Thursday, 18 June 2015 - AMC

Dow +180.10 at 18115.84, Nasdaq +68.07 at 5132.95, S&P +20.80 at 2121.24

Thursday should reflect the market sentiment post FOMC meeting. Also we are going to see more market moving data releasing. I suppose it is not likely to be a quiet session but it is going to be volatile. I will be monitoring the market to determine which sides to go - it seems like having a breakout soon or another correction on the way...      

Direction for Thursday 18 June, 2015; Up

I was expecting some upside in the market but not this kind of huge upside. Market seems to be positive after the FOMC dovish statement. While the rally was strong for probably the first half of the session, the second half was rather flat-ish as it hit a resistance. It does put some brake on this rally. Or is it?   

Market Summary

Industry Watch

Strong: Consumer Discretionary, Consumer Staples, Health Care, Utilities

Weak: Energy, Financials, Technology

Other Market Moving Factor:

• Eurozone finance ministers meet in Luxembourg 
• Biotechnology outperforms

[BRIEFING.COM] The major averages ended Thursday on an upbeat note with the Nasdaq Composite (+1.3%) leading the market higher. In addition to pacing today's advance, the Nasdaq set a fresh nominal intraday record high at 5,143.32, overtaking levels last seen in March 2000.  

Equity indices rallied throughout the morning after the combination of yesterday's FOMC policy statement and today's economic data set the tone for interest rates to remain at their current levels for longer. To that point, the CPI report for May (+0.4%; Briefing.com consensus 0.5%) was cooler than expected while the remaining data points released today indicated improving economic conditions.  

Stocks extended their gains in the early afternoon once Germany's Die Zeit reported that Greece is on track to receive an extension until the end of the year without the involvement of the International Monetary Fund. However, that report was struck down promptly as German Chancellor Angela Merkel said she is only aware of the proposal that was brought forth by the creditors.  

Furthermore, Reuters reported European Central Bank member Benoit Coeure was asked if Greek banks will be able to open tomorrow, to which he responded, "Tomorrow, yes. Monday, I don't know." However, the ECB was quick to deny issuing this warning.  

Despite the continued uncertainty, all ten sectors posted gains with health care (+1.5%) holding the lead throughout the session. The countercyclical group rallied behind biotechnology as iShares Nasdaq Biotechnology ETF (IBB 377.88, +11.33) spiked 3.1%. In turn, biotechnology helped the Nasdaq Composite spend the day ahead of the Dow and S&P 500. 

The tech-heavy Nasdaq enjoyed all-around support as chipmakers displayed relative strength with the PHLX Semiconductor Index climbing 1.5%. Meanwhile, most large cap tech names held their own, but Oracle (ORCL 42.75, -2.16) fell 4.8% after missing earnings/revenue estimates and guiding below consensus expectations. Oracle's underperformance kept the tech sector (+0.8%) behind the broader market throughout the day.  

Elsewhere among cyclical sectors, industrials ended in-line with the broader market, but that masked relative strength in transport names. The Dow Jones Transportation Average spiked 1.5% with all 20 members ending in the green. Alaska Air (ALK 63.99, +1.96) climbed 3.2% to pace the rally while five other components gained at least 2.0% apiece. 

Also of note, the energy sector (unch) surrendered its gain ahead of the close even though crude oil added 1.1%, settling at $60.42/bbl. In other commodities, gold futures jumped 2.1% to $1202/ozt, contributing to a 1.2% gain in the Market Vectors Gold Miners ETF (GDX 19.09, +0.23). 

Treasuries surrendered their overnight gains and continued their retreat into the afternoon, sending the benchmark 10-yr yield higher by three basis points to 2.35%.  

Today's trading volume surpassed recent totals as more than 830 million shares changed hands at the NYSE floor.  

Economic data included Initial Claims, CPI, Current Account Balance, Leading Indicators, and the Philadelphia Fed Survey: 

• The initial claims level declined to 267,000 for the week ending June 13 from an unrevised 279,000 while the Briefing.com consensus expected a decline to 276,000 
  • The four-week moving average dipped to 277,000 from 279,000 
• The Consumer Price Index increased 0.4% in May after increasing 0.1% in April while the Briefing.com consensus expected an increase of 0.5% 
  • That was the largest monthly increase in the headline index since a 0.6% gain in February 2013. Prices were flat on a year-over-year basis 
  • Total energy prices increased 4.3% in May after decreasing 1.3% in April 
    • Gasoline prices rose 10.4% after declining 1.7% in April 
  • Excluding food and energy, core CPI increased 0.1% in May after increasing 0.3% in April while the consensus expected an increase of 0.2% 
• The current account deficit for the first quarter totaled $113.30 billion while the Briefing.com consensus expected the deficit to hit $116.70 billion 
  • The fourth quarter deficit was revised to $103.10 billion from $113.50 billion 
• The Leading Indicators report for May was up 0.7% while the Briefing.com consensus expected an increase of 0.4% 
• The Philadelphia Fed Survey for June rose to 15.2 from 6.7 while economists polled by Briefing.com had expected an improvement to 8.0 

