Wednesday, 22 Apr 2015 - AMC

Dow +88.68 at 18038.27, Nasdaq +21.07 at 5035.17, S&P +10.67 at 2107.96

Market remains volatile but I reckon if the market broke its trend support, we should see more correction along. At this point in time I do not carry much optimism for a rally. Although a good earnings season should still give the market a push higher but in terms of sustainability I still think a correction is more likely.

Direction for Wednesday 22 Apr, 2015; Down

I got my call wrong. The rally in the market seems to indicate the underlying strength of the bulls. Despite market opened lower, technology helped to push the market higher. Meanwhile crude oil inventories continues to show a record level. That might apply some pressure on the rising oil price and it is also important to note that the supply level is possibly at the max...                               

Market Summary

Industry Watch

Strong: Energy, Financials, Technology, Telecom Services

Weak: Consumer Discretionary, Consumer Staples, Health Care, Industrials, Materials

Other Market Moving Factor:

• Mixed results from Dow components: Boeing (BA) and Coca-Cola (KO) beat while McDonald's (MCD) misses

[BRIEFING.COM] The major averages registered modest midweek gains with the S&P 500 (+0.5%) ending ahead of the Nasdaq Composite (+0.4%). 

Overall, the Wednesday session was very quiet as the key indices spent the day in a slow advance. Intraday trading volume highlighted that dynamic, but more than 735 million shares changed hands at the NYSE floor by the close, representing the highest total of the week. 

All ten sectors registered gains with the top-weighted technology sector (+1.1%) ending in the lead. The influential group was underpinned by daylong strength in shares of MasterCard (MA 91.20, +3.43) and Visa (V 68.01, +2.66) after it was reported China will allow foreign card processors to compete with UnionPay, which is the only company that processes yuan-denominated card payments at this time. Meanwhile, tech heavyweights like Apple (AAPL 128.62, +1.71), Google (GOOGL 549.18, +6.25), and Microsoft (MSFT 42.98, +0.35) joined the rally in progress. 

On the earnings front, Broadcom (BRCM 46.18, +2.20) and VMWare (VMW 91.00, +5.60) posted respective gains of 5.0% and 6.6% after beating estimates while EMC (EMC 27.13, +0.81) rallied 3.1% despite missing estimates and guiding lower. 

Elsewhere among cyclical sectors, financials (+0.7%) and energy (+0.6%) outperformed while the remaining sectors settled closer to their flat lines. Notably, the energy sector finished among the leaders even though crude oil fell 0.6% to $56.28/bbl. 

Moving to the countercyclical side, the health care sector (+0.2%) was among the early leaders after Amgen (AMGN 169.10, +0.64) beat earnings estimates and guided higher; however, the stock narrowed its gain to 0.4% by the close after being up more than 2.5% at the start. Similarly, the iShares Nasdaq Biotechnology ETF (IBB 363.84, -0.66) surrendered its early gain and ended lower by 0.2%, which contributed to the underperformance of the Nasdaq Composite. 

Going back to earnings, three Dow components reported their results today with Coca-Cola (KO 41.31, +0.53) and McDonald's (MCD 97.84, +2.97) posting respective gains of 1.3% and 3.1%. Shares of KO rallied in reaction to a bottom-line beat while McDonald's advanced despite missing earnings expectations. Also of note, Boeing (BA 151.19, -2.14) fell 1.4% after below-consensus revenue overshadowed better than expected earnings. 

Treasuries slumped during morning action and extended their losses in the afternoon, sending the 10-yr yield higher by seven basis points to 1.98%. 

Economic data included Existing Home Sales, FHFA Housing Price Index, and MBA Mortgage Index: 

• Existing home sales for March were reported to have increased 6.1% from February to an annualized rate of 5.19 million units while the Briefing.com consensus expected a reading of 5.05 million 
• The FHFA Housing Price Index for February rose 0.7%, which followed an unrevised increase of 0.3% in January 
• The weekly MBA Mortgage Index rose 2.3% to follow last week's 2.3% decline 

Tomorrow, weekly Initial Claims will be released at 8:30 ET (Briefing.com consensus 288K) while the New Homes Sales report for March will cross the wires at 10:00 ET (consensus 520K).

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +1.3%; Hong Kong’s Hang Seng +0.3%; China’s Shanghai Composite +2.4%
Wednesday produced a mixed outing for Asian-Pacific markets, yet the Big Three — the Nikkei, the Hang Seng, and the Shanghai Composite — all traded higher. The Shanghai was the big mover with a 2.4% gain, yet the Nikkei stole many of the headlines with a close above 20,000 and a push to its highest level in 15 years that followed Japan reporting its first trade surplus in nearly three years.

