Tuesday, 17 Feb 2015 - AMC

Dow +28.23 at 18047.58, Nasdaq +5.43 at 4899.27, S&P +3.35 at 2100.34

Market is turning bullish but fundamentally I think the US economy is still lagging. Perhaps I can say that the rally is more on a speculation. I believe the market is only likely to continue strongly if we see a better economic numbers. Otherwise I think this is just a false breakout.

Do note that equity and bond market will be closed on Monday due to President's Day.

Direction for Tuesday 17 Feb, 2015; Down

I was thinking there might be more profit-taking on Tuesday but I am wrong. There was some weakness at the opening but eventually the market managed to shake off with a nice run. Truth to be told, I am not feeling entirely bullish...                      

Market Summary

Industry Watch

Strong: Financials, Health Care, Technology, Utilities

Weak: Consumer Discretionary, Consumer Staples, Energy, Materials

Other Market Moving Factor:

• Little progress between Greece and Eurogroup as negotiations continue
• Reports of continued fighting in Debaltseve, Ukraine
• Biotechnology outperforms

[BRIEFING.COM] The stock market kicked off an abbreviated trading week with a sleepy Tuesday session that had the S&P 500 (+0.2%) locked in an eleven-point range while the tech-heavy Nasdaq (+0.1%) spent the bulk of the day near its flat line. 

Broadly speaking, the market appeared to be little concerned with weekend developments overseas, making the price action more closely correlated with the gyrations in the oil market. The benchmark index returned to its session high just above the 2,100 mark during the final minutes of the day; however, that move was not correlated to anything in particular. 

A ceasefire between Ukraine and Russia-backed rebels went into effect over the weekend, but the agreement only reduced fighting in the eastern part of the country. Most importantly, the truce failed to stop the assault on an important rail hub in Debaltseve, with rebel leaders claiming control of the area, according to the Associated Press. 

Russia's President Vladimir Putin, who met Hungary's Prime Minister Viktor Orban today, said the fate of Debaltseve could have been foreseen while the UN Security Council called for an immediate ceasefire. 

Meanwhile in Brussels, yesterday's Eurogroup meeting with Greece provided little reason for optimism for a swift solution. The atmosphere at the negotiating table may have gotten a bit frostier today after Eurogroup officials struck down a proposal that was brought forth by France's Pierre Moscovici, and had the support of Greek Finance Minister Yanis Varoufakis. 

This morning's torrent of quotes from the Eurogroup was followed by more thunder from Greek Prime Minister Alexis Tsipras, who was interviewed in Germany's Stern, and reiterated "The old austerity program is dead." 

Despite Mr. Tsipras' comments, an afternoon report, attributed to unnamed sources, claimed that Greece will ask for an extension to the program that has been proclaimed dead. That report made the rounds in the early afternoon and helped nudge the S&P 500 to the 2,100 level. 

Five sectors posted gains with health care (+0.7%) spending the entire session in the lead. The influential group was underpinned by biotechnology with the iShares Nasdaq Biotechnology ETF (IBB 326.82, +3.36) adding 1.0%. 

The relative strength of the health care sector helped the benchmark index resist early weakness among cyclical sectors. Energy (+0.3%) was among the weakest performers in the early going, but the growth-sensitive sector perked up when crude oil erased its early morning loss. The energy component rallied 1.7% to $53.54/bbl after trading below the $52.00/bbl level this morning. 

Elsewhere among cyclical sectors, financials (+0.3%) outperformed while the discretionary sector (-0.2%) was pressured by Amazon.com (AMZN 375.27, -6.56), which lost 1.7%. Automakers also struggled with Ford (F 16.11, -0.19) and General Motors (GM 37.24, -0.38) down 1.2% and 1.0%, respectively. 

While the stock market maintained a narrow range, the same could not be said for Treasuries. The 10-yr note spent the day in a steady slide, sending the benchmark yield higher by 13 basis points to 2.15%. The selling may have occurred in anticipation of tomorrow's FOMC minutes from the January meeting that are likely to keep participants on guard for a potential rate hike. 

Light participation was a theme last week and not much changed today with just 763 million shares changing hands at the NYSE floor. 

Economic data was limited to the Empire Manufacturing Survey and NAHB Housing Market Index: 

• The Empire Manufacturing Survey for February registered a reading of 7.8, which was below the prior month's reading of 9.9 while the Briefing.com consensus expected an improvement to 9.0 
• The NAHB Housing Market Index for February slipped to 56 from 57 while the Briefing.com consensus expected an uptick to 58 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while January Housing Starts (Briefing.com consensus 1.07 million), Building Permits (consensus 1.065 million), PPI (consensus -0.4%), and core PPI (expected 0.1%) will all be reported at 8:30 ET. The January Industrial Production (consensus 0.4%) and Capacity Utilization (expected 79.9%) reports will be released at 9:15 ET while the FOMC minutes from the January meeting will cross the wires at 14:00 ET.

