Friday, 26 June 2015 - AMC

Dow +56.66 at 17947.02, Nasdaq -31.68 at 5080.51, S&P -0.70 at 2101.61

The Greece debt saga is going to drag the market until an agreement is met, perhaps with more profit taking. There is not much bullishness in the market now. For tomorrow, I am looking to see whether the support is going to hold. If it does, we should see a higher low which is likely to see an upside next week.

Direction for Friday 26 June, 2015: Down

Market was rather bearish on Friday. DOW managed to stay positive while NASDAQ and S&P ended with losses. As Greece could not settle on any agreement and default on their payment seems to be imminent, things just get much worse. As a result, we are seeing a rise in the Dollar Index and this has some effect on crude oil too. With dollar getting stronger, price of crude oil might take a toll.   

Market Summary

Industry Watch

Strong: Consumer Discretionary, Consumer Staples, Financials, Industrials

Weak: Energy, Technology, Utilities

Other Market Moving Factor:

• Greece remains without a debt deal as June 30 payment to the International Monetary Fund looms
• Disappointing guidance from Micron (MU) weighs on high-beta chipmakers

[BRIEFING.COM] The stock market ended the week on a mixed note with the Dow Jones Industrial Average (+0.3%) posting a modest gain while the Nasdaq Composite (-0.6%) spent the day in negative territory. For its part, the S&P 500 ended flat, locking in a 0.4% decline for the week to end ahead of the Nasdaq (-0.7% week-to-date).  

To little surprise, the trading day began with more rhetoric but little tangible progress between Greek leaders and the country's creditors. With that in mind, the talks are set to enter the eleventh hour with both sides sticking to their own proposals. This morning, Germany's Handelsblatt reported that creditors have offered Greece EUR15.50 billion in bailout funds over the next five months if Greek representatives can agree to the requested reforms; however, that offer was turned down by the Greek delegation. European markets appeared unconcerned with the lack of progress as France's CAC, Germany's DAX, and Italy's MIB spiked between 4.0% and 4.8% for the week. Not to be outdone, Greece's Athens General Composite surged 13.8% for the week, returning into the middle of this year's range. 

Domestically, investors appeared to suffer from a case of Grexhaustion, showing little concern about the possibility of a Graccident as it now becomes imperative to reach a deal on Saturday if Greece is to make the June 30 debt payment to the International Monetary Fund. Failing to meet that deadline would put the ‘Grexit' talk back on the table. That being said, U.S. Treasuries retreated into the afternoon with the 10-yr yield spiking eight basis points to 2.48%. Also of note, selling in the long bond ran the 30-yr yield higher by ten basis points to 3.25%, representing the highest level since September.  

Six of ten sectors registered gains, but daylong weakness in the technology sector (-0.8%) was today's main story and the primary reason for Nasdaq's underperformance. Specifically, it was the high-beta chipmaker industry group that suffered from widespread losses after Micron (MU 19.66, -4.36) reported disappointing results and issued uninspiring guidance. Shares of MU plunged 18.2% to levels not seen since late 2013 while the PHLX Semiconductor Index lost 2.4% with all 30 components ending in the red. 

That significant weakness weighed on the technology sector while the Nasdaq also had to contend with losses among biotechnology names. The iShares Nasdaq Biotechnology ETF (IBB 372.70, -3.13) lost 0.8% while the health care sector (-0.1%) spent the day near its flat line with hospital names offsetting the weakness in biotechnology. 

Similar to the health care sector, the S&P 500 spent the day near its unchanged level. The index benefited from relative strength in just about every sector other than technology. Most notably, financials (+0.3%), consumer discretionary (+0.4%), and industrials (+0.2%) kept the benchmark index little changed throughout the day.  

Of the three influential groups, the discretionary sector was underpinned by apparel retailers after Finish Line (FINL 28.25, +1.25) and Dow component Nike (NKE 109.71, +4.49) reported better than expected results. The two names gained 4.6% and 4.3%, respectively.  

Elsewhere, the industrial sector rallied behind Deere (DE 96.44, +3.04), which spiked 3.3%, breaking out to a four-year high. There was no news to account for the move and other manufacturers of heavy machinery ended little changed. As for transport stocks, the Dow Jones Transportation Average (+0.1%) eked out a slim gain for the day, but not before notching a fresh eight-month low during morning action.  

