Thursday, 14 May 2015 - AMC

Dow +191.75 at 18252.24, Nasdaq +69.10 at 5050.79, S&P +22.62 at 2121.10

Market has been flat for the past few sessions and it looks as though market is finding a reason to do a breakout or selloff. I think unemployment claims tomorrow will justify last Friday's employment report. That might give the market a catalyst to adjust. To be honest I am finding it harder to give the market a proper direction. It comes down to the battle between the bulls and the bears, and that could mean sideway for the time being.

Direction for Thursday 14 May, 2015; Up

It looks as if the bulls are winning or is it? The better than expected unemployment claims somewhat pushed the market for a higher opening. On the other hand, I think we might see some more correction in the crude oil amid the supply concern with the recovery of the Dollar Index.           

Market Summary

Industry Watch

Strong: Consumer Staples, Financials, Technology, Materials

Weak: Consumer Discretionary

Other Market Moving Factor:

• Treasuries advance
• Retailers struggling after disappointing revenue and comparable store sales from Kohl's (KSS)
• Dollar Index erases overnight loss

[BRIEFING.COM] The major averages registered solid gains on Thursday with the S&P 500 climbing 1.1%. The benchmark index settled at a fresh record high of 2121.10 while the Nasdaq Composite (+1.4%) outperformed.  

Equity indices spiked out of the gate and spent the rest of the day in a slow drift higher with all ten sectors taking part in the advance. The top-weighted technology sector (+1.7%) followed yesterday's outperformance with another strong showing that kept the group in the lead throughout the session. Large cap names like Apple (AAPL 128.95 +2.94), Google (GOOGL 549.20, +9.71), Microsoft (MSFT 48.72, +1.09), and Facebook (FB 81.37, +2.93) gained between 1.8% and 3.7%, which helped overshadow a 1.0% decline in the shares of Cisco Systems (CSCO 29.05, -0.30) after the company reported a one-cent beat and issued in-line guidance. It is worth noting that Cisco's report triggered a Sterne Agee CRT downgrade to ‘Neutral.' 

Meanwhile, high-beta chipmakers could not keep pace with the sector, but the PHLX Semiconductor Index still gained 1.2%, ending ahead of the broader market. However, another high-beta group, biotechnology, contributed to the strength in the Nasdaq. To that point, iShares Nasdaq Biotechnology ETF (IBB 355.59, +4.74) gained 1.4% and climbed above its 50-day moving average (350.53) after struggling with that level since the end of April. In turn, the health care sector (+1.4%) settled among the leaders.  

Similar to health care, the countercyclical consumer staples sector (+1.5%) also settled ahead of the S&P 500. Avon Products (AVP 7.07, +0.40) was a notable mover within the group after it was reported that PTG Capital offered $18.75 per share of AVP; however, Avon responded to the report, saying no such offer has been received and that it was unable to verify the existence of PTG Capital. Shares of AVP briefly rallied to their 50-day moving average (8.09), before narrowing their gain to 6.0% by the close.  

Overall, five sectors added 1.0% or more while consumer discretionary (+0.4%) and energy (+0.1%) represented the only two laggards of note.  

The discretionary sector was weighed down by apparel retailers after Kohl's (KSS 64.62, -9.89) delivered an uninspiring report. The stock fell 13.3% after disappointing comparable store sales and below-consensus revenue overshadowed a bottom-line beat.  

Elsewhere, the energy sector lagged amid a pullback in crude oil. WTI crude settled lower by 1.0% at $59.88/bbl. even as the Dollar Index (93.40, -0.21) slipped 0.2%, registering its third consecutive decline. 

Today's advance in equities was accompanied by a rallying Treasury market with the 10-yr yield falling five basis points to 2.23%.  

Once again, participation was relatively light with roughly 700 million shares changing hands at the NYSE floor. 

Economic data included Initial Claims and PPI: 

• The initial claims level declined to 264,000 for the week ending May 9 from an unrevised 265,000 while the Briefing.com consensus expected an increase to 275,000 
  • That was the third consecutive week that the initial claims level remained below 270,000 
  • The four-week moving average dropped to 271,750 from 279,500, which is the lowest level since April 22, 2000 
  • The continuing claims level remained at 2.229 mln for the week ending May 2 after a slight upward revision (from 2.228 mln) for the week ending April 25 
• After the first increase since October 2014, producer prices resumed their downward trajectory in April with the PPI declining 0.4% in April after increasing 0.2% in March while the Briefing.com consensus expected an increase of 0.2% 
  • Food prices declined 0.9% in April after declining 0.8% in March. These prices haven't increased on a month-to-month basis since November 2014. 
  • Excluding food and energy, core PPI declined 0.2% in April after increasing 0.2% in March while the consensus expected an increase of 0.1% 

Tomorrow, the Empire Manufacturing Index for May (Briefing.com consensus 4.5) will be released at 8:30 ET while April Industrial Production (consensus 0.1%) and Capacity Utilization (expected 78.4%) will both be reported at 9:15 ET. The day's data will be topped off with the 10:00 ET release of the preliminary reading of the Michigan Sentiment Index for May (expected 96.0).

