Tuesday, 2 June 2015 - AMC

Dow -28.43 at 18011.94, Nasdaq -6.40 at 5076.53, S&P -2.13 at 2109.60

Put it simply, Monday session was literally flat. I feel the market is more to the bearish side and the bulls are doing their best to fight back. But this week have quite a number of major economic data that is likely to be market mover. So market can go anywhere.

With that aside, I think there should be some more pullback in tomorrow session. However I am not too surprised if the market moves in sideway or start to sell off...

Direction for Tuesday 2 June, 2015; Up

Market is getting funky lately. A sell off at the opening bell plus a strong pullback shortly after and ended the day with some profit taking. This was quite a show. The market is still surrounded with uncertainty.                 

Market Summary

Industry Watch

Strong: Consumer Discretionary, Energy, Industrials, Materials

Weak: Consumer Staples, Health Care, Utilities

Other Market Moving Factor:

• Focus remains on Greece following Monday night meeting between country's creditors
• Dollar Index slides

[BRIEFING.COM] The stock market registered a slim loss on Tuesday, making for a near carbon copy of yesterday's affair with the S&P 500 shedding 0.1%.  

Equities faced some selling pressure at the start after the overnight session was filled with more speculation about Greece's future in the eurozone. Last night, leaders from France, Germany, and EU met to draft a proposal for Greek representatives, but Greek leaders prepared a version of their own. That being said, it remains unclear if either version will be deemed acceptable by both sides. 

With Greece in limbo for at least another day, a short squeeze in the euro sent the single currency higher by 2.0% against the dollar to 1.1145. Contributing to the euro strength was some chatter that the European Central Bank could stop its quantitative easing program early due to inflationary pressures. To that point, eurozone CPI rose 0.3% year-over-year in May (expected 0.2%) while core CPI increased 0.9% (consensus 0.7%). Germany's 10-yr bund tumbled in response, sending its yield higher by 17 basis points to 0.72%.  

Similarly, the U.S. 10-yr note retreated overnight and continued backtracking into the afternoon. The benchmark note settled just above its worst level of the day with its yield higher by eight basis points at 2.26%. 

As for stocks, the S&P 500 found early support in the neighborhood of its 50-day moving average (2,100) and returned to its flat line shortly after noon ET. In all likelihood, some of the money leaving Treasuries found its way into stocks, but the benchmark index could not stay above its unchanged level into the close.  

Five sectors registered gains with all coming from the cyclical side; however, the top-weighted technology sector (-0.3%) could not keep pace with the market. High-beta chipmakers were largely responsible for the weakness, evidenced by a 1.2% decline in the PHLX Semiconductor Index. Despite today's retreat, the index remains higher by 6.0% so far in Q2. Meanwhile, large cap tech names were mixed with Apple (AAPL 129.96, -0.58) and Microsoft (MSFT 46.92, -0.31) losing close to 0.5% apiece while Google (GOOGL 553.95, +4.74) and Facebook (FB 80.44, +0.15) advanced.  

Similar to technology, the health care sector (-0.6%) acted as a lead blanket, limiting the rebound's strength. Large cap components fueled the weakness while biotechnology also struggled with iShares Nasdaq Biotechnology ETF (IBB 363.46, -1.35) sliding 0.4%.  

On the upside, energy (+0.5%) and materials (+0.3%) outperformed throughout the day while consumer discretionary (+0.2%), financials (+0.2%), and industrials (+0.2%) also registered gains.  

The energy sector was supported by a rally in crude oil, which climbed 1.7% to $61.28/bbl. Conversely, the energy component benefitted from a 1.5% decline in the Dollar Index (95.96, -1.43). 

Today's participation was an improvement from yesterday, but that was a small victory considering only 712 million shares changed hands at the NYSE floor.  

Economic data was limited to the Factory Orders report for April, which showed a 0.4% decline while the Briefing.com consensus expected a flat reading. April marked the eighth monthly decline in factory orders over the last nine months. Furthermore, durable goods orders were revised down from the -0.5% reported in the advance release to -1.0%.  