Today's participation was well above average as rebalancing of the Russell indices led to increased churn. As a result, nearly two billion shares changed hands at the NYSE floor.

Economic data was limited to the final reading of the Michigan Sentiment Index for June, which was revised up to 96.1 from a preliminary reading of 94.6 while the Briefing.com consensus expected no change. The June reading was up from 90.7 in May, representing the highest level for the index since hitting 98.1 in January.  

Monday's data will be limited to the 10:00 ET release of the Pending Home Sales report for May. 

• Nasdaq Composite +6.8% YTD
• Russell 2000 +5.9% YTD 
• S&P 500 +2.0% YTD 
• Dow Jones Industrial Average +0.7% YTD 

Week in Review: All Eyes Remain on Greece 

The stock market opened the trading week on a higher note with the Dow and S&P 500 gaining 0.6% apiece while the Nasdaq Composite (+0.7%) outperformed. Equity indices spent the entire Monday session in the green with investor sentiment receiving a boost from reports indicating Greek officials submitted a new proposal to the Eurogroup. However, regional officials did not share the market's optimism with Germany's Finance Minister Wolfgang Schaeuble saying he does not see anything new in the proposal. The developments pressured global bonds with Germany's 10-yr bund yield spiking 12 basis points to 0.88%. Similarly, the U.S. 10-yr note retreated throughout the day, sending its yield higher by ten basis points to 2.36%. Some of the outflows from the Treasury market made their way into equities as nine of ten sectors posted gains while the rate-sensitive utilities sector (-0.1%) was pressured by the increase in yields.  

The major averages ended Tuesday on a modestly higher note after spending the bulk of the day near their flat lines. The S&P 500 added 0.1% after trading inside an eight-point range. Equity indices held modest gains at the start amid continued optimism that Greece will be able to come to terms with its creditors. In addition, better than expected Manufacturing (52.5; consensus 52.2) and Services PMI (54.4; consensus 53.6) readings for the eurozone contributed to the upbeat sentiment overseas. Once the U.S. session got underway, the S&P 500 held a four-point gain, but surrendered that advance just one hour into the session as heavily-weighted sectors like technology (unch), industrials (-0.2%), and consumer staples (-0.5%) weighed. The top-weighted technology sector was able to erase the majority of its loss before the final hour, but chipmakers struggled into the afternoon. The PHLX Semiconductor Index lost 0.6% with all but six components ending in the red. 

The stock market ended the midweek session on a broadly lower note with the S&P 500 losing 0.7% and turning negative for the week (-0.1%). Equity indices began the day with slim losses after the International Monetary Fund rejected Greece's restructuring proposal, putting the two sides back at square one. According to Greek Prime Minister Alexis Tsipras, this was the first time the IMF did not accept equivalent fiscal measures proposed by Greek officials. Interestingly, the market appeared to be on the comeback trail during the opening hour with the S&P 500 making a brief appearance in the green; however, the index reversed into the red shortly after activist investor Carl Icahn shared his thoughts on the market as part of an appearance on CNBC. During his interview, Mr. Icahn said he believes the market is "extremely overheated," pointing to high-yield bonds in particular.  

The market registered its second consecutive decline on Thursday with the S&P 500 (-0.3%) sliding below its 50-day moving average (2,107). The benchmark index held a modest gain through the morning, but relative weakness among several influential sectors pulled the S&P 500 into negative territory during afternoon action. Stocks began the day with slim gains, but retreated from their opening levels during the initial hour amid reports the Eurogroup meeting was suspended to give the Greek delegation time to submit a better proposal to the creditors. The market dipped from its opening levels in reaction, but was able to briefly extend to a fresh session high with the health care (+0.5%) sector driving the move after the Supreme Court upheld federal subsidies to the Affordable Care Act. Hospital names benefited from the news with the likes of Tenet Healthcare (THC 56.21, +6.13), HCA (HCA 90.72, +7.35), and Universal Health (UHS 140.82, +10.14) spiking between 7.8% and 12.2%. Also in the health care sector, insurer Humana (HUM 197.37, +13.14) surged during the afternoon and ended higher by 7.1% after Bloomberg reported the company received a takeover offer from Aetna (AET 132.60, +5.09).

