Tuesday, 30 June 2015 - AMC

Dow +23.16 at 17619.85, Nasdaq +28.40 at 4986.87, S&P +5.47 at 2063.23

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

Market seems to repeat yesterday movement in the first half of the session. However market managed to pullback slightly as there was some short covering at the support level. Given the bearish state, the strength of the pullback was pretty much limited. As such we can see the market went down again to test the support level. Crude oil also bounced back from its support while Dollar Index continues to rise as well.

Greece is not yet out of the woods yet and remains a critical factor to watch out in the market.        

Market Summary

Industry Watch

Strong: Financials, Consumer Discretionary, Health Care, Energy

Weak: Consumer Staples, Telecom Services, Utilities

Other Market Moving Factor:

• Greece misses EUR1.60 billion debt payment to the International Monetary Fund: current bailout set to expire at midnight

[BRIEFING.COM] The stock market ended the final June session on a higher note, but that did not stop the S&P 500 (+0.3%) from registering a 2.1% loss for the month. 

Equity indices spent the first three hours of the day in a steady retreat from their opening highs with the S&P 500 making a momentary appearance in the red after German Chancellor Angela Merkel said that Germany cannot consider new proposals from Greece until after Sunday's referendum. 

However, the benchmark index climbed to a fresh high during afternoon action with the move taking place amid reports Greece could cancel its Sunday referendum if negotiations are resumed and an agreement could be reached on required prior actions. To that point, Eurogroup Chief Jeroen Dijsselbloem acknowledged the receipt of a new proposal from the Greek government with the offer set to be reviewed at tomorrow's Eurogroup meeting.  

The speculation about a potential cancellation of the referendum had little impact on the euro, which spent the afternoon near its session low reached after Ms. Merkel's comments. The single currency slid 0.6% against the dollar to 1.1145. 

Meanwhile, Treasuries spent the afternoon near their flat lines after erasing their overnight losses. The 10-yr note ended just below its flat line with its yield higher by a basis point at 2.34%, which represented a 22-basis point increase since the end of May. 

Seven sectors settled in the green with energy (+0.6%) and consumer discretionary (+0.5%) showing relative strength throughout the day. The energy sector rallied behind crude oil, which climbed 1.9% to $59.44/bbl. Despite today's outperformance, the energy sector still lost 3.6% for the month.  

Similar to energy, eight other sectors finished the month in negative territory while the consumer discretionary sector (+0.5%) added 0.5% thanks to today's outperformance. Homebuilders represented an area of relative strength in June with iShares Dow Jones US Home Construction ETF (ITB 27.45, +0.02) adding 0.1% today to extend its monthly gain to 3.1%. 

Elsewhere, the top-weighted technology sector (+0.2%) spent the day just behind the broader market as several large cap names struggled while high-beta chipmakers fared relatively well. The PHLX Semiconductor Index gained 0.4% with all but eight components ending in the green. Despite today's strength, the Semiconductor Index lost 8.7% in June.  

The underperformance among large cap tech names did not stop the Nasdaq Composite (+0.6%) from ending ahead of the broader market as biotechnology displayed relative strength. The iShares Nasdaq Biotechnology ETF (IBB 368.97, +8.40) gained 2.3% while the health care sector (+0.4%) settled ahead of other countercyclical groups. 

Today's trading volume was heavier than average as quarter-end flows contributed to the increased activity with more than a billion shares changing hands at the NYSE floor.  

Economic data included Chicago PMI, Consumer Confidence, and Case-Shiller 20-city Index: 

