16 Jun 2015

Monday, 15 June 2015 - AMC



Dow -107.54 at 17791.30, Nasdaq -21.13 at 5029.97, S&P -9.68 at 2084.43

From my point of view, I reckon the market has not really break out of the trading range. There hasn't been much bullish/bearish trend, which reflecting the lack of leadership in the market. Last week the market was purely pushing up by some dip buying and following with profit taking. I don't think there is much distribution neither accumulation, but rather just short term trading.

Greece's debt situation has not been resolved yet. It has been a dragging issue to the euro and that is going to continue looming the Euro market.  

This coming Wednesday will set some tone on the Fed's decision on interest rate. That is going to bring in more volatility to the market. Also we have quite a number of market moving data releasing across the week too.        

Direction for Monday 15 June, 2015; Down
Well the bearishness only lasted for the first 30 minutes of the trading session? And I believed to there was some short-covering following the heavy selling at the start. This is interesting as the market seems to not have the conviction to go down lower for the day. The Dollar Index suffered some loss after the disappointment in production rate. While crude oil remains volatile amid oversupply situation in a seasonal demand period.                           

Market Summary

Industry Watch
Strong: Energy, Telecom Services, Utilities

Weak: Health Care, Technology, Industrials, Materials

Other Market Moving Factor:
  • Weekend talks between Greece and creditors go nowhere with Greek officials resisting requests for pension and wage cuts: Bunds and Treasuries rally

    S&P 500 slips below 100-day moving average (2,088)

      [BRIEFING.COM] The stock market began the new trading week on a cautious note with the S&P 500 sliding below its 100-day moving average (2,089). The benchmark index lost 0.5% and registered its second consecutive decline.  

      Equities notched their session lows during the opening hour after Sunday's talks between Greek officials and the country's creditors broke down without any progress. This left the situation essentially unchanged since last week with the two sides remaining at odds over cuts to state pensions/wages and the appropriate VAT levels. 

      The lack of progress between the two sides fueled the opening retreat, but the S&P 500 was able to cut its loss in half by midday. Equities held near their afternoon levels after Germany's Suddeutsche Zeitung reported that Eurozone officials have agreed on a plan B in the event Greece is unable to come to terms with its creditors. According to the report, a special summit will be held on Friday night if this week passes without a deal. Furthermore, it is expected that capital controls will be imposed, but enforcement of those measures would be in the hands of the Greek parliament.  

      For the second day in a row, the lack of progress led to a widening in European yield spreads with demand for German bunds driving their yield down a basis point to 0.82% while Italy's 10-yr yield jumped 11 basis points to 2.33%. Similarly, Spain's 10-yr yield increased ten basis points to 2.38% as European investors showed safe-haven demand.  

      That safe-have demand kept Treasuries in the green throughout the day. The 10-yr note settled below its high, but still ended in the green with its yield down four basis points at 2.36%.  

      Nine of ten sectors registered losses with the top-weighted technology space (-0.6%) struggling throughout the day. The sector was pressured by some of its largest components like Microsoft (MSFT 45.48, -0.49), Oracle (ORCL 43.74, -0.60), and Facebook (FB 80.71, -0.82) while high-beta chipmakers fared relatively well even though the PHLX Semiconductor Index shed 0.2%. Micron (MU 24.24, -0.89) and SanDisk (SNDK 64.18, -1.92) kept the index near the broader market after both names were downgraded at Morgan Stanley. Micron lost 3.5% while SanDisk surrendered 2.9%. 

      Elsewhere, industrials (-0.8%) and materials (-0.7%) underperformed while the remaining cyclical sectors ended near the broader market. Notably, the consumer discretionary space (-0.5%) settled in-line with the S&P 500, which masked relative strength among homebuilders. The iShares Dow Jones US Home Construction ETF (ITB 26.94, +0.04) added 0.2% after Standard Pacific (SPF 8.82, +0.46) and Ryland Group (RYL 45.02, +2.23) agreed to a merger of equals. 

