Wednesday, 8 Apr 2015 - AMC

Dow +27.09 at 17902.51, Nasdaq +40.59 at 4950.83, S&P +5.57 at 2081.91

Tomorrow is also the start of Q2 earnings season. Looking at the market performance, I think the big boys are staying out and it is likely the market is going to take a turn soon.

We are also expecting the release of FOMC minutes that might give the market some adrenaline in Wednesday session. However I feel market is likely to remain sideway still yet downside remains imminent.

Direction for Tuesday 7 Apr, 2015; Down

Market is not going anywhere amid the release of FOMC minutes. Crude oil inventories continue to build up to a record level and that brought the oil prices down sharply. Certainly the big boys were not doing anything on Wednesday.  

Market Summary

Industry Watch

Strong: Consumer Discretionary, Financials, Health Care

Weak: Energy, Industrials, Telecom Services, Utilities

Other Market Moving Factor:

• Dollar Index erases overnight decline
• Biotechnology outperforms
• Crude oil retraces Tuesday advance

[BRIEFING.COM] The stock market ended Wednesday on a higher note, but not before making a couple appearances in the red. The S&P 500 added a modest 0.3% while the Nasdaq Composite (+0.8%) outperformed. 

Equity indices climbed out of the gate with the Nasdaq receiving major support from biotechnology. Meanwhile, the S&P 500 notched its session high during the initial 30 minutes, but returned to its flat line shortly thereafter amid significant weakness in the energy sector (-1.0%). 

The growth-sensitive energy space was pressured by a tailspin in crude oil futures after latest data from the American Petroleum Institute revealed that crude inventories increased by 10.9 million barrels since last week. As a result, total inventories have reached levels not seen at this time of the year in at least 80 years. WTI crude fell 6.5% to $50.44/bbl, erasing its Tuesday advance, and cutting into its gain from Monday. 

Unlike energy, most of the remaining cyclical sectors ended near their flat lines while the consumer discretionary sector (+0.9%) outperformed after showing relative weakness yesterday. Today, however, the group enjoyed broad support, including relative strength among homebuilders. The iShares Dow Jones US Home Construction ETF (ITB 28.41, +0.40) climbed 1.4%. 

Elsewhere, the health care sector (+0.9%) also displayed strength throughout the day, which was largely due to biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 352.01, +10.09) outperformed from the get-go and extended its gain after Mylan (MYL 68.36, +8.79) announced a proposal to acquire Perrigo (PRGO 195.00, +30.29) for $205/share. The news sent shares of PRGO higher by 18.4% while the biotech ETF advanced 3.0% and kept the Nasdaq in the lead. 

Similar to biotechnology, the high-beta chipmaker space contributed to Nasdaq's strength with the PHLX Semiconductor Index advancing 0.7%. However, the technology sector (+0.2%) ended a bit behind the broader market following mixed action in large cap names. Google (GOOGL 548.84, +3.98) added 0.7% while Apple (AAPL 125.60, -0.41) lost 0.3% after Societe Generale downgraded the stock to ‘Hold' from ‘Buy.' 

Treasuries ended the day on a modestly lower note with the 10-yr yield rising one basis point to 1.90%. The benchmark yield saw little reaction to the afternoon release of FOMC minutes that provided little clarity regarding the timing of the first rate hike. 

According to the minutes, FOMC members were split over whether June would be the right time to begin raising rates. Several members believed that recent data and the outlook warranted a rate hike in June while others voiced concerns that the economic outlook would not be strong enough to support a rate hike in the near term. 

The dollar was also discussed in the minutes with participants acknowledging that net exports would be hampered by the strong greenback. In addition, a few members voiced their belief that the dovish tone emanating from global central banks could lead to additional dollar strength. 

Fittingly, the Dollar Index (98.02, +0.19) erased its intraday loss in reaction to the minutes, adding 0.2% for the day. 

Today's participation was close to recent averages with roughly 750 million shares changing hands at the NYSE floor. 

