Monday, 29 June 2015 - AMC

Dow -350.33 at 17596.69, Nasdaq -122.04 at 4958.47, S&P -43.85 at 2057.76

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

With Greece stepping closer to default, more investors are selling off their positions in the equity markets to prevent themselves from exposing to the market risk. Market certainly do look bearish given the strong sell off plus the huge gap down at the opening. On top of that, we are seeing a DFDM. 

Besides Greece, we are seeing some more weakness in Asia market especially China's market. It is aware that the Shanghai Composite has went into a bearish region. Guess more s-h-i-t is loaded.   

Market Summary

Industry Watch

Strong: -

Weak: Information Technology, Financials, Materials, Consumer Discretionary, Health Care

Other Market Moving Factor:

• Greek government rejects Eurogroup's cash-for-reform proposal; Approves July 5 referendum on the issue
• Weakness in global equity markets
• Underperformance of information technology and financial sectors
• S&P 500 takes out low end of trading range it has been locked in since early April (2080-2120)
• Dow Jones Industrial Average closes below 200-day moving average

[BRIEFING.COM] Greek leaders said ‘no' to the Eurogroup's cash-for-reform proposal and investors around the world in turn said ‘no' to buying stocks on Monday. Just about every major market closed down at least 2.0%. 

The hardest-hit markets were the European bourses, which included Germany's DAX Index (-3.6%) and Spain's IBEX (-4.6%). Japan's Nikkei dropped 2.9% while China's Shanghai Composite fell 3.3% despite the People's Bank of China cutting its benchmark lending and deposit rates by 25 basis points each to 4.85% and 2.00%, respectively.

In comparison, the U.S. stock market fared reasonably well, yet that doesn't mean it did well. Hit with broad-based selling pressure, the S&P 500 declined 2.1% as buyers basically wanted no part of today's action outside a few areas of specific interest. 

One area was the utilities sector (-0.6%), which traded with a modest gain for most of the day before ultimately feeling the gravitational pull of the weak market.  Another area was the Treasury market, which attracted safe-haven flows. The 10-yr note surged more than a point and saw its yield drop 15 basis points to 2.33%.

The CBOE Volatility Index (VIX 18.85, +4.83, +34.5%), meanwhile, made a huge move as investors sought hedges to protect against downside risk. The scope of the move underscored the concerns surrounding the situation in Greece, which imposed capital controls and closed its banks, and how underappreciated the risk of getting to the point of referendum really was. 

In light of the latest developments, Standard & Poor's downgraded Greece to CCC- from CCC and said it now thought there was a 50% probability that Greece will leave the eurozone. Additionally, there was little confidence in the thought that Greece will make its EUR 1.6 billion debt payment to the IMF on Tuesday. 

Notwithstanding the latter developments, the euro reversed early losses and strung together a rally that saw it gain 0.8% against the dollar on Monday. That move, and a strong gain by the yen, pressured the U.S. Dollar Index, which fell 0.6% to 94.87. 

The weaker dollar, however, did not help oil prices, which declined 2.3% to $58.32 per barrel as demand concerns tied to the macro situation took root. 

In the stock market, the financial sector (-2.4%) got hit the hardest as Greek contagion concerns and a flatter yield curve got the better of the sector, which had been outperforming in recent weeks on curve steepening and the thinking Greece and its creditors would strike an eleventh-hour solution. Misery of course loves company and the financial sector had plenty of it. Tagging along for the joyless ride were the materials (-2.4%), health care (-2.3%), consumer discretionary (-2.3%), and information technology (-2.2%) sectors, but every sector was down for the day. 

Every stock in the Dow Jones Industrial Average lost ground, too, but none more so than Goldman Sachs (GS 207.65, -5.52), which happens to be the highest-priced stock in the price-weighted average. With Monday's retreat, the Dow Jones Industrial Average fell below its 200-day moving average. The S&P 500 did not, but stands less than 10 points above that key line of technical support after closing on its lows and turning negative for the year (-0.1%). 

The only economic release today was the Pending Home Sales report for May. Keeping with the theme of the day, it disappointed with a 0.9% increase (Briefing.com consensus +1.4%). 

