Tuesday, 17 Mar 2015 - AMC

Dow -128.34 at 17849.08, Nasdaq +7.93 at 4937.44, S&P -6.99 at 2074.20

In my own opinion, I feel the run on Monday is not quite valid in a sense. As I still do not see a leadership in the market and the big boys are remaining idle. Furthermore we are going to expect the FOMC policy update on Wednesday so I think the market is going to be quite beforehand.

Building permits will be out tomorrow and this might give us a look on how's the economy is doing relative to the employment data from last week. I suppose the market is likely to go sideway prior to the big day on Wednesday.

Direction for Tuesday 17 Mar, 2015; Down

Market does look sideway despite staying in negative throughout the session. Except NASDAQ which break into positive after half time. NASDAQ has some bullish momentum while DOW and S&P lagged behind. Nothing much to mention in particular as the market is expecting the FOMC meeting for the next two days.       

Market Summary

Industry Watch

Strong: Technology, Utilities

Weak: Consumer Discretionary, Energy, Health Care, Materials

Other Market Moving Factor:

• Crude oil remains weak
• FOMC begins two-day meeting

[BRIEFING.COM] The stock market ended the Tuesday session on a mixed note ahead of Wednesday's release of the latest policy directive from the Federal Reserve. The Nasdaq Composite added 0.2% while the S&P 500 and Dow Jones Industrial Average lost 0.3% and 0.7%, respectively. 

Equity indices endured some selling in the early going, but the Nasdaq spent the day ahead of the broader market thanks to relative strength in the technology sector (+0.1%). Specifically, shares of Apple (AAPL 127.04, +2.09) climbed 1.7%, which underpinned the sector and the Nasdaq. Meanwhile, most large cap components struggled, which was also the case with high-beta chipmakers. The PHLX Semiconductor Index fell 0.7%. That being said, the daylong strength within the technology sector helped the broader market erase the bulk of its early decline. 

The Nasdaq received another measure of support from biotechnology with the iShares Nasdaq Biotechnology ETF (IBB 356.25, +2.28) climbing 0.6% to a new record. However, the health care sector (-0.3%) could not turn positive. 

Similarly, another influential sector—industrials (-0.4%)—ended in the red even though transport stocks displayed relative strength with the Dow Jones Transportation Average ending just below its flat line. The broader sector could not follow suit as the largest component—General Electric (GE 25.31, -0.14)—lost 0.6%. 

Elsewhere among cyclical sectors, energy (-0.5%) settled among the laggards as crude oil faced continued pressure. The energy component fell 1.2% to $43.15/bbl after marking a session low at $42.75/bbl this morning. Crude oil endured a volatile day and made a brief appearance in the green while the Dollar Index (99.66, +0.06) spent the session near its unchanged level. However, the Dollar Index is likely to be active tomorrow when investors respond to the FOMC policy statement. 

The main point of focus will be whether the Fed decides to keep its reference to remaining "patient" ahead of the first rate hike. In a recent appearance before the Senate Banking Committee, Fed Chair Janet Yellen said that removing the call for patience would open the door to a potential rate hike at any policy meeting that follows. 

Treasuries held solid gains in the morning, but the 10-yr note cut its gain in half, sending the benchmark yield lower by two basis points to 2.06%. 

Today's participation was below average with roughly 700 million shares changing hands at the NYSE floor. 

Economic data was limited to February housing starts, which declined 17.0% to 897,000 from an upwardly revised 1.081 million (from 1.065 million) while the Briefing.com consensus expected a decline to 1.041 million. Record snowfall in the Northeast and extreme cold in the Midwest likely played a large part in curtailing new construction. Housing starts in these regions declined 45.0% in February, from 262,000 in January to 144,000. Those regions accounted for 64.0% of the entire February decline in housing starts. 

