Wednesday, 17 June 2015 - AMC

Dow +30.59 at 17935.20, Nasdaq +9.33 at 5064.88, S&P +4.14 at 2100.43

Somehow I feel the recovery is faltering by the end of session on Tuesday. Maybe more short-covering to close their positions. As we are awaiting Fed's meeting tomorrow and the day after, I think the market is going to be filled with uncertainty. I suppose most traders are concerned with the decision of the interest rate raise and when. Nonetheless, it is better to stay out and monitor than taking a huge risk against yourself.        

Direction for Wednesday 17 June, 2015; Abstain

Volatile. That is one word to describe the market on Wednesday. There was some selling in the early session followed by an increase in buying after the release of FOMC statement. Fed's stance on raising interest rate remains dovish with more confirmation from economic indicators.                                

Market Summary

Industry Watch

Strong: Consumer Discretionary, Consumer Staples, Utilities

Weak: Energy, Health Care, Industrials, Telecom Services

Other Market Moving Factor:

• No new developments on the Greek front
• FedEx (FDX) misses earnings/revenue estimates
• FOMC maintains current policy stance, but Fed forecast implies two 25-bps rate hikes before 2016

[BRIEFING.COM] The stock market ended the midweek session on an upbeat note with the S&P 500 settling four points below its 50-day moving average (2,104). The benchmark index added 0.2% while the Dow and Nasdaq posted comparable gains.  

Equity indices began the trading day with modest gains, but the first half of the session saw a steady retreat with liquidity drying up ahead of the afternoon release of the FOMC policy statement, which called for no change to the current monetary policy stance. However, the accompanying interest rate forecast implied two 25-basis point increases before the year ends. Furthermore, the Fed lowered its 2015 GDP growth forecast range to 1.8-2.0% from the range of 2.3-2.7% that was forecast in March.  

Stocks struggled for direction immediately after the release, but rallied to highs during Chair Janet Yellen's press conference, which was viewed as dovish. To that point, Ms. Yellen said the central bank would like to see more "decisive evidence" on inflation and employment before hiking rates.  

U.S. Treasuries retreated into the afternoon, but surged back to unchanged in the wake of the FOMC statement. The benchmark 10-yr yield ended at 2.31% after hitting 2.40% in the afternoon. Meanwhile, the Dollar Index (94.27, -0.73) dropped to a new low for the month with the euro climbing to 1.1340 against the greenback.  

Speaking of the euro, the single currency advanced even though the day went by without any progress between Greece and its creditors. According to Bloomberg, Greek Prime Minister said his government is ready to give a "big no" to what is perceived to be a bad deal offered by the EU. That being said, the European Central Bank increased Greece's Emergency Liquidity Assistance to $84.10 billion from $83.00 billion.  

Eight of ten sectors registered gains with four of six cyclical groups ending ahead of the broader market. The energy sector (-0.2%) was among the early leaders, but returned to its flat line by the close even as crude oil narrowed its decline to 0.2% at $59.77/bbl by the pit close. 

Similar to energy, the financial sector (-0.1%) settled behind the broader market while consumer discretionary (+0.5%), technology (+0.2%), industrials (+0.2%), and materials (+0.4%) posted gains. The consumer discretionary sector ended ahead of other cyclical groups thanks to strength among media and retail names while industrials kept pace with the market even as transport stocks struggled. 

The Dow Jones Transportation Average lost 0.4%, widening this week's decline to 1.2%. Shares of FedEx (FDX 176.73, -5.40) were largely responsible for the weakness, falling 3.0% after the logistics company reported disappointing earnings and revenue. 

Moving to the countercyclical side, consumer staples (+0.5%) and utilities (+0.9%) outperformed while health care (+0.1%) and telecom services (unch) finished behind the broader market. The slight uptick in the health care sector masked relative strength in biotech names that sent iShares Nasdaq Biotechnology ETF (IBB 366.55, +2.17) higher by 0.6%. 

Today's participation was relatively light with roughly 700 million shares changing hands at the NYSE floor.  

Economic data was limited to the weekly MBA Mortgage Index, which fell 5.5% to follow last week's 8.4% increase. 