Volume was heavier-than-average with 853 million shares changing hands at the NYSE where decliners outpaced advancers by a 10-to-1 margin. In turn, volume in the SPDR S&P 500 ETF Trust (SPY 205.47, -4.35) was the heaviest it has been (185.7 million) since April 17.  

Turning our attention to Tuesday, headlines out of Greece will continue to hold sway, but it will be the response around the globe to Monday's equity market losses that will be the focal point. U.S. data will include the Case-Shiller 20-City Home Price Index for April (Briefing.com consensus +5.6%; prior +5.0%), the Chicago PMI for June (Briefing.com consensus 50.0; prior 46.2), and the June Consumer Confidence report (Briefing.com consensus 97.5; prior 95.4).

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -2.9%; Hong Kong’s Hang Seng -2.6%; China’s Shanghai Composite -3.3%
Markets in the Asia-Pacific region ended lower on Monday, with the Shanghai (-3.3%) took center stage in the region, after the PBOC cut its 1-yr lending rate by 25bps to 4.85% (and a 50bp cut to the RRR to a handful of banks), over the weekend, in an effort to help contain the volatility in the major Mainland indexes. The move seemed to have worked initially, with the Shanghai opening up over 2% and managing to trade there in the early part of the day. But, the global sentiment left too sour of a taste in traders’ mouths and sellers began to take over heading into the lunch break. By the end of the session, stocks had fallen over 3%, and officially put all major Chinese indices into “bear” territory. Japanese shares were torched in response to the negativity seen in the broader markets and the strength in the yen as a flight to safety play.

Economic data

• Japan
• May Prelim Industrial Prod: -2.2% vs -0.8% exp
• May Retail Sales: +1.7% vs +1.0% exp
• China
• May Industrial Profits: +0.6% vs +2.6% in May 2014

Equity Markets

• Japan’s Nikkei declined 2.9% with the yen showing relative strength versus the dollar. Alll sectors closed in negative territory, with Utilities (-1.7%) performing better than the broad markets. IT and Healthcare were both laggards, both finishing 3.5% lower.
• Hong Kong’s Hang Seng declined 2.6%, 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%).
• China’s Shanghai Composite plummeted 3.3%, and officially put the index into bear market territory (down ~21% from the highs). The sharp decline came on a day that started off strong following the PBOC rate cuts, but global sentinment weighed on shares. China Southern Airways traded down 7%, but a few banks helped financials stay afloat with China Minsheng Bank gaining 3.6% and Bank of China up 0.7%.
• India’s Sensex declined 0.6%, held back by weakness in the indexes top loser, Tech Mahindra, down over 7%. Out of the 30 stocks in the Sensex, 24 ended the day in negative territory.

FX

• USD/CNY -0.01% at 6.2090
• USD/INR +0.3% at 63.88
• USD/JPY -0.7% at 122.88

EUROPE

Worries about Greek Situation Weighing Heavily on European Markets
The eleventh-hour solution between Greece and its creditors has not been reached. Over the weekend, Greek leaders rejected the latest cash-for-reform proposal from the Eurogroup. In doing so, the possibility of Greece defaulting on its debt payments and exiting the eurozone was increased. That concern is readily apparent in Greek debt as the yield on Greece’s 10-yr note has surged 372 basis points to 14.39%.

The concerns are also readily apparent in major equity markets around the globe, most of which have fallen at least 2.5%, including Japan’s Nikkei (-2.9%), China’s Shanghai Composite (-3.3%), Germany’s DAX Index (-3.3%), France’s CAC 40 (-3.6%), and Spain’s IBEX (-3.8%). The U.S. market is slated to open noticeably lower, although it is expected to exhibit some relative strength based on the S&P futures which are trading 1.0% below fair value.