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -0.3%; Hong Kong’s Hang Seng -1.8%; China’s Shanghai Composite -7.4%
Markets in the Asia-Pacific region ended mostly lower on Friday, having been pulled down in sympathy with the rout in the Shanghai Composite, which plummeted 7.4% on no specific news. The sharp decline there was generally attributed to investor skittishness and deleveraging activity following the parabolic rise of the Chinese stock market.

Economic data

• Japan
• May Household Spending +2.4% month-over-month (expected +2.2%; prior -5.5%); +4.8% year-over-year (expected +3.4%; prior -1.3%)
• May National CPI +0.5% year-over-year (expected +0.4%; prior +0.6%)
• May National Core CPI +0.1% year-over-year (expected 0.0%; prior +0.3%)
• May Unemployment Rate 3.3% (expected 3.3%; prior 3.3%)
• Singapore
• May Industrial Production +2.4% month-over-month (expected +1.5%; prior -5.8%); -2.3% year-over-year (expected -2.1%; prior -8.7%)

Equity Markets

• Japan’s Nikkei declined 0.3% in spite of some encouraging household spending data. The energy (-2.7%), communications (-1.0%), utilities (-1.0%), and industrial (-0.8%) sectors were the weakest areas. Showa Shell Sekiyu (-5.0%), Toyobo (-4.8%), and Yamato Holdings (-3.6%) led declining issues. Shinsei Bank (+4.1%) was the best-performing stock. Out of the 225 index members, 70 ended higher, 146 finished lower, and 9 were unchanged. For the week, the Nikkei increased 2.6%.
• Hong Kong’s Hang Seng declined 1.8%, trading in sympathy with the beating mainland shares took. Broad-based losses were paced by the energy (-2.2%), consumer cyclical (-1.8%), and financial (-1.7%) sectors. The biggest laggards were China Resources Power Holdings (-5.1%), China Unicom Hong Kong (-4.9%), and Tingyi Cayman Islands Holdings (-4.1%). Lenovo Group (0.0%), which finished unchanged, was the only stock that didn’t suffer a loss. Out of the 50 index members, 0 ended higher, 49 finished lower, and 1 was unchanged. For the week, the Hang Seng declined 0.4%.
• China’s Shanghai Composite plummeted 7.4%, experiencing its biggest one-day loss in five months. The sharp decline came on a day that Guotai Junan Securities, the country’s third most profitable brokerage firm, soared 44% in its debut as a publicly-traded company. Reports attributed the sell-off to deleveraging of margin accounts, worries about excess supply from new share listings, and momentum cutting the other way for weak-handed holders of stocks. For the week, the Shanghai Composite declined 6.4%. Over the last two weeks, the Shanghai Composite has dropped 18.8%.
• India’s Sensex declined 0.3%, held back by weakness in the communications (-2.1%), utilities (-2.0%), and industrial (-1.7%) sectors. Out of the 30 index members, 16 ended higher and 14 finished lower. For the week, the Sensex increased 1.8%.
• Australia’s S&P/ASX 200 declined 1.5%, led by losses in the utilities (-4.1%), resources (-3.2%), and energy (-3.2%) sectors. Bradken (-11.3%) led all decliners while Woolworths (+3.8%) topped the list of winners. For the week, the S&P/ASX 200 declined 0.9%.
• Regional advancers: South Korea +0.3%, Indonesia +0.1%, Philippines +0.5%
• Regional decliners: Taiwan -0.2%, Malaysia -0.4%, Singapore -0.9%, Thailand -0.2%, Vietnam -1.1%

FX

• USD/CNY -0.01% at 6.2090
• USD/INR +0.1% at 63.608
• USD/JPY -0.2% at 123.39

EUROPE

Major European indices trade in mixed fashion with UK’s FTSE (-0.5%) trailing the region while France’s CAC (+0.4%) outperforms. Recent reports from Handelsblatt indicate European creditors have offered Greece EUR15.50 billion in bailout funds over the next five months if Greek representatives can agree to the requested reforms

