Monday, 11 May 2015 - AMC

Dow -85.94 at 18105.17, Nasdaq -9.98 at 4993.57, S&P -10.77 at 2105.33

Last week market movement was volatile as we were expecting Nonfarm payroll data. Friday session was merely significant at the opening 1 hour. We can see that market is unlikely to break higher judging from the reaction. However I will still be looking at how the market opens next week before jumping to any conclusion. Meanwhile I think the employment report is kinda mixed as I am still skeptical about the general condition with average earnings remaining relatively flat.

I think we would see some profit taking next Monday but I don't feel quite confident or convincing for the market to rally now. Maybe my hunch is telling me Sell in May and go away.

Direction for Monday 11 May, 2015; Down

Mostly there was profit taking in the market and there was not much sign of bulls around. Wasn't quite a surprise as market was hitting the resistance last week. NASDAQ went into red after an intra-day triple top formation. Crude oil was rather flat as there wasn't any movement from the Dollar Index as well. 

For an update, the People Bank of China decided to cut rates for the third time after inflation data was disappointed. Growth is seemingly weak in China and that could drag the world's economy.                

Market Summary

Industry Watch

Strong: Health Care

Weak: Energy, Telecom Services, Information Technology, Materials

Other Market Moving Factor:

• S&P 500 flirting with range-top resistance at 2120
• Market rates spike again with 10-yr yield at highs for the year and 30-yr bond yield above 3.00%
• People's Bank of China cuts its main lending and deposit rates (third rate cut in last six months)
• Eurogroup meeting to discuss Greece situation (headlines suggest Greece has executed an order to make its IMF payment)
• Weakness in energy sector

[BRIEFING.COM] The stock market followed up Friday's broad-based rally with an outing on Monday that never got on track due to a variety of reasons:

• Technical resistance
  • The S&P 500 got brushed back early following a test of its closing high for the year (2117.69)
• Rising long-term rates with the yield on the 10-yr note hitting new highs for the year at 2.27% and the 30-yr bond yield jumping 13 basis points to 3.03%
  • Selling was steady all day and unwound all of Friday's post-employment report gains
• A particularly weak showing from the energy sector (-2.1%), which failed to get on track after news reports indicated OPEC expects oil prices to stay below $100 for the next decade
• Concerns about the state of China's economy after the People's Bank of China announced an interest rate cut for the third time in the last six months
  • Main lending rate was lowered 25 basis points to 5.10%
  • Deposit rate was reduced 25 basis points to 2.25%
• Ongoing angst about Greece's ability to win access to the next bailout tranche
• Relative weakness in Apple (AAPL 126.32, -1.30, -1.0%); and
• A lack of leadership in general
  • Every sector finished lower
  • The energy sector was the only sector to lose more than 1.0%

By and large, the lack of follow through after testing the all-time closing high took the wind out of the market early and then the market trended steadily lower as long-term rates crept steadily higher.

The Dow Jones Industrial Average (-0.5%), Nasdaq Composite (-0.2%), and S&P 500 (-0.5%) all ended the day in red figures.  The Russell 2000 (+0.2%) finished off its highs for the day, but still managed to close the session higher.

There wasn't any economic data of note out of the U.S. today, yet things will get more interesting on that front later in the week with the release of the April Retail Sales report on Wednesday, the April Producer Price Index on Thursday, and the April Industrial Production report on Friday.

On a related note, San Francisco Fed President Williams (an FOMC voter) told CNBC that he believes the first quarter weakness was an anomaly and that he expects the economy to rebound.  That didn't help sentiment at the front of the Treasury curve either as the yield on the 2-yr note jumped four basis points to 0.62%.

The three major indices ended the day with a whimper, finishing at or near their lows for the session.  After falling 15% on Friday, the CBOE Volatility Index increased 7.3% on Monday

Trading volume was light with just 680 million shares changing hands at the NYSE.  That was approximately 14% below the volume seen in Friday's rally effort.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +1.3%; Hong Kong’s Hang Seng +0.5%; China’s Shanghai Composite +3.0%
Most major markets in the Asia-Pacific region finished higher on Monday, following Wall Street’s rally on Friday and bolstered by Sunday’s announcement from the people’s bank of China that it is cutting the lending and deposit rates by 25 basis points each to 5.10% and 2.25%, respectively. China’s Shanghai Composite jumped 3.0% on the news.

