Monday, 20 Apr 2015 - AMC

Dow +208.63 at 18034.93, Nasdaq +62.79 at 4994.60, S&P +19.22 at 2100.40

I feel Monday is more to a make or break session. We may see some short covering or a slight rebound from the market. But if the market continues to break lower the support level, I reckon there will be more selloff next week. At this point in time, my view on the technicals is that market is still in a sideway trend as there is no clear leadership yet still. Given so I don't feel much optimism for the market to go higher since the US economy is rather weak. Do watch out on Greece also.

Direction for Monday 20 Apr, 2015; Up

Market had a reversal as I suspect it was more short covering that led the spike in the morning. In China, the central bank decided to cut their reserve requirement in effect to bring back some growth to the economy. This also brought some upside to the market. Let's just not forget about Greece as they are inch from hitting the default button.                          

Market Summary

Industry Watch

Strong: Energy, Industrials, Technology, Utilities

Weak: 

Other Market Moving Factor:

• People's Bank of China makes largest reserve requirement ratio cut since November 2008 (to 18.5% from 19.5%)
• Dollar rallies against the euro

[BRIEFING.COM] The stock market began the week on an upbeat note with the S&P 500 (+0.9%) erasing the bulk of its decline from Friday. The benchmark index reclaimed its 50-day moving average (2,086) at the start and spent the remainder of the day near its early high while the Dow Jones Industrial Average (+1.2%) and Nasdaq Composite (+1.3%) outperformed. 

Global equity markets enjoyed a strong start to the week after the People's Bank of China lowered the reserve requirement ratio for all banks to 18.5% from 19.5%. The 100-basis point cut was the largest such move since November 2008 and was implemented in hopes of avoiding a slowdown in China's economic growth. 

The easing news from China helped markets in Europe register broad gains with investors overlooking the latest Greece-related developments. Specifically, the Greek government has requested local governments to transfer their cash balances to the Bank of Greece as the troubled sovereign continues scrambling for funds ahead of the next IMF payment deadline. That being said, the euro slid about 0.7% to 1.0735 against the dollar while the Dollar Index (97.93, +0.41) advanced 0.4%. 

All ten sectors registered solid gains with five groups adding more than 1.0%. The top-weighted technology sector (+1.8%) ended in the lead after climbing throughout the session with large cap components fueling the move. To that point, Apple (AAPL 127.60, +2.85), Google (GOOGL 544.53, +11.79), Facebook (FB 83.09, +2.31), and Microsoft (MSFT 42.90, +1.28) rallied between 2.2% and 3.1% while Dow component IBM (IBM 166.16, +5.49) jumped 3.4% ahead of its earnings report. 

Speaking of earnings, investors received just a small batch of reports this morning, but the floodgates will open as the week continues. The consumer discretionary sector (+1.1%) ended among the leaders with an assist from Hasbro (HAS 74.16, +8.27), which surged 12.6% in reaction to better than expected earnings and revenue. 

Elsewhere, the industrial sector (+1.1%) also displayed relative strength with transport stocks doing some heavy lifting. The Dow Jones Transportation Average spiked 1.7% with all 20 components ending in the green. Railroads stood out with CSX (CSX 34.89, +1.59) soaring 4.8% while Kansas City Southern (KSU 107.37, +2.88) jumped 2.8% ahead of tomorrow's earnings report. 

Another cyclical sector—financials (+0.5%)—could not catch up to the broader market even though Morgan Stanley (MS 36.96, +0.21) reported better than expected results. Shares of MS climbed 0.6% while other major financials posted comparable gains. 

Treasuries spent the day in a slow retreat from their overnight highs with the 10-yr yield rising two basis points to 1.88%. 

Today's participation was on the light side with fewer than 670 million shares changing hands at the NYSE floor. 

Investors did not receive any economic data today and tomorrow's session will also be free of noteworthy releases. 

Global Market

ASIA

Asian Markets Summary: Japan’s Nikkei -0.1%; Hong King’s Hang Seng -2.0%; China’s Shanghai Composite -1.6%
Asian-Pacific markets were mostly lower on Monday, following in the footsteps of Wall Street’s weak outing on Friday and the news after Friday’s close that Chinese securities regulators were implementing steps to curb speculative trading activity. Monday’s headlines were dominated, however, by the news that the People’s Bank of China cut the reserve requirement ratio for all banks by a larger-than-expected 100 basis points to 18.50%.