• Eurozone May Private Sector Loans +0.5% year-over-year (expected 0.4%; prior 0.0%) while May M3 Money Supply +5.0% year-over-year (consensus 5.4%; last 5.3%)
• Germany’s May Import Price Index -0.2% month-over-month (expected 0.1%; prior 0.6%); -0.8% year-over-year (expected -0.4%; last -0.6%)
• France’s Consumer Confidence held at 94 (expected 93)
• Italy’s June Business Confidence rose to 103.9 from 103.4 (consensus 103.8) while Consumer Confidence improved to 109.5 from 106.0 (expected 105.7)

Closing Prices

• UK’s FTSE: -0.8%
• Germany’s DAX: + 0.2%
• France’s CAC: + 0.4%
• Spain’s IBEX: + 0.7%
• Portugal’s PSI: + 0.3%
• Italy’s MIB Index: + 0.7%
• Irish Ovrl Index: + 0.4%
• Greece ASE General Index: + 2.0%

Macroeconomic Data

Economic Data

from Briefing.com

• Michigan Sentiment - Final : 96.1 vs 94.8 (Prior 94.6)

MICHIGAN SENTIMENT


Highlights

• The University of Michigan Consumer Sentiment Index was revised up to 96.1 in the final June reading from a preliminary reading of 94.6. That is up from a reading of 90.7 in May. The Briefing.com Consensus expected the Consumer Sentiment Index to remain at 94.6.

Key Factors

• That was the best reading since the Consumer Sentiment Index reached 98.1 in January.
• The gain in sentiment was likely a reaction to large improvements in labor market conditions. That offset concerns about higher gasoline prices.
• The Expectations Index increased to 87.8 in June from 84.2 in May. The Current Conditions Index increased to 108.9 from 100.8.
• Gains in consumers sentiment do not necessarily translate into consumption growth. Consumption relies on income growth. As long as income continues to push higher, consumption growth should follow.

Big Picture

• Consumer sentiment has little influence on consumption. As long as payroll levels continue to expand, the resulting income growth should keep consumption gains steady regardless of the monthly ebbs and flows in sentiment.

Market Internals

NYSE:

Higher Volumes than the day before – 1623.8M vs 773.8M 


Decliners outpaced Advancers (adv/dec): 1343 / 1764

New Lows outpaced New Highs (highs/lows): 86 / 199

NASDAQ:

Higher Volumes than the day before – 2751.0M vs 1598.6M

Decliners outpaced Advancers (adv/dec): 1168 / 1661

New Highs outpaced New Highs (highs/lows): 139 / 76

VOLATILITY S&P500 (VIX)
14.02 +0.01 (+0.07%)

Internals still reflect a bearish sentiment, especially with New Lows continue to spike up. Volume increases as a result from rebalancing of the Russell indices. VIX did not break above its 100 MA but it manages to sit above its 20/50 MAs. This shows the uncertainty in the market amid the lack of confidence.    

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,946.68 +56.32 (+0.31%)

Volume: 158,115,783 (above average of 95,497,082)
Range: 17,892.03 - 18,013.15

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,080.51 -31.68 (-0.62%)
Volume: 1,251,422,507 (above average of 430,132,278)

Range: 5,060.82 - 5,121.47

S&P 500 INDEX (SPX: CBOE)

2,101.49 -0.82 (-0.04%)

Volume: 927,539,000 (above average of 515,643,277)

Range: 2,095.38 - 2,108.92 

DOW did not go below yesterday low but it is held below by its trend line and 100MA. NASDAQ broke below its support level and sit above its 50MA. S&P remains relatively unchanged at the intersection between its trend support and channel while sitting on its 100MA. I think that we might see a pullback in the market.