Economic data reported this morning was limited to the weekly MBA Mortgage Index, which ticked up 0.4% to follow last week's 4.6% increase. 

Tomorrow, weekly Initial Claims (Briefing.com consensus 285K) will be released at 8:30 ET while the Wholesale Inventories report for February will cross at 10:00 ET (expected 0.2%). 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +0.8%; Hong Kong’s Hang Seng +3.8%; China’s Shanghai Composite +0.8%
Major stock indices in the Asia-Pacific region were mostly higher while smaller regional markets were mostly lower. The former were helped along by some M&A activity, enthusiasm for continued accommodative monetary policy stances, and a momentum trade. The Shanghai Composite scored its 18th gain in the last 20 trading sessions, but it was the Hang Seng, which soared 3.8%, that stole Wednesday’s bullish show.

Economic data

• Japan
• Bank of Japan leaves main interest rate unchanged at 0.10% (expected 0.10%)
• Adjusted Current Account JPY 600 bln (expected JPY 610 bln; prior JPY 1.06 trln)
• March Economy Watchers Current Index 52.2 (expected 50.9; prior 50.1)
• South Korea
• April M2 Money Supply +8.60% (prior +8.20%)

Equity Markets

• Japan’s Nikkei increased 0.8% and touched its highest level since June 2000 (19,845.53) following the Bank of Japan’s decision to keep its monetary policy unchanged. Gains were led by the consumer non-cyclical (+1.5%) sector, although the financial sector (-0.1%) was a notable laggard. Dentsu (+6.1%), Shiseido Co (+5.3%), and Aeon Co (+5.0%) led individual gainers. Out of the 225 index members, 161 finished up, 53 closed down, and 11 were unchanged.
• Hong Kong’s Hang Seng soared 3.8% after re-opening from its holiday closure. The move was reportedly helped along by mainland investors who took full advantage of the daily quota under the Shanghai-Hong Kong Stock Connect program. Every sector closed higher with the influential financial sector (+3.6%) logging a healthy gain. Hong Kong Exchanges and Clearing (+12.2%) led all individual winners, followed by Belle International Holdings (+9.6%) and China Merchants Holdings (+8.8%). Out of the 50 index members, 46 ended higher, 3 finished lower, and 1 was unchanged.
• China’s Shanghai Composite jumped 0.8% and finished higher for the 18th time in the last 20 trading sessions. Over that span, the Shanghai Composite has gained 21.6%. The financial stocks were the main drivers of Wednesday’s advance.
• India’s Sensex increased 0.7%, led by strong gains in the communications (+3.6%), energy (+3.2%), and technology (+1.8%) sectors. Individual standouts included Coal India (+5.8%), Reliance Industries (+4.0%), and Bharti Airtel (+3.6%).
• Australia’s S&P/ASX 200 increased 0.6%, helped along by gains in the energy (+2.6%), resources (+1.7%), and materials (+1.3%) sectors.
• Regional advancers: South Korea +0.6%
• Regional decliners: Taiwan -0.7%, Singapore -0.1%, Malaysia -0.3%, Thailand -0.3%, Indonesia -0.7%, Philippines -0.6%, Vietnam -0.1%

FX

• USD/CNY +0.05% at 6.2014
• USD/INR -0.1% at 62.240
• USD/JPY -0.5% at 119.73

EUROPE

Major European indices trade in mixed fashion with UK’s FTSE (+0.4%) showing relative strength thanks to M&A activity. Also of note, Greek Prime Minister Alexis Tsipras is meeting with Russian President Vladimir Putin in Moscow today. Coincidentally, Greece is due to pay EUR450 million to the International Monetary Fund tomorrow.