      Meanwhile, the countercyclical side looked a little better with the health care sector (+0.03%) eking out a slim gain. Similarly, the utilities sector (-0.2%) finished ahead of the broader market while telecom services (-0.6%) and consumer staples (-0.7%) underperformed.  

      Today's trading volume was below average with roughly 715 million shares changing hands at the NYSE floor.  

      Economic data included Empire Manufacturing, Industrial Production/Capacity Utilization, and NAHB Housing Market Index: 
      • The Empire Manufacturing Survey for June registered a reading of -2.0, which was below the prior month's reading of 3.1 and below the Briefing.com consensus estimate, which was pegged at 6.0 
      • Industrial production decreased 0.2% in May after declining a downwardly revised 0.5% (from -0.3%) in April while the Briefing.com consensus expected an increase of 0.3%
        • Manufacturing production declined 0.2% in May after increasing 0.1% in April, which was the first decline since a 0.2% drop in February 
        • Capacity utilization hit 78.1% while the Briefing.com consensus expected a reading of 78.3% 
      • The NAHB Housing Market Index for June rose to 59 from 54 while the Briefing.com consensus expected an increase to 56 
      Tomorrow, May Housing Starts (Briefing.com consensus 1.10 million) and Building Permits (consensus 1.10 million) will both be released at 8:30 ET. 


      Global Market
      ASIA

      Asian Markets Close: Japan’s Nikkei -0.1%; Hong Kong’s Hang Seng -1.5%; China’s Shanghai Composite -2.0%
      The new week started with broad-based losses for markets in the Asia-Pacific region. The weakness was attributed in part to concerns surrounding Greece and Wall Street’s weak showing on Friday. An added drag on trading sentiment was the news that China’s securities regulator imposed new rules that limit the size of margin trading. China’s Shanghai Composite declined 2.0%.

      Economic data
      • South Korea
        • May Trade Balance KRW 6.30 bln (expected KRW 6.30 bln; prior KRW 6.30 bln)
        • May Exports -10.9% year-over-year (prior -10.9%)
        • May Imports -15.4% year-over-year (prior -15.3%)
      • Singapore
        • Q1 Unemployment Rate 1.8% (expected 1.8%; prior 1.8%)
        • Retail Sales +0.8% month-over-month (expected +1.2%; prior +1.1%); +5.0% year-over-year (expected +6.0%; prior +2.1%)
      • India
        • May WPI Inflation -2.36% year-over-year (expected -2.50%; prior -2.65%)
        • WPI May Food Inflation +3.80% (prior +5.70%)
        • WPI May Fuel Inflation -10.51% (prior -13.0%)

      Equity Markets
      • Japan’s Nikkei declined 0.1%, weighed down by weakness in the technology (-1.0%), energy (-0.9%), and basic materials (-0.7%) sectors. SCREEN Holdings (-2.3%), Mitsui Mining & Smelting (-2.2%), and Toho Zinc (-2.1%) led declining issues. Nichirei (+7.0%) and Tokyo Fudosan Holdings (+3.2%) paced the winners. Out of the 225 index members, 93 ended higher, 128 finished lower, and 4 were unchanged.
      • Hong Kong’s Hang Seng declined 1.5% and finished at its lows for the day. All sectors finished lower, yet the largest negative influences were the financial (-1.6%) and communications (-1.4%) sectors. Belle International Holdings (-6.8%), Bank of Communications (-3.6%), and Ping An Insurance (-3.1%) were the worst-performing issues. Cathay Pacific Airways (+1.8%), China Resources Power Holdings (+1.6%), and Hang Seng Bank (+0.1%) were the only stocks out of the 50 index members that ended higher.
      • China’s Shanghai Composite dropped 2.0% as the specter of new share listings at the end of the week and new margin trading restrictions imposed by the country’s securities regulator cooled off the market, which had risen 12.1% over the last two weeks. Weakness was seen in all areas of the Chinese market on Monday. The technology sector (-7.1%) was the biggest laggard in the CSI 300 Index.
      • India’s Sensex increased 0.6% following the release of better than expected wholesale price data. Gains were paced by the consumer cyclical (+1.1%) and consumer non-cyclical (+0.7%) sectors. Individual standouts included Sun Pharmaceutical (+3.0%), Mahindra & Mahindra (+2.3%), and Housing Development Finance (+2.0%). Hindalco Industries (-2.1%) and State Bank of India (-1.5%) were the biggest laggards. Out of the 30 index members, 18 ended higher and 12 finished lower.
      • Australia’s S&P/ASX 200 declined 0.1% with losses in the gold (-2.9%), energy (-2.4%), and utilities (-1.2%) sectors leading things lower. Out of the 200 index members, 71 ended higher, 116 finished lower, and 13 were unchanged.
      • Regional advancers: Vietnam +0.6%
      • Regional decliners: South Korea -0.5%, Taiwan -0.5%, Malaysia -0.7%, Indonesia -2.0%, Singapore -0.9%, Thailand -0.6%, Philippines -0.6%

