relationship with the Obama Administration 
  • The Greece story seems to have been resolved in the mind of the market, at least for the next 4 months
  • The only item of immediate consequence for Treasuries was the 5-year note auction
    • The $35 bln 5-yr note auction was met with mediocre demand 
      • High yield of 1.480% 
      • The bid-to-cover ratio was 2.48 -- within the typical range, but at the lower end
      • Indirect bidders: 60% (higher than average)
      • Direct bidders: 12.8% (highest of the past 7 auctions)
• Economic Data
  • January New Home Sales 
    • Actual 481K, Briefing.com consensus 470M, prior 482K revised up from 481K 
  • MBA Mortgage Index for the week ending 2/21
    • Actual -3.5%, prior -13.2%

• Commodity Prices: 
  • WTI Crude futures for April delivery ended up $1.61/bbl (+3.27%) to $50.89/bbl 
    • This rally came despite a bearish inventory report from the EIA (+8.4M)
  • Copper rose $0.02 to $2.66/lb.
  • Gold gave back some overnight gains, but still finished at $1204.1, up $6.80 or 0.57%

• Currencies:
  • USD/JPY: +7 pips (0.06%) to 118.82 
  • EUR/USD: +9 pips (0.08%) to $1.1357 

• The Day Ahead:
  • Initial and Continuing Jobless Claims for the week ending (08:30 ET)
  • January CPI (08:30 ET)
  • January Durable Goods Orders (08:30 ET)
  • December FHFA Housing Price Index (09:00 ET)
  • Natural Gas Inventories for the week ending 2/21 (10:30 ET)
  • $29 billion 7-year note auction (13:00 ET)
  • Atlanta Fed President Lockhart (FOMC voter) speaks before the 2015 Banking Outlook Conference (13:00 ET)

Treasury Yields:

• 2 Year Note 0.61% +0.01
• 5 Year Note 1.47% UNCH
• 10 Year Note 1.96% -0.03
• 30 Year Bond 2.56% -0.04

2/30 Spread: 195 bps ( -5 ) …  2/10 Spread: 135 bps ( -4 )

Preview for Thursday 26 Feb, 2015

Economic Data

Thursday (26 Feb) :

• Initial Claims : 290K (Prior 283K)
• Continuing Claims : 2400K (Prior 2425K)
• CPI : -0.6% (Prior -0.4%)
• Core CPI : 0.1% (Prior 0.0%)
• Durable Orders : 1.7% (Prior -3.3%)
• Durable Goods ex-transportation : 0.5% (Prior -0.8%)
• FHFA Housing Price Index : (Prior 0.8%)
• Natural Gas Inventories : (Prior -111bcf)

Earnings Highlights

Thursday (26 Feb) :
BMO - MBLY DDD ACIW ACTA AES AKRX AMCX AMWD BUD ANSS ARCC HAWK BDBD CCG CRI CTRX CNP CHS CWEI CNNX CNSL CYBX EME STAY EXLP EXH FCH FIG FRO GCAP GOGO HEES HSC ONE HSGX HMHC HSNI ICON IPCC IQNT SNAK IRDM ITC KSS KOP LPI LTM LKQ MGLN VAC MDXG MITL NSM NXST NTI NTLS NXTM OGE ZEUS ORN BIN RHP SRPT SDRL SHLD SEAS SRE SNH SNMX SERV STOR SFY TASR TICC TWI TD TD VICL VC WAC WMAR WNR WNRL XCRA

AMC - TWOU AEGR MITT AL AIRM MDRX AMH APEI AMSF WTR ARUN AHT ASPN ABTL ADSK BIO WIFI BCEI CSU CERS CLNE FIX CROX CUBE DGI ECPG ENOC EVC ENV EVHC GPS HLF HPTX ICFI IMMR BLOX IM PODD XENT IILG JCP KBR KND LYV EVAR MAIN MTZ MNVR MGRC MENT MNST NCMI NMBL NOG NVAX OVTI OUT PE PEGA PFMT PSIX PKT KWR RPTP RP RBA RRMS ROST SB SBAC SEMG SREV SZYM SWN SRC SPLK SGM TUBE TUMI TPC UIL UNXL OLED UHS ECOL VGR WTW

Summary

We are seeing more bulls and bears fight as the market is not having a clear leadership. I believe we would see a correction before the market continues another rally.

There are some major economic data will be releasing on Thursday. Who knows if that might provide a catalyst for the market?

Direction for Thursday 26 Feb, 2015; Down

2015 Daily Directional Accuracy: 13/30 (43.33%) 
2015 Weekly Directional Accuracy: 5/7 (71.43%)