Economic data

• China
• PBOC cuts reserve requirement ratio to 18.50% from 19.50%
• Japan
• April Tankan Index 12 (prior 16)
• Tertiary Industry Activity Index +0.3% month-over-month (expected -0.6%; prior +0.7%)
• South Korea
• March PPI -0.1% month-over-month (prior +0.1%); -3.7% year-over-year (expected -1.4%; prior -3.6%)
• New Zealand
• Q1 CPI -0.3% quarter-over-quarter (expected -0.2%; prior -0.2%); +0.1% year-over-year (expected +0.2%; prior +0.8%)

Equity Markets

• Japan’s Nikkei declined 0.1%, dragged down by a weak showing from the financial sector (-0.9%). Sumco Corp (-3.0%), Mitsubishi Estate Co (-2.8%), Takashimaya Co (-2.7%), TOTO Ltd (-2.6%), and Tokyu Fudosan Holdings (-2.6%) topped the list of individual decliners. Okuma Corp (+5.1%) paced the winners. Out of the 225 index members, 63 ended higher, 158 finished lower, and 4 were unchanged.
• Hong Kong’s Hang Seng declined 2.0%, feeling the pinch of Friday’s decision by Chinese regulators to curb speculative trading activity and the weakness on Wall Street. Losses were led by the energy (-3.9%), basic materials (-3.0%), consumer cyclical (-2.4%), and financial (-2.2%) sectors. Kunlun Energy Co (-7.1%), PetroChina (-6.1%), and Lenovo Group (4.4%) led declining issues. China Unicom Hong Kong (+2.3%) was the only issue to gain more than 1.0%. Out of the 50 index members, 5 ended higher, 42 finished lower, and 3 were unchanged.
• China’s Shanghai Composite declined 1.6% in a roller-coaster session which featured the news that the People’s Bank of China slashed its reserve requirement ratio by a larger-than-expected 100 basis points to 18.50%. That news followed on the heels of Friday’s announcement that Chinese securities regulators were taking steps to clamp down on speculative trading activity. The technology (-4.6%), financial (-4.3%), and consumer non-cyclical (-2.6%) sectors were notable pockets of weakness in the mainland market on Monday.
• India’s Sensex declined 2.0% amid a steady wave of selling that began at the start of trading. The energy (-3.5%), industrial (-2.3%), and consumer cyclical (-2.2%) sectors paced the retreat. Reliance Industries (-4.5%), Hero MotoCorp (-3.9%), Mahindra & Mahindra (-3.0%), and Cipla Ltd (-3.0%) topped the list of declining issues. Only two stocks — Sun Pharmaceutical (+0.6%) and ICICI Bank (+0.3%) — finished Monday with a gain.
• Australia’s S&P/ASX 200 declined 0.8%. Monday’s losses were led by the information technology (-1.7%), industrial (-1.4%), and consumer staples (-1.4%) sectors.
• Regional advancers: South Korea +0.2%, Malaysia +0.2%
• Regional decliners: Taiwan -0.2%, Singapore -0.6%, Thailand -0.4%, Indonesia -0.2%, Philippines -1.0%, Vietnam -0.6%

FX

• USD/CNY +0.1% at 6.2019
• USD/INR +0.6% at 62.916
• USD/JPY +0.1% at 119.07

EUROPE

Major European indices trade mostly higher with Germany’s DAX (+1.5%) trading well ahead of its peers. European investors are maintaining their focus on Greece with the Eurogroup meeting scheduled to take place in Riga on Friday.