Still, the weather can't be completely at fault. Poor underlying economic conditions likely caused some of the February pullback. For example, in the West region, warmer-than-normal temperatures should have helped offset some of the decline from the East, but that did not happen. Starts fell 18.2% to 239,000 in February from 292,000. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the Federal Open Market Committee will release its latest policy statement at 14:00 ET. 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +1.0%; Hong Kong’s Hang Seng -0.2%; and China’s Shanghai Composite +1.6%
Markets in the Asia-Pacific region followed Wall Street’s lead on Tuesday and ended mostly higher, paced by notable gains in South Korea’s Kospi Index (+2.2%), China’s Shanghai Composite (+1.6%), and Japan’s Nikkei (+1.0%), which powered its way to another new 15-year high. Separately, both the Bank of Japan and Bank Indonesia left their key policy rates unchanged as expected at 0.10% and 7.50%, respectively.

Economic data

• China
• February Foreign Direct Investment +17.0% (prior +29.4%)
• Japan
• Leading Index 105.5 (expected 105.1; prior 105.1)
• Hong Kong
• February Unemployment Rate 3.3% (expected 3.3%; prior 3.3%)
• Indonesia
• January Loans +11.5% year-over-year (prior +11.6%)
• Singapore
• February Trade Balance SGD 5.18 bln (expected SGD 6.00 bln; prior SGD 8.50 bln)

Equity Markets

• Japan’s Nikkei increased 1.0% to a new 15-year high. Gains were broad-based with all sectors increasing on the day. The strongest areas were the technology (+2.8%), industrial (+1.5%), and consumer non-cyclical (+1.3%) sectors. The top individual gainers were TDK Corp (+6.4%), Minibea Co (+5.9%), Kao Corp (+4.7%), Hitachi Ltd (+4.3%), and Sony Corp (+4.3%). Out of the 225 index members, 138 closed higher, 75 closed down, and 12 were unchanged.
• Hong Kong’s Hang Seng declined 0.2%. Losses in the communications (-0.9%), consumer cyclical (-0.7%), and basic materials (-0.5%) sectors weighed, while the key financial sector was flat. Individual winners included China Merchants Holdings Intl (+4.3%), China Resources Power Holdings (+3.1%), and China Resources Land Ltd (+2.4%). The biggest decliners were Sands China (-2.9%), Sino Land Co (-2.4%), and Wharf Holdings Ltd (-2.0%). Out of the 50 index members, 22 were up, 21 were down, and 7 were unchanged.
• China’s Shanghai Composite jumped another 1.6% and finished the day with a strong move higher over the final hour of trading. Leading sectors included the financial (+1.6%), utilities (+1.5%), and industrial (+1.2%) sectors as policy stimulus hopes continued to fuel buying interest. Over the last five trading sessions, the Shanghai Composite has increased 6.6%.
• India’s Sensex increased 1.1% and also powered higher late in the session with a 0.8% move over the final 40 minutes of action. The basic materials (+3.3%), consumer non-cyclical (+2.5%), and industrial (+2.1%) sectors led the advance. Top gainers included Hindalco Industries (+5.5%), Sesa Sterlite (+4.0%), Dr Reddy’s Laboratories (+3.6%), and Axis Bank Ltd (+2.5%). Infosys (-1.2%) was the worst performer.
• Australia’s S&P/ASX 200 increased 0.8% with gains in the telecommunication services (+1.7%), energy (+1.5%), and Resources (+1.1%) sectors leading the way. Including Tuesday’s gain, the ASX 200 is up 8.0% year-to-date and 13.2% over the last three months.
• Regional advancers: South Korea +2.2%, Taiwan +0.3%, Malaysia +0.4%, Indonesia +0.1%, Philippines +0.8%, Vietnam +0.2%
• Regional decliners: Singapore -0.2%, Thailand -0.2%

FX

• USD/CNY -0.2% at 6.2495
• USD/INR -0.1% at 62.739
• USD/JPY -0.1% at 121.28

EUROPE

Major European indices trade mostly lower as participants take profits following a big run that began in January. Germany’s DAX is the weakest performer (-1.3%) after surging 24.0% since the end of 2014.

