Wednesday, 29 July 2015 - AMC

Dow +121.12 at 17751.39, Nasdaq +22.53 at 5111.73, S&P +15.32 at 2108.57

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

Market went for the upside ahead of FOMC announcement at 2pm ET. Meanwhile NASDAQ was lagging prior to the announcement. Nothing significant was mentioned in the FOMC statement. However that was perceived as something dovish by the market.

Crude oil spiked up as inventories report shows a more than expected drawdown. Crude oil also managed to recover after hitting as low as $46.70 on Tuesday. But the strength from Dollar Index is likely to keep the pressure on the prices of commodities. 

Over at China, the Chinese government managed to keep the market in control (again) and as a result, Shanghai Composite closed with an upside on Wednesday. While Europe market were doing relatively okay. 

Market Summary

Industry Watch

Strong: Consumer Discretionary, Energy, Industrials, Telecom Services

Weak: Health Care, Utilities

Other Market Moving Factor:

• Global risk tolerance improves after 3.4% rally in China's Shanghai Composite
• Biotechnology boosted by better than expected results from Gilead Sciences (GILD)
• Twitter (TWTR) falls 10%+ on cautious user growth outlook provided by the management
• FOMC statement calls for labor market improvement before first rate hike

[BRIEFING.COM] The stock market registered its second consecutive advance on Wednesday with the S&P 500 climbing 0.7% to extend its weekly gain to 1.4%. The benchmark index overtook its 100- (2,095) and 50-day moving averages (2,100) during morning action while the tech-heavy Nasdaq (+0.4%) struggled to keep pace with the broader market.  

Equity indices began the day with slight gains after China's Shanghai Composite spiked 3.4% overnight, which improved risk tolerance among global investors. The Dow and S&P 500 rallied throughout the session while the Nasdaq hovered near its opening levels into the afternoon before setting new highs ahead of the close.  

The tech-heavy index was pressured by biotechnology as iShares Nasdaq Biotechnology ETF (IBB 377.43, -5.41) lost 1.4% despite better than expected earnings from Gilead Sciences (GILD 115.71, +2.64). Shares of GILD spiked 2.3% while the broader health care sector (+0.2%) settled among the laggards. Similar to biotechnology, high-beta chipmakers lagged, but the PHLX Semiconductor Index was able to end the day higher by 0.1%. On the earnings front, Twitter (TWTR 31.24, -5.30) sank 14.5% after the company's bottom-line beat was overshadowed by cautious commentary regarding user growth outlook. 

Although the technology sector (+0.7%) struggled in the early going, the top-weighted sector closed the gap during afternoon action, ending in-line with the broader market. Similarly, the materials sector (+0.7%) settled near the S&P 500 while the other four cyclical sectors displayed relative strength.  

Most notably, the industrial sector spiked 1.2% with transport stocks fueling the move after C.H. Robinson (CHRW 69.85, +3.12) beat bottom-line estimates on light revenue. The stock surged 4.7% while the broader Dow Jones Transportation Average jumped 1.7% to extend this week's gain to 4.3%.  

Elsewhere, the energy sector (+1.3%) settled ahead of industrials thanks to an intraday rally in crude oil that sent the energy component higher by 1.7% to $48.77/bbl. Also of note, Anadarko Petroleum (APC 76.28, +3.43) soared 4.7% after beating earnings expectations.  

Today's advance in equities was accompanied by selling in the Treasury market that sent the 10-yr yield higher by three basis points to 2.28%. Treasuries spiked off their intraday lows after the latest policy statement from the FOMC called for more improvement in the labor market before raising rates. On a related note, the Dollar Index (97.16, +0.40) dipped immediately after the minutes crossed the wires, but rallied during the late afternoon at the expense of the euro (-0.8%), which slipped to 1.0980. 

For the second day in a row, participation was ahead of average with more than 850 million shares changing hands at the NYSE floor.  