Economic data

• China
• PBOC cuts deposit rate to 2.25% (prior 2.50%)
• PBOC cuts interest rate to 5.10% (prior 5.35%)
• Australia
• April Business Confidence 3 (prior 3)
• April NAB Business Survey 4 (prior 6)
• New Zealand
• April Electronic Card Retail Sales -0.7% month-over-month (expected +0.5%; prior +0.8%); +3.9% year-over-year (prior 3.7%)

Equity Markets

• Japan’s Nikkei increased 1.3%, driven by gains in all sectors. The technology (+2.3%) and consumer cyclical (+1.8%) sectors were the biggest gainers. Mitsui Mining & Smelting (+13.5%), Fujikura Ltd (+11.6%), and Tosoh Corp (+9.2%) topped the list of individual winners while Sharp Corp (-26.4%), which plummeted after a capital reduction report, and Toshiba (-16.6%), which was hit hard after canceling its dividend payment and withdrawing its earnings guidance, led all decliners. Out of the 225 index members 171 ended higher, 47 finished lower, and 7 were unchanged.
• Hong Kong’s Hang Seng increased 0.5%, led by gains in the technology (+4.2%) and communications (+1.6%) sectors that offset a weak showing from the consumer non-cyclical (-1.3%) sector. Belle Intl (+4.6%), China Resources Enterprise (+4.3%), and Lenovo Group (+4.2%) led the winners while Hengan Intl (-2.6%), Li & Fung (-2.0%), and Cathay Pacific Airways (-1.5%) led the decliners. Out of the 50 index members 27 ended higher, 21 finished lower, and 2 were unchanged.
• China’s Shanghai Composite increased 3.0% following the news the PBOC cut its lending and deposit rates by 25 basis points each to 5.10% and 2.25%, respectively. This was the third rate cut in the last six months. The Shanghai Composite closed at its high for the day with only five stocks overall trading lower. Linhai Co (-4.1%) and Guangdong Songfa Ceramics Co (-1.8%) were the only stocks to lose more than 1.0% in Monday’s trade.
• India’s Sensex increased 1.5% and ended near its highs for the day. The basic materials (+3.6%) and financial (+2.4%) sectors were the two strongest-performing areas. Vedanta (+5.7%) and State Bank of India (+5.4%) led all issues while Hindustan Unilever (-3.4%), ITC Ltd (-0.5%), and Bharti Airtel (-0.4%) brought up the rear and were the only three stocks to lose ground.
• Australia’s S&P/ASX declined -0.2%, surrendering some modest gains registered earlier in the day. The telecom services (-1.7%), consumer staples (-0.9%), and financial (-0.5%) sectors were the weak links on Monday.
• Regional advancers: South Korea +0.6%, Singapore +0.5%, Philippines +0.2%
• Regional decliners: Taiwan -0.3%, Malaysia -0.1%, Thailand -0.6%, Indonesia -0.2%, Vietnam -0.5%

FX:

• USD/CNY +0.03% at 6.2097
• USD/INR +0.3% at 63.871
• USD/JPY +0.1% at 119.92

EUROPE

Major European indices trade mixed. France’s CAC -1.4%, Germany’s DAX -0.5%, and UK’s FTSE +0.2%. Elsewhere, Greece’s ASE -3.5%, Italy’s MIB -0.6% and Spain’s IBEX Unch.

Greece seems to be the center of attention again, which jarred concerns after articles out over the weekend indicated that the IMF is making contingency plans on a Greek default as well as the EU’s worries the nation will not meet its debt obligation to the IMF on Tuesday. As such, the Athens Exchange is trading over 3% lower, and helping to put pressure on the CAC and DAX. Otherwise, there was no other major macro data in Europe.