Economic data

• Japan
• March Adjusted Trade Balance JPY 0.00 tln (expected JPY -0.41 tln; prior JPY -0.57 tln)
• Exports +8.5% year-over-year (expected +8.5%; prior +2.4%)
• Imports -14.5% year-over-year (expected -12.8%; prior -3.6%)
• Australia
• Q1 CPI +0.2% quarter-over-quarter (expected +0.2%; prior +0.2%); +1.3% year-over-year (expected +1.3%; prior +1.7%)

Equity Markets

• Japan’s Nikkei increased 1.3%, closing above the psychologically-important 20,000 level and at a 15-year high. Trade was bolstered by the report showing the country’s first trade surplus in nearly three years. The financial sector (+2.4%) led a broad-based advance that saw only the energy sector (-1.1%) not participate. Leading gainers included Sony Financial Holdings (+6.7%), Tokyo Dome Corp (+5.4%), Nitto Boseki Co (+4.6%), Nomura Holdings (+4.5%), and Kawasaki Heavy Industries (+4.5%). Out of the 225 index members, 168 ended higher, 49 finished lower, and 8 were unchanged.
• Hong Kong’s Hang Seng increased 0.3%, led by strength in the financial (+1.1%) and diversified (+1.0%) sectors. China Resources Power Holdings (+12.3%), China Merchants Holdings (+7.4%), China Resources Land (+5.6%), China Overseas Land & Investment (+5.4%), and Hong Kong Exchanges and Clearing (+2.7%) topped the list of winners. Belle Intl (-3.5%), Sands China (-2.3%), CNOOC (-1.2%), and China Mobile (-1.2%) paced the decliners. Out of the 50 index members, 27 ended higher, 21 finished lower, and 2 were unchanged. ·
• China’s Shanghai Composite increased 2.4% and finished at its high for the day. The Shanghai Composite is up 2.6% week-to-date and 36.0% since the end of 2014. The Chinese market was paced by strength in the financial (+4.0%), technology (+3.2%), and consumer cyclical (+2.5%) sectors.
• India’s Sensex was in negative territory entering its final hour of trading, but staged a closing rally that left it up 0.8% for the session. The industrial (+3.2%), consumer non-cyclical (+2.6%), and financial (+1.3%) sectors led the way. Individual standouts included Hindustan Unilever (+4.2%), Axis Bank (+3.6%), Larsen & Toubro (+3.5%), Hero MotoCorp (+3.5%), and Dr Reddy’s Laboratories (+3.0%). Wipro (-5.9%) was the biggest loser.
• Australia’s S&P/ASX 200 declined 0.6% with some firm first quarter CPI data quelling rate cut speculation. Losses were led by the energy (-1.0%), financial (-0.9%), and utilities (-0.6%) sectors.
• Regional advancers: Taiwan +0.8%, Vietnam +0.05%
• Regional decliners: South Korea -0.04%, Singapore -0.4%, Malaysia -0.4%, Thailand -1.1%, Indonesia -0.4%, Philippines -0.2%

FX

• USD/CNY -0.1% at 6.1957
• USD/INR +0.1% at 62.886
• USD/JPY -0.2% at 119.46

EUROPE

Major European indices trade mostly lower with Germany’s DAX (-0.8%) pacing the decline. The European Central Bank has raised Greece’s Emergency Liquidity Assistance allowance by EUR1.50 billion to EUR75.50 billion, according to Germany’s Handelsblatt.

• Italy’s February Retail Sales -0.2% month-over-month (expected 0.3%; prior 0.2%); +0.1% year-over-year (last 1.2%). Separately, Industrial Sales +0.4% month-over-month (expected -1.6%; last -1.7%)

Closing Prices

• UK’s FTSE: -0.5%
• Germany’s DAX: -0.6%
• France’s CAC: + 0.4%
• Spain’s IBEX: -0.2%
• Portugal’s PSI: -1.0%
• Italy’s MIB Index: + 0.3%
• Irish Ovrl Index: -0.5%
• Greece ASE General Index: + 2.4%

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : 2.3% (Prior -2.3%) 
• FHFA Housing Price Index : 0.7% (Prior 0.3%)
• Existing Home Sales : 5.19M vs 5.05M (Prior 4.89M - Up)
• Crude Inventories : 5.315M (Prior 1.294M)

EXISTING HOME SALES

Highlights

• Existing home sales increased 6.1% in March to 5.19 mln SAAR from an upwardly revised 4.89 mln SAAR (from 4.88 mln SAAR) in February. The Briefing.com Consensus expected existing home sales to increase to 5.05 mln.