Economic data released this morning was limited to the MBA Mortgage Index and Pending Home Sales: 

• The weekly MBA Mortgage Index rose 0.8% to follow last week's 0.1% uptick 
• Pending home sales for June fell 1.8% while the Briefing.com consensus expected an increase of 1.0% 

Tomorrow, weekly Initial Claims (Briefing.com consensus 272,000) and the advance reading of Q2 GDP (consensus 2.5%) will be released at 8:30 ET. 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -0.1%; Hong Kong’s Hang Seng +0.5%; China’s Shanghai Composite +3.4%
Markets in the Asia-Pacific region were mostly higher on Wednesday, none more so than China’s Shanghai Composite (+3.4%), which flirted with another day of losses before a late-day rally turned the tide of negative sentiment. Wall Street’s positive showing on Tuesday and the reversal in the Chinese equity market helped underpin some of Wednesday’s buying interest.

Economic data

• Japan
• June Retail Sales +0.9% year-over-year (expected +0.5%; prior +3.0%)

Equity Markets

• Japan’s Nikkei declined 0.1%, held back by losses in the industrials (-4.0%) and technology (-1.3%) sectors, which flowed out of profit warnings from Fanuc (-10.7%) and Tokyo Electron (-11.4%). Those two stocks were the worst-performing issues. NTT Data (+3.5%), Nippon Electric Glass (+3.5%), and Shiseido (+3.1%) paced the winners. Out of the 225 index members, 134 ended higher, 82 finished lower, and 9 were unchanged.
• Hong Kong’s Hang Seng increased 0.5%, pushing higher in its afternoon session in conjunction with a rebound in mainland markets. Index gains were led by Kunlun Energy (+4.1%), China Merchants Holdings International (+3.5%), and PetroChina (+2.8%). Top laggards included China Mengniu Dairy (-1.9%), Tencent Holdings (-1.4%), and Ping An Insurance (-1.1%). Out of the 50 index members, 28 ended higher, 18 finished lower, and 4 were unchanged.
• China’s Shanghai Composite increased 3.4%, capturing all of its gains in a closing rally that began with about 90 minutes left in its trading day. There was no specific news catalyst for the spike, which reports attributed mostly to the thinking among market participants that the government will continue to support equity prices. The CSI 300 Index for its part gained 3.1%.
• India’s Sensex increased 0.4%, holding on to modest gains throughout the trading day. The advance was led by the industrials (+1.7%), consumer discretionary (+1.2%), technology (+0.9%), and materials (+0.8%) sectors. Infosys (+2.1%), Lupin Ltd (+1.9%), and Bharti Airtel (+1.9%) topped the list of individual winners. ITC Ltd (-2.3%), State Bank of India (-2.2%), and GAIL India (-1.5%) led the laggards.
• Australia’s S&P/ASX 200 jumped 0.7%, aided by strength in the metals & mining (+1.8%), materials (+1.5%), and information technology (+1.5%) sectors. Fortescue Metals (+7.4%) was the best-performing stock while Nine Ent Fpo (-4.2%) brought up the rear. Out of the 200 index members, 138 ended higher, 50 finished lower, and 12 were unchanged.
• Regional advancers: Indonesia +0.1%, Singapore +0.1%, Thailand +0.7%, Philippines +0.1%
• Regional decliners: South Korea -0.1%, Taiwan -0.2%, Malaysia -0.04%, Vietnam -1.1%

FX

• USD/CNY -0.01% at 6.2091
• USD/INR -0.1% at 63.8475
• USD/JPY +0.01% at 123.57

EUROPE

Major European indices have retreated from their best levels of the day, but they remain mostly higher while Italy’s MIB (-0.9%) underperforms. European Economic and Monetary Affairs Commissioner Pierre Moscovici said that the risk of a Greek exit from the Eurozone has diminished and that negotiations on the third bailout package have gotten off to a good start.