• The Chicago PMI increased to 49.4 in June from 46.2 in May while the Briefing.com consensus expected an increase to 50.0 
  • According to the report, manufacturing activity in the Chicago region has contracted in 4 out of the last 5 months 
  • The contraction in production eased in June, as the related index increased to 49.8 from 45.8 in May 
  • Unfortunately, the contraction may not end next month as the Order Backlogs Index fell to 41.0 in June from 47.3 in May, which was the lowest reading since September 2009 
• The Conference Board's Consumer Confidence Index increased to 101.4 in June from a downwardly revised 94.6 (from 95.4) in May while the Briefing.com consensus expected an increase to 97.5 
  • The Expectations Index increased to 94.6 in June from 86.2 in May while the Present Situation Index rose to 111.6 from 109.5 
• The Case-Shiller 20-city Home Price Index for April rose 4.9% against a 5.6% increase expected by the Briefing.com consensus 
  • This followed the previous month's increase of 5.0% 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while June Challenger Job Cuts will be reported at 7:30 ET. The ADP Employment Report for June (Briefing.com consensus 220K) will be released at 8:15 ET while May Construction Spending (consensus 0.3%) and June ISM Index (expected 53.2) will both be reported at 10:00 ET. 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +0.6%; Hong Kong’s Hang Seng +1.1%; China’s Shanghai Composite +5.5%
There were broad-based gains across markets in the Asia-Pacific region on Tuesday as Monday’s sell-off triggered some bargain-hunting activity. China’s Shanghai Composite led all comers. After enduring an early 5.1% decline that left the Composite down 26% from its June 12 peak, the market came roaring back and ended the session with a 5.5% gain as investors embraced the thought of the government and central bank doing more to prevent a continued market decline.

Economic data

• Japan
• May Housing Starts +5.8% year-over-year (expected +5.8%; prior +0.4%)
• May Construction Orders -7.4% year-over-year (prior -12.1%)
• Average Cash Earnings +0.6% year-over-year (expected +0.7%; prior +0.7%)
• Hong Kong
• M3 Money Supply +14.3% (prior +14.2%)
• South Korea
• May Industrial Production -1.3% month-over-month (expected -0.7%; prior -1.3%); -2.8% year-over-year (expected -2.0%; prior -2.6%)
• Retail Sales 0.0% month-over-month (expected +0.5%; prior +1.4%)
• July Manufacturing BSI Index 67 (prior 74)
• Australia
• May HIA New Home Sales -2.3% month-over-month (prior +0.6%)
• Singapore
• May Bank Lending SGS 597.0 bln (prior SGD 594.3 bln)

Equity Markets

• Japan’s Nikkei increased 0.6% on broad-based gains that were led by the consumer non-cyclical (+1.2%) and communications (+0.9%) sectors. Individual standouts included Shionogi & Co (+7.8%), Aeon (+6.8%), and Nippon Paper Industries (+3.6%). Sony Corp (-8.3%) led all decliners. Out of the 225 index members, 134 ended higher, 77 finished lower, and 14 were unchanged.
• Hong Kong’s Hang Seng increased 1.1%, rallying in suit with a strong showing out of the mainland market. The financial sector (+0.8%) was an influential mover, yet gains were led by the energy (+1.4%) and basic materials (+1.3%) sectors. Leading gainers included China Resources Land (+4.1%), Bank of Communications (+4.1%), and Lenovo Group (+4.1%). Sands China (-2.1%) and Cathay Pacific Airways (-1.0%) were the only two stocks to decline at least 1.0%. Out of the 50 index members, 40 ended higher, 9 finished lower, and 1 was unchanged.
• China’s Shanghai Composite declined 5.1% shortly after the start of trading but came roaring back as the session progressed and ended the day up 5.5% (the market saw an 11.2% intraday swing from low to high). Reports attributed the turnaround to confidence in the prospect of the government and central bank taking more steps to prevent a stock market meltdown, including possibly halting IPOs. China’s CSI 300 Index jumped 6.7% with the technology (+8.9%) and financial (+7.5%) helping to set the pace.
• India’s Sensex increased 0.5%, bolstered by strength in the consumer non-cyclical (+1.8%), basic materials (+1.5%), and communications (+1.5%) sectors. The technology sector (-1.3%) did not participate in Tuesday’s advance. Out of the 30 index members, 18 ended higher and 12 finished lower.
• Australia’s S&P/ASX 200 jumped 0.7% and finished near its highs for the day. The industrials (+1.6%), energy (+1.1%), and telecom services (+1.1%) sectors were the best-performing areas. Out of the 200 index members, 130 ended higher, 59 finished lower, and 11 were unchanged.
• Regional advancers: South Korea +0.7%, Taiwan +0.9%, Malaysia +0.9%, Indonesia +0.6%, Singapore +1.1%, Vietnam +0.2%
• Regional decliners: Thailand -0.7%, Philippines -0.04%

FX

• USD/CNY -0.1% at 6.2010
• USD/INR -0.04% at 63.680
• USD/JPY -0.1% at 122.38

EUROPE

Major European indices trade in mixed fashion with UK’s FTSE (-0.4%) in the red while Italy’s MIB (+0.8%) outperforms. As expected, Greece did not make its EUR1.60 billion debt payment to the International Monetary Fund with the focus now turning to the country’s referendum on Sunday, July 5. That being said, German Chancellor Angela Merkel reminded recently that Greece’s current bailout program expires at midnight. Meanwhile, German Finance Minister Wolfgang Schaeuble said Greece could stay in the Eurozone even if Sunday’s referendum produces a ‘no’ vote.