• Eurozone Retail Sales -0.2% month-over-month; +3.0% year-over-year. Both figures matched expectations
• French Trade Deficit narrowed to EUR3.50 billion from EUR3.70 billion (expected deficit of EUR3.80 billion)
• Swiss CPI +0.3% month-over-month (expected 0.2%; prior -0.3%); -0.9% year-over-year (consensus -1.0%; last -0.8%)

Closing Prices

• UK’s FTSE: -0.4%
• Germany’s DAX: -0.7%
• France’s CAC: -0.3%
• Spain’s IBEX: -0.6%
• Portugal’s PSI: + 1.8%
• Italy’s MIB Index: -0.5%
• Irish Ovrl Index: + 0.1%
• Greece ASE General Index: -1.2%

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : 0.4% (Prior 4.6%) 
• Crude Inventories : 10.949M (Prior 4.766M)
• FOMC Minutes 

Market Internals

NYSE:

Higher Volumes than the day before – 765.5M vs 663.0M 


Advancers outpaced Decliners (adv/dec): 1861 / 1171

New Highs outpaced New Lows (highs/lows): 114 / 9

NASDAQ:

Higher Volumes than the day before – 1677.9M vs 1569.9M

Advancers outpaced Decliners (adv/dec): 1766 / 997

New Highs outpaced New Lows (highs/lows): 95 / 31

VOLATILITY S&P500 (VIX)

13.98 -0.80 (-5.41%)

Internals are showing the kind of bullishness which is not reflected in the price. Kind of strange to me indeed. VIX also went lower and does this mean market is still optimistic? Anyway in my opinion, the internals are looking divergence...        

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,902.51 +27.09 (+0.15%)

Volume: 76,821,076 (below average of 99,591,042)

Range: 17,822.23 - 17,976.20

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,950.82 +40.59 (+0.83%)

Volume: 409.8M (below average of 452,128,473)
Range: 4,914.15 - 4,956.72

S&P 500 INDEX (SPX: CBOE)

2,081.90 +5.57 (+0.27%)

Volume: 488.2M (below average of 551,468,250)

Range: 2,073.30 - 2,086.65 

The market is sitting on the 20 and 50 MAs support but it does not make a higher high. That somehow gives us a hint of the strength of the bulls. Despite that, market is still in a sideway trend and there is no clear leadership yet.

Commodities

Closing Commodities: Oil Prices Sink Following Bearish Inventory Data

• Crude oil continued to hold its losses today, which began after the API reported bearish oil storage late yesterday
• Overall, WTI crude fell over $3 since the API released its weekly storage data to below $50.50/barrel in recent trade
• May crude finished the day $-3.52 lower at $50.44/barrel
• In other energy, May nat gas lost $0.06 to $2.62/MMBtu
• Metals lost ground as well with gold, silver and copper all posting modest losses
• June gold fell $7.30 in pit trading today to $1203.30/oz, while May silver declined $0.37 to $16.47/oz
• May copper closed $0.03 lower to $2.73/lb.

Energy

• May crude oil futures fell $3.52/barrel (or -6.5%) to $50.44/barrel
• May natural gas closed $0.06 lower at $2.62/MMBtu
• RBOB Gasoline closed $0.12 (or -6.4%) lower at $1.74/gallon
• Heating oil closed $0.08 lower (or -4.5%) at $1.70/gallon

Highlights:

• Crude Oil: EIA data (for week ending Mar. 20) released this morning showed an inventory build of 10.49 mln barrels vs. 3.3 mln barrel estimates
• This build represented the largest weekly build in 14 yrs

Agriculture

• May corn closed $0.04 lower at $3.79/bushel
• May wheat closed $0.01 lower at $5.26/bushel
• May soybeans closed flat at $9.72/bushel
• Ethanol closed $0.02 lower at $1.59/gallon
• Sugar #11 closed 0.20 cents higher at 12.97 cents/lb

Metals

• June gold ended today’s session $7.30 lower at $1203.30/oz
• May silver closed $0.37 lower at $16.47/oz
• May copper closed $0.03 lower at $2.73/lb