• Eurozone CPI +0.6% month-over-month; -0.3% year-over-year. Both readings matched expectations. Separately, Core CPI +0.7% year-over-year (expected 0.6%; prior 0.6%) and ZEW Economic Sentiment rose to 62.4 from 52.7 (expected 58.2)
• Germany’s March ZEW Economic Sentiment ticked up to 54.8 from 53.0 (expected 58.2) as ZEW Current Conditions rose to 55.1 from 45.5 (consensus 50.0)

CLOSING PRICES

• UK’s FTSE: + 0.5%
• Germany’s DAX: -1.5%
• France’s CAC: -0.6%
• Spain’s IBEX: -0.8%
• Portugal’s PSI: -0.3%
• Italy’s MIB Index: -0.9%
• Irish Ovrl Index: -2.0%
• Greece ASE General Index: + 0.9%

Macroeconomic Data

Economic Data

from Briefing.com

• Building Permits : 897K vs 1041K (Prior 1081K - Up)
• Housing Starts : 1092K vs 1070K (Prior 1060K - Up)

HOUSING STARTS

Highlights

• Housing starts declined 17.0% in February to 897,000 from an upwardly revised 1.081 mln (from 1.065 mln) in January. The Briefing.com Consensus expected housing starts to decline to 1.041 mln.

Key Factors

• Many analysts have blamed inclement weather conditions for the poor retail sales and industrial production reports that were released over the last few days. Our analysis of the data suggested there were more underlying problems than just the weather. 
• Much of the poor housing data, though, can rightfully be blamed on bad weather.
• Record snowfall in the Northeast and extreme cold in the Midwest likely played a large part in curtailing new construction. Housing starts in these regions declined 45.0% in February, from 262,000 in January to 144,000. Those regions accounted for 64% of the entire February decline in housing starts.
• Still, the weather can’t be completely at fault.  Poor underlying economic conditions likely caused some of the February pullback. For example, in the West region, warmer-than-normal temperatures should have helped offset some of the decline from the Eastern half of the U.S. That did not happen. Starts fell 18.2% to 239,000 in February from 292,000.
• The construction details were a little disappointing. Single-family starts, which normally move on a stable trend, fell 14.9% to 593,000 in February from 697,000 in January. The volatile multifamily sector declined 20.8% to 304,000 from 384,000.
• Normally, the trends in single-family and multifamily construction could give some indication of how construction growth will move over the next few months. However, given that the weather likely produced some of the weakness, the big drop in single-family construction is not something to be overly concerned about.
• Despite the decline in starts, the number of units under construction increased slightly to 836,000 in February from 833,000 in January.

Big Picture

• The pullback in construction in February was likely due to an exogenous weather factor. The size of the expected rebound in March would explain the full impact of the weather conditions.

Market Internals

NYSE:

Lower Volumes than the day before – 716.0M vs 755.6M 


Decliners outpaced Advancers (adv/dec): 1448 / 1611

New Highs outpaced New Lows (highs/lows): 101 / 69

NASDAQ:

Higher Volumes than the day before – 1711.9M vs 1701.3M

Advancers outpaced Decliners (adv/dec): 1417 / 1348

New Highs outpaced New Lows (highs/lows): 117 / 69

VOLATILITY S&P500 (VIX)

15.66 +0.05 (+0.32%)

The internals are actually not looking bearish but rather suggesting the lack in leadership. VIX managed to close slightly higher but the intra-day shows some optimism in the market.                  