Macroeconomic Data

Economic Data

from Briefing.com

• Empire Manufacturing : 7.8 vs 9.0 (Prior 9.9)
• NAHB Housing Market Index : 55 vs 58 (Prior 57)
• Net Long-Term TIC Flows : Prior $33.5B

Market Internals

NYSE:

Higher Volumes than the day before – 780.1M vs 624.7M 


Decliners outpaced Advancers (adv/dec): 1353 / 1779

New Highs outpaced New Lows (highs/lows): 146 / 13

NASDAQ:

Lower Volumes than the day before – 1752.3M vs 1816.0M

Advancers outpaced Decliners (adv/dec): 1551 / 1206

New Highs outpaced New Lows (highs/lows): 132 / 24

VOLATILITY S&P500 (VIX)

15.80 +1.11 (+7.56%)

It seems the internals are not that bullish compared to the price levels. Also the long-legged doji from VIX shows the lack of conviction in the bullishness.      

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,047.58 +28.23 (+0.16%)

Volume: 98,760,925 (above average of 93,289,806)

Range: 17,951.41 - 18,052.01

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,899.27 +5.43 (+0.11%)

Volume: 450,146,696 (above average of 444,404,024)

Range: 4,880.64 - 4,901.89

S&P 500 INDEX (SPX: CBOE)

2,100.34 +3.35 (+0.16%)

Volume: 557,220,000 (above average of 526,975,154)

Range: 2,089.80 - 2,101.30 

S&P is on its way to make a new high. The rally has made it seen like too good to be truth, but I think we should see a slight correction soon. We can see that the indices are on their upper bound of Bollinger Bands and the candlestick patterns are showing a hanging man.   

Commodities

Closing Commodities: Gold and Silver End the Day Down, Crude Closes Up

• Gold and Silver ended the day down, both sank in early trading and never recovered, Apr Gold ended the day $18.50 lower at $1208.50/oz, and Mar Silver ended the day down $0.91 to $16.37/oz
• Mar Copper closed $0.02 lower at $2.58/lb
• March Crude Oil futures closed the day up $0.87/barrel to $53.54/barrel
• Mar Natural Gas closed down $0.04 to $2.76/MMBtu

Energy Price Action

• Mar crude oil futures rose $0.87/barrel to $53.54/barrel
• Mar natural gas fell $0.04 to $2.76/MMBtu
• RBOB Gasoline closed $0.04 lower (-2.5%) at $1.59/gallon
• Heating oil closed $0.01 higher at $1.98/gallon

Agricultural Price Action

• Mar corn closed $0.02 higher at $3.90/bushel
• Mar wheat closed $0.01 higher at $5.35/bushel
• Feb soybeans ended $0.18 higher at $10.08/bushel
• Ethanol closed $0.02 at $1.46/gallon
• Sugar #11 closed 0.26 cents lower at 15.14 cents/lb

Metals Price Action

• Apr gold ended today’s session $18.50 lower at $1208.50/oz
• Mar silver ended $0.91 lower at $16.37/oz
• Mar copper closed $0.02 lower at $2.58/lb

Currencies

Currency Commentary: DXY Continues Consolidation

• The Dollar Index continues to test 94 for support. After seeing an aggressive rally in the back end of 2014, the DXY has settled into a consolidation phase in that 93.50-95 area. That has continued today with a decline to 93.85 seeing quick support and a bounce back to the 94.20. Economic data was a little light as Empire Manufacturing and NAHB Housing surveys missed expectations. Market focus will be on tomorrow’s FOMC minutes as we prepare for the February 24 Janet Yellen testimony.
• The euro was able to rally in early trade despite cautious headlines surrounding the Greek debt debate. There was some early chatter that the two sides had agreed to a deal but that was far from the truth. If anything, headlines would suggest the two sides are digging in and are at a stalemate. There is talk of another meeting on Friday. ZEW surveys released today were mixed as the German one missed expectations but the Eurowide survey came in better than expected. 1.14 remains a key level as markets watch the Greek drama play out.
• The pound is running into resistance at the 1.54. level. Sterling was able to rally following an inflation report that was better than feared. But the technical level held firm resistance and led to some profit taking.
• The yen has been sliding lower as it dips back to the 119 level. Japan saw its Q4 GDP number miss expectations but it is unlikely to change the stance of the Bank of Japan as members are skeptical any further stimulus will have an immediate impact on the economy. The central bank will meet this evening with few expectations for any action (BONDX, FOREX).