      FX
      • USD/CNY +0.01% at 6.2090
      • USD/INR +0.01% at 64.106
      • USD/JPY +0.2% at 123.60

      EUROPE

      Major European indices trade lower across the board after Sunday’s talks between Greek officials and the country’s creditors broke down during the opening hour, leaving the situation unchanged since last Friday. Cuts to pensions/wages and VAT levels on electricity are reportedly among the main points of contention.
      • Eurozone trade surplus expanded to EUR24.90 billion from EUR23.40 billion (expected surplus of EUR22.50 billion)
      • Italy’s May CPI +0.1% month-over-month (expected 0.2%; prior 0.1%); +0.1% year-over-year (consensus 0.2%; last 0.1%)
      • Swiss May PPI -0.8% month-over-month (expected 0.1%; last -2.1%); -6.0% year-over-year (consensus -5.1%; prior -5.2%). Separately, April Retail Sales +1.6% year-over-year (consensus -2.2%; last -2.8%)

      Closing Prices
      • UK’s FTSE: -1.1%
      • Germany’s DAX: -1.9%
      • France’s CAC: -1.8%
      • Spain’s IBEX: -1.7%
      • Portugal’s PSI: -2.3%
      • Italy’s MIB Index: -2.4%
      • Irish Ovrl Index: -0.6%
      • Greece ASE General Index: -4.7%

              Macroeconomic Data


              Economic Data
              from Briefing.com

              • Empire Manufacturing : -2.0 vs 6.0 (Prior 3.1)
              • Industrial Production : -0.2% vs 0.3% (Prior -0.3%)
              • Capacity Utilization : 78.1% vs 78.3% (Prior 78.2%) 
              • NAHB Housing Market Index : 59 vs 56 (Prior 54)
              • Net Long-Term TIC Flows : $53.9B (Prior $17.6B)

              INDUSTRIAL PRODUCTION


              Highlights

              • Industrial production decreased 0.2% in May after declining a downwardly revised 0.5% (from -0.3%) in April. The Briefing.com Consensus expected industrial production to increase 0.3%.

              Key Factors

              • Industrial production has not increased on a month-to-month basis since November 2014.
              • Manufacturing production declined 0.2% in May after increasing 0.1% in April. That was the first decline in manufacturing output since a 0.2% drop in February.
              • The decline in production matched the downbeat regional Federal Reserve manufacturing surveys.The pullback in manufacturing would have been much larger if not for a continued surge in motor vehicles and parts production. Production from the auto industry rose 1.7% in May after increasing 2.0% in April.
              • Total motor vehicle assemblies increased to 12.44 mln SAAR in May from 12.14 mln SAAR in April. That was the most new vehicles assembled in one month since 13.2 mln SAAR vehicles were put together in July 2014.
              • Most of the increase in assemblies came from the auto sector, as production of cars increased to 4.60 mln SAAR from 4.37 mln SAAR. Truck assemblies increased to 7.83 mln SAAR from 7.78 mln SAAR.
              • Excluding motor vehicles, manufacturing production declined 0.3% in May after being flat in April.
              • Higher oil prices helped, but didn't end, the downward trend in mining production. Production declined 0.3% in May after declining 1.3% in April.
              • Utilities production increased 0.2% after declining 3.7% in April.

