Tuesday, 28 July 2015 - AMC

Dow +189.68 at 17630.27, Nasdaq +49.43 at 5089.21, S&P +25.61 at 2093.25

I think the bulls were trying to go against the bears from more selling on Monday but it looks to me that the bears are still a notch stronger. As such I suppose there is more room to the downside. Even so I am watching out for a false breakout in the market.

Tuesday marks the first day of FOMC meeting and the announcement is more or less going to move the market. Maybe the market is pricing in the announcement on Wednesday but well, just watch the market closely.

Direction for Tuesday 28 July, 2015: Down

It might looks to me that there was a false breakout in DOW as we saw the market rebound after consolidating at the support on Monday. However that didn't come at a surprise as the pullback is more or less expected after the sell-off last week. 

China market remains shaky and I don't think that bodes well for the global economy. Asia markets are still underperforming while Europe was doing slightly better. 

Market Summary

Industry Watch

Strong: Consumer Staples, Health Care, Energy, Industrials, Materials

Weak: Utilities

Other Market Moving Factor:

• China's Shanghai Composite falls 1.7% on Tuesday after being down 5.0%+ early
• Better than expected results from UPS (UPS), Ford (F), Merck (MRK), and Pfizer (PFE); DuPont (DD) disappoints 
• FOMC begins two-day meeting

[BRIEFING.COM] The stock market snapped its five-day losing streak with a daylong Tuesday rally that sent the S&P 500 higher by 1.2%. The benchmark index tested its 100-day moving average (2,095) during afternoon action while the Nasdaq Composite (+1.0%) underperformed throughout the day. 

Equity indices rebounded from losses registered over the past week, starting the day on an upbeat note after the overnight session saw more volatility in Asia. Specifically, China's Shanghai Composite was down as much as 5.1% at the start of the trading day, but narrowed its loss to 1.7% by the close. The turnaround off session lows coincided with a spike in S&P 500 futures in the wee hours of the morning. 

All ten sectors posted gains with some of the recent underperformers leading the market higher. To that point, the energy sector surged 2.9% after sliding 4.3% over the past five days. The growth-sensitive sector was lifted by the shares of BP (BP 37.29, +1.24) after the industry giant reported a bottom-line miss on better than expected revenue. Another large sector member, LyondellBasell (LYB 92.46, +2.61) spiked 2.9% in reaction to a bottom-line beat. On a related note, crude oil rose 1.3% to $47.98/bbl, providing added support.  

Similar to energy, the other commodity-related sector—materials (+2.1%)—finished well ahead of most other groups. Steelmakers underpinned the space after AK Steel (AKS 2.90, +0.38) soared 15.1% in reaction to a bottom-line beat, overshadowing losses in Dow component DuPont (DD 55.90, -0.83) after the company reported disappointing results.  

Elsewhere among Dow members, Pfizer (PFE 35.35, +1.01) and Merck (MRK 57.52, +0.53) reported better than expected earnings, helping the health care sector (+1.8%) finish among the leaders. Furthermore, biotechnology also contributed to the strength in the sector, evidenced by a 2.5% gain in iShares Nasdaq Biotechnology ETF (IBB 382.84, +9.26).  

The relative strength in biotechnology was not enough to pull the Nasdaq in-line with the broader market as several large cap technology sector (+0.9%) components underperformed. The likes of Cisco Systems (CSCO 28.21, 0.00), Google (GOOGL 659.66, +1.39), and Hewlett-Packard (HPQ 30.27, +0.02) ended little changed while Baidu.com (BIDU 168.03, -29.65) plunged 15.0% after the company reported disappointing results and issued cautious guidance.  

To be sure, the slight underperformance in technology was not an issue for the broader market, which benefitted from relative strength in other areas like industrials (+1.9%). The cyclical sector rallied behind transport stocks after UPS (UPS 99.94, +4.82) and JetBlue Airways (JBLU 22.82, +0.47) reported earnings. UPS beat bottom-line estimates on light revenue while JetBlue delivered in-line results. The two stocks posted respective gains of 5.1% and 2.1% while the Dow Jones Transportation Average spiked 2.8%. 

Treasuries retreated overnight and held modest losses throughout the day with the 10-yr yield climbing rising two basis points to 2.25%.  