Excluding transportation, durable goods orders declined 0.2% in April, which was down from a 0.5% gain that was originally reported in the advance data, and more in-line with the weak readings from the April regional manufacturing surveys. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the May ADP Employment Change will be reported at 8:15 ET (Briefing.com consensus 200K). The April Trade Balance (consensus -$44.00 billion) and May ISM Services (consensus 57.1) will be released at 8:30 ET and 10:00 ET, respectively, while the Fed's June Beige Book will cross the wires at 14:00 ET.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -0.1%; Hong Kong’s Hang Seng -0.5%; China’s Shanghai Composite +1.7%
Tuesday was not a good day for markets in the Asia-Pacific region. Just about every market finished lower with one notable exception: China’s Shanghai Composite, which jumped another 1.7% on the heels of Monday’s 4.7% gain. India’s Sensex led the declines with a 2.4% loss that followed an expected decision by the Reserve Bank of India to cut its repo rate for the third time this year by 25 basis points to 7.25%. Japan’s Nikkei, meanwhile, saw its 12-session win streak come to an end.

Economic data

• Japan
• Monetary Base +35.6% year-over-year (expected 34.3%; prior 35.2%)
• Australia
• Reserve Bank of Australia holds cash rate steady at 2.00% as expected
• Q1 Current Account AUD -10.7 bln (expected AUD -10.8 bln; prior AUD -10.2 bln)
• Q1 Net Exports Contribution 0.5% (expected +0.1%; prior +0.7%)
• South Korea
• May CPI +0.3% month-over-month (expected +0.2%; prior +0.1%); +0.5% year-over-year (expected +0.5%; prior +0.4%)
• April Current Account KRW 8.14 bln (prior KRW 10.43 bln)
• India
• Reserve Bank of India cuts repo rate to 7.25% from 7.50% as expected
• Cash Reserve ratio left unchanged at 4.00%
• Reverse repo rate cut to 6.25% from 6.50%

Equity Markets

• Japan’s Nikkei declined 0.1%, bringing an end to its 12-session winning streak. The financial (-1.1%) and energy (-0.7%) sectors were the worst-performing areas. Mizuho Financial Group (-3.3%), Bridgestone Corp (-3.3%), and Taiyo Yuden Co (-3.1%) led declining issues while Chubu Electric Power (+4.5%), NTT Docomo (+3.9%), and JTEKT Corp (+3.8%) led the gainers. Out of the 225 index members, 87 ended higher, 134 finished lower, and 4 were unchanged.
• Hong Kong’s Hang Seng declined 0.5% with weakness in the consumer cyclical (-1.1%) and financial (-0.8%) sectors weighing on matters. Li & Fung (-5.9%), China Mengniu Dairy (-2.4%), and China Resources Land (-2.0%) paced declining stocks. China Shenhua Energy (+2.1%) was the best-performing issue and only stock to gain more than 1.0%. Out of the 50 index members, 11 ended higher, 35 finished lower, and 4 were unchanged.
• China’s Shanghai Composite increased 1.7% on the heels of Monday’s 4.7% gain. Tuesday’s gain came on the back of a last-hour rally in the market. Reportedly, the financial stability report from the People’s Bank of China did not make note of stock prices being overvalued — an omission that seemed to cheer stock market participants. Every sector in the Chinese market finished higher with gains ranging from 0.6% to 6.6%.
• India’s Sensex declined 2.4% in a trend-down day that began at the start of trading and continued after the Reserve Bank of India cut the repo rate 25 basis points as expected to 7.25%. That was the third cut this year in the repo rate. Leading the declines were the financial (-3.5%), consumer cyclical (-2.4%), and basic materials (-2.4%) sectors. Axis Bank (-4.4%), State Bank of India (-4.3%), and ITC Ltd (-4.0%) were the biggest individual losers. Bharti Airtel (+0.4%) was the only stock to finish higher.
• Australia’s S&P/ASX 200 declined 1.7% and finished near its lows for the session after the Reserve Bank of Australia held the cash rate steady at 2.00% as expected. The metals & mining (-2.2%), materials (-2.2%), and resources (-2.2%) sectors were the worst-performing areas.
• Regional advancers: None
• Regional decliners: Taiwan -0.1%, South Korea -1.1%, Singapore -1.5%, Malaysia -0.1%, Thailand -1.3%, Philippines -1.5%, Vietnam -0.8%
• Closed for holiday: Indonesia (Vesak Day)