Key Factors

• Throughout the report, the underlying conditions in March showed an improving buying season.
• Sales transitioned from investors to homeowners. All-cash sales dropped to 24% in March from 26% in February. Individual investor sales accounted for 14% of total existing home sales for a second consecutive month. 
• More importantly, first-time homebuyers -- which are needed to keep home sales expanding -- edged up to 30% from 29% in February. That is still below the 40% that first-time buyers typically buy during a normal housing market, but the trend is moving in the correct direction.
• Sales demand was widespread as all areas of the country reported positive month-over-month and year-over-year sales growth.
• Altogether, March sales were the strongest since the same number of units were sold in September 2013.
• Supply remains a problem and will likely keep sales growth constrained. Inventories increased 5.1% to 2.00 mln, but at the current sales rate, there is only 4.6 months' supply. That is down from a 4.7 months' supply in February and well under the 6 months' supply that realtors are looking for.
• The median existing home prices increased 7.8% y/y to $240,500.

Big Picture

• In general, the March sales report revealed the strongest underlying buying conditions in over a year.

Market Internals

NYSE:

Higher Volumes than the day before – 753.9M vs 689.9M 


Advancers outpaced Decliners (adv/dec): 1749 / 1238

New Highs outpaced New Lows (highs/lows): 90 / 21

NASDAQ:

Lower Volumes than the day before – 1680.5M vs 1700.2M

Advancers outpaced Decliners (adv/dec): 1503 / 1278

New Highs outpaced New Lows (highs/lows): 113 / 42

VOLATILITY S&P500 (VIX)
12.71 -0.54 (-4.08%)

It does look more bullish in the internals but it remains unconvincing still. VIX also went down and it is going to test its support level again. If the VIX is unable to break lower, we should see a rebound.              

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,038.27 +88.68 (+0.49%)

Volume: 91,256,311 (below average of 100,587,503)
Range: 17,887.76 - 18,056.02

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,035.17 +21.07 (+0.42%)
Volume: 398,296,110 (below average of 443,107,537)

Range: 4,992.62 - 5,040.65

S&P 500 INDEX (SPX: CBOE)

2,107.96 +10.67 (+0.51%)

Volume: 505,662,000 (below average of 545,241,108)

Range: 2,091.05 - 2,109.98 

NASDAQ continues to lead the market. But given the volume decreases as market continues to rise, I am thinking whether it is going to be sustainable. NASDAQ is likely to form a double top and S&P is forming a wedge pattern too.

Commodities

Closing Commodities: WTI Oil Falls Modestly Following Weekly Storage Data

• WTI crude oil futures ultimately ended today’s session in the red following the API and EIA weekly storage data
• June crude lost $0.41 today to $56.20/barrel
• May nat gas ended with modest gains, rising $0.02 to $2.60/MMBtu
• Following the morning sell-off in gold, silver and copper, losses held as all three commodities remained in negative territory for the rest of today’s session
• June gold lost $16.20 to $1186.80/oz, May silver -0.22% at $15.78/oz and May copper -0.03% to $2.67/lb.

Energy

• June crude oil futures fell $0.41/barrel to $56.20/barrel
• May natural gas rose $0.02 to $2.60/MMBtu
• RBOB Gasoline closed $0.04 higher at $1.93/gallon
• Heating oil rose $0.01 to $1.87/gallon

Highlights:

• Crude Oil: EIA data released this morning for the week ending April 17, showed a crude oil inventory build of 5.314 mln (vs. 2.8 mln consensus)

Agriculture

• May corn closed flat at $3.73/bushel
• July wheat closed $0.01 lower at $4.99/bushel
• July soybeans closed $0.05 lower at $9.72/bushel
• Ethanol closed $0.02 lower at $1.62/gallon
• Sugar #11 closed 0.25 cents higher at 12.66 cents/lb

Metals

• June gold ended today’s session $16.20 lower (-1.3%) at $1186.80/oz
• May silver closed $0.22 lower at $15.78/oz
• May copper closed $0.03 lower at $2.67/lb

Currencies

Pound Sterling Rallies on BOE Minutes

• Pound sterling rallied 0.81% against the dollar as the minutes from the Bank of England's policy meeting were released
  • Two members unexpectedly said that the decision to hold the main policy rate at 0.5% was a close call
• Dollar/Swiss rallied 1.39% to 0.9686 as the Swiss National Bank removed exemptions from Switzerland's negative interest rates for public accounts 
• EUR/USD rose 0.02% to $1.0737
• USD/JPY rallied 0.13% to 119.85. A court approved two nuclear reactor re-openings on Wednesday. After the Fukushima disaster in 2011, all of the nation's reactors were taken offline for safety reviews. The loss of nuclear power led to more fossil fuel use and Japan has to import those fuels, leading to a weaker yen
• AUD/USD rallied 0.74% to $0.7769
• The U.S. Dollar Index was barely changed, down 0.07% to 97.94