There is no economic data on tomorrow's schedule. 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -1.1%; Hong Kong’s Hang Seng -0.2%; China’s Shanghai Composite -3.7%
Markets in the Asia-Pacific region featured some winners and some losers. It was the losers that stood out, though, as part of that grouping included Japan’s Nikkei (-1.1%) and China’s Shanghai Composite (-3.7%). The former was pressured by a stronger yen and finished at its lows for the day while the latter recoiled in a late selloff driven by concerns over an influx of new share listings.

Economic data

• China
• May House Prices -5.7% year-over-year (prior -6.1%)
• FDI +10.1% (prior +10.4%)
• Japan
• June Reuters Tankan Index 14.0 (prior 13.0)
• Hong Kong
• May Unemployment Rate 3.2% (expected 3.3%; prior 3.2%)
• New Zealand
• Q1 GDP +0.2% quarter-over-quarter (expected +0.6%; prior +0.8%); +2.6% year-over-year (expected +3.0%; prior +3.5%)

Equity Markets

• Japan’s Nikkei declined 1.1% in a trend down day that finished with the market at its lows for the session. A stronger yen helped drive things lower. Losses were paced by the financial (-1.7%), communications (-1.6%), and industrial (-1.2%) sectors. Sumco Corp (-5.6%), Sojitz Corp (-4.3%), and Nisshinbo Holdings (-4.3%) led all decliners. Yamaha Corp (+4.4%) sat atop a small group of winners. Out of the 225 index members, 14 ended higher, 208 finished lower, and 3 were unchanged.
• Hong Kong’s Hang Seng declined 0.2% with losses in the communications (-0.7%) and energy (-0.6%) sectors weighing. China Unicom Hong Kong (-4.0%), Bank of Communications (-2.4%), and China Merchants Holdings (-2.2%) were the biggest losers. China Resources Enterprise (+8.2%) and China Resources Land (+2.5%) were the best-performing issues. Out of the 50 index members, 23 ended higher, 24 finished lower, and 3 were unchanged.
• China’s Shanghai Composite dropped 3.7% with nearly the entirety of the loss taking place over the final two hours of trading. The impact of new share listings received most of the attribution for the weak showing. There was a report showing home price declines decelerated in May, yet they were still down 5.7% year-over-year. The communications (-6.3%), technology (-6.1%), and consumer non-cyclical (-4.1%) sectors were among the weakest areas in the Chinese market on Thursday and helped drive a 4.1% decline in the CSI 300 Index.
• India’s Sensex increased 1.1% on the back of strength in the energy (+3.1%) and financial (+1.0%) sectors. Individual standouts included Reliance Industries (+5.1%), Tata Motors (+2.7%), and Oil & Natural Gas Corp (+2.2%). Cipla Ltd (-1.0%) led a small pack of decliners. Out of the 30 index members, 25 ended higher, and 5 finished lower.
• Australia’s S&P/ASX 200 declined 1.3%. The information technology (-2.0%), consumer staples (-1.9%), and REIT (-1.7%) sectors led the way lower. Ten Network Holdings (-12.8%), Cabcharge Australia (-6.3%), and Bradken (-5.9%) were the biggest losers.
• Regional advancers: South Korea +0.3%, Taiwan +0.3%, Vietnam +0.3%, Philippines +0.9%
• Regional decliners: Malaysia -0.5%, Indonesia -0.01%, Singapore -0.8%, Thailand -0.6%

FX:

• USD/CNY -0.03% at 6.2079
• USD/INR -0.2% at 63.770
• USD/JPY -0.6% at 122.64

EUROPE

Major European indices trade lower across the board as the Eurogroup begins today’s meeting with little hope that a deal will be struck between Greece and its creditors. Meanwhile, Greek Prime Minister Alexis Tsipras is in St. Petersburg today and is scheduled to meet Russian President Vladimir Putin tomorrow. Elsewhere, the Swiss National Bank held its key interest rate at -0.75%, as expected, while the Norges Bank lowered its benchmark interest rate by 25 basis points to 1.00%, leaving room for additional cuts this year