FX

• USD/CNY -0.02% at 6.1982
• USD/INR +0.4% at 63.876
• USD/JPY -0.01% at 124.77

EUROPE

Major European indices trade mostly lower with Germany’s DAX (-0.6%) leading the retreat. All eyes remain on Greece after the country submitted another proposal to its creditors. Recall that leaders from France, Germany, and EU met last night to draft an agreement that would be presented to Greek representatives. At this time, it remains unclear which proposal will be deemed acceptable by both sides.

• Eurozone May CPI +0.3% year-over-year (expected 0.2%; prior 0.0%) while core CPI +0.9% year-over-year (expected 0.7%; previous 0.6%). Separately, April PPI -0.1% month-over-month (consensus 0.1%; prior 0.2%); -2.2% year-over-year (expected -2.0%; previous -2.3%)
• Germany’s Unemployment Change -6,000 (consensus -10,000; prior -9,000) while the Unemployment Rate held at 6.4%, as expected
• UK’s May Construction PMI 55.9 (expected 55.0; prior 54.2) while April BoE Consumer Credit GBP1.173 billion (expected GBP1.00 billion; prior GBP1.294 billion)
• Spain’s Unemployment Change -118,000 (expected -115,500; prior -118,900)

Closing Prices

• UK’s FTSE: -0.4%
• Germany’s DAX: -0.9%
• France’s CAC: -0.4%
• Spain’s IBEX: + 0.3%
• Portugal’s PSI: + 0.7%
• Italy’s MIB Index: + 0.6%
• Irish Ovrl Index: -1.5%
• Greece ASE General Index: -2.5%

Macroeconomic Data

Economic Data

from Briefing.com

• Factory Orders : -0.4% vs 0.0% (Prior 2.2% - Up)
• Auto Sales : (Prior 5.3M)
• Truck Sales : (Prior 7.9M)

FACTORY ORDERS

Highlights

• Factory orders declined 0.4% in April after increasing an upwardly revised 2.2% (from 2.1%) in March. The Briefing.com Consensus expected orders to be flat.

Key Factors

• Durable goods orders were revised down from the advance release to -1.0% (from -0.5%). 
• Excluding transportation, durable goods orders declined 0.2% in April. That was down from a 0.5% gain originally reported in the advance data, and more in-line with the weak readings from the April regional manufacturing surveys. 
• Business investment saw large downward revisions. Orders of nondefense capital goods excluding aircraft declined 0.4% in April after increasing 1.6% in March. That was down from an originally reported 1.0% April gain. Shipments, which factor into GDP growth, were also revised down (to 0.5% from 0.8%) but managed to stay in the black. 
• Nondurable goods orders increased 0.2% in April after declining 0.4% in March. 
• Even though petroleum prices have turned upward, orders at petroleum refineries (-0.2%) remained on a downward trend.

Big Picture

• April marked the eighth monthly decline in factory orders over the last nine months.

AUTO SALES

Highlights

• After exceeding 17.0 mln at a seasonally adjusted annual rate (SAAR) for the first time since November 2014, motor vehicle demand softened in April. Sales dropped to 16.5 mln SAAR in April from 17.1 mln SAAR in March.
• Domestic sales declined to 13.2 mln SAAR in April from 13.7 mln SAAR in March. Domestic car sales declined to 5.3 mln SAAR in April from 5.4 mln SAAR in March. Domestic truck sales fell to 7.9 mln SAAR from 8.2 mln SAAR. That was the smallest number of domestic trucks sold in one month since 7.7 mln SAAR were sold in December 2014.
• Sales of imports declined to 3.3 mln SAAR in April from 3.5 mln SAAR in March. Demand for imported cars slipped to 2.1 mln SAAR from 2.3 mln SAAR. Imported trucks sales showed modest improvement, increasing to 1.3 mln SAAR in April from 1.2 mln SAAR in March.