Today's participation was ahead of recent averages as more than 900 million shares changed hands at the NYSE floor.  

Economic data was limited to Case-Shiller 20-City Index and Consumer Confidence: 

• The Conference Board's Consumer Confidence Index fell to 90.9 in July from a downwardly revised 99.8 (from 101.4) in June while the Briefing.com consensus pegged the Index at 100.0 
  • The reading was the lowest since September 2014 and well below the most pessimistic forecast (97.5) in the Briefing.com consensus 
  • The Present Conditions Index fell to 107.4 in July from 110.3 in June while the Expectations Index dropped to 79.9 from 92.8 
    • That was the lowest expectations reading since falling to 76.5 in February 2014 
• The Case-Shiller 20-city Home Price Index for May rose 4.9% against a 5.6% increase expected by the Briefing.com consensus 
  • This followed the previous month's revised increase of 5.0% (from 4.9%) 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while Pending Home Sales for June will be reported at 10:00 ET (Briefing.com consensus 1.0%). Also of note, the Federal Reserve will release its latest policy directive at 14:00 ET.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -0.1%; Hong Kong’s Hang Seng +0.6%; China’s Shanghai Composite -1.7%
Markets in the Asia-Pacific region finished mostly lower on Tuesday in a quiet day of economic reporting, yet a number of markets closed the day in recovery mode. The Shanghai Composite, for instance, was down 5.1% in early trading and ended the day down 1.7%. The recovery efforts helped set a positive tone for the European and U.S. markets following declines on Monday.

Economic data

• None

Equity Markets

• Japan’s Nikkei declined 0.1% after being down 1.4% early in the trading session. The weakness was led by the materials (-1.7%) and financial (-0.9%) sectors, yet strength in the consumer staples (+1.0%) and technology (+0.5%) sectors helped provide offsetting support. Mitsubishi Heavy Industries (-4.5%), Nissan Motor (-4.1%), and Nitto Denko (-4.1%) topped the list of laggards. Tokyo Electric Power (+4.7%), Nitto Boseki (+4.5%), and Nippon Suisan Kaisha (+3.5%) led the gainers. Out of the 225 index members, 76 ended higher, 140 finished lower, and 9 were unchanged.
• Hong Kong’s Hang Seng increased 0.6% after falling 3.1% on Monday. China Resources Enterprise (+2.9%), CNOOC (+2.7%), and AIA Group (+2.7%) were the best-performing stocks while China Resources Land (-2.7%), Ping An Insurance (-2.4%), and China Overseas Land & Investment (-1.8%) were the worst-performing stocks. Out of the 50 index members, 32 ended higher, 16 finished lower, and 2 were unchanged.
• China’s Shanghai Composite declined 1.7% but had been down as much as 5.1% in early trading. Market participants remained skittish over Monday’s rout, but used the news of the PBOC injecting cash into money markets and reports the government is ready to increase stock purchases as a springboard for paring the day’s losses. The CSI 300 Index dropped 0.2%.
• India’s Sensex declined 0.4% and ended near its lows for the day. The losses were driven by weakness in the health care (-1.8%), consumer discretionary (-0.9%), and financials (-0.5%) sectors. Hero MotoCorp (-2.8%), Dr Reddy’s Laboratories (-2.7%), and Housing Development Finance Corp (-2.4%) paced the losers while Bharat Heavy Electricals (+2.5%), NTPC Ltd (+2.1%), and HDFC Bank (+1.2%) paced the winners. Out of the 30 index members, 12 ended higher and 18 finished lower.
• Australia’s S&P/ASX 200 dipped 0.1%, but had been down 1.1% in early morning action as it seemingly tracked the behavior of the Chinese stock market. Weakness in the gold (-2.1%), information technology (-1.2%), and consumer discretionary (-1.0%) sectors prevented the complete comeback effort. Out of the 200 index members, 69 ended higher, 111 finished lower, and 20 were unchanged.
• Regional advancers: South Korea +0.01%, Taiwan +0.3%, Thailand +0.1%
• Regional decliners: Malaysia -0.6%, Indonesia -1.2%, Singapore -1.0%, Vietnam -0.6%

FX

• USD/CNY unch at 6.2095
• USD/INR -0.3% at 63.9575
• USD/JPY +0.4% at 123.74

EUROPE

Major European indices trade higher across the board with Italy’s MIB (+2.0%) pacing the advance. The relative strength should not be that surprising considering the International Monetary Fund said the European Central Bank may need to extend its quantitative easing program past September of next year and may have to boost the total amount if the Greek situation causes a spike in regional yields.