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,849.08 -128.34 (-0.71%)

Volume: 82,560,562 (below average of 94,353,684)

Range: 17,785.79 - 17,972.22

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,937.44 +7.93 (+0.16%)

Volume: 415,815,446 (below average of 444,401,618)
Range: 4,907.02 - 4,944.91

S&P 500 INDEX (SPX: CBOE)

2,074.28 -6.91 (-0.33%)

Volume: 475,714,000 (below average of 528,184,200)

Range: 2,065.08 - 2,080.59 

It looks to me that the support levels for the indices are holding well. MACD momentum is showing the slowdown in bearishness and maybe we might see a turnaround. However all three indices are still currently below their 50MAs and that would serve as a strong resistance level.               

Commodities

Closing Commodities: WTI Oil Falls For A Sixth Consecutive Session

• Natural gas futures rallied today apparently on a Northeast cold blast, boosting demand for heating fuel
• Ultimately, Apr nat gas closed 5.5% higher today at $2.86/MMbtu
• WTI crude oil futures were weak again and fell for a sixth consecutive session
• Apr crude finished $0.51 lower at $43.43/barrel
• Apr gold lost $5.50 today to $1147.90/oz, while May silver fell $0.08 to $15.53/oz
• May copper declined $0.03 to $2.64/lb

Energy Price Action

• Apr crude oil futures fell $0.51/barrel to $43.43/barrel
• Apr natural gas closed $0.15 higher at $2.86/MMBtu
• RBOB Gasoline closed flat at $1.73/gallon
• Heating oil closed $0.01 lower at $1.69/gallon

Agricultural Price Action

• May corn closed $0.08 lower at $3.71/bushel
• May wheat closed $0.11 lower at $5.04/bushel
• May soybeans closed $0.13 lower at $9.56/bushel
• Ethanol closed $0.02 lower at $1.42/gallon
• Sugar #11 closed 0.08 cents higher at 12.82 cents/lb

Metals Price Action

• Apr gold ended today’s session $5.50 lower at $1147.90/oz
• May silver closed $0.08 lower at $15.53/oz
• May copper closed $0.03 lower at $2.64/lb

Currencies

Antipodeans Fall:

• Currency markets ended today with no major theme except anticipation of the FOMC statement and press conference tomorrow
• The U.S. Dollar Index was unchanged at 99.61
• EUR/USD rose 17 pips (0.17%) to $1.0595
  • Eurozone CPI fell 0.3% y/y, in line with expectations
  • Italian 10-yr note yields were up 12 bps from Monday's close, yielding 1.26%. Peripheral European sovereign bonds were very weak today
  • The rhetoric between Greece's government and the troika became more heated today, as Greece's deputy prime minister, finance minister, and minister for international economic affairs penned an Op-Ed in the Financial Times noting the benefits that have accrued to the Eurozone's core as a result of Greece's depression. (As the euro has weakened to reflect the risk of a Eurozone break-up and the ECB has embarked upon quantitative easing to relieve the loss of confidence, German exporters have profited handsomely.)
  • Jeroen Dijsselbloem contributed to the discord by raising the possibility of capital controls in Greece to prevents its exit from the euro
• The British pound sterling lost ground against the dollar, falling 73 pips (-0.49%) to $1.4756 
• The Swiss franc is approaching a 9-year high against the U.S. dollar, after an extraordinarily volatile beginning to 2015
• AUD/USD:  -19 pips (-0.25%) to $0.7624
• NZD/USD: -68 pips (-0.92%) to $0.7313
• The Bank of Japan kept its quantitative easing program on course, as expected. It will continue to expand the monetary base by 80 trillion yen ($659 billion) per year
  • USD/JPY fell 2 pips (-0.02%)to 121.35
  • Volatility in Dollar/Yen has been compressing since the beginning of the year because the BoJ has signaled that it sees no need for further depreciation. Still, volatility has a natural cycle to it, and what has been transpiring for the past 5 trading days is unsustainable

Bonds

Treasuries Climb Ahead of Fed:

• The Treasury complex rallied in a flattening trade today, after a very weak housing start number for the month of February. Traders and investors were hesitant to position ahead of tomorrow's Fed statement and press conference. The focus is on whether or not the word "patient" appears in the statement
• Yield check:
  • 2-yr: +2 bp to 0.67%
  • 5-yr: unch at 1.55%
  • 10-yr: -2 bps to 2.06%
  • 30-yr: -3 bps to 2.61%

• News:
  • Housing starts fell 17.0% in February to 897K versus a Briefing.com consensus estimate of 1.041M. The January number was revised up to 1.081M, from 1.065M
    • A lot of the surprise, but not all, can be blamed on record snowfall in the Northeast and extreme cold in the Midwest 
    • In the West region, high-than-average temperatures should have compensated for some of the decline in other regions, but housing starts fell 18.2% in the West
  • February Building Permits beat estimates at 1.092M, versus a Briefing.com consensus forecast of 1.07M. The data from January was revised to 1.060M from 1.053M
  • The war of words between Greece's government and Eurogroup and German officials continued:
    • Three Greek government ministers penned an Op-Ed in today's Financial Times defending the sacrifices of Greece's citizens in the face of the austerity plan, and highlighting the gains to the European core, writing that "while the crisis has made matters worse for Greece and others, it has had unintended — but positive — consequences for “core” eurozone countries. Germany and others have benefited from exchange and interest rates that are lower than they would have faced had they still had their own currencies."
    • Eurogroup President Jeroen Dijsselbloem said that a bank holiday a la Cyprus was a possibility to keep Greece from leaving the euro
    • The connection between the headlines surrounding Greece and sovereign yields in the European periphery ex-Greece has been extremely low lately, implying little systemic risk from a Greek exit from the Eurozone

• Commodities:
  • WTI Crude made a new 6-year low today, trading as low as 42.63. The same old story of oversupply, fears of limited storage capacity, and Saudi intentions of bankrupting the marginal producers, dominated the headlines. The contract now stands down 75 cents (-1.71%) to $43.13/bbl
  • Copper fell 3 cents (-1.12%) to $2.64/lb.
  • Gold fell $5.40 (-0.47%) to 1147.80/troy oz.

• Currencies:
  • EUR/USD rose 11 pips (0.1%) to $1.0588
  • USD/JPY rose 2 pips (0.01%) to 121.39

• Data Out Wednesday:
  • MBA Mortgage Index for the week ending 3/14 (07:00 ET)
  • Crude Inventories (10:30 ET)
  • March FOMC Rate Decision (14:00 ET)

Treasury Yields:

• 2 Year Note 0.70% +0.04
• 5 Year Note 1.56% -0.01
• 10 Year Note 2.06% -0.04
• 30 Year Bond 2.61% -0.06

2/30 Spread: 191 bps ( -10 ) …  2/10 Spread: 136 bps ( -8 )

Preview for Wednesday 18 Mar, 2015

Economic Data

Wednesday (18 Mar) :

• MBA Mortgage Index : (Prior -1.3%)
• Crude Inventories : (Prior 4.512M)
• FOMC Rate Decision : 0.25% (Prior 0.25%)

Earnings Highlights

Wednesday (18 Mar) :
BMO - ATU EJ EVLV FDX GIS GLYC LEJU

AMC - CTAS CLC CORT CUB GES MLHR JBL JUNO KTWO QEPM RENN SCVL SLW SFS GOMO TLYS WSM

Summary

Volume still remains weak in the market and this means that the big players are not getting their positions yet. That explains the lack of leadership too.

Anyway tomorrow will have the FOMC meeting decision and this is going to be a significant market mover. Watch out for the crude oil as well since the oil prices have dropped to a recent low recently. These would just bring in more volatility into the market and for now it is better to stay out.

Direction for Wednesday 18 Mar, 2015; Abstain

2015 Daily Directional Accuracy: 18/37 (48.65%) 
2015 Weekly Directional Accuracy: 5/8 (62.50%)