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -1.0%; Hong Kong’s Hang Seng +0.1%; China’s Shanghai Composite +0.1%
It was a relatively mixed day of returns for markets in the Asia-Pacific region on Thursday as Wall Street’s uneven performance after the disappointing retail sales report and worries about rising bond rates curbed investor enthusiasm.

Economic data

• Japan
• Machine Tool Orders +10.4% year-over-year (prior +14.9%)
• M2 Money Stock +3.6% year-over-year (expected +3.6%; prior +3.6%)
• Foreign Investments in Japanese Stocks JPY 72.7 bln (prior JPY 821.0 bln)
• Foreign Bond Buying JPY 492.6 bln (prior JPY 185.3 bln)
• India
• April WPI Inflation -2.65% year-over-year (expected -2.30%; prior -2.33%)
• April WPI Food +5.73% year-over-year (prior +6.30%)
• April WPI Fuel -13.03% year-over-year (prior -12.6%)
• April WPI Manufacturing Inflation -0.52% year-over-year (prior -0.19%)
• South Korea
• May M2 Money Supply +9.0% year-over-year (prior +8.6%)
• New Zealand
• Q1 Retail Sales +2.7% quarter-over-quarter (expected +1.5%; prior +1.9%)
• April Business NZ PMI 51.8 (prior 54.5)

Equity Markets

• Japan’s Nikkei declined 1.0%, pressured by losses in all sectors. The weakest links were the communications (-1.8%), energy (-1.4%), consumer non-cyclical (-1.4%), and industrial (-1.1%) sectors. SKY Perfect JSAT Holdings (-7.8%), Casio Computer (-5.2%), and Chiyoda Corp (-4.4%) topped the list of individual decliners. Konica Minolta (+11.9%) led all gainers. Out of the 225 index members, 55 ended higher, 164 finished lower, and 6 were unchanged.
• Hong Kong’s Hang Seng increased 0.1% in a rather mixed day of trading. The technology sector (+2.1%) scored the biggest gain, yet that was offset by relative weakness in the more influential energy (-0.8%), consumer cyclical (-0.7%), and financial (-0.2%) sectors. Tencent Holdings (+2.9%), Cathay Pacific Airways (+2.2%), and Lenovo Group (+2.1%) led the winners while Tingyi Cayman Islands Holding Corp (-2.5%), CNOOC (-2.4%), and Sands China (-2.3%) paced the losers. Out of the 50 index members, 27 ended higher, 20 finished lower, and 8 were unchanged.
• China’s Shanghai Composite increased 0.1% in a day of relatively subdued trading action. The basic materials (+3.1%) sector was the best-performing area in the Chinese market on Thursday, but losses in the technology (-2.1%), communications (-1.0%), financial (-0.7%), and industrial (-0.6%) sectors acted as an offset.
• India’s Sensex declined 0.2%, but bounced back late in the session from larger declines. The technology sector (-0.9%) was the weakest area on Thursday while the consumer cyclical (+1.3%) and basic materials (+1.1%) sectors were the strongest. Top gainers included Hindalco Industries (+3.0%), State Bank of India (+2.4%), and Tata Steel (+1.9%). Leading laggards were Vedanta Ltd (-1.6%), Infosys (-1.1%), and Wipro (-1.1%).
• Australia’s S&P/ASX 200 declined 0.3%, pressured by an 18.4% decline in shares of ResMed that followed an adverse conclusion of a trial study in the U.S. pertaining to the company’s sleeping device. The metals & mining (-1.6%), health care (-1.2%), and resources (-1.2%) sectors were the weakest areas.
• Regional advancers: South Korea +0.3%, Singapore +0.1%, Malaysia +0.3%, Thailand +0.1%, Philippines +0.3%, Vietnam +0.2%
• Regional decliners: Taiwan -1.2%
• Holiday closure: Indonesia (Ascension Day)

FX

• USD/CNY -0.05% at 6.2016
• USD/INR -0.5% at 63.681
• USD/JPY +0.05% at 119.20

EUROPE

Major European indices trade with modest gains, but activity has been subdued across the region with many participants away for Ascension Day.