Bonds

Yields Rise, as Safe Haven Demand Wanes:

• Investors didn't wait for tomorrow's FOMC minutes and raft of economic data to scuttle their long bets on US Treasuries, today. Investors seem to have taken last week's lack of a Treasury rally as confirmation that the late January precipitated heavy selling across most of the curve
  • The 2-yr yield popped only 4 bps to 0.67%, probably as a result of investors shortening duration in their portfolios. Also, the outlook on policy normalization from the Fed has not changed since Friday, creating a curve steepening trade, consistent with the continuation of economic recovery
  • The 5-yr yield traded its highest level since January 2nd, having risen 46 bps since its mid-January low. It ended up 10 bps at 1.60%
  • The 10-yr yield lost 13 bps to 2.15%. It has almost traded through the range from October 15th of last year, the day of the liquidity vaccum when the 10-yr note had a 30-bp range
  • The 30-yr yield rose 14 bps to 2.74%
• Empire State Manufacturing Index came in at 7.8, versus Briefing.com consensus expectations of 9.0. This data-point seemed to have little effect on the markets
• The selling occurred despite a breakdown in talks between Greece and the troika, which sent Greece's 10-yr notes 65 bps higher to 10.40%
  • Various sources reported that Greece will request a 6-month extension of its loan on Wednesday, although Greek government officials also said that the loan would not be part of the current agreement
• Ukraine and Russian-backed separatists continue to fight over Debaltseve, a strategic railroad hub. It is possible that 8,000 Ukrainian troops are surrounded there

• The USD Index finished -0.15 (-0.16%) at 94.05
• The S&P 500 index traded a fresh record-high of 2101
• WTI Crude trade down $3 midday, but rallied all the way back to $0.73 (1.38%) at 53.50 at the time of writing

• Data Tomorrow:
  • MBA Mortgage Index for the week ending 2/14 (07:00 ET)
  • Housing Starts and Building Permits (January) (10:00 ET)
  • PPI (January) (08:30 ET)
  • Industrial Production and Capacity Utilization (January) (09:15 ET)
  • FOMC Minutes (14:00 ET)

Treasury Yields:

• 2 Year Note 0.70% +0.04
• 5 Year Note 1.62% +0.09
• 10 Year Note 2.14% +0.12
• 30 Year Bond 2.73% +0.10

2/30 Spread: 203 bps ( +6 ) …  2/10 Spread: 144 bps ( +8 )

Preview for Wednesday 18 Feb, 2015

Economic Data

Wednesday (18 Feb) :

• MBA Mortgage Index : Prior -9.0%
• Housing Starts : 1070K (Prior 1089K)
• Building Permits : 1065K (Prior 1032K)
• PPI : -0.4% (Prior -0.3%)
• Core PPI : 0.1% (Prior 0.3%)
• Industrial Production : 0.4% (Prior -0.1%)
• Capacity Utilisation : 79.9% (Prior 79.7%)
• FOMC Minutes

Earnings Highlights

Wednesday (18 Feb) :
BMO : ALLE ANGI BCRX CNK CIR CRTO CONE XRAY DXYN DUK DX ENBL ENZY FLR GRMN GEO HL HLT HUN H I MZOR NI NOR SABR SIR SBGI SONS ELOS MDCO VA WAB YNDX

AMC : AIMC ARII CRMT AMTG ARRS AVG CAR AXLL BGS ABX BJRI CSLT CDE CVG CW CYNI DTLK DENN ELNK ETP ETE EOG EPE EQC EVTC EXAM FNF LOPE HSTM HT IAG TILE IPI KEG KEYW LHO LDRH MIC MHLD MANT MRO MAR NVMI OIS ASGN OGS PAAS PKD PCYC STR RGP REXX SBRA SCTY SSS STNR SUNE SXL SUN SNPS TS TERP THRX TRN UAM UFPI WGP WES WMB WPZ XPO YUME

Summary

Greece's debt situation remains uncertain. FOMC minutes will be releasing tomorrow and we will expect some major economic data too. I suppose if the numbers are disappointing we would see some reason for profit-taking. But watch out for the volatility.

Direction for Wednesday 18 Feb, 2015; Down

2015 Daily Directional Accuracy: 11/28 (39.29%) 
2015 Weekly Directional Accuracy: 4/6 (66.67%)