              Big Picture

              • Even though the headwinds from low oil prices and the strong dollar have gradually shifted, industrial production remains on a firm downward trend.

              Market Internals

              NYSE:
              Higher Volumes than the day before – 734.1M vs 648.6M 

              Decliners outpaced Advancers (adv/dec): 1091 / 1992
              New Lows outpaced New Highs (highs/lows): 46 / 114

              NASDAQ:
              Higher Volumes than the day before – 1734.8M vs 1415.1M
              Decliners outpaced Advancers (adv/dec): 1161 / 1658
              New Highs outpaced New Highs (highs/lows): 106 / 58

              VOLATILITY S&P500 (VIX)
              15.39 +1.61 (+11.68%)

              I would say the internals are still pointing more to the bearish side. This reflects some divergence in relative to the price action. One point to note will be the huge gap up in VIX. It broke above 15.00 level and also the 200 MA. That certainly means something here.

              Technical Updates

              DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
              17,791.17 -107.67 (-0.60%)
              Volume: 91,922,596 (below average of 97,802,374)
              Range: 17,698.42 - 17,890.76

              NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
              5,029.97 -21.13 (-0.42%)
              Volume: 429.9M (above average of 423,201,523)
              Range: 4,985.94 - 5,035.37

              S&P 500 INDEX (SPX: CBOE)
              2,084.43 -9.68 (-0.46%)
              Volume: 504,787,125 (below average of 521,448,138)
              Range: 2,072.49 - 2,091.34 

              I think DOW is somewhat supported by its 200MA while S&P and NASDAQ are sitting on their respective trend lines. Seems like a wedge pattern forming which might translate to more trading in the range. However if the market broke below their support level, we should see more selloff coming.


              Commodities

              Closing Commodities: Nat Gas Closes Strong On Supply Concerns; Dollar Weakens Late
              • The dollar saw broad weakening after a mid-morning high near 95.4, which gave commodities broad support going into the close
              • The index has sold off in most recent trade, and is now slightly negative at -0.2% to 94.8
              • Crude has traded red all session, as OPEC production concerns outweighed a weakening dollar amidst a lack of positive catalysts. The July contract closed -0.6% to $59.55/barrel
              • Natural gas strength went unchallenged throughout the afternoon, as the commodity extended large morning gains.
              • Supply concerns emanating from a developing storm in the Gulf Coast, in addition to periphal drivers that included warmer weather forecasts in the Eastern US, drove Nat gas to close up 5.1% to $2.89/MMBtu
              • Precious metals lifted off the flat line in mid-morning trade, and supported by a falling dollar index closed modestly positive.
              • August gold closed +0.5% at $1185.60/oz and July silver ended +1.5% to $16.08/oz
              • Copper saw no lift from a weakening dollar, as sentiment remained focused on recent negative macro-econ data trends out of China. Copper closed -1.1% to $2.65/lb

              Energy
              • July crude oil futures fell $0.38 to $59.55/barrel
              • July natural gas closed $0.14 higher at $2.89/MMBtu
              • RBOB Gasoline closed $0.02 lower at $2.10/gallon
              • Heating oil futures closed $0.02 lower to $1.87/gallon

              Agriculture
              • July corn closed $0.05 lower at $3.48/bushel
              • July wheat closed $0.16 lower (-3.2%) to $4.89/bushel
              • July soybeans closed $0.01 lower to $9.39/bushel
              • Ethanol closed $0.02 lower at $1.46/gallon
              • Sugar #11 closed 0.26 cents lower to 11.46 cents/lb

              Metals
              • August gold ended today’s session $6.30 higher at $1185.60/oz
              • July silver closed $0.24 higher at $16.08/oz
              • July copper closed $0.03 lower at $2.65/lb