Tomorrow, weekly Initial Claims (Briefing.com consensus 276K), May CPI (consensus 0.5%), and Q1 Current Account Balance (expected -$116.70 billion) will all be reported at 8:30 ET while May Leading Indicators (expected 0.4%) and the Philadelphia Fed Survey for June (consensus 8.0) will be reported at 10:00 ET.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -0.2%; Hong Kong’s Hang Seng +0.7%; China’s Shanghai Composite +1.7%
Markets in the Asia-pacific region were mostly higher on Wednesday, bolstered by Wall Street’s positive showing on Tuesday and a recovery effort in the Chinese market following two days of substantive declines. Japan bucked the trend with a modest decline that followed some disappointing data for exports and imports in May.

Economic data

• Japan
• May Trade Balance JPY -216 bln (expected JPY -226 bln; prior JPY -53 bln)
• Exports +2.4% year-over-year (expected +3.5%; prior +8.0%)
• Imports -8.7% year-over-year (expected -7.5%; prior -4.2%)
• Australia
• MI Leading Index -0.1% month-over-month (prior 0.0%) ·
• Singapore
• May Trade Balance SGD 6.61 bln (expected SGD 7.02 bln; prior SGD 5.91 bln)
• Non-Oil Exports -3.1% month-over-month (expected -5.7%; prior -8.6%); -0.2% year-over-year (expected +3.1%; prior +2.2%)

Equity Markets

• Japan’s Nikkei declined 0.2% following some weaker than expected data for exports and imports in May. The utilities (-1.6%) and financial (-0.7%) sectors were the worst-performing areas. Unitika (-3.3%), Sumco Corp (-3.1%), and Tokyo Electric Power (-2.9%) paced the decliners. NTN Corp (+7.2%) led advancing stocks. Out of the 225 index members, 62 ended higher, 157 finished lower, and 6 were unchanged.
• Hong Kong’s Hang Seng increased 0.7%, led by strength in its consumer cyclical (+1.2%), consumer non-cyclical (+0.9%), and financial (+0.7%) sectors. Individual standouts included Want Want China Holdings (+2.8%), Bank of China (+2.4%), and Cathay Pacific Airways (+2.3%). CNOOC (-1.1%) led decliners and was the only stock to drop more than 1.0%. Out of the 50 index members, 40 ended higher, 8 finished lower, and 2 were unchanged.
• China’s Shanghai Composite increased 1.7%, overcoming an early 2.5% decline. The rebound followed a 5.5% decline in the first two days of the trading week. All sectors rebounded in the Chinese market on Wednesday. Standout performers in the CSI 300 Index were the technology (+5.1%), utilities (+4.9%), and energy (+2.7%) sectors.
• India’s Sensex increased 0.6%, bolstered by gains in the consumer non-cyclical (+2.0%), communications (+1.9%), and energy (+1.8%) sectors. Cipla Ltd (+3.8%), Tata Steel (+3.6%), and Hindustan Unilever (+3.3%) led individual winners while Vedanta (-3.3%), Bharat Heavy Electricals (-2.0%), and Tata Power (-1.8%) paced the decliners. Out of the 30 index members, 20 ended higher and 10 finished lower.
• Australia’s S&P/ASX 200 jumped 1.1%. The advance was led by the financial (+1.6%), energy (+1.6%), and telecom services (+1.4%) sectors. Individual standouts included Pacific Brands (+9.0%), Sandfire Resources (+8.8%), and Challenger Ltd (+4.5%). Out of the 200 index members, 136 ended higher, 50 finished lower, and 14 were unchanged.
• Regional advancers: South Korea +0.3%, Malaysia +0.3%, Indonesia +1.5%, Thailand +0.9%, Philippines +0.4%
• Regional decliners: Taiwan -0.3%, Vietnam -0.3%