Bonds

Treasuries Decline Sharply

• Government notes and bonds declined today in a curve-steepening trade with much of the losses precipitated by a better-than-expected March Existing Home Sales report
• Yield check:
  • 2-yr: +3 bps to 0.55%
  • 5-yr: +6 bps to 1.39%
  • 10-yr: +6 bps to 1.97%
  • 30-yr: +7 bps to 2.65%

• News:
  • Tension in Greece declined today with the Greek 10-year note yield declining 75 basis points
    • The most obvious positive development of the past few days was the decree by the federal government that municipalities would have to keep their cash reserves at the Bank of Greece. A government official said that this might buy Greece six weeks of time
      • The 1.7 billion euro wage and pension bill looms at the end of April
      • The government must also repay the IMF 200 million euro on May 1st
  • The MBA Mortgage Index for last week rose 2.3% versus the prior fall of 2.3%
  • The February FHFA Housing Price Index rose 0.7% versus the 0.3% rise in January
  • The March Existing Home Sales number was 5.19 mln, higher than the Briefing.com consensus of 5.05 mln and the prior reading of 4.88 mln
    • The report revealed the strongest underlying buying conditions in a year
    • The Treasury complex sold off in response, but the trade seemed disproportionate relative to the significance of the data. The scene looked more like a market waiting for an excuse to sell

• Commodities:
  • WTI Crude fell 0.62% to $56.26/bbl
  • Gold fell 1.44% to 1185.80/troy oz.
  • Copper fell 1.09% to $2.672/lb.

• Equities:
  • The S&P 500 shook off the higher interest rates today to trade up 0.53% to 2,108.31 -- within 12 points of its all-time high

• Data Out Thursday:
  • Initial and Continuing Jobless Claims for the weeks of 4/18 and 4/11, respectively (08:30 ET)
  • March New Home Sales (10:00 ET)
  • Natural Gas Inventories for the week ending 4/18 (10:30 ET)
• New Supply:
  • $18 billion 5-Year TIPS Auction (Results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.57% +0.02
• 5 Year Note 1.41% +0.06
• 10 Year Note 1.99% +0.07
• 30 Year Bond 2.66% +0.08

2/30 Spread: 209 bps ( +6 ) …  2/10 Spread: 142 bps ( +5 )

Preview for Thursday 23 Apr, 2015

Economic Data

Thursday (23 Apr) :

• Initial Claims : 288K (Prior 294K)
• Continuing Claims : 2380K (Prior 2268K)
• New Home Sales : 517K (Prior 539K)
• Natural Gas Inventories : (Prior 63 bcf)

Earnings Highlights

Thursday (23 Apr) :
BMO - MMM ABBV ADPT ALK ALXN ASPS MO AMAG AEP AVT BKU BAX BBT BEAV BMS BHE BNCL BCC CAB CAM CSL CAT CLFD CMS CFX COR DAN DHR DLX DPZ DOW DPS DNKN LLY EQT EQM FNB FAF FCX GMT GM GPK HP HSY HUB.B IR IQNT IVC JNS JAH JCI KKR LAZ LTM ERIC MHO CLI HZO MJN MDSO MDP VIVO MTH NDAQ NWE NVS NUE OCN ORI OSTK PSTB PTEN BTU PENN PEP PNK PJC PII POOL PG PRLB PHM DGX RTN RS COL RTIX SFE SQNS SIAL SNA LUV SWK STC SUI SXC SYNT TBI UTEK UNP UAL UTL USG GRA WBC WCC WHR WNS
During Mkt Hours - GRC HTLD
AMC - ABAX ACTG ALGN ALTR AMZN BGS BAS BJRI HAWK BLDR BCR ELY COF CBI CPHD CB CYN CVTI DV DGII ETFC ECHO EFII WIRE ETH FCB FII FICO FBP FR FLS FET FSL GIMO GOOG GHL HBHC HBI HGR HA HWAY AWAY HUBG INFA JNPR KLAC KN LSTR MKTO MTSN MXIM MXWL MDCA MMSI MCRL MSCC MSFTMTX NBHC N NTGR NEM OLN P PCTI PDFS PEB PGI PFG QLIK QDEL RGA RSG RMD RHI SBAC SHOR SSD SWN SPNC SPSC SFG SBUX SRCL SPWR SIVB SYA SYNA TFSL TRN UIS UHS VRSN VCRA WRE WSFS

Summary

Market remains volatile as we are in the midst of earnings season. A good Q2 earnings should give the market some upside after all April is considered as the most bullish month. We are going to see more earnings on Thursday and the unemployment claims could potentially be a catalyst for the market to break out.

Direction for Thursday 23 Apr, 2015; Up

2015 Daily Directional Accuracy: 29/57 (50.88%) 
2015 Weekly Directional Accuracy: 8/13 (61.54%)