Macro Data
Although participants saw little in the wake of major regional data points, but there were several lower tier releases:

• Sweden Apr PES Unemployment Rate : 3.8% vs 3.9% exp
• Denmark Mar Current Account Balance (in DKK): 2.9 bln vs 1.8 bln exp
• Denmark Mar CPI: +0.1% vs +0.1% exp
• Netherlands Mar Manufacturing Production: -1.4% vs +1.7% in Feb
• Norway Apr CPI M/M: +0.4% vs +0.3% exp

Closing Prices

• UK’s FTSE: -0.2%
• Germany’s DAX: -0.3%
• France’s CAC: -1.2%
• Spain’s IBEX: + 0.1%
• Portugal’s PSI: + 0.6%
• Italy’s MIB Index: + 0.0%
• Irish Ovrl Index: -0.6%
• Greece ASE General Index: -2.5%

Macroeconomic Data

Economic Data

from Briefing.com

• No Economic Data

Market Internals

NYSE:

Lower Volumes than the day before – 696.3M vs 725.6M 


Decliners outpaced Advancers (adv/dec): 1085 / 1985

New Highs outpaced New Lows (highs/lows): 60 / 28

NASDAQ:

Lower Volumes than the day before – 1722.9M vs 1954.7M

Advancers outpaced Decliners (adv/dec): 1456 / 1316

New Highs outpaced New Lows (highs/lows): 70 / 42

VOLATILITY S&P500 (VIX)
13.85 +0.99 (+7.70%)

I cannot really tell much on the internals besides it is getting divergence. Volume remains weak and there is no clear leadership in the market. However judging from the look of VIX, I reckon we should see it continues to go higher.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,105.17 -85.94 (-0.47%)

Volume: 86,054,921 (below average of 99,290,975)
Range: 18,089.11 - 18,199.95

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,993.57 -9.98 (-0.20%)
Volume: 410,319,140 (below average of 434,796,181)

Range: 4,992.02 - 5,017.38

S&P 500 INDEX (SPX: CBOE)

2,105.33 -10.77 (-0.51%)

Volume: 467,022,000 (below average of 531,055,862)

Range: 2,104.58 - 2,117.69 

Nothing special from the technicals, the market had a knee jerk reaction after hitting resistance level last Friday. DOW is sitting on its support level too. NASDAQ also seems to have a hard time breaking higher its resistance. I guess we might still see market heading sideway.

Commodities

Closing Commodities: Key Commodities Including Oil, Nat Gas, Gold And Silver End Lower

• The dollar index remained in positive territory all day today, which helped weigh on commodities prices today
• However, in early morning trade, commodities including oil, gold and silver were showing some gains despite seeing strength in the dollar
• WTI crude oil ultimately ended the day -$0.18 at $59.24/barrel. June nat gas dropped 3% to $2.80/MMBtu
• Precious metals closed lower as well
• June gold lost $6.20 to $1182.90/oz, while July silver fell $0.18 to $16.30/oz
• Copper ended at $2.91/lb, down one cent.

Energy

• June crude oil futures fell $0.18 to $59.24/barrel
• June natural gas closed $0.08 lower (-2.7%) at $2.80/MMBtu
• RBOB Gasoline closed flat at $1.99/gallon
• Heating oil futures closed $0.02 lower at $1.94/gallon

Agriculture

• July corn closed $0.04 lower to $3.60/bushel
• July wheat closed flat at $4.82/bushel
• July soybeans closed $0.01 lower to $9.74/bushel
• Ethanol closed $0.01 lower at $1.65/gallon
• Sugar #11 closed 0.06 cents higher to 13.48 cents/lb

• The USDA will release its May WASDE report tomorrow at Noon ET, which will stand to heavily influence trading during tomorrow’s session

Metals

• June gold ended today’s session $6.20 lower to $1182.90/oz
• July silver closed $0.18 lower at $16.30/oz
• July copper closed $0.01 lower to $2.91/lb

