Wednesday, 11 Mar 2015 - AMC

Dow -27.55 at 17635.39, Nasdaq -9.85 at 4849.95, S&P -3.92 at 2040.25

It is time to stay hedge at this point in time as I believe the market is going to remain volatile amid rate hike speculation. And the ECB's QE is also having some effect on dollar and the bond rate which somehow contributed to the selling on Tuesday. Right now I am staying hedge and watching the market movement. I still think market is lacking a direction and is likely to go sideway for the meantime. Although I must say there should be some short-covering tomorrow after the massive sell off...

Direction for Wednesday 11 Mar, 2015; Up

Market was consolidating before afternoon and broke below the support afterwards. It seems like the bears are catching their breath after the huge selloff on Tuesday. As there wasn't any major market moving data, we are not seeing any real movement just yet. 

Market Summary

Industry Watch

Strong: Energy, Financials

Weak: Consumer Staples, Technology, Materials, Utilities

Other Market Moving Factor:

• Dollar Index Nears 100.00
• Financial sector rebounds after falling 2.1% on Tuesday

[BRIEFING.COM] The Dow (-0.2%), Nasdaq (-0.2%), and S&P 500 (-0.2%) registered modest losses on Wednesday while the Russell 2000 (+0.6%) outperformed. The small-cap index climbed steadily throughout the afternoon while the S&P 500 spent the day in an 11-point range near its flat line before settling just below its 100-day moving average (2,042). 

Yesterday's sharp slide was paced by the two largest sectors by weight, but technology (-0.7%) and financials (+0.6%) spent today on opposite sides of their unchanged levels, which contributed to the sideways action. 

The financial sector settled in the lead ahead of this evening's release of the complete results of the stress test administered by the Federal Reserve. Citigroup (C 52.33, +1.10) was the top performer among the majors, climbing 2.2%. 

Meanwhile, the technology sector struggled throughout the session, sliding to lows during the final hour of action. Shares of Apple (AAPL 122.24, -2.27) fell 1.8%, keeping the sector under pressure while chipmakers displayed relative strength. Intel (INTC 32.34, +0.64) and SanDisk (SNDK 82.73, +2.56) posted respective gains of 2.0% and 3.2% while the PHLX Semiconductor Index rose 0.3%. Intel rallied afterVentureBeat reported that the company's processors will be used in Apple iPhones in 2016 while SanDisk was added to Goldman's Conviction Buy List. 

Elsewhere among cyclical sectors, the discretionary space (-0.5%) lagged while the energy sector (+0.2%) ended among the leaders even though crude oil settled lower by 0.4% at $48.21/bbl after testing the $47.40/bbl level intraday. The dollar-denominated energy component had to contend with another uptick in the greenback that pushed the Dollar Index (99.76, +1.15) higher by 1.2%. The dollar enjoyed another day of broad strength, pressuring the euro to 1.0540. 

Over on the countercyclical side, consumer staples (-0.8%) and utilities (-0.7%) underperformed throughout the day while health care ended flat after showing intraday strength. The sector saw little reaction to news indicating Endo International (ENDP 87.76, -1.24) offered to buy Salix Pharmaceuticals (SLXP 168.60, +10.95) for $175/share. 

Treasuries rallied following today's solid 10-yr auction, sending the benchmark 10-yr yield lower by three basis points to 2.11%. 

Today's participation was in-line with recent averages as roughly 760 million shares changed hands at the NYSE floor. 

Economic data released today was limited to the weekly MBA Mortgage Index, which fell 1.3% to follow last week's 0.1% uptick. 

Tomorrow, weekly Initial Claims (Briefing.com consensus 306K), February Retail Sales (consensus 0.4%), and February Import/Export Prices will be released at 8:30 ET while the Business Inventories report for January (consensus 0.1%) will cross the wires at 10:00 ET. The day's data will be topped off with the 14:00 ET release of the Treasury Budget for February (consensus -$192 billion), which was pushed back from today.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +0.3%; Hong Kong’s Hang Seng -0.8%; China’s Shanghai Composite +0.2% 
Markets in the Asia Pacific region were mostly lower Wednesday in the wake of Wall Street’s weak showing on Tuesday. Losses, however, were generally modest in scope. Both Japan (+0.3%) and China (+0.2%) bucked the regional trend. Gains in the Shanghai Composite were seen despite weaker than expected readings for February fixed asset investment, industrial production, and retail sales.