With respect to Greece, the current position on things is as follows:

• Greece’s parliament has approved a July 5 referendum in which Greek citizens will vote on whether to accept or reject the Eurogroup’s cash-for-reform proposal
• Capital controls were imposed and include a €60 daily withdrawal limit from ATMs and a ban on transfers and payments outside the country
• Greek banks and the stock market will be closed until July 6
• In the wake of the Greek government’s rejection of the bailout proposal, the European Central Bank is maintaining the ceiling to the provision of emergency liquidity assistance to Greek banks at the level decided on June 26

Closing Prices

• UK’s FTSE: -2.0%
• Germany’s DAX: -3.6%
• France’s CAC: -3.7%
• Spain’s IBEX: -4.6%
• Portugal’s PSI: -5.2%
• Italy’s MIB Index: -5.2%
• Irish Ovrl Index: -2.5%
• Greece ASE General Index: Closed

Macroeconomic Data

Economic Data

from Briefing.com

• Pending Home Sales : 0.9% vs 1.4% (Prior 2.7% - Down)

Market Internals

NYSE:

Lower Volumes than the day before – 875.2M vs 1623.8M 


Decliners outpaced Advancers (adv/dec): 288 / 2883

New Lows outpaced New Highs (highs/lows): 20 / 330

NASDAQ:

Lower Volumes than the day before – 2008.2M vs 2751.0M

Decliners outpaced Advancers (adv/dec): 390 / 2488

New Lows outpaced New Highs (highs/lows): 52 / 150

VOLATILITY S&P500 (VIX)
18.85 +4.83 (+34.45%)

The bears are overwhelming and internals are extremely bearish. VIX opened with a huge gap up and took a large spike, reflecting a drastic increase in volatility and fear in the market. It is more or less confirmed that market is definitely in a bearish mode now. Now the resistance level would be around 21.00 level and if VIX is going there, I reckon it would be an extreme fear which translate to even more sell-off...        

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,596.35 -350.33 (-1.95%)

Volume: 116,337,391 (above average of 95,686,292)
Range: 17,590.55 - 17,936.74

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,958.47 -122.04 (-2.40%)
Volume: 490.4M (above average of 430,295,981)

Range: 4,956.23 - 5,051.01

S&P 500 INDEX (SPX: CBOE)

2,057.64 -43.85 (-2.09%)

Volume: 587.0M (above average of 515,986,297)

Range: 2,056.64 - 2,098.63 

DOW broke below its support level at around 17,750 level and 200MA, while sitting above another support at 17,600 now. NASDAQ broke below its 100MA and sit above its channel as a support. S&P broke out of its channel and went below its support level at around 2,075 level. It seems that the market is likely to break away from its consolidation range with more correction.

Commodities

Closing Commodities: Greece Helps Weigh On Oil Prices, Copper Ends Flat

• The dollar index slid lower today, but this didn’t provide much upside to commodities.
• Crude oil traded in the red all day, helped by Greece news.
• Aug crude oil ended the day -$1.35 to $58.32/barrel. Aug natural gas rose $0.04 to $2.81/MMBtu
• Metals were mixed/mostly flat to given the action in the Greece/ dollar index.
• Aug gold ended today’s floor trading session $5.90 lower to $1179.10/oz.
• July silver lost $0.07 to $15.70/oz and July copper ended unchanged at $2.63/lb.

Energy

• August crude oil futures fell $1.35 to $58.32/barrel
• August natural gas closed $0.04 higher at $2.81/MMBtu
• RBOB Gasoline closed $0.02 lower at $2.00/gallon
• Heating oil futures closed $0.03 lower to $1.84/gallon

Agriculture

• July corn closed $0.01 lower at $3.84/bushel
• September wheat closed $0.18 higher at $5.84/bushel
• November soybeans closed $0.03 lower to $9.81/bushel
• Ethanol closed $0.02 lower at $1.56/gallon
• Sugar #11 closed 0.15 cents higher to 11.82 cents/lb

• The USDA is set to release two grain reports tomorrow at Noon ET, which have the potential to increase volatility across the agricultural commodity spectrum

Metals

• August gold ended today’s session $5.90 higher at $1179.10/oz
• September silver closed $0.07 lower at $15.70/oz
• September copper closed flat at $2.63/lb