Commodities

Closing Commodities: WTI Crude Closes Below $60/Barrel

• WTI crude oil futures end lower again, however, today’s loss was very small.
• Overall, energy futures ended the day mostly lower with oil, natural gas and RBOB gasoline all declining and heating oil rallying.
• Aug crude oil fell $0.06 today to $59.67/barrel, while Aug natural gas fell $0.08 to $2.77/MMBtu’
• Note: Use the August contract for front-month natural gas
• Aug gold finished today’s session $1.40 higher at $1173.20/oz and July silver fell $0.07 to $15.73/oz
• July copper gained $0.03 today to $2.65/lb

Energy

• August crude oil futures fell $0.06 to $59.67/barrel
• August natural gas closed $0.08 lower at $2.77/MMBtu
• RBOB Gasoline closed $0.14 lower at $1.87/gallon
• Heating oil futures closed $0.15 higher to $2.02/gallon

• The Baker Hughes total US rig count increased by 2 to 859, marking the first week of increases after 28 consecutive weeks of decline

Agriculture

• July corn closed $0.08 higher at $3.85/bushel
• September wheat closed $0.27 higher (+5%) at $5.66/bushel
• November soybeans closed $0.08 higher to $9.84/bushel
• Ethanol closed $0.02 higher at $1.58/gallon
• Sugar #11 closed 0.15 cents higher to 11.67 cents/lb

Metals

• August gold ended today’s session $1.40 higher at $1173.20/oz
• July silver closed $0.07 lower at $15.73/oz
• July copper closed f$0.03 higher at $2.65/lb

Currencies

Dollar Gains Broadly

• The greenback climbed against all of the majors today except the Swiss franc as investors sought a safe haven from the uncertainty in the eurozone
  • The Michigan Sentiment survey for June moved up to 96.1, ahead of the Briefing.com consensus of 94.6 and the reading from May which was also 94.6
  • U.S. Dollar Index: +0.32% to 95.49
• GBP/USD: -0.16% to $1.5723
• EUR/USD: -0.43% to $1.1158
  • Greek Prime Minister Alexis Tsipras went home to Athens after declining a 5-month extension which Syriza politicians said would only prolong Greece's depression
  • The delegations from Greece and its official creditors will continue to meet over the weekend
  • Again, there remains a "door number 3" because Christine Lagarde, the managing director of the IMF, has 1 month to report to its board that Greece failed to make a payment
• USD/JPY: +0.26% to 123.89
  • The pair rallied on higher Treasury yields, which makes the long side of $/Yen more attractive to carry traders
  • Core CPI for Japan grew 0.1% y/y in May, higher than expected
  • Japanese household spending grew 4.8% y/y
• USD/CHF: -0.09% to 0.9358
  • The Swissy rallied on safe-haven demand
• USD/CAD: -0.02% to 1.2328
• AUD/USD: -1.14% to $0.7649
• NZD/USD: -0.85% to $0.6837

Bonds

9-Month High for Bond Yield

• U.S. government debt declined today in a curve-steepening trade as Greek woes and a declining Nasdaq failed to generate buying interest. While the final revision to the Michigan Consumer Sentiment survey was better than expected, that hardly warranted a 6 bp jump in the 10-year note yield. This move was more likely just a continuation of the repricing in yields that has been happening since April
• Yield Check:
  • 2-yr: +2 bps to 0.70%
  • 5-yr: +5 bps to 1.75%
  • 10-yr: +6 bps to 2.48%
  • 30-yr: +7 bps to 3.25%

• News:
  • The University of Michigan Consumer Sentiment Index was revised up to 96.1 in the final June reading from a preliminary reading of 94.6. That is up from a reading of 90.7 in May. The Briefing.com Consensus expected the Consumer Sentiment Index to remain at 94.6
    • That was the best reading since the Consumer Sentiment Index reached 98.1 in January
    • The gain in sentiment was likely a reaction to large improvements in labor market conditions. That offset concerns about higher gasoline prices.
    • Spending trends follow income and not sentiment
  • Greek Prime Minister Alexis Tsipras turned down a 5-month extension from Greece's official creditors and returned home to Athens
    • Discussions will continue over the weekend. One person, cited by The Guardian, put the chance of a weekend agreement over 50%
      • The same person was not so certain about Greek parliamentary approval of any agreement
  • The Shanghai Composite lost more than 7% overnight

• Commodities:
  • WTI Crude: -0.23% to $59.56/bbl.
  • Gold: +0.19% to $1,174.0/troy oz.
  • Copper: +0.76% to $2.6425/lb.