• Eurozone Q1 Labor Cost Index +2.2% year-over-year (last 1.2%)
• UK’s May Retail Sales +0.2% month-over-month, as expected; +4.6% year-over-year (consensus 4.8%; prior 4.6%). Core Retail Sales +0.2% month-over-month (expected 0.1%; prior 0.8%); +4.4% year-over-year (consensus 4.5%; last 4.6%)
• Spain’s trade deficit widened to EUR2.25 billion from EUR890 million (expected deficit of EUR1.50 billion)
• Swiss trade surplus expanded to CHF3.43 billion from CHF2.66 billion (expected surplus of CHF2.72 billion)

Closing Prices

• UK’s FTSE: + 0.4%
• Germany’s DAX: + 1.1%
• France’s CAC: + 0.3%
• Spain’s IBEX: + 0.6%
• Portugal’s PSI: 0.0%
• Italy’s MIB Index: + 1.1%
• Irish Ovrl Index: + 0.4%
• Greece ASE General Index: + 0.4%

Macroeconomic Data

Economic Data

from Briefing.com

• Initial Claims : 267K vs 276K (Prior 279K)
• Continuing Claims : 2222K vs 2270K (Prior 2265K)
• CPI : 0.4% vs 0.5% (Prior 0.1%)
• Core CPI : 0.1% vs 0.2% (Prior 0.3%)
• Current Account Balance : -$113.3B vs -$116.4B (Prior -$113.5B) 
• Philadelphia Fed : 15.2 vs 8.0 (Prior 6.7)
• Leading Indicators : 0.7% vs 0.4% (Prior 0.7%)
• Natural Gas Inventories : 89 bcf (Prior 111 bcf)

UNEMPLOYMENT CLAIMS

Highlights

• The initial claims level declined to 267,000 for the week ending June 13 from an unrevised 279,000 for the week ending June 6. The Briefing.com Consensus expected the initial claims level to decline to 276,000.
• The continuing claims level decreased to 2.222 mln for the week ending June 6 from an upwardly revised 2.272 mln (from 2.265 mln) for the week ending May 30. The consensus expected the continuing claims level to decline to 2.259 mln.

Key Factors

• The four-week moving average dipped to 277,000 from 279,000. 
• While the moving average is slightly above the 15-year lows that were reached in May, the trend in initial claims supports a labor market that is nearing full employment and monthly payroll gains north of 200,000.

Big Picture

• The minor upward move in the four-week average for initial claims is nothing to worry about.

CPI

Highlights

• The CPI increased 0.4% in May after increasing 0.1% in April. The Briefing.com Consensus expected the CPI to increase 0.5%.
• Excluding food and energy, core CPI increased 0.1% in May after increasing 0.3% in April. The consensus expected these prices to increase 0.2%.

Key Factors

• That was the largest monthly increase in the headline index since a 0.6% gain in February 2013. Prices were flat on a year-over-year basis.
• Almost the entire gain can be attributed to a big increase in energy prices, specifically gasoline. Total energy prices increased 4.3% in May after decreasing 1.3% in April. Gasoline prices rose 10.4% after declining 1.7% in April. Year-over-year, gasoline prices are down 25.0%.
• Food prices were unchanged for a second consecutive month in May.
• The increase in core prices was the smallest monthly gain since a similar increase in December 2014. Year-over-year, core prices increased 1.7% in May, down from a 1.8% increase in the year ending in April. That is well below the Fed’s implied CPI target of 2.5%.
• There weren’t any unusual outliers in the core CPI data. Prices are simply tracking the low-growth income trends and the weak pipeline pressures in the producer index.

Big Picture

• CPI growth trends are well below the Fed's target level, and there are very few underlying pressures that would cause these trends to suddenly change.

PHILADELPHIA FED

Highlights

• The Philadelphia Fed’s Business Outlook Survey increased to 15.2 in June from 6.7 in May. The Briefing.com Consensus expected the index to increase to 8.0.

Key Factors

• There were large improvements in trends throughout the data, and the report generally supports better manufacturing conditions throughout the Philadelphia region.
• The Shipments Index increased to 14.3 in June from 1.0 in May. Orders growth was strong for both new orders (15.2 from 4.0) and unfilled orders (3.7 from -3.6). The growth in orders should keep upward pressure on production.
• The Average Employee Workweek Index increased to 4.7 and recovered from a contraction (-5.6) in May. The gains in the average workweek, however, were offset by slightly softer payroll numbers. The Number of Employees Index fell to 3.8 from 6.7.