Economic data 

• Japan
  • January Core Machinery Orders -1.7% month-over-month (expected -4.1%; prior +8.3%); +1.9% year-over-year (expected -1.0%; prior +11.4%)
• China 
  • February Fixed Asset Investment +13.9% year-over-year (expected +15.0%; prior +15.7%)
  • February Industrial Production +6.8% year-over-year (expected +7.8%; prior +7.9%)
  • February Retail Sales +10.7% year-over-year (expected +11.7%; prior +11.9%)
• South Korea 
  • January M2 Money Supply +8.2% (prior +8.5%)
• Australia
  • January Home Loans -3.5% month-over-month (expected -2.0%; prior +2.7%)
  • March Westpac Consumer Sentiment -1.2% (prior +8.0%)

Equity Markets

• Japan’s Nikkei increased 0.3%, bolstered by strength in the industrial (+0.8%) and consumer non-cyclical (+0.7%) sectors. Sojitz Corp (+6.1%) led all individual gainers followed by Chiyoda Corp (+5.4%), Shionogi & Co (+3.0%), Eisai Co (+2.9%), and Ajinomoto Co (+2.7%). UNY Group Holdings (-2.9%) and Mitsubishi Materials (-2.7%) paced the decliners.
• Hong Kong’s Hang Seng declined 0.8% and ended on its lows for the day, pressured by weakness in the utilities (-1.1%), financial (-0.6%), and communications (-0.5%) sectors. Top decliners included China Shenhua Energy Co (-3.8%), Sands China (-3.6%), Galaxy Entertainment (-3.4%), Lenovo Group (-2.9%), and China Resources Power Holdings (-2.4%).
• China’s Shanghai Composite jumped 0.2% in the wake of weaker than expected economic data for fixed asset investment, industrial production, and retail sales. The consumer cyclical (+0.9%) and financial (+0.6%) sectors provided support.
• India’s Sensex declined 0.2%, surrendering gains in the last hour of trading. Weakness in the basic materials (-2.8%), technology (-0.9%), and industrials (-0.7%) sectors pressured the index. Leading decliners included Hindalco Industries (-5.6%), Sesa Sterlite (-2.5%), Tata Steel (-1.9%), Tata Motors (-1.7%), and Cipla Ltd/India (-1.6%). • Australia’s S&P/ASX declined 0.5% with a weak showing from the metals & mining (-3.4%), resources (-2.7%), and materials (-2.6%) sectors acting as a drag on the proceedings.
• Regional advancers: Thailand +0.8%
• Regional decliners: Taiwan -0.1%, South Korea -0.2%, Singapore -0.6%, Malaysia -0.7%, Indonesia -0.8%, Philippines -0.5%, Vietnam -0.5%

FX: 

• USD/CNY unch at 6.2620
• USD/INR -0.2% at 62.786
• USD/JPY +0.4% at 121.56

EUROPE

European Markets Update: FTSE UNCH, DAX +1.6%, CAC +1.8%
Major European indices trade mostly higher while UK’s FTSE has returned to its flat line. On a separate note, The European Commission said it has begun technical discussions with Greece in order to secure the extension of Greece’s bailout.

• France’s Nonfarm Payrolls were unchanged quarter-over-quarter, as expected (previous 0.0%), while the Current Account deficit narrowed to EUR300 million from EUR2.00 billion (expected EUR2.30 billion)
• UK’s Industrial Production -0.1% month-over-month (expected 0.2%; prior -0.2%); +1.3% year-over-year, as expected (previous 0.8%). Separately, Manufacturing Production -0.5% month-over-month (consensus 0.2%; last 0.1%); +1.9% year-over-year (consensus 2.6%; last 2.6%)

CLOSING PRICES

• UK’s FTSE: + 0.3%
• Germany’s DAX: + 2.7%
• France’s CAC: + 2.4%
• Spain’s IBEX: + 1.2%
• Portugal’s PSI: + 2.2%
• Italy’s MIB Index: + 2.2%
• Irish Ovrl Index: + 1.3%
• Greece ASE General Index:  -2.5%