• Germany’s August GfK Consumer Climate held at 10.1, as expected
• UK’s June BoE Consumer Credit GPB1.22 billion (expected GBP1.10 billion; prior GBP1.06 billion) while June Mortgage Approvals hit 66,580 (expected 66,000; prior 64,830). Separately, July CBI Distributive Trades Survey fell to 21 from 29 (expected 30)
• France’s July Consumer Confidence ticked down to 93 from 94 (expected 94)
• Spain’s June Retail Sales +2.3% year-over-year (consensus 3.3%; prior 3.1%)
• Swiss June Consumption Indicator inched up to 1.68 from 1.62 (expected 2.50)

Closing Prices

• UK’s FTSE: + 1.2%
• Germany’s DAX: + 0.3%
• France’s CAC: + 0.8%
• Spain’s IBEX: + 0.2%
• Portugal’s PSI: + 0.7%
• Italy’s MIB Index: -0.3%
• Irish Ovrl Index: + 0.7%
• Greece ASE General Index: CLOSED

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : 0.8% (Prior 0.1%)
• Pending Home Sales : -1.8% vs 1.0% (Prior 0.6% - Down)
• Crude Inventories : -4.203M (Prior 2.468M) 
• FOMC Rate Decision : 0.25% vs 0.25% (Prior 0.25%)

Market Internals

NYSE:

Lower Volumes than the day before – 880.8M vs 931.3M 


Advancers outpaced Decliners (adv/dec): 2248 / 832

New Lows outpaced New Highs (highs/lows): 63 / 71

NASDAQ:

Lower Volumes than the day before – 1875.5M vs 2006.5M

Advancers outpaced Decliners (adv/dec): 1586 / 1241

New Lows outpaced New Highs (highs/lows): 52 / 83

VOLATILITY S&P500 (VIX)
12.50 -0.94 (-6.99%)

Internals are still pointing to bullishness. New Lows has been dropping significantly while New Highs is increasing steadily. VIX broke lower of its ascending trend line and went to test its support at around 12.00. Nonetheless this is showing an underlying confidence in the market.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,751.39 +121.12 (+0.69%)

Volume: 93,143,692 (above average of 92,806,092)
Range: 17,629.20 - 17,776.78

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,111.73 +22.53 (+0.44%)
Volume: 443,575,147 (above average of 433,732,500)

Range: 5,080.04 - 5,117.84

S&P 500 INDEX (SPX: CBOE)

2,108.57 +15.32 (+0.73%)

Volume: 568,110,000 (above average of 526,762,523)

Range: 2,094.08 - 2,110.60

DOW went higher and is testing its 200MA. That is going to be a significant resistance moving forward and then another one at 17,780/17,785. NASDAQ managed to stay above its resistance at 5,100 and sit above 20 and 50MAs. If NASDAQ breaks above 5,120, the next resistance is likely to be 5,165. S&P also broke above its 20 and 50MAs. It seems market managed to pullback but watch out for the 3rd candle reversal. 

Commodities

Closing Commodities: WTI Oil Rises, Ends Below $49/Barrel

• FOMC provided some additional volatility in the commodities space this afternoon
• The initial reaction was a lower dollar index and modestly higher precious metals, oil and copper
• However, that quickly reversed as the dollar index surged higher
• Sept crude oil finished the day +1.7% at $48.77/barrel, while in other energy, Sept nat gas rose 1.4% to $2.86/MMBtu
• Aug gold rose back above the $1100/oz area post-FOMC, but ended the day -0.3% at $1092.70/oz
• Sept silver gained 0.5% to $14.71/oz, while Sept copper ended unchanged at $2.41/lb

Energy

• September crude oil futures rose $0.81 (+1.7%) to $48.77/barrel
• September natural gas closed $0.04 higher (+1.4%) at $2.86/MMBtu
• RBOB Gasoline closed $0.01 higher at $1.76/gallon
• Heating oil futures closed flat at $1.61/gallon