Big Picture

• Manufacturing activities rebounded in the Philadelphia region.

LEADING INDICATORS

Highlights

• The Conference Board’s Leading Economic Index increased 0.7% for a second consecutive month in May. The Briefing.com Consensus expected the index to increase 0.4%.

Key Factors

• Since 8 of the 10 components of the index are known prior to the release, the difference between the consensus and actual growth rates is generally minor.
• In this case, the building permits data were released after the consensus made their leading index forecast. Permits easily topped the consensus expectation (1.275 mln actual vs. 1.100 mln consensus), which led to similar upside surprise in the leading index forecast.
• According to the report, the Conference Board expects a minor increase in orders of nondefense capital goods excluding aircraft in May.

Big Picture

• The Leading Economic Index maintains steady growth.

Market Internals

NYSE:

Higher Volumes than the day before – 852.5M vs 716.7M 


Advancers outpaced Decliners (adv/dec): 2078 / 1019

New Highs outpaced New Lows (highs/lows): 116 / 46

NASDAQ:

Higher Volumes than the day before – 1866.9M vs 1706.4M

Advancers outpaced Decliners (adv/dec): 1963 / 847

New Highs outpaced New Highs (highs/lows): 170 / 34

VOLATILITY S&P500 (VIX)
13.19 -1.31 (-9.03%)

Internals are showing strong bullishness with volume supporting and New Highs remains elevated. VIX has been a surprise this week as it could not overcome the resistance level 15.00 and went below the 20 and 50 MAs which all pointed to some underlying strength from the bulls.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,115.84 +180.10 (+1.00%)

Volume: 94,459,485 (below average of 96,926,063)
Range: 17,944.61 - 18,174.73

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,132.95 +68.07 (+1.34%)
Volume: 434,520,917 (above average of 422,139,612)

Range: 5,082.03 - 5,143.32

S&P 500 INDEX (SPX: CBOE)

2,121.24 +20.80 (+0.99%)

Volume: 544,428,000 (below average of 518,418,015)

Range: 2,101.58 - 2,126.65 

Both DOW and S&P broke out of their trend which suggest some change in market momentum. But the former is back to test at the channel while the latter is at its resistance level. NASDAQ also reaches a new high after the break out yet it is at the upper bound of Bollinger Bands. It looks to me that we might see some resistance in moving forward.

Commodities

Closing Commodities: Gold Rallies Over 2%, WTI Oil Gains

• Weakness in the dollar index today helped provide some strength to select commodities such as precious metals
• Aug gold ended the day +2.1% at $1202.00/oz, while July silver gained $0.19 to $16.16/oz
• WTI oil futures gained some steam today, rising $0.65 to $60.42/barrel
• Gasoline and heating oil futures also posted gains today
• Meanwhile, July natural gas lost 2.8% to $2.78/MMBtu
• July corn fell $0.02 today to end floor trading at $3.58/bushel

Energy

• July crude oil futures rose $0.65 to $60.42/barrel
• July natural gas closed $0.08 lower (-2.8%) at $2.78/MMBtu
• RBOB Gasoline closed $0.01 higher at $2.11/gallon
• Heating oil futures closed $0.01 higher to $1.91/gallon

• The EIA released Natural Gas storage data this morning, showing a draw of 89 bcf, vs. estimates of 95 bcf: which drove price action throughout the course of the day

Agriculture

• July corn closed $0.02 lower at $3.58/bushel
• July wheat closed $0.03 lower at $4.88/bushel
• July soybeans closed $0.11 higher to $9.77/bushel
• Ethanol closed $0.01 lower at $1.46/gallon
• Sugar #11 closed 0.10 cents lower to 11.25 cents/lb

Metals

• August gold ended today’s session $25.20 higher (+2.1%) at $1202.00/oz
• July silver closed $0.19 higher at $16.16/oz
• July copper closed flat at $2.61/lb