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : -1.3% (Prior 0.1%)
• Crude Inventories : 4.512M (Prior 10.303M)

Market Internals

NYSE:

Lower Volumes than the day before – 777.5M vs 852.1M 


Advancers outpaced Decliners (adv/dec): 1777 / 1281

New Lows outpaced New Highs (highs/lows): 40 / 110

NASDAQ:

Lower Volumes than the day before – 1825.5M vs 1857.5M

Advancers outpaced Decliners (adv/dec): 1558 / 1187

New Lows outpaced New Highs (highs/lows): 57 / 88

VOLATILITY S&P500 (VIX)

16.87 +0.18 (+1.08%)

Market internals is not entirely bullish I would say, and the volume is lacking as well. VIX has been increasing which indicates the continuous building up of fears in the market. But I am still feeling the divergence as TRIN is staying below 1.00 throughout (lack in convincing).                

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,635.39 -27.55 (-0.16%)

Volume: 102,121,893 (above average of 94,865,258)

Range: 17,627.00 - 17,731.78

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,849.94 -9.85 (-0.20%)

Volume: 456,592,278 (above average of 450,063,068)
Range: 4,846.79 - 4,876.09

S&P 500 INDEX (SPX: CBOE)

2,040.24 -3.92 (-0.19%)

Volume: 540,138,000 (above average of 534,843,785)

Range: 2,039.69 - 2,050.08 

DOW and NASDAQ broke below their trend line respectively. Also both DOW and S&P have already broke below their 50 MAs. MACD is showing the increment in bearish momentum too. I am watching the indices to find their support levels and meanwhile I suppose the market is likely to go down further.        

Commodities

Closing Commodities: WTI Crude Closed Above $48, But With A Modest Loss

• WTI crude oil was rather volatile again, following some industry data
• Apr crude popped higher, but reversed following yesterday’s API data
• Today, crude fell following the EIA data to today’s low, well below $48/barrel.
• Apr crude recovered back above $48 in floor trading, but closed $0.19 lower still at $48.21/barrel
• Natural gas rallied today and held its gains. Apr nat gas closed $0.10 higher at $2.83/MMBtu
• Gold and silver climbed higher following its morning low, but still closed in the red
• Apr gold closed $9.50 lower at $1150.60/oz, while May silver closed $0.26 lower at $15.38/oz

Energy Price Action

• Apr crude oil futures fell $0.19/barrel to $48.21/barrel
• Apr natural gas rose $0.10 to $2.83/MMBtu
• RBOB Gasoline closed flat at $1.82/gallon
• Heating oil closed $0.01 higher to $1.82/gallon

Agricultural Price Action

• May corn closed $0.02 higher at $3.90/bushel
• May wheat closed $0.05 higher at $4.99/bushel
• May soybeans closed $0.09 higher at $9.93/bushel
• Ethanol closed $0.02 higher at $1.49/gallon
• Sugar #11 closed 0.12 cents higher at 13.14 cents/lb

Metals Price Action

• Apr gold ended today’s session $9.50 lower at $1150.60/oz
• May silver closed $0.26 lower at $15.38/oz
• May copper closed $0.01 lower at $2.61/lb

Currencies

Dollar Index Soars:

• The U.S. Dollar rallied against all of the majors as the decline in the EUR/USD has entered panic phase
  • EUR/USD declined 166 pips (-1.55%) to $1.0534  
    • As the European national banks have begun to implement the ECB's quantitative easing program this week, bond yields in the Eurozone have plummeted, potentially causing fixed-income capital to defect from the single currency
  • GBP/USD declined 150 pips (-1.00%) to $1.4925
    • Manufacturing Production declined 0.5% in the U.K. during January which was more than estimates. It had grown by 0.1% in December
  • The commodity currencies all declined against the dollar as well
    • AUD/USD: -51 pips (-0.66%) to $0.7584
    • NZD/USD: -81 pips (-1.11%) to $0.7202
    • USD/CAD: -78 pips (-0.62%) to 1.2757
  • The Japanese Yen held up best of all the majors, with $/Yen rising only 47 pips or 0.39% to 121.45

Bonds

Treasuries Rise Amid Currency Turmoil:

• U.S. government debt rallied today and the yield curve flattened, as the U.S. Dollar index continued its meteoric rise. Equities traded sideways, but their dead-cat bounce after Tuesday's decline may have encouraged Treasury holders to hold on to long positions
• Yield check:
  • 2-yr: +1 bp to 0.69%
  • 5-yr: unch at 1.61%
  • 10-yr: -2 bps to 2.11%
  • 30-yr: -4 bps to 2.69%
• 2's/10's fell 3 bps to 142 bps and 5's/30's fell 4 bps to 108 bps

• Tensions between Greece and Germany increased overnight, as Greece and the troika's meeting scheduled for today became inexplicably postponed for a day
  • Greece's justice minister did not help matters by suggesting that German property in Greece could be seized to compensate for the Nazi occupation during WWII
  • Greece's 10-year note yield increased by 28 basis points to 10.52%
• The ECB continued its 3rd day of quantitative easing, implemented by the national central banks, and European yields declined further
  • Low European yields are likely causing international investors to shift their allocations towards Treasuries instead
• The 10-year note auction (reopening) was met with average demand
  • High yield: 2.139%
  • Bid-to-cover ratio: 2.65
  • Indirect bid: 58.6%
  • The indirect bid was higher than average, indicating more interest from foreign central banks

• Commodities:
  • WTI Crude declined by 8 cents (-0.16%) to $48.21/bb, after trading as low as $47.33 following the weekly supply report. There was a build in crude inventories of 4.512 million barrels versus a 10.3 million barrel build for last week
  • Gold held up surprisingly well in light of the dollar buying, declining only $7.80 (-0.67%) to $1152.30/troy oz.

• Currencies:
  • EUR/USD: -146 pips (-1.37%) to $1.0554. This pair has been declining very rapidly and seems to have entered an exhaustive phase. Opinions differ about whether or not that exhaustion will include the euro trading $1.00
  • USD/JPY: +44 pips (+0.36%) to 1.2143

• Data Out Thursday:
  • Initial and Continuing Jobless Claims (08:30 ET)
  • February Retail Sales (08:30 ET)
  • February Export and Import Prices (08:30 ET)
  • January Business Inventories (10:30 ET)
• New Supply:
  • $13 billion 30-year auction (re-opening) (13:00 ET)

Treasury Yields:

• 2 Year Note 0.70% UNCH
• 5 Year Note 1.60% -0.02
• 10 Year Note 2.11% -0.03
• 30 Year Bond 2.69% -0.04

2/30 Spread: 199 bps ( -4 ) …  2/10 Spread: 141 bps ( -3 )

Preview for Thursday 12 Mar, 2015

Economic Data

Thursday (12 Mar) :

• Initial Claims : 306K (Prior 320K)
• Continuing Claims : 2421K (Prior 2421K)
• Retail Sales : 0.4% (Prior -0.8%)
• Retail Sales ex-auto : 0.6% (Prior -0.9%)
• Export Prices ex-ag. : Prior -1.0%
• Import Prices ex-oil : Prior -0.7%
• Business Inventories : 0.1% (Prior 0.1%)
• Natural Gas Inventories : Prior -228bcf
• Treasury Budget : Prior -$193.5B

Earnings Highlights

Thursday (12 Mar) :
BMO - BONT CVGW CMN CRME CSTM DANG DEST DG GCO GLP HWCC HOV JASO JRN KIRK LGIH LCUT SKIS PWE PGEM QIWI RICE LEAF SMRT SNSS PLCE MTN

AMC - ARO ANAC ATHX LOCO FTD FF GST HIL IRG INGN IRET JMBA KTOS MED OMED PPHM RMAX TEAR ULTA EGY ZUMZ

Summary

To be honest I don't have a good feeling about the market right now. First we saw the sell off, then the sideway so it is better to be cautious amid the volatile sessions.  Tomorrow we have some unemployment claims numbers and retails sales that could give the market more gyration (and more downside?). As I did mentioned on Tuesday that it is important to stay hedge as the market is likely to surprise us further.

I would say Thursday session might have some short-covering and maybe sideway afterwards, depending on the economic data.

Direction for Thursday 12 Mar, 2015; Up

2015 Daily Directional Accuracy: 15/33 (45.45%) 
2015 Weekly Directional Accuracy: 5/7 (71.43%)