Agriculture

• December corn closed $0.08 lower at $3.78/bushel
• September wheat closed $0.15 lower at $4.96/bushel
• November soybeans closed $0.02 lower to $9.43/bushel
• Sugar #11 closed $0.29 higher at 11.46 cents/lb

Metals

• August gold ended today’s session $3.50 lower (-0.3%) at $1092.70/oz
• September silver closed today’s session $0.07 higher (+0.5%) at $14.71/oz
• September copper closed flat at $2.41/lb

Currencies

Dollar Edges Higher After Fed Decision

• The U.S. Dollar Index rallied 0.22% to 96.99 after the FOMC left rates on hold, as expected, and made only very subtle changes to the statement
• EUR/USD: -0.59% to $1.1004
  • In Germany, the GfK German Consumer Climate Index was flat in August at 10.1, in line with forecasts
  • Retail Sales in Spain rose a less-than-expected 2.3% y/y in June, versus a 3.1% jump in May
  • French Consumer Confidence unexpectedly fell in July to 93, from 94 in June
• GBP/USD: -0.03% to $1.5607
• USD/JPY: +0.30% to 123.94
  • In Japan, Retail Sales fell less than expected, down 0.8% m/m in June
• USD/CHF: +0.49% to 0.9663
  • In Switzerland, the Consumption Indicator rose to a lower-than-expected 1.68 in June from 1.62 in May
• USD/CAD: +0.05% to 1.2936
  • The loonie ripped higher after the crude oil inventory data showed a bigger-than-expected draw-down last week, but then relinquished its gains after traders bought dollars on the FOMC statement
• AUD/USD: -0.62% to $0.7297
• NZD/USD: -0.60% to $0.6670

Bonds

Treasuries Decline but Shrug at Fed

• U.S. Treasuries sold off this morning and were virtually unaffected by the strong results of the 5-year note auction or the release of the Fed decision and accompanying statement
• Yield Check:
  • 2-yr: +3 bps to 0.70%
  • 5-yr: +2 bps to 1.61%
  • 10-yr: +3 bps to 2.28%
  • 30-yr: +3 bps to 2.99%

• News:
  • The MBA Mortgage Index for the week ending 07/25 rose 0.8% in the week to July 25th versus a 0.1% gain in the prior week
  • The National Association of Realtors' Pending Home Sales Index fell 1.8% in June versus the Briefing.com consensus of +1.0%. The index rose 0.6% in May (revised from 0.9%)
  • The $35 bln 5-year note auction was met with strong demand, as the high yield was 1.0 bp below where the when-issued market anticipated at 12:59 ET
    • High yield 1.625%
    • Bid-to-cover 2.58
    • Indirect bid 67.5%
    • Direct bid 5.3%
  • The FOMC left interest rates unchanged, as expected. The committee made only minor (but positive) changes to its assessment of the economy
    • The statement read "underutilization of labor resources has diminished" whereas in recent meetings it read, "underutilization of labor resources has somewhat diminished"
    • Instead of reading, "The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market," today's statement read, ""The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market"

• Commodities:
  • WTI Crude: +1.75% to $48.82/bbl.
  • Gold: -0.05% to $1,095.70/troy oz.
  • Copper: +0.33% to $2.41/lb.

• Currencies:
  • EUR/USD: -0.78% to $1.0983
  • USD/JPY: +0.27% to 123.91

• Data out Thursday:
  • Initial Jobless Claims for the week ending 7/25 and Continuing Jobless Claims for the week ending 7/18 (08:30 ET)
  • Q2 GDP and Chain Deflator – Advanced Estimate (08:30 ET)
  • Natural Gas Inventories for the week ending 7/25 (10:30 ET)
• Treasury Auction:
  • $29 bln 7-year note auction (results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.70% +0.01
• 5 Year Note 1.62% +0.01
• 10 Year Note 2.29% +0.03
• 30 Year Bond 2.99% +0.03