Currencies

Dollar Falls Sharply Despite Greek Woes

• The greenback and the loonie were the losers in foreign exchange markets today as overnight knee-jerk selling in the euro was steadily reversed
  • U.S. Dollar Index: -0.72% to 94.78
• EUR/USD: +0.77% to $1.1254
  • German CPI for June missed expectations, falling 0.1% m/m versus a 0.1% gain in May
  • Spain's Harmonized Index of Consumer Prices was flat y/y in June, beating expectations and a 0.3% fall in May
  • The eurozone's Business and Consumer Survey fell to a worse-than-expected 103.5 in June from 103.8 in May
• GBP/USD: +0.01% to $1.5749
  • Mortgage approvals declined to a worse-than-expected 64.43K in May versus 67.58K in April
• USD/CAD: +0.52% to 1.2383
  • The Raw Materials Price Index rose to a worse-than-expected 4.4% m/m in May versus 4.0% for April
• USD/JPY: -1.13% to 122.48
  • Industrial Production missed estimates in May, falling 2.2% m/m versus a 1.2% jump in April
  • Retail Sales rose 3.0% m/m in May, better than estimates but worse than the 4.9% reading in April
• USD/CHF: -0.84% 0.9256
  • The Swiss National Bank intervened in the fx market to prevent significant appreciation of the Swissy after the Greek negotiations fell through at the weekend
• AUD/USD: +0.51% to 0.7697
• NZD/USD: +0.27% to 0.6867

Bonds

Yields Plummet on Flight to Quality

• U.S. Treasuries soared today after investors scrambled to safety following the breakdown of negotiation between Greece and its creditors over the weekend. A referendum on a bailout extension is to be voted upon on July 5th, but that will be after the June 30th deadline for Greece's 1.55 mln euro payment to the IMF
• Yield Check:
  • 2-yr: -7 bps to 0.64%
  • 5-yr: -13 bps to 1.63%
  • 10-yr: -14 bps to 2.33%
  • 30-yr: -14 bps to 3.10%

• News:
  • Negotiations between Greece and its official creditors broke down over the weekend
    • Prime Minister Alexis Tsipras decided to hold a referendum on July 5th to let Greeks decide if they want to stay in the eurozone at the expense of pension and cuts and no debt forgiveness
    • If Greece doesn't make its 1.55 bln euro payment to the IMF on June 30th, IMF Managing Director Christine Lagarde has the option of not reporting the missed payment to the executive board for a month. She has indicated that she will not delay
    • Greek banks did not open on Monday and ATMs allowed only $60 of withdrawals per depositor per day. The banks are supposed to reopen on Thursday
    • S&P downgraded Greece from CCC to CCC- and said that the probability of Grexit is 50%
  • The Shanghai Composite fell to bear market territory overnight, down more than 20% from its high on June 12th. The PBoC eased monetary policy over the weekend to stem the selling, but the major indices still declined
  • Pending Home Sales in the U.S. rose 0.9% in May, short of the Briefing.com consensus of 1.4% and April's gain of 3.4%
    • That was the highest level of sales since mid-2006
  • Puerto Rico's governor announced that the commonwealth its $72 bln of debt because the burden is currently unsustainable

• Commodities:
  • WTI crude: -2.23% to $58.30/bbl.
  • Gold: +0.48% to $1,178.90/troy oz.
  • Copper: -0.15% to $2.6315/lb.

• Currencies:
  • EUR/USD: +0.66% to $1.1241
  • USD/JPY: -1.07% to 122.57

• Data out Tuesday:
  • April Case-Shiller 20-City Index (09:00 ET)
  • June Chicago PMI (09:45 ET)
  • June Consumer Confidence (10:00 ET)
• Fed Speaker:
  • St. Louis Fed President Bullard (non-FOMC voter) (18:00 ET)

Treasury Yields:

• 2 Year Note 0.64% -0.08
• 5 Year Note 1.62% -0.13
• 10 Year Note 2.33% -0.16
• 30 Year Bond 3.09% -0.16

2/30 Spread: 245 bps ( -8 ) …  2/10 Spread: 169 bps ( -8 )

Preview for Tuesday 30 June, 2015

Economic Data

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)

Earnings Highlights

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

Summary
With China and Greece crisis looming, like I mentioned previously that most investors are taking risk off from the equity market and it is noticeable from the lowering in yield curve. As we are seeing more economic data from China and the Eurozone, that might trigger more selling in the market. Also, Greece's debt payment is due soon and if they are not going to settle on any agreement, Grexit is only a matter of time.

The indices are approaching the 200MA as a support, and that might give us some pullback. But given the raging momentum, it is going to be hard. 

Direction for Tuesday 30 June, 2015: Down

2015 Daily Directional Accuracy: 57/98 (58.16%) 

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