FX

• USD/CNY +0.02% at 6.2096
• USD/INR -0.02% at 64.151
• USD/JPY +0.4% at 123.91

EUROPE

Major European indices trade lower across the board with France’s CAC (-0.9%) trailing the region. European investors remain focused on Greece as another day is set to pass without a deal with EU creditors. Elsewhere, the Bank of England released the minutes from its latest policy meeting, which revealed a unanimous vote in favor of maintaining the current policy stance

• Eurozone May CPI +0.2% month-over-month; +0.3% year-over-year. Separately, Core CPI +0.9% year-over-year. All readings matched expectations
• UK’s May Claimant Count -6,500 (expected -12,300; prior -7,800) while the Unemployment Rate held at 5.5%. Separately, April Average Earnings Index + Bonus 2.7% (consensus 2.1%; prior 2.3%)
• Italy’s April Trade Balance EUR3.74 billion (expected EUR3.27 billion; prior EUR4.01 billion)
• Swiss ZEW Expectations ticked up to 0.1 from -0.1

Closing Prices

• UK’s FTSE: -0.4%
• Germany’s DAX: -0.6%
• France’s CAC: -1.0%
• Spain’s IBEX: -0.6%
• Portugal’s PSI: -0.8%
• Italy’s MIB Index: -0.7%
• Irish Ovrl Index: -0.3%
• Greece ASE General Index: -3.2%

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : -5.5% (Prior 8.4%)  
• Crude Inventories : -2.676M (Prior -6.812M)
• FOMC Rate Decision : 0.25% vs 0.25% (Prior 0.25%)

Market Internals

NYSE:

Higher Volumes than the day before – 716.7M vs 652.7M 


Advancers outpaced Decliners (adv/dec): 1612 / 1461

New Highs outpaced New Lows (highs/lows): 88 / 71

NASDAQ:

Higher Volumes than the day before – 1706.4M vs 1648.0M

Decliners outpaced Advancers (adv/dec): 1320 / 1463

New Highs outpaced New Highs (highs/lows): 149 / 40

VOLATILITY S&P500 (VIX)
14.50 -0.31 (-2.09%)

I didn't really find anything significant from the internals besides a slight increase in volume. New Highs seems to tick higher while New Lows is sliding down. VIX is still held above by its 100 MA and it looks as if there isn't much confidence in the market.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,935.74 +31.26 (+0.17%)

Volume: 92,407,327 (below average of 97,205,497)
Range: 17,839.65 - 17,998.00

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,064.88 +9.33 (+0.18%)
Volume: 394.3M (below average of 421,859,333)

Range: 5,042.25 - 5,080.11

S&P 500 INDEX (SPX: CBOE)

2,100.44 +4.15 (+0.20%)

Volume: 480,805,890 (below average of 518,753,125)

Range: 2,088.86 - 2,106.79 

DOW did not break away from its trend line and held below by its 100 MA. While NASDAQ is also held below by its 20 MA. S&P is sitting on its 100MA while at the end of the channel and approaching to test its trend line next. The respective MAs are serving as a good support/resistance to the 3 indices. MACD is indicating a slowdown in the selling momentum.

Commodities

Closing Commodities: Fed Causes Dollar Index To Drop, Giving Boost To Select Commodities

• Commodities got a boost both trading lower following the FOMC statement/policy update, Federal Reserve rate decision
• Metals ended floor trading flat to lower
• Aug gold lost $4.30 to $1176.80/oz, while July silver finished flat at $15.97/oz
• Copper also ended flat, finishing at $2.61/lb
• However, following the 2pm ET Fed decision, precious metals rallied. Gold is now +0.5%, while silver is +1.3%
• Moving to the energy space…
• WTI crude oil futures rallied some following the Fed and ended floor trading -0.23% at $59.77/barrel

Energy

• July crude oil futures fell $0.23 to $59.77/barrel
• July natural gas closed $0.03 lower at $2.86/MMBtu
• RBOB Gasoline closed $0.03 lower at $2.10/gallon
• Heating oil futures closed $0.01 higher to $1.90/gallon

Agriculture

• July corn closed $0.06 higher at $3.60/bushel
• July wheat closed $0.02 higher at $4.91/bushel
• July soybeans closed $0.08 higher to $9.66/bushel
• Ethanol closed $0.01 lower at $1.47/gallon
• Sugar #11 closed 0.04 cents higher to 11.35 cents/lb