• UK’s Q2 GDP expanded 0.7% quarter-over-quarter, as expected (prior 0.4%); +2.6% year-over-year, as expected (prior 2.9%). Separately, Index of Services +0.4% (consensus 0.5%; last 0.5%)
• Italy’s July Consumer Confidence fell to 106.5 from 109.3 (expected 109.0) while Business Confidence slipped to 103.6 from 103.9, as expected

Closing Prices

• UK’s FTSE: + 0.8%
• Germany’s DAX: + 1.1%
• France’s CAC: + 1.0%
• Spain’s IBEX: + 1.0%
• Portugal’s PSI: -0.3%
• Italy’s MIB Index: + 2.3%
• Irish Ovrl Index: + 0.8%
• Greece ASE General Index: CLOSED

Macroeconomic Data

Economic Data

from Briefing.com

• Case-Shiller 20-city Index : 4.9% vs 5.6% (Prior 5.0% - Up)
• Consumer Confidence : 90.9 vs 100.0 (Prior 99.8 - Down)

CONSUMER CONFIDENCE

Highlights

• The Conference Board’s Consumer Confidence Index fell to 90.9 in July from a downwardly revised 99.8 (from 101.4) in June. The Briefing.com Consensus pegged the Consumer Confidence Index at 100.0.

Key Factors

• That was the lowest reading in the Consumer Confidence Index since September 2014 and was well below the most pessimistic forecast (97.5) in the Briefing.com Consensus.
• The Present Conditions Index fell to 107.4 in July from 110.3 in June. The Expectations Index dropped to 79.9 from 92.8. That was the lowest expectations reading since falling to 76.5 in February 2014. 
• The decline in confidence was likely the result of highly publicized economic concerns following the latest Greek and European debt crisis. In a somewhat confusing note, consumers complained that labor market conditions worsened in July despite record low initial claims readings and another move down in the unemployment rate. 
• The drop in the Consumer Confidence Index is unlikely to have a material impact on consumption trends. Consumption relies on income growth, not sentiment levels. As long as the job market continues to improve, the related boost to income should pass through to higher consumption growth.

Big Picture

• Consumer sentiment has little influence on consumption. As long as payroll levels continue to expand, the resulting income growth should keep consumption gains steady regardless of the monthly ebbs and flows in sentiment.

Market Internals

NYSE:

Higher Volumes than the day before – 931.3M vs 922.4M 


Advancers outpaced Decliners (adv/dec): 2262 / 834

New Lows outpaced New Highs (highs/lows): 35 / 185

NASDAQ:

Higher Volumes than the day before – 2006.5M vs 1975.6M

Advancers outpaced Decliners (adv/dec): 1762 / 1078

New Lows outpaced New Highs (highs/lows): 36 / 166

VOLATILITY S&P500 (VIX)
13.44 -2.16 (-13.85%)

Volume is strong and the internals is turned around as the bullishness recovers. New Lows dropped significantly while New Highs is slowly picking up. VIX went under 15.00 level to bullish region and it broke below its 50 and 100MAs. It seems that there is still a strong optimism in the market.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,630.27 +189.68 (+1.09%)

Volume: 103,451,096 (above average of 92,943,525)
Range: 17,449.81 - 17,650.07

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,089.21 +49.43 (+0.98%)
Volume: 475.5M (above average of 433,242,201)

Range: 5,025.61 - 5,097.69

S&P 500 INDEX (SPX: CBOE)

2,093.25 +25.61 (+1.24%)

Volume: 612.2M (above average of 526,495,969)

Range: 2,069.09 - 2,095.60

DOW broke above its resistance and returned back to its ascending trend line. However it remains under its 200MA. NASDAQ formed a rather bullish engulfing candlestick and stay above its 20 and 50MAs. With the ascending trend line supporting, the next resistance is 5,100 then 5150/5160. S&P also made a pullback from its support level and close above its 20MA. Meanwhile it is still sitting on its 200MA and it is likely to push to break its 50MA. I reckon tomorrow session is likely to be tight range. 