Currencies

Dollar Recovers Losses After CPI

• Both Treasury and foreign exchange markets agreed today that the lower-than-expected headline and Core CPI readings for May will not lead to a "lower and slower" path of interest rate hikes from the Fed. Treasuries quickly gave back sharp gains and the dollar quickly recovered losses after May CPI growth came out at +0.4% versus the Briefing.com consensus of +0.5% (Core growth was +0.1% versus expectations for +0.2%)
  • The US Dollar Index is down 0.31% to 94.00
• EUR/USD: +0.23% to $1.1381
  • The Eurogroup meeting today produced no results and Greece's departure from the eurozone looks like a very real possibility, BUT
  • Donald Tusk, European Council president, has called a meeting of eurozone leaders on Monday
  • Greece's official creditors are showing more increased signs of exasperation with the Greek delegation. Greece's leadership appears prepared to reject a deal that cuts pensions (Alexis Tsipras penned a piece in Der Tagesspiegel in which he discussed the importance of pensions to people's survival in an economy with 25% unemployment) or increases VAT on electricity. The Greeks may also be demanding debt reductions as the current debt burden is obviously unsustainable
• USD/JPY: -0.48% to 122.99
  • Dollar/yen has been moving lower since the FOMC announcement yesterday
• USD/CHF: -0.01% to 0.9217
  • The SNB held rates steady at -0.75% and maintained its forward guidance
• USD/CAD: -0.04% to 1.2226

Bonds

Governments Fail to Follow Through on FOMC Gains

• Treasuries gave up ground today in a curve-steepening trade despite a headline CPI and core CPI that missed estimates. The Philly Fed Manufacturing Index blew past expectations and is encouraging for those investors who were concerned about the divergence between measures of output and employment trends in the U.S. economy
• Yield Check:
  • 2-yr: unch at 0.65%
  • 5-yr: +1 bp to 1.63%
  • 10-yr: +3 bps to 2.35%
  • 30-yr: +4 bps to 3.13%

• News:
  • The Consumer Price Index rose 0.4% in May after a 0.1% gain in April. The Briefing.com Consensus expected the CPI to increase 0.5%
    • It was the largest monthly increase in the headline index since a 0.6% gain in February 2013. Prices were flat on a year-over-year basis
    • Almost all of the gain came from rising gasoline prices
  • The increase in Core CPI was the smallest monthly gain since a similar increase in December 2014. Year-over-year, core prices increased 1.7% in May, down from a 1.8% increase in the 12 months to April. That is well below the Fed’s implied CPI target of 2.5%
  • Initial Jobless Claims were just slightly lower than expected at 267K versus the Briefing.com consensus of 276K and 279K for the prior week
  • Continuing Claims were better than expected at 2222K. The Briefing.com consensus was for 2259K and there were 2272 Continuing Claims in the prior reading
  • The Philadelphia Fed Manufacturing Index rose to 16.2 in May versus a Briefing.com consensus of 8.0 and a reading of 6.7 in April
    • There were large improvements in trends throughout the data, and the report generally supports better manufacturing conditions throughout the Philadelphia region
  • The Conference Board’s Leading Economic Index increased 0.7% for a second consecutive month in May. The Briefing.com Consensus expected the index to increase 0.4%
  • The $7 bln 30-year TIPS auction drew average interest, with a high yield of 1.142%, a bid-to-cover ratio of 2.45, and an indirect bid of 70.8%

• Commodities:
  • WTI crude: +0.78% to $60.39/bbl.
  • Gold: +2.14% to $1,202.0/troy oz.
  • Copper: +0.13% to $2.6075/lb.

• Currencies:
  • EUR/USD: +0.20% to $1.1377
  • USD/JPY: -0.54% to 122.92

• Friday's Fed Speakers:
  • San Francisco Fed President Williams (FOMC voter) gives policy speech (11:40 ET)
  • Cleveland Fed President Mester (non-FOMC voter) speaks on “Community Development and the Federal Reserve” (12:45 ET)

Treasury Yields:

• 2 Year Note 0.66% -0.01
• 5 Year Note 1.65% +0.02
• 10 Year Note 2.35% +0.03
• 30 Year Bond 3.14% +0.05

2/30 Spread: 248 bps ( +6 ) …  2/10 Spread: 169 bps ( +4 )

Preview for Friday 19 June, 2015

Economic Data

Friday (19 June) :

• No Economic Data

Earnings Highlights

Friday (19 June) : 
BMO - KMX DRI KBH
AMC - None Scheduled

Summary

It was more or less surprised for me to see the huge breakout as I was expecting to see some consolidation. Perhaps market reaction to the Fed statement is much positive. As we have seen a strong upside for the week, we might see some profit taking on Friday to end the week.

Tomorrow is Quadruple Witching which we could see more volatility and of course, volume.        

Direction for Friday 19 June, 2015; Down

2015 Daily Directional Accuracy: 52/91 (57.14%) 

2015 Weekly Directional Accuracy: 13/21 (61.90%)