              Currencies

              Muted Moves for Currencies
              • The U.S. Dollar Index was down 0.08% to 94.90, giving back its overnight rally after U.S. Industrial Production missed estimates (Actual -0.2% vs. the Briefing.com consensus of +0.3%)
              • EUR/USD: -0.02% to $1.1257 
                • The ZEW Institute's Index of Expectations for Economic Growth for the eurozone in June will be released tonight
              • GBP/USD: +0.13% to $1.5581
                • The May CPI for the U.K. will be released tonight
              • USD/JPY: +0.04%to 123.43
              • USD/CHF: +0.51% to 0.9328
              • USD/CAD: +0.02% to 1.2316
              • AUD/USD: +0.42% to $0.7764
              • NZD/USD: +0.09% to 0.6995



              Bonds

              Treasuries Finish Higher but off Best Levels
              • The U.S. Treasury complex rallied early in the session on global risk aversion over Greece. The weak Empire Manufacturing and Industrial Production data pushed the rally further, but governments backed off after equities began to recover and the NAHB Housing Market Index easily beat expectations
              • Yield Check:
                • 2-yr: -3 bps to 0.70%
                • 5-yr: -4 bps to 1.70%
                • 10-yr: -4 bps to 2.36%
                • 30-yr: -2 bps to 3.09%
              • News:
                • The index measuring factory activity in the New York region declined slightly but widely missed expectations in May, reading -2.0. The Briefing.com consensus was for 6.0 and the prior reading was 3.1
                  • The forward looking components were even worse than the headline number, with unfilled orders up to -4.81 from -11.46 in April and new orders down to -2.12 from 3.85 
                • Industrial production decreased 0.2% in May after declining a downwardly revised 0.5% (from -0.3%) in April. The Briefing.com Consensus expected industrial production to increase 0.3%
                  • Industrial Production has not increased on a m/m basis since November 2014 
                  • The decline in production matched the downbeat regional Federal Reserve manufacturing surveys.The pullback in manufacturing would have been much larger if not for a continued surge in motor vehicles and parts production. Production from the auto industry rose 1.7% in May after increasing 2.0% in April
                  • Higher oil prices helped, but didn't end, the downward trend in mining production. Production declined 0.3% in May after declining 1.3% in April
                • Capacity Utilization declined to 78.1% in May from 78.3% in April. The Briefing.com consensus was 78.3%
                • The NAHB Housing Market Index blew by estimates, rising to 59 in June from 54 in May. The Briefing.com consensus was 56
                • German newspaper Suddeutsche reported that an emergency plan for Greece is being drawn up by European officials. The plan is said to include capital controls
              • Commodities:
                • WTI crude: -0.67% to $59.56/bbl.
                • Gold: +0.59% to $1,186.10/troy oz.
                • Copper: -1.14% to $2.6475/lb.
              • Currencies:
                • EUR/USD: +0.29% to $1.1292
                • USD/JPY: unch at 123.38
              • Data out Tuesday:
                • May Housing Starts (08:30 ET)
                • May Building Permits (08:30 ET)

              Treasury Yields:
              • 2 Year Note 0.72% -0.02
              • 5 Year Note 1.71% -0.04
              • 10 Year Note 2.36% -0.03
              • 30 Year Bond 3.09% -0.01

              2/30 Spread: 237 bps ( +1 ) …  2/10 Spread: 164 bps ( -1 )




              Preview for Tuesday 16 June, 2015



              Economic Data

              Tuesday (16 June) :
              • Housing Starts : 1100K (Prior 1135K) 
              • Building Permits : 1100K (Prior 1143K)

              Earnings Highlights

              Tuesday (16 June) :
              BMO - FDS JW.A
              AMC - ADBE ANFI BOBE LZB

              Summary
              It seems more like a short covering to me and the technicals is telling me there is possibility of the market might continue to move slightly higher. Tomorrow is the start of the 2-day FOMC meeting which explains partly why the traders are taking off profits ahead. I would say market is getting more defensive and buckle up for more volatility this few days.          

              Direction for Tuesday 16 June, 2015; Up

              2015 Daily Directional Accuracy: 50/89 (56.18%) 
              2015 Weekly Directional Accuracy: 13/21 (61.90%)

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