Currencies

Dollar Makes up Losses After Fed Minutes

• The U.S. Dollar Index rose 0.14% to 97.97, after falling as low as 97.25 this morning, after the Fed minutes showed that several participants wanted to begin the rate normalization process at the June meeting
  • A couple of members said that the FOMC shouldn't hike rates until 2016
  • The comments were perceived as hawkish and the 2-year note sold off in response
• EUR/USD fell 0.31% to $1.0788
  • Alexis Tsipras, Greek prime minister, was in Moscow today meeting with Vladimir Putin, the Russian president. The talks had no material effect on Greece's financial position
• USD/JPY fell 0.25% to 120.01. The BoJ met last night and made no modifications to its current program of unconventional monetary policy

Bonds

Treasuries End Mixed

• After a morning bout of profit-taking, the Treasury complex resumed course higher in the afternoon, prior to and following the release of the minutes from the March FOMC meeting
• Yield check:
  • 2-yr: unch at 0.52%
  • 5-yr: +2 bps to 1.34%
  • 10-yr: +1 bp to 1.90%
  • 30-yr: +1 bp to 2.53%

• News:
  • The MBA Mortgage Index for the week ending April 4 rose 0.4% versus 4.6% for the week prior
  • Fed Governor Powell delivered a speech at the Council on Foreign Relations this morning in NY. He said that the Fed should look for more proof than it would during a normal recession to make sure that the economy is back on track before raising interest rates. According to Powell (and all of the data), the economy has been wounded severely and it isn't clear what the economy's potential capacity actually is
    • He saw March's dismal employment report as an aberration from an otherwise encouraging trend of data
    • Powell said that the Fed should be concerned about financial stability but that the risks aren't significant yet
  • NY Fed President Dudley spoke at the Reuters Newsmaker Event in NY today
    • He said that he sees a slight pickup in wage inflation
  • The $21 billion 10-year note auction (reopening) was met with better-than-average demand
    • High yield: 1.925%
    • Bid-to-cover ratio: 2.62
    • Indirect bid: 58.5%
  • The FOMC minutes from the March meeting were released at 14:00 ET
    • The committee noted that it could begin raising rates before it saw an uptick in the inflation gauges 
    • Several participants thought that a hike might be warranted at the June meeting

• Commodities:
  • WTI Crude fell 5.76% to $50.88/bbl after a larger-than-expected supply build for last week
  • Gold fell 0.74% to %1201.70/troy oz.
  • Copper fell 1.14% to $2.7315/lb.

• Currencies
  • EUR/USD: -0.33% to $1.0787
  • USD/JPY: -0.20% to 120.07

• Data Out Thursday:
  • Initial and Continuing Jobless Claims (08:30 ET)
  • February Wholesale Inventories (10:00 ET)
  • Natural Gas Inventories(10:30 ET)
  • 30-Year Bond Auction (Reopening) (Results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.54% +0.02
• 5 Year Note 1.35% +0.03
• 10 Year Note 1.92% +0.03
• 30 Year Bond 2.53% +0.01

2/30 Spread: 199 bps ( -1 ) …  2/10 Spread: 138 bps ( +1 )

Preview for Thursday 9 Apr, 2015

Economic Data

Thursday (9 Apr) :

• Initial Claims : 287K (Prior 268K)
• Continuing Claims : 2407K (Prior 2325K)
• Wholesale Inventories : 0.3% (Prior 0.3%)
• Natural Gas Inventories : (Prior -18 bcf)

Earnings Highlights

Thursday (9 Apr) :
BMO - STZ SYRG WBA
AMC - ANGO HGR PSMT RT TCPI ZEP

Summary

It seems like the market did not react much to the disappointing employment number last Friday and the FOMC minutes on Wednesday. That gives me some room of thought as the big boys are not being active yet. With the Q2 earnings season starting, the market is undoubtedly going to get more volatile.

Question remains whether the market is going to sustain or slide lower. I did mention before market opened on Wednesday that the downside is imminent and I am still staying on to that view. Market to me right now doesn't feel right to be bullish at all...

Direction for Thursday 9 Apr, 2015; Down

2015 Daily Directional Accuracy: 24/49 (48.98%) 
2015 Weekly Directional Accuracy: 6/10 (60.00%)