• Eurozone June CPI +0.2% month-over-month, as expected, while May Unemployment Rate held at 11.1%, as expected
• Germany’s June Unemployment Change -1,000 (consensus -5,000; prior -5,000) while the Unemployment Rate held at 6.4%. Separately, May Retail Sales +0.5% month-over-month (expected 0.2%; prior 1.3%); -0.4% year-over-year (consensus 2.8%; last 1.1%)
• UK’s Q1 GDP was revised up to 0.4% from 0.3% quarter-over-quarter, as expected. Separately, Q1 Business Investment +2.0% quarter-over-quarter (consensus 1.8%; last 1.7%) and Q1 Current Account deficit narrowed to GBP26.60 billion from GBP28.90 billion (expected deficit of GBP23.80 billion)
• France’s May Consumer Spending +0.1% month-over-month (expected -0.1%; prior 0.1%)
• Italy’s May PPI +0.2% month-over-month while June CPI +0.1% month-over-month, as expected. Separately, May Unemployment Rate held at 12.4% (consensus 12.3%)

Closing Prices

• UK’s FTSE: -1.5%
• Germany’s DAX: -1.3%
• France’s CAC: -1.6%
• Spain’s IBEX: -0.8%
• Portugal’s PSI: + 0.4%
• Italy’s MIB Index: -0.5%
• Irish Ovrl Index: -0.4%
• 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%)
• Chicago PMI : 49.4 vs 50.0 (Prior 46.2)
• Consumer Confidence : 101.4 vs 97.5 (Prior 95.4)

CHICAGO PMI

Highlights

• The Chicago PMI increased to 49.4 in June from 46.2 in May. The Briefing.com Consensus expected the Chicago PMI to increase to 50.0.

Key Factors

• According to the report, manufacturing activity in the Chicago region has contracted in 4 out of the last 5 months.
• The contraction in production eased in June, as the related index increased to 49.8 from 45.8 in May. Unfortunately, the contraction may not end next month. While new orders managed to break free of their contraction cycle, evidenced by the index rising to 51.7 from 47.5, the pullback in backlogs got much worse. 
• The Order Backlogs Index fell to 41.0 in June from 47.3 in May. That was the lowest reading since September 2009.Without a steady supply of backlogs, an upturn in production will be highly reliant on the volatile new orders growth.
• The Employment Index fell to 45.7 in June from 48.0 in May. That was the lowest reading since November 2009.

Big Picture

• The Chicago PMI has little overall economic value, and is only watched by the financial markets because it is usually released one day in advance of the similar national ISM manufacturing survey. A significant move in this regional survey will therefore sometimes be seen as having predictive value for the ISM index.

CONSUMER CONFIDENCE

Highlights

• The Conference Board’s Consumer Confidence Index increased to 101.4 in June from a downwardly revised 94.6 (from 95.4) in May. The Briefing.com Consensus expected the Consumer Confidence Index to increase to 97.5.

Key Factors

• The increase in the index brought it back in-line with March levels.
• The Expectations Index increased to 94.6 in June from 86.2 in May. The Present Situation Index rose to 111.6 from 109.5. That was the highest reading since it reached 112.1 in February.
• Typically, confidence follows trends in job market conditions, gasoline costs, and equity values. In June, strong improvements in job market conditions, as shown by an initial claims level that flirted with 15-year lows throughout the month, outweighed gasoline price increases.
• The increase in confidence does not necessarily mean consumption growth will also accelerate. Consumption is tied to income growth. As long as income continues to expand, consumption growth should follow.

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 – 1181.2M vs 875.2M 


Advancers outpaced Decliners (adv/dec): 1904 / 1231

New Lows outpaced New Highs (highs/lows): 20 / 233

NASDAQ:

Lower Volumes than the day before – 1983.2M vs 2008.2M

Advancers outpaced Decliners (adv/dec): 1763 / 1075

New Lows outpaced New Highs (highs/lows): 40 / 120

VOLATILITY S&P500 (VIX)
18.23 -0.62 (-3.29%)

I think the internals are still bearish despite a rise in Advancers, New Highs did not budge. VIX opened lower than yesterday close but eventually it is held up by its support level and this continues to show the market remains  fearful.        