Metals

• August gold ended today’s session $4.30 lower at $1176.80/oz
• July silver closed flat at $15.97/oz
• July copper closed flat at $2.61/lb

Currencies

Dollar Falls After Yellen's Remarks

• The US Dollar Index is down 0.72% to 94.32 after Fed Chair Yellen said that the FOMC needs more "decisive" evidence from inflation and employment before they begin to hike rates
  • The median projection of the FOMC members for Fed funds at the end of 2015 was 0.625% -- for 2016, it was was 1.625%
• EUR/USD: +0.78% to 1.1232
  • The rally was an effect of the Fed decision and Yellen's testimony rather than eurozone related
• USD/JPY: -0.03% to 123.382
  • The pair gave up all of its overnight gains after the dovish remarks from the Fed
• GBP/USD: +1.21% to 1.5831
  • The Bank of England released minutes of their June meeting today. There were 2 members who felt that the decision to hold or raise was "finely balanced"

Bonds

Treasuries Recover Deep Losses After FOMC

• The Treasury complex went deep into the red this morning, with significant sellers finding little liquidity in the pre-Fed announcement market. The Fed statement and Fed Chair Yellen's subsequent press conference were interpreted dovishly by the market and sent all maturities except for the 30-year into the green
• Yield Check:
  • 2-yr: -4 bps to 0.65% (from 0.74% pre-Fed)
  • 5-yr: -5 bps to 1.61% (from 1.73% pre-Fed)
  • 10-yr: unch at 2.31% (from 2.39% pre-Fed)
  • 30-yr: +4 bps to 3.09% (from 3.13% pre-Fed)

• News:
  • The MBA Mortgage Index fell 5.5% for the week ending 6/13 versus an 8.4% rise in the prior week
  • Crude oil inventories for the week ending 6/13 fell 2.676 mln barrels versus a fall of 6.812 mln the week before
  • The European Central Bank increased Greece's Emergency Liquidity Assistance Program to 84.1 bln euro. There had been concern that the program would not be renewed due to differences between Greece and its official creditors
  • The FOMC held rates steady, as expected. There were no dissenters
    • From the press conference: Conditions not yet met for a rate hike; initial rate increase should not be overstated; wants to see more 'decisive evidence' that moderate growth will be sustained; says conditions may evolve in a manner that will warrant 'gradual' rate increases
    • The "dot plot" showed that the median estimate for Fed funds at the end of 2015 was 0.625% -- for 2016, it was 1.625%
    • In the press conference, Fed Chair Yellen said that employment and inflation had not made enough progress before a Fed rate hike

• Commodities:
  • WTI Crude: -0.22% to $59.84/bbl.
  • Gold: +0.45% to $1,186.20/troy oz.
  • Copper: +0.25% to $2.622/lb.

• Currencies:
  • EUR/USD: +0.76% to $1.1330
  • USD/JPY: +0.01% to 123.44

• Data out Thursday:
  • Initial Jobless Claims for the week ending 6/13 and Continuing Jobless Claims for the week ending 6/6 (08:30 ET)
  • May CPI and Core CPI (08:30 ET)
  • Q1 Current Account Balance (08:30 ET)
  • June Philadelphia Fed (10:00 ET)
  • May Leading Indicators (10:00 ET)
  • Natural Gas Inventories for the week ending 6/13 (10:30 ET)
• New Supply:
  • $7 billion 30-Year TIPS (reopening) (results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.67% -0.04
• 5 Year Note 1.63% -0.05
• 10 Year Note 2.32% UNCH
• 30 Year Bond 3.09% +0.03

2/30 Spread: 242 bps ( +7 ) …  2/10 Spread: 165 bps ( +4 )

Preview for Thursday 18 June, 2015

Economic Data

Thursday (18 June) :

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

Earnings Highlights

Thursday (18 June) :
BMO - KR RAD
AMC - FNSR RHT SWHC

Summary

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

2015 Daily Directional Accuracy: 51/90 (56.67%) 

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