Commodities

Closing Commodities: WTI Oil Slides Lower In Electronic Trade

• The dollar index remained in the red today, but some commodities such as oil and copper didn’t see any benefit to this move
• Oil slid lower today as bearish catalysts continue to weigh on prices
• Front-month Sept crude oil finished today’s session -1.5% at $47.42/barrel
• In electronic trade, crude fell as low as $47.05/barrel
• Aug nat gas gained one cent today to $2.79/MMBtu
• Gold and silver closed higher, Aug gold +1% and Sept silver +0.8%
• Sept copper dropped -1.3% to $2.35/lb

Energy

• September crude oil futures fell $0.71 (-1.5%) to $47.42/barrel
• August natural gas closed $0.01 higher (+0.4%) at $2.79/MMBtu
• RBOB Gasoline closed $0.02 lower at $1.76/gallon
• Heating oil futures closed $0.04 lower at $1.60/gallon

Agriculture

• December corn closed $0.18 lower at $3.84/bushel
• September wheat closed $0.11 lower at $5.01/bushel
• November soybeans closed $0.32 lower to $9.32/bushel
• Sugar #11 closed flat at 11.24 cents/lb

Metals

• August gold ended today’s session $10.60 higher (+1%) at $1096.20/oz
• September silver closed today’s session $0.12 higher (+0.8%) at $14.61/oz
• September copper closed $0.03 lower (-1.3%) at $2.35/lb

Currencies

Dollar Gains, Euro and Yen Fall

• The greenback made progress against the euro and yen today as global equities rebounded ahead of tomorrow's FOMC decision
  • US Dollar Index: +0.24% to 96.73
• EUR/USD: -0.33% to $1.1050
  • Italian Business Confidence fell to 103.6 in July from 103.9 in June, as expected
  • Italian Consumer Confidence unexpectedly dropped to 106.5 in July from 109.3 in June
• GBP/USD: +0.29% to $1.5606
  • In the U.K., economic output per person finally reached its pre-crisis peak from Q1 2008, according to the first estimate 
  • Q2 GDP grew 0.7% q/q (2.6% y/y), in line with expectations. Q1 2015 GDP growth had been +0.4% q/q
  • The service sector grew by 0.7% and industrial output grew 1%. The construction sector showed no growth from Q1 and manufacturing fell by 0.3%
• USD/JPY: +0.27% to 123.61
• USD/CHF:  +0.10% to 0.9631
• USD/CAD: -0.82% to 1.2933
• AUD/USD: +0.70% to $0.7325
• NZD/USD: +1.04% to $0.6680

Bonds

Bear-Steepening Trade

• Treasuries declined today and the yield curve unwound some of its sharp flattening of the past two weeks despite some weaker-than-expected economic data for the U.S.
• Yield Check:
  • 2-yr: unch at 0.66%
  • 5-yr: +2 bps to 1.59%
  • 10-yr: +3 bps to 2.25%
  • 30-yr: +3 bps to 2.96%

• News:
  • The Case-Shiller 20-City Index rose 4.9% y/y in May, short of the Briefing.com consensus of 5.6%. The index saw growth of 5.0% in April, revised up from 4.9%
    • Denver led the gains with a 10% increase in prices and Washington, D.C. trailed the pack, rising only 1.3%
  • The Conference Board reported the lowest reading of the Consumer Confidence Index since September 2014. The index fell to 90.0 in July from a downwardly revised 99.8 in June (previous estimate of 101.4). The Briefing.com consensus was for 100.0
    • The decline in confidence was likely the result of highly publicized economic concerns following the latest Greek and European debt crisis. In a somewhat confusing note, consumers complained that labor market conditions worsened in July despite record low initial claims readings and another move down in the unemployment rate
  • The $26 billion 2-year note auction drew the highest indirect bid since 2009, but the primary take-down was the second lowest on record. The auction stopped through by 0.3 bps
    • High yield: 0.69%
    • Bid-to-cover: 3.42
    • Indirect bid: 54.4%
    • Direct bid: 17.9%

• Commodities:
  • WTI Crude: +0.72% to $47.73/bbl.
  • Gold: -0.18% to $1,094.50/troy oz.
  • Copper: +2.15% to $2.404/lb.