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,619.51 +23.16 (+0.13%)

Volume: 126,464,435 (above average of 95,793,934)
Range: 17,576.50 - 17,714.66

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,986.87 +28.40 (+0.57%)
Volume: 536,566,591 (above average of 431,628,224)

Range: 4,968.26 - 5,008.76

S&P 500 INDEX (SPX: CBOE)

2,063.11 +5.47 (+0.27%)

Volume: 717,671,000 (above average of 514,782,672)

Range: 2,056.32 - 2,074.28 

DOW remained below its 200MA but it is well supported by another support level at around 17,600. I think the resistance levels would be the 200MA and probably 17,750 area. NASDAQ is back to test its resistance level at around 5,000. S&P is somewhat held up by its 200MA and the next resistance level would be 2,070 level following by the previous trend line. Meanwhile MACD is still showing a rise in bearish momentum.

Commodities

Closing Commodities: Grains Soar Following USDA’s Acreage And Grain Stocks Reports

• The dollar index continued to trade higher today, which weighed on commodities such as metals today
• Grains showed some impressive volatility today following today’s USDA report
• Corn rallied 10% to $4.22/bushel today, wheat rallied $6% to $6.17/bu and soybeans gained 6% to $10.36/bu
• However, the energy space found some buying strength
• Aug crude oil ended up the day $1.12 higher to $59.44/barrel, while Aug natural gas rose $0.02 to $2.83/MMBtu
• Metals showed some modest losses today
• Copper lost $0.02 to finish the day at $2.61/lb
• Aug gold fell $7.30 to $1171.80, while Sept silver fell $0.08 to $15.62/oz

Energy

• August crude oil futures rose $1.12 to $59.44/barrel
• August natural gas closed $0.02 higher at $2.83/MMBtu
• RBOB Gasoline closed $0.05 higher at $2.05/gallon
• Heating oil futures closed $0.05 higher to $1.89/gallon

Agriculture

• July corn closed $0.38 higher (+9.9%) at $4.22/bushel
• September wheat closed $0.33 higher (+5.7%) at $6.17/bushel
• November soybeans closed $0.55 higher (+5.6%) to $10.36/bushel
• Ethanol closed $0.07 higher (+4.5%) at $1.63/gallon
• Sugar #11 closed 0.46 cents higher to 12.28 cents/lb

• Corn, Soybean and Wheat price action was driven by the mid-day release of the USDA’s Annual Acreage and Quarterly Grain Stock reports

Metals

• August gold ended today’s session $7.30 lower at $1171.80/oz
• September silver closed $0.08 lower at $15.62/oz
• September copper closed $0.02 lower at $2.61/lb

Currencies

Dollar Gains Broadly

• The greenback made significant gains again the euro, the loonie, the swissy, and the kiwi today
  • The Chicago Purchasing Manager Index rose to 49.4 in June, but remained below 50, which indicates contraction. The Briefing.com consensus was for 50.0 and May's reading was 46.2
  • Consumer Confidence jumped to 101.4 in June from 95.4 in May. The Briefing.com consensus called for 97.5
  • U.S. Dollar Index: +0.74% to 95.49
• EUR/USD: -0.66% to $1.1141
  • Greece is all but guaranteed to miss its 1.55 bln euro payment to the IMF due today
    • The country is still on track to vote on a referendum on continued membership in the eurozone this Sunday, July 5th
• GBP/USD: +0.03% to $1.5735
  • GDP growth in the U.K. was 0.4% according to the final revision released earlier today
• USD/JPY: -0.25% to 122.31
  • Average Cash Earnings grew 0.6% y/y in May, less than expected and less than the 0.7% growth in April
  • Housing Starts grew 5.8% y/y in May, in line with estimates and better than the 0.4% growth in April 
• USD/CHF: +1.05% to 0.9354
  • KOF Leading Indicators fell to a worse-than-expected 89.7 in June from 92.7 in May
• USD/CAD: +0.67% to 1.2490
  • Canadian GDP fell 0.1% m/m in April after a 0.2% decline in March. Market expectations were for a rise in output
• AUD/USD: +0.38% to $0.7710
• NZD/USD: -0.94% to $0.6778
  • Kiwi touched a 3-year low as Deutsche Bank forecast a fourth cut to the RBNZ's policy rate for this year