2/30 Spread: 229 bps ( +2 ) …  2/10 Spread: 159 bps ( +2 )

Preview for Thursday 30 July, 2015

Economic Data

Thursday (30 July) :

• Initial Claims : 271K (Prior 255K)
• Continuing Claims : 2200K (Prior 2207K)
• GDP - Adv : 2.6% (Prior -0.2%)
• Chain Deflator - Adv : 1.5% (Prior 0.0%)
• Natural Gas Inventories : (Prior 61 bcf)

Earnings Highlights

Thursday (30 July) :
BMO - ACIW ACOR APD ALU ALXN ALKS ALLE AB AMRC BUD ACI ARNA ACRE AWI AZN ATRO AAWW ADP AVP BLL BANC BNCL BOFI BWA BCO BWEN BC BG CCMP CPN CCJ CCG CRR CAH CRS CSH CVE CEVA CRL GTLS CBR CI CBB CME CCE CL COP COT CVI UAN CVRR DLPH XRAY DCIX DBD UFS DFT EDR ERJ ENDP ENTG EPD EXLS STAY FCAU FELP FIG FMS FCN GLPI IT GLOP GNC GG GOV GPX GHM GVA HEES HHS HP HST IDA IDXX INCR INGR IART I IDCC IVZ IRMD IRDM IRM ITC ESI KMT KVHI LLL LBY LINE LKQ MMYT MPC MTRN MHFI MDWD MD MDP MDXG MOBL MDLZ MWW MPLX MSCI NNN NSM NAVB NMM NTCT NICE NOK OIIM OXY ODFL OMG OA OSK OSTK PCRX PBF PBFX PWE PRFT PNK PF PNW PES PBI POT PG BIN PWR RYAM RFP RDS.A RTIX RYL SC SCG SEE SNMX SQBG SHOP SNE SMP SWK HOT STFC SHOO SRI SSYS SUI SUP TLMR TASR TE TDY TFX TEX TEVA TWC TKR TWI TMUS TOWR UPL VLO VLY VICL VA VG WLT WMAR WST WRK WWE XEL XYL YNDX ZBH
AMC - AMSF AMGN ANH AMCC AIV AXTI BSAC BAS BEAT BCOR SAM BCOV BRCM BVN CALD CPT CATM CVCO CHEF CHSP CLW COHR COHU CXP COLM FIX CPSI CTRL CRAY CMLS DTLK DCT DECK DLR DGI DXPE EIX EGO EA ELLI EEP NPO EVHC ESS ES EXEL EXPE FEIC FRGI FEYE FFBC FR FPO FE FLS FLDM FLR GMED GSIT GUID HK HBI HNSN HME HTCH ICFI IMMR IM PODD ISBC KAMN KLAC LSCC LEG LNKD LRE MATX MATW MTSN MXWL MGRC MTD MCHP MOH MWA NGVC NKTR NSR NR OLN OMCL OUTR PCCC PDFS PKI PXLW PLNR PGI PTCT QLGC KWR QTM QUMU RGC RMD RNG RMTI ROVI SB SQI SGEN SKYW SZYM SPF SPN SRDX SYA SYNA TEP TNDM TCO TSYS TNAV TPX TXTR TMST UHS VVUS VCRA WAGE WWWW WBMD WU GB INT AUY YRCW ZLTQ

Summary
Despite market went higher on Wednesday, I think most traders are still waiting for the release of GDP number tomorrow. Nothing much was inferred from the FOMC statement as the Fed remains patient in raising rate. Therefore I suppose many will look into the GDP and we should see more reaction in the market on Thursday instead. Market can go anywhere from here and it is better to stay off first.

By the way, we are in the tobacco season and we have seen some tobacco companies posting a better than expected earnings reports. I will also be monitoring Altria and Reynolds closely for any opportunity.

Direction for Thursday 30 July, 2015: Abstain

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

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