• Germany’s March PPI +0.1% month-over-month (expected 0.2%; prior 0.1%); -1.7% year-over-year (consensus -1.6%; last -2.1%)
• Spain’s Trade Deficit narrowed to EUR2.04 billion from EUR2.60 billion (expected deficit of EUR2.00 billion)

Closing Prices

• UK’s FTSE: + 0.8%
• Germany’s DAX: + 1.7%
• France’s CAC: + 0.9%
• Spain’s IBEX: + 0.2%
• Portugal’s PSI: + 0.7%
• Italy’s MIB Index: + 1.3%
• Irish Ovrl Index: + 0.0%
• Greece ASE General Index: -0.1%

Macroeconomic Data

Economic Data

from Briefing.com

• No Economic Data

Market Internals

NYSE:

Lower Volumes than the day before – 683.4M vs 772.0M 


Advancers outpaced Decliners (adv/dec): 2148 / 892

New Highs outpaced New Lows (highs/lows): 55 / 13

NASDAQ:

Lower Volumes than the day before – 1632.4M vs 1953.9M

Advancers outpaced Decliners (adv/dec): 1901 / 896

New Highs outpaced New Lows (highs/lows): 66 / 28

VOLATILITY S&P500 (VIX)
13.30 -0.59 (-4.25%)

I don't see a clear leadership in the internals. Monday session was pointing towards bullishness but without much volume I suppose it is not going to be sustainable. VIX is also reflecting the weakness in the market as the bullishness falters.           

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,034.93 +208.63 (+1.17%)

Volume: 103,163,433 (above average of 100,885,539)
Range: 17,841.18 - 18,092.22

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,994.60 +62.79 (+1.27%)
Volume: 386,630,301 (below average of 445,743,337)

Range: 4,952.68 - 5,000.20

S&P 500 INDEX (SPX: CBOE)

2,100.40 +19.22 (+0.92%)

Volume: 481,863,000 (below average of 547,604,985)

Range: 2,084.11 - 2,103.94 

The market took a rebound at the support level. I feel that this is just a knee jerk reaction as traders were taking some profit by covering their shorts. MACD is also showing a slowdown in bullish momentum. I don't see much upside at the moment. By the way I do note the indices are forming a wedge pattern though.

Commodities

Closing Commodities: Commodities Feel Pressure From Strong Dollar Index

• Strength in the dollar index continued to help weigh on commodities today
• Select commodities like oil traded more independently compared to showing the typical inverse correlation
• June crude oil ultimately ended today’s trading session $0.53 higher at $57.85/barrel. May nat gas lost $0.09 to $2.54/MMBtu
• Metals continued to feel pressure from strength in the dollar today
• June gold ended $9.60 lower at $1193.50/oz, while May silver fell $0.33 to $15.89/oz
• May copper fell $0.05 to $2.73/lb

Energy

• June crude oil futures rose $0.53/barrel to $57.85/barrel
• May natural gas fell $0.09 to $2.54/MMBtu
• RBOB Gasoline closed $0.01 lower at $1.92/gallon
• Heating oil closed flat at $1.88/gallon

Note:

The crude oil front month rolled over the June contract today.

Agriculture

• May corn closed $0.02 lower at $3.78/bushel
• May wheat closed $0.06 higher at $4.99/bushel
• May soybeans closed $0.09 higher at $9.77/bushel
• Ethanol closed $0.01 higher at $1.62/gallon
• Sugar #11 closed 0.55 cents lower (-4.2%) at 12.69 cents/lb

Metals

• June gold ended today’s session $9.60 lower at $1193.50/oz
• May silver closed $0.33 lower at $15.89/oz
• May copper closed $0.05 lower at $2.73/lb

Currencies

Dollar Gains Against All Majors

• The US Dollar Index rose 0.48% to 97.99 as the People's Bank of China reduced the required reserve ratio for banks by a full percentage point to 18.50% and halted the sell-off in risk that began in Europe last Thursday
• EUR/USD declined 0.71% to $1.0728
  • The situation in Greece looks more dire each week as more government officials downplay the risk of contagion from Grexit and Syriza continues to fail on producing an acceptable list of structural reforms
    • The Greek government decreed today that local governments would have to keep their cash reserves at the central bank
  • The federal government has to pay 1.7 billion euro in public wages and pensions by the end of April 
  • 200 million euro is due to the IMF on May 1st
• USD/JPY: +0.39% to 119.39
  • The Trans-Pacific Partnership is close to being a done deal, according to the Wall Street Journal
    • The hurdles are allegedly car imports to the U.S. and agricultural imports (rice) to Japan
    • The agreement is considered to be an important part of "Abenomics." Failure to reach an accord would be a second blow in as many weeks to the Japanese Prime Minister after an enterprising judge blocked the reopening of many nuclear plants on April 14th. Delaying the reopening will have a significant effect on output for the island nation
• USD/CHF: +0.48% to 0.9568
• GBP/USD: -0.32% to $1.4897
• AUD/USD: -0.89% to $0.7714
• NZD/USD: -0.45% to $0.7645
• USD/CAD: -0.07% to 1.2233