Key Factors

• Year-over-year, motor vehicle sales increased 4.6%.Every motor vehicle manufacturers except for Honda (HMC, -1.8%) posted year-over-year gains.
• The Big 3 all picked up market share in April. General Motors (GM, 5.9%) led the group with Fiat Chrysler (FCAU, 5.9%) and Ford (F, 5.4%) following closely behind.
• Sales at Toyota (TM) increased a modest 1.8% y/y in April. Despite the lackluster April, sales at Toyota at up 8.1% year-to-date, which is the top performing major motor vehicle company so far in 2015.
• Volkswagen (3%) and Hyundai-Kia (1.3%) also lost market share in April.
• After declining 20% y/y in March, sales at Tesla (TSLA) rose 13.3% in April.
• Year-to-date, total sales are up 5.4%.

Big Picture

• Total motor vehicle sales are expected to increase to 17.0 mln in 2015.

Market Internals

NYSE:

Higher Volumes than the day before – 727.7M vs 682.2M 


Advancers outpaced Decliners (adv/dec): 1657 / 1391

New Highs outpaced New Lows (highs/lows): 43 / 27

NASDAQ:

Lower Volumes than the day before – 1716.0M vs 1894.7M

Advancers outpaced Decliners (adv/dec): 1606 / 1167

New Highs outpaced New Highs (highs/lows): 89 / 37

VOLATILITY S&P500 (VIX)
14.24 +0.27 (+1.93%)

I don't think internals are suggesting anything but flat movement. Volume is significantly higher. VIX is showing more fear in the market despite there is still some underlying strength in bullishness. But if VIX breaks above 15, we could see some shift in the sentiment...  

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,011.94 -28.43 (-0.16%)

Volume: 77,551,677 (below average of 99,505,416)
Range: 17,925.33 - 18,091.87

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,076.53 -6.40 (-0.13%)
Volume: 410,953,177 (below average of 427,971,769)

Range: 5,047.35 - 5,100.02

S&P 500 INDEX (SPX: CBOE)

2,109.60 -2.13 (-0.10%)

Volume: 471,166,000 (below average of 528,411,703)

Range: 2,099.14 - 2,117.59 

Looking at the intra-day, I would say there is still some bullishness. But DOW is barely holding on to the channel and likewise for NASDAQ. While S&P just suggesting uncertainty. It seems to me that the indices are hovering around their significant resistance/support level. Any deviation would somehow return back to the level.

Commodities

Closing Commodities: Dollar Index Continued Sharply Lower, Helping Commodities Hold Gains

• Energy futures posted gains across the board today in oil, natural gas, heating oil and RBOB gasoline futures
• July WTI crude oil held today’s gains mostly, closing floor trading $1.04 higher at $61.28/barrel
• July natural gas closed $0.05 to $2.70/MMBtu
• Precious metals and copper largely held gains today as well
• Aug gold rose $6.20 today to $1194.70/oz, while July silver rose $0.11 to $16.81/oz
• July copper closed $0.02 today to $2.74/lb

Energy

• July crude oil futures rose $1.04 to $61.28/barrel
• July natural gas closed $0.05 higher at $2.70/MMBtu
• RBOB Gasoline closed $0.01 higher to $2.06/gallon
• Heating oil futures closed $0.02 higher at $1.95/gallon

Agriculture

• July corn closed $0.06 higher to $3.59/bushel
• July wheat closed $0.18 higher (+3.6%) to $5.13/bushel
• July soybeans closed $0.13 higher (+1.4%) to $9.40/bushel
• Ethanol closed $0.03 higher at $1.53/gallon
• Sugar #11 closed 0.07 cents higher to 12.32 cents/lb

Metals

• August gold ended today’s session $6.20 higher to $1194.70/oz
• July silver closed $0.11 higher at $16.81/oz
• July copper closed $0.02 higher at $2.74/lb