• Currencies:
  • EUR/USD: -0.31% to $1.1052
  • USD/JPY: +0.28% to 123.61

• Data out Wednesday:
  • MBA Mortgage Index for the week ending 07/25 (07:00 ET)
  • June Pending Home Sales (10:00 ET)
  • Crude Inventories for the week ending 7/25 (10:30 ET)
  • July FOMC Rate Decision (14:00 ET)
• Auctions:
  • $35 bln 5-year note auction (results at 13:00 ET)
  • $15 bln 2-year floating rate note auction (results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.69% +0.01
• 5 Year Note 1.61% +0.03
• 10 Year Note 2.26% +0.03
• 30 Year Bond 2.96% +0.03

2/30 Spread: 227 bps ( +2 ) …  2/10 Spread: 157 bps ( +2 )

Preview for Wednesday 29 July, 2015

Economic Data

Wednesday (29 July) :

• MBA Mortgage Index : (Prior 0.1%)
• Pending Home Sales : 1.0% (Prior 0.9%)
• Crude Inventories : (Prior 2.468M) 
• FOMC Rate Decision : 0.25% (Prior 0.25%)

Earnings Highlights

Wednesday (29 July) :
BMO - WBAI ACCO ADT MO AMED AMT ANTM APO AVY BDC BGCP BOKF BAH CARB CG CRI CBG CBZ CDK GIB CHH CLF CTCM CFR DIN DXYN DORM DRQ ETN ESIO EME EVER EXC FDML FCF FLY BEN GCI GRMN GD GEL GT GTI HTA HSIC HES HLT HSP HCBK HUM HUN ICON IRT IBP IP JAH JLL LVLT LFUS MAMTH MTOR MVIS TYPE NOC PAG PCG PX Q ROK ROL RES SGNT SAIA STNG SSE SLAB SPIL SONS SO SPR SPW STRZA STRA SNCR DATA MDCO TRI TGI UBSI UMC UAM VNTV WOOF GRA WCIC WEC WEX WILN
AMC - AAC  AEGN AFFX AEM ALGT AMC DOX MTGE AEL ARII ANIK AR ACGL ARRS ASH ATW BAX BKFS BLKB BKCC BXP CWT ELY CMO CAVM CBL CGI CEMP CHMT CHDN CMPR CLD CNO CXO CNW CSGP CROX CTRP CW DDR DRE DYAX EHTH ESRT ECYT ESV EPE EQIX EQY EXL EXR FB FARO FOE FICO FNF FBP FISV FORM FORR FMI FRM THRM THG HVT HLS HTH HOLX HOS HY IMPR NSIT TILE ISIL IVR IPCM IXYS KS KEG KRC KGC KEX KRG KRA LQ LRCX LOCK LNC LPSN MTW MN MANT MAR MMLP MCK MDAS MEOH MET MAA MC MUR NCIT NBIX NE NTRI NXPI ASGN OGS OTEX ORLY OI PEIX PEGA PVA PDM PPC POWI PTC PSA QGEN QUIK O RRTS ROG RKUS SGMO SBAC SIGI SCI NOW SFLY SKX SCTY SSS SSNC STAA STMP STNR SU SPRT TAL TER TTEK THRX CLUB UNM VNDA VAR VGR VRTX WTS WSTL WDC WGP WES WLL WFM WMB WMGI WYNN

Summary
I suspect there was some short-covering in today pullback ahead of FOMC statement and GDP number on Wednesday and Thursday respectively. I can't say the market is back to its bullishness yet as I feel market is still vulnerable.

FOMC announcement is going to be a top alert to all traders. That itself explains a lot and it is definitely a big big market mover.

I have close all my positions on my trade and will be watching how the market react to the FOMC meeting. At this point of writing, futures is showing a slight upside.

Direction for Wednesday 29 July, 2015: Abstain

2015 Daily Directional Accuracy: 72/118  (61.02%) 

2015 Weekly Directional Accuracy: 17/27 (62.96%)