Currencies

Dollar Rallies

• The U.S. dollar made ground today against all of the majors but the pound sterling, with the U.S. Dollar Index rising 0.18% to 94.96
• GBP/USD rallied 0.92% to $1.5584
  • The Bank of England maintained its policy rate at 0.50%, where it has remained since 2009
  • The quantitative easing program was maintained at its current level of 375 billion pounds
• EUR/USD: -0.63% to $1.1152
  • Greece made a 750 mln euro payment to the IMF today
  • The Greek negotiating team was in Brussels for talks with the Eurogroup. According to their public statement, progress was made
• USD/JPY: +0.21% to 120.04
• USD/CHF: +0.33% to 0.9344
• USD/CAD: +0.04% to 1.2087
• AUD/USD: -0.32% to $0.7908
• NZD/USD: -1.82% to $0.7355
  • The Kiwi got hit badly today by speculation of further interest rate cuts by the RBNZ

Bonds

Treasury Rally Ends Abruptly

• The relief rally in the Treasury complex that began last Thursday was cut short today despite no new economic data, as investors decided that they wanted more yield to be compensated for higher volatility. It is also likely that Treasury bears who missed the first leg of the sell-off got short into last week's rally or this morning
• Yield check:
  • 2-yr: +3 bps to 0.60%
  • 5-yr: +9 bps to 1.58%
  • 10-yr: +11 bps to 2.27%
  • 30-yr: +13 bps to 3.03%

• News:
  • Over the weekend, the People's Bank of China cut its main lending and deposit rates by 25 basis points each. That was the third cut in only 6 months
    • Chinese equities rallied on the news with the Shanghai Composite rising 3.04% to 4,333.58
  • The Greek government successfully repaid the IMF 750 mln euro
  • The Eurogroup of 19 eurozone finance ministers met with Greece's delegation to try to resolve the debt crisis in that country
    • The two sides still need to agree on pension and labor market reform

• Commodities:
  • WTI Crude: -0.42% to $59.14/bbl
  • Gold: -0.50% to 1182.90/troy oz.
  • Copper: -0.53% to $2.905/lb.

• Currencies:
  • EUR/USD: -0.61% to 1.1155
  • USD/JPY: +0.28% to 120.13

• Data out Tuesday:
  • March JOLTS – Job Openings (10:00 ET)
  • April Treasury Budget (14:00 ET)
• New Supply:
  • $24 billion 3-year note auction (13:00 ET)
• Fed Speak:
  • San Francisco Fed President Williams (FOMC voter) speaks before the NY Association for Business Economics (12:45 ET)

Treasury Yields:

• 2 Year Note 0.62% +0.03
• 5 Year Note 1.59% +0.09
• 10 Year Note 2.28% +0.12
• 30 Year Bond 3.03% +0.13

2/30 Spread: 241 bps ( +10 ) …  2/10 Spread: 166 bps ( +9 )

Preview for Tuesday 12 May, 2015

Economic Data

Tuesday (12 May) :

• JOLTS - Job Openings : (Prior 5.133M)
• Treasury Budget : $155.0B (Prior $106.9B)

Earnings Highlights

Tuesday (12 May) :
BMO - WMS ACM ARCO ARES ATRO CRCM DCIX EGRX ECA FMSA IBP IFF LDOS NAVB NAO OTIV SKYS
AMC - PRSS CARA CDNA DCO ESIO EXAR FIVN HMIN HDP INGN LMNS MCK NEWR NVMI OPWR PE RENN RSPP SSRI STKL TUBE VTAE VTL VSLR ZFGN Z

Summary

Monday was more to a quiet session. Market seems to be in a state of mixed reaction as it is neither bullish or bearish. But the technology sector is lagging and that might translates into some weakness in the market. I think tomorrow session is likely to continue with the slightly bearish condition but I don't feel it is going to be big or put it simply - flat to downside.

Direction for Tuesday 12 May, 2015; Down

2015 Daily Directional Accuracy: 36/68 (52.94%) 

2015 Weekly Directional Accuracy: 9/16 (56.25%)