• Investors did not receive any economic data

Closing Prices

• UK’s FTSE: + 0.3%
• Germany’s DAX: + 1.8%
• France’s CAC: + 1.4%
• Spain’s IBEX: + 0.7%
• Portugal’s PSI: + 0.1%
• Italy’s MIB Index: + 1.5%
• Irish Ovrl Index: + 0.9%
• Greece ASE General Index: + 0.7%

Macroeconomic Data

Economic Data

from Briefing.com

• Initial Claims : 264K vs 275K (Prior 265K)
• Continuing Claims : 2229K vs 2288K (Prior 2229K - Up)
• PPI : -0.4% vs 0.2% (Prior 0.2%)
• Core PPI : -0.2% vs 0.1% (Prior 0.2%)
• Natural Gas Inventories : 111 bcf (Prior 76 bcf)

UNEMPLOYMENT CLAIMS

Highlights

• The initial claims level declined to 264,000 for the week ending May 9 from an unrevised 265,000 for the week ending May 2. The Briefing.com Consensus expected the initial claims level to increase to 275,000.
• The continuing claims level remained at 2.229 mln for the week ending May 2 after a slight upward revision (from 2.228 mln) for the week ending April 25. The consensus expected the continuing claims level to increase to 2.2288 mln.

Key Factors

• That was the third consecutive week that the initial claims level remained below 270,000. The four-week moving average dropped to 271,750 from 279,500. That is the lowest level since April 22, 2000.
• It is undeniable that business layoff activities have slowed.

Big Picture

• The initial claims level is showing vast improvements in labor force conditions.

PPI

Highlights

• After the first increase since October 2014, producer prices resumed their downward trajectory in April. The PPI declined 0.4% in April after increasing 0.2% in March. The Briefing.com Consensus expected the PPI to increase 0.2%.
• Excluding food and energy, core PPI declined 0.2% in April after increasing 0.2% in March. The consensus expected these prices to increase 0.1%.

Key Factors

• Final demand for goods prices dropped 0.7%, which was the largest decline since a 2.0% decline in January. Most of the decline was the result of a 2.9% decline in energy prices. Despite the EIA reporting an increase in gasoline prices for the month, the PPI report revealed a 4.7% decline in these costs. 
• Food prices declined 0.9% in April after declining 0.8% in March. These prices haven’t increased on a month-to-month basis since November 2014.
• Final demand for services declined 0.1% in April after a 0.1% increase in March. Nearly the entire decline was a result of a 0.8% decrease in final demand trade services, of which 40% of the decline was a result of a 1.0% drop in margins for machinery and equipment wholesaling.
• Excluding food, energy, and trade, the PPI increased 0.1% in April, down from a 0.2% increase in March.
• Pipeline pressures continue to remain weak. Core processed intermediate goods prices fell 0.5% in April after decreasing 0.2% in March. That was the eighth consecutive monthly decline. Core unprocessed goods prices were flat after decreasing 2.3% in March. Those prices haven’t increased since September 2014.
• Intermediate services prices increased 0.5% in April after increasing 0.2% in March.

Big Picture

• There are no pricing pressures down the producer pipeline. This should keep both consumer and producer price growth in check.

Market Internals

NYSE:

Lower Volumes than the day before – 713.5M vs 719.8M 


Advancers outpaced Decliners (adv/dec): 2348 / 753

New Highs outpaced New Lows (highs/lows): 97 / 22

NASDAQ:

Higher Volumes than the day before – 1730.7M vs 1662.9M

Advancers outpaced Decliners (adv/dec): 1922 / 879

New Highs outpaced New Lows (highs/lows): 114 / 33

VOLATILITY S&P500 (VIX)
12.74 -1.02 (-7.41%)

So much for the bullishness, volume remains thin. I am starting to see an increase in New Highs which show some strength in the market. VIX also went lower and I suppose it should continue the momentum to test the support level.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,252.24 +191.75 (+1.06%)

Volume: 91,581,834 (below average of 98,927,866)
Range: 18,062.49 - 18,255.21

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,050.80 +69.10 (+1.39%)
Volume: 404,813,631 (below average of 432,298,295)

Range: 4,999.65 - 5,051.72

S&P 500 INDEX (SPX: CBOE)

2,121.10 +22.62 (+1.08%)

Volume: 477,949,000 (below average of 529,018,891)

Range: 2,100.43 - 2,121.45 

The 3 indices are looking for a breakout. They broke above their respective resistance level on Thursday. MACD is also indicating the slowdown in bearishness. However DOW is at the upper bound of its Bollinger Bands and S&P is hitting a trend resistance, I reckon we should see some profit taking ahead of tomorrow session.  