• Currencies:
  • EUR/USD: -0.33% to $1.1167
  • USD/JPY: +0.20% to 123.82

• Week Ahead:
  • Monday: May Pending Home Sales (10:00 ET)
  • Tuesday: April Case-Shiller 20-City Index (09:00 ET); June Chicago PMI (09:45 ET); June Consumer Confidence (10:00 ET); St. Louis Fed President Bullard (non-FOMC voter) (18:00 ET)
  • Wednesday: MBA Mortgage Index for the week ending 6/27 (07:00 ET); June Challenger Job Cuts (07:30 ET); June ADP Employment Change (08:15 ET); June ISM Index (10:00 ET); May Construction Spending (10:00 ET); Crude Inventories for the week ending 6/27 (10:30 ET); June Auto and Truck Sales (17:00 ET)
  • Thursday: Initial Jobless Claims for the week ending 6/27 and Continuing Jobless Claims for the week ending 6/20; June Employment Situation Report (08:30 ET); May Factory Orders (10:00 ET); Natural Gas Inventories for the week ending 6/27 (10:30 ET)

Treasury Yields:

• 2 Year Note 0.72% +0.04
• 5 Year Note 1.75% +0.05
• 10 Year Note 2.49% +0.09
• 30 Year Bond 3.25% +0.09

2/30 Spread: 253 bps ( +5 ) …  2/10 Spread: 177 bps ( +5 )

Preview for the week Monday 29 June to Friday 3 July, 2015

Economic Data

Monday (29 June) :

• Pending Home Sales : 1.4% (Prior 3.4%)

Tuesday (30 June) :

• Case-Shiller 20-city Index : 5.6% (Prior 5.0%)
• Chicago PMI : 50.0 (Prior 46.2)
• Consumer Confidence : 97.5 (Prior 95.4)

Wednesday (1 July) :

• MBA Mortgage Index : (Prior 1.6%)
• Challenger Job Cuts : (Prior -22.5%) 
• ADP Employment Change : 220K (Prior 201K)
• ISM Index : 53.2 (Prior 52.8)
• Construction Spending : 0.2% (Prior 2.2%)
• Crude Inventories : (Prior -4.934M)  
• Auto Sales : (Prior 5.9M)
• Truck Sales : (Prior 8.4M)

Thursday (2 July) :

• Initial Claims : 270K (Prior 271K)
• Continuing Claims : 2231K (Prior 2247K)
• Nonfarm Payrolls : 230K (Prior 280K)
• Nonfarm Private Payrolls : 225K (Prior 262K)
• Unemployment Rate : 5.4% (Prior 5.5%)
• Hourly Earnings : 0.2% (Prior 0.3%)
• Average Workweek : 34.5 (Prior 34.5)
• Factory Orders : 0.2% (Prior -0.4%)
• Natural Gas Inventories : (Prior 75 bcf)

Friday (3 July) : Independence Day - Market Closed

• No Economic Data

Earnings Highlights

Monday (29 June) :
BMO - None Scheduled
AMC - ANFI APOL HELI IRET

Tuesday (30 June) :
BMO - CAG OMN SCHN
AMC - AVAV CAMP

Wednesday (1 July) :
BMO - AYI AZZ BSET STZ GIS GBX MKC PAYX UNF
AMC - AYA FC GLPW PRGS

Thursday (2 July) :
BMO - ISCA
AMC - None Scheduled

Friday (3 July) : Independence Day - Market Closed
BMO - None Scheduled
AMC - None Scheduled

Summary
Market remains in the state of uncertainty as Greece is still undergoing their negotiations with the creditors. That is why Friday session was more or less flat.

Next week is the start of July month and according to past data, this month has the largest volatility. We are going to see quite a number of market mover data next week too. Not to mention the Greece has not yet find a solution to its debt payment. The government have decided to shut all banks on Monday to prevent a bank run. (http://www.marketwatch.com/story/greek-banks-to-stay-closed-monday-2015-06-28?dist=lbeforebell) The shit is about to hit the fan soon.

Despite the coming long weekend, I am not optimistic at the moment and watch out for the volatility swing next week.

Direction for Monday 29 June, 2015: Down

Direction for the week Monday 29 June to Friday 3 July, 2015: Down

2015 Daily Directional Accuracy: 56/97 (57.73%) 

2015 Weekly Directional Accuracy: 14/23 (60.87%)