Bonds

Treasuries Slip as Safe-Haven Seekers Vanish

• After a Friday session that brought flashbacks of 2008 to some traders and featured a global shutdown of Bloomberg's data systems, skittish investors paid again for panicking. The U.S. equity indices reversed almost all of their losses today, although the European averages recovered only modestly. Treasuries gave back large chunks of their gains from Friday in a curve-steepening trade. The consensus explanation was a required reserve ratio cut of a full percentage point from China's central bank
• Yield check:
  • 2-yr: +2 bps to 0.53%
  • 5-yr: +2 bps to 1.33%
  • 10-yr: +3 bps to 1.89%
  • 30-yr: +5 bps to 2.57%

• News:
  • The People's Bank of China cut the required reserve ratio by a full percentage point, the biggest cut since 2008. By reducing the amount of reserves that banks need to hold for every dollar of loans, the move should reduce pressure on China's beleaguered banking system and increase its capacity to lend
  • William Dudley, president of the NY Fed and a permanent voting member of the FOMC, said that the U.S. economy should recover through the rest of the year from the Q1 slowdown 
    • First-quarter growth has been generally weak over the past five years
    • Falling oil prices have caused a drop in business investment
    • The stronger dollar may reduce growth by 0.6% this year
  • Kaisa Group Holding Ltd., a Chinese property developer, missed a $52 million interest payment on debentures due in 2017 and 2018
    • This is a long-anticipated development for those expecting stress in China's property sector
  • Greek sovereign yields hit fresh highs and the Greek federal government mandated that local governments keep their cash reserves at the central banks
    • The head of Gazprom will visit Greece tomorrow, potentially to discuss a pipeline deal that would provide a windfall for the Greek government

• Commodities:
  • WTI Crude for June delivery: +0.46 to $57.77/bbl
  • Gold: -0.71% to $1194.50/troy oz.
  • Copper: -1.71% to $2.7265/lb.

• Currencies:
  • EUR/USD: -0.66% to $1.0735
  • USD/JPY: +0.30% to 119.30

• No Market-Moving Events Scheduled for Tuesday

Treasury Yields:

• 2 Year Note 0.55% +0.04
• 5 Year Note 1.33% +0.02
• 10 Year Note 1.90% +0.03
• 30 Year Bond 2.56% +0.05

2/30 Spread: 201 bps ( +1 ) …  2/10 Spread: 135 bps ( -1 )

Preview for Tuesday 21 Apr, 2015

Economic Data

Tuesday (21 Apr) :

• No Economic Data

Earnings Highlights

Tuesday (21 Apr) :
BMO - ATI ACI ARMH AG ASTE BHI EAT CP CLS CS DOV DD FITB GCI GPC HOG ITW JAKK KSU KMB LPT LECO LMT MAN MLNX MTG MLI EDU NTRS NVR OMC PCAR PNR PLD RF STBA SAP SBNY SAH SNV TCB AMTD TTS TRV UA UTX VZ WIT
AMC - ACE ADTN AMGN BRCMCAMP CMG CREE CUBI DFS DLB DRWI EWBC FMBI FTI FWRD FULT HTS ILMN INFN IBKR ISRG IRBT LTXB MANH MSA NBR NAVI PFPT OKSB SYK SMCI URI VASC VMW YHOO YUM ZIXI

Summary

Earnings reports are better than expected. Most eyes are on the Greece debt issue now. I remain in my stance of having a slight correction in the market. In terms of overall market sentiment, the market is still relatively stagnant (sideway). I think there is a high chance that the market will continue to go down after some profit taking or maybe just a flat session, again.

Direction for Tuesday 21 Apr, 2015; Down

2015 Daily Directional Accuracy: 28/55 (50.91%) 
2015 Weekly Directional Accuracy: 8/13 (61.54%)