Commodities

Closing Commodities: Nat Gas Rallies, Closes at $3/MMBtu, WTI Oil Ends Below $60/Barrel

• The dollar index slid off of today’s low, which gave a little support to precious metals late in the day
• June gold ended $7.10 higher to $1225.00/oz, while July silver rose $0.26 to $17.49/oz
• WTI oil remained in the red all day, ultimately closing $0.58 lower at $59.88/barrel.
• Nat gas held gains after surged higher following the weekly storage data
• June nat gas rose $0.07, closing at $3.00/MMBtu today

Energy

• June crude oil futures fell $0.58 to $59.88/barrel
• June natural gas closed $0.07 higher at 3.00/MMBtu
• RBOB Gasoline closed $0.01 higher to $2.05/gallon
• Heating oil futures closed flat at $2.00/gallon

• The EIA released its weekly Natural Gas stockpile report this morning, which showed working gas in storage of 1,897 bcf, a net increase of 111 bcf W/W

Agriculture

• July corn closed $0.06 higher to $3.68/bushel
• July wheat closed $0.32 higher (6.6%) to $5.14/bushel
• July soybeans closed $0.01 higher to $9.58/bushel
• Ethanol closed $0.03 higher at $1.67/gallon
• Sugar #11 closed 0.12 cents lower to 12.84 cents/lb

Metals

• June gold ended today’s session $7.10 higher to $1225/oz
• July silver closed $0.26 higher at $17.49/oz
• July copper closed $0.01 lower at $2.92/lb

Currencies

Dollar Gains Slip Away

• The U.S. Dollar Index fell 0.12% to 93.51 in a relatively inactive session
• EUR/USD: +0.35% to $1.13884
  • Global rates found a tentative top around 07:30 AM ET
• USD/JPY: -0.01% to 119.22
• USD/CHF: -0.47% to 0.9131
• GBP/USD: +0.17% to $1.5764
• NZD/USD: -0.60% to $0.7491
• AUD/USD: -0.61% to $0.8070
  • The pair has been trading higher since the Reserve Bank of Australia cut rates last week due to general dollar weakness. The RBA would like to see the Aussie trade lower and that is not happening
• USD/CAD: +0.26% to 1.1988

Bonds

Treasuries Move Higher

• U.S. interest rates declined modestly today with the biggest declines in the 5 and 10-year yields. European rates finally seemed to find a high around 07:30 ET
• Yield check:
  • 2-yr: -4 bps to 1.51%
  • 5-yr: -6 bps to 1.51%
  • 10-yr: -5 bps to 2.24%
  • 30-yr: -2 bps to 3.07%

• News:
  • Initial Jobless Claims were better than expected at 264K versus a Briefing.com consensus of 275K and 265K claims last week
    • That was the third consecutive week that the initial claims level remained below 270,000. The four-week moving average dropped to 271,750 from 279,500. That is the lowest level since April 22, 2000
  • Continuing Jobless Claims remained at 2.229 million for the week ending May 2 after a slight upward revision (from 2.228 million) for the week ending April 25. The Briefing.com consensus expected Continuing Claims to increase to 2.2288 million
  • After the first increase since October 2014, producer prices resumed their downward trajectory in April. The PPI declined 0.4% in April after increasing 0.2% in March. The Briefing.com consensus expected the PPI to increase 0.2%
  • Excluding food and energy, the Core PPI for April declined 0.2% in April after increasing 0.2% in March. The consensus expected these prices to increase 0.1%
  • The $16 billion 30-year auction was met with modest demand:
    • High yield: 3.044%
    • Bid-to-cover: 2.20
    • Indirect bid: 50.8%

• Commodities:
  • WTI Crude fell 1.04% to $59.87/bbl
  • Gold for June delivery rallied 0.28% to $1,221.60/troy oz. That was its highest level since mid-February
  • Copper: -0.26% to $2.9215/lb.

• Currencies:
  • EUR/USD: +0.24% to $1.1986
  • USD/JPY: -0.03% to 119.19

• Data out Tomorrow:
  • May Empire Manufacturing (08:30 ET)
  • April Industrial Production and Capacity Utilization (09:15 ET)
  • May Michigan Sentiment (10:00 ET)
  • March Net Long-Term TIC Flows (16:00 ET)

Treasury Yields:

• 2 Year Note 0.56% -0.03
• 5 Year Note 1.51% -0.06
• 10 Year Note 2.23% -0.04
• 30 Year Bond 3.03% -0.04

2/30 Spread: 247 bps ( -1 ) …  2/10 Spread: 167 bps ( -1 )

Preview for Friday 15 May, 2015

Economic Data

Friday (15 May) :

• Empire Manufacturing : 4.0 (Prior 1.2)
• Industrial Production : 0.1% (Prior -0.6%)
• Capacity Utilization : 78.4% (Prior 78.4%)
• Michigan Sentiment : 96.0 (Prior 95.9)
• Net Long-Term TIC Flows : (Prior $9.8B)

Earnings Highlights

Friday (15 May) : 
BMO - HGG JMG OCUL TNP
AMC - None Scheduled

Summary

Market is at the verge of a near breakout or a correction. I think we might still see some push to a new high but I guess there would be profit taking following after market reaches a high. Nonetheless I am getting harder to call the market.

Direction for Friday 15 May, 2015; Up

2015 Daily Directional Accuracy: 38/71 (53.52%) 

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