Bonds

Governments End Little Changed

• U.S. Treasuries oscillated between positive and negative territory today, responding halfheartedly to economic data releases which were neutral on balance, although the fourth sub-50 reading of the Chicago PMI this year gives some cause for concern about the recovery. So far, the weakness has been isolated to the Midwest
• Yield Check:
  • 2-yr: unch at 0.64%
  • 5-yr: +1 bp to 1.63%
  • 10-yr: +1 bps to 2.34%
  • 30-yr: unch at 3.10%

• News:
  • The Case-Shiller 20-City Index rose 4.9% in April versus the Briefing.com consensus of +5.6%. The index climbed 5.0% in March
    • All 20 cities showed a year-over-year gain
  • The Chicago PMI came out at 49.4 in June, worse than the Briefing.com consensus of 50.0 but better than the 46.2 from May
    • According to the report, manufacturing activity in the Chicago region has contracted in 4 out of the last 5 months
    • Unfortunately, the contraction may not end next month. While new orders managed to break free of their contraction cycle, evidenced by the index rising to 51.7 from 47.5, the pullback in backlogs got much worse
      • The Order Backlogs Index fell to 41.0 in June from 47.3 in May. That was the lowest reading since September 2009
  • Consumer Confidence soared past estimates to 101.4 for June versus the Briefing.com consensus of 97.5. Confidence was at a downwardly-revised 94.6 in May
  • The Greek government sent a proposal for a 2-year bailout extension to its official creditors but they have declined to negotiate before the July 5th referendum on Greece's membership in the single currency bloc
  • Vice Fed Chair Stanley Fischer spoke at Oxford University and noted that the FOMC would have to begin hiking rates before it has reached its objectives because monetary policy operates with a time lag

• Commodities:
  • WTI crude: +1.75% to $59.35/bbl
  • Gold: -0.65% to $1,171.30/troy oz.
  • Copper: -0.57% to $2.6185/lb.

• Currencies:
  • EUR/USD: -0.59% to $1.1149
  • USD/JPY: -0.23% to 122.34

• Data out Wednesday:
  • MBA Mortgage Index for the week ending 6/27 (07:00 ET)
  • June Challenger Job Cuts (07:30 ET)
  • June ADP Employment Change (08:15 ET)
  • June ISM Index (10:00 ET)
  • May Construction Spending (10:00 ET)
  • Crude Inventories for the week ending 6/27 (10:30 ET)
  • June Auto and Truck Sales (17:00 ET)

Treasury Yields:

• 2 Year Note 0.64% UNCH
• 5 Year Note 1.63% +0.01
• 10 Year Note 2.35% +0.02
• 30 Year Bond 3.11% +0.02

2/30 Spread: 247 bps ( +2 ) …  2/10 Spread: 171 bps ( +2 )

Preview for Wednesday 1 July, 2015

Economic Data

Wednesday (1 July) :

• MBA Mortgage Index : (Prior 1.6%)
• Challenger Job Cuts : (Prior -22.5%) 
• ADP Employment Change : 220K (Prior 201K)
• ISM Index : 53.2 (Prior 52.8)
• Construction Spending : 0.2% (Prior 2.2%)
• Crude Inventories : (Prior -4.934M)  
• Auto Sales : (Prior 5.9M)
• Truck Sales : (Prior 8.4M)

Earnings Highlights

Wednesday (1 July) :
BMO - AYI AZZ BSET STZ GIS GBX MKC PAYX UNF
AMC - AYA FC GLPW PRGS

Summary
It seems like a short covering to me. The retracement did not carry much strength. If the sellers want to maintain some control, I reckon we might see a limited pullback like Tuesday. Maybe we might see a consolidation in the market before it goes for another sell-off. Personally I don't feel much bullish at the moment and you do not think you are getting the bottom because market might just go against you big time. Market is still not out of the trading range yet if you look at it exactly, but it looks as if it is about to.

With Greece default on its payment to IMF, it certainly leads to more weakness in the global market. 

Direction for Wednesday 1 July, 2015: Up

2015 Daily Directional Accuracy: 58/99 (58.59%) 

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