Currencies

Euro Rips Against Dollar

• EUR/USD rallied 2.19% today to 1.1164 after higher European sovereign yields attracted international capital back to Europe from the United States
  • Eurozone CPI grew a higher-than-expected 0.3% y/y in May. Prices were flat in April
  • German unemployment fell by 6K workers in May, worse than expectations and the 9K worker decline in April
• The U.S. Dollar Index lost against all of the majors today. At the pixel, it is down 1.56% to 95.87
• USD/JPY: -0.61% to 124.05
  • The pair traded a 12-year high earlier in the session at 125.05
• GBP/USD: +0.95% to $1.5346
• USD/CAD: -0.93% to 1.2408
• AUD/USD: +0.22% to $0.7757
  • The Reserve Bank of Australia held its main policy rate 2.00%. The central bank has acknowledged that there's a property bubble in Sydney
• NZD/USD: +1.10% to $0.7180
• USD/CHF: -1.33% to 0.9332

Bonds

Treasuries Drop Sharply

• The U.S. Treasury market fell today in a curve-steepening trade. While the data releases for the U.S. economy were weak, the move lower was part of a second-leg of a global bond sell-off that began in April and that dynamic is over-riding the weak data for now
• Yield Check:
  • 2-yr: unch at 0.64%
  • 5-yr: +6 bps to 1.61%
  • 10-yr: +8 bps to 2.26%
  • 30-yr: +8 bps to 3.02%

• News:
  • Eurozone CPI grew a higher-than-expected 0.3% y/y in May. Prices were flat in April
    • Core CPI grew 0.9%
  • Factory orders declined 0.4% in April after increasing an upwardly revised 2.2% (from 2.1%) in March. The Briefing.com Consensus expected orders to be flat
    • April marked the eighth monthly decline in factory orders over the last nine months
  • Speaking in Washington, D.C. this morning, Federal Reserve Governor Lael Brainard said that recent weak economic data is clouding the economic outlook
    • She said that consumers, while crucial to supporting demand, seem "disinclined" to spend their savings from lower gasoline prices
    • She said it was puzzling that housing starts are so slow given strong job growth and low interest rates
  • Greece's 305 million euro payment to the IMF is due on Friday (June 5th)

• Commodities:
  • WTI Crude: +1.88% to $61.33/bbl
  • Gold: +0.45% to $1,194.0/troy oz.
  • Copper: +0.59% to $2.736/lb.

• Currencies:
  • EUR/USD: +2.05% to $1.1150
  • USD/JPY: -0.58% to 124.09

• Data out Wednesday:
  • MBA Mortgage Index for the week of 5/30 (07:00 ET)
  • May ADP Employment Change (08:15 ET)
  • April Trade Balance (08:30 ET)
  • May ISM Services (10:00 ET)
  • Crude Inventories for the week of 5/30 (10:30 ET)
  • Fed’s Beige Book (14:00 ET)
• Fed Speak:
  • Chicago Fed President Evans (FOMC voter) speaks before the Chicago Banking Symposium (14:15 ET)

Treasury Yields:

• 2 Year Note 0.64% UNCH
• 5 Year Note 1.61% +0.06
• 10 Year Note 2.27% +0.08
• 30 Year Bond 3.02% +0.08

2/30 Spread: 238 bps ( +8 ) …  2/10 Spread: 163 bps ( +8 )

Preview for Wednesday 3 June, 2015

Economic Data

Wednesday (3 June) :

• MBA Mortgage Index : (Prior -1.6%)  
• ADP Employment Change : 200K (Prior 169K) 
• Trade Balance : -$44.0B (Prior -$51.4B)
• ISM Services : 57.1 (Prior 57.8)
• Crude Inventories : (Prior -2.802M)
• Fed's Beige Book 

Earnings Highlights

Wednesday (3 June) :
BMO - BF.B NX VRA
AMC - APIC DRC FIVE DATE LF MFRM GOMO VRNT

Summary

Perhaps one good reason to explain why the market has been reacting rather weird is the Fed's Beige book tomorrow. That might give the traders or investors some hints on when the Fed is raising the interest rate. With Greece's debt situation looming in the euro area, market is looking more fragile.

Together with the ADP employment number, we should see a volatile session on Wednesday.  

Direction for Wednesday 3 June, 2015; Up

2015 Daily Directional Accuracy: 43/81 (52.44%) 

2015 Weekly Directional Accuracy: 11/19 (57.89%)