Monday, 10 Aug 2015 - AMC

Dow +241.79 at 17615.17, Nasdaq +58.25 at 5101.79, S&P +26.61 at 2104.18

Well there was more pullback in the market as we saw Monday session opened to the upside. However the lack of economic data also affected the remaining session in moving mostly flat for the day. 

China market churned out a positive day despite their disappointing PPI number. Perhaps what influenced the market was the intervention of the central bank. Meanwhile Europe was performing generally okay as they are staying off the radar at the moment besides the negotiations for the third bailout package for Greece.  

Market Summary

Industry Watch

Strong: Consumer Discretionary, Energy, Health Care, Industrials, Technology, Telecom Services

Weak: Utilities

Other Market Moving Factor:

• Greece on track to secure third bailout package in time for August 20 payment to European Central Bank
• China's Shanghai Composite surges 4.9% after disappointing trade data increases hopes for stimulus

[BRIEFING.COM] The stock market began the trading week on a sharply higher note with the S&P 500 spiking 1.3% while the Dow (+1.4%) and Nasdaq (+1.2%) bookended the benchmark index.  

Equity indices surged out of the gate after the overnight session featured a 4.9% spike in China's Shanghai Composite after below-consensus trade data from China was viewed as an argument in favor of more policy easing. The overnight strength carried over to the European session as regional indices rallied amid reports suggesting Greek officials and eurozone negotiators are nearing a final agreement on a third bailout package for Greece.  

Once the opening bell rang on Wall Street, U.S. stocks perked up with the S&P 500 charging above its 50-day (2,096) and 100-day (2,098) moving averages. The benchmark index overtook both those levels during the opening hour, and inched to new highs during afternoon action with nine sectors ending in the green.  

Cyclical sectors paced the opening rally and they continued showing relative strength into the afternoon. The industrial sector (+1.9%) was the early leader, thanks to a 19.1% surge in Precision Castparts (PCP 230.93, +37.05) after the company agreed to be acquired by Berkshire Hathaway (BRK.B 143.39, -0.16) for $235/share.  

Meanwhile, another cyclical sector—energy (+3.1%)—took the lead during late morning action thanks to an intraday spike in crude oil. The energy component jumped 2.5% to $44.95/bbl with the move partially supported by dollar weakness as the Dollar Index (97.17, -0.40) fell 0.4%.  

Elsewhere among cyclical groups, the top-weighted technology sector (+1.6%) settled among the leaders with chipmakers showing notable strength. The PHLX Semiconductor Index soared 2.5% with all but one component ending in the green. 

Moving to the countercyclical side, the telecom services sector (+1.8%) settled ahead of the broader market while consumer staples (+0.4%), health care (+0.8%), and utilities (-0.4%) underperformed.  

The utilities sector struggled throughout the day as higher Treasury yields made rate-sensitive utility stocks less appealing. The 10-yr note settled just above its low with the benchmark yield higher by seven basis points at 2.24%. 

Today's participation was roughly in-line with average as 800 million shares changed hands at the NYSE floor. 

Investors did not receive any economic data today, but tomorrow, preliminary Q2 productivity (Briefing.com consensus 1.4%) and unit labor cost (consensus -0.1%) data will be released at 8:30 ET while June Wholesale Inventories will be reported at 10:00 ET.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +0.4%; Hong Kong’s Hang Seng -0.1%; China’s Shanghai Composite +4.9%
China’s Shanghai Composite was up to its old ways, gaining 4.9% on a wave of policy stimulus speculation that took shape following a disappointing trade balance report and a larger than expected decline in the producer price index. The local enthusiasm, however, didn’t carry over in universal fashion as a number of other markets in the region, including Hong Kong’s Hang Seng (-0.1%), ended lower on China’s fundamentally disappointing economic news.

Economic data

• China
• July Trade Balance CNY 43.03 bln (expected CNY 53.25 bln; prior CNY 46.54 bln)
• Exports -8.3% year-over-year (expected -1.0%; prior +2.8%)
• Imports -8.1% year-over-year (expected -8.0%; prior -6.1%)
• July CPI +0.3% month-over-month (expected +0.3%; prior 0.0%); +1.6% year-over-year (expected +1.5%; prior +1.4%)
• July PPI -5.4% year-over-year (expected -5.0%; prior -4.8%)
• Japan
• Adjusted Current Account JPY 1.30 tln (expected JPY 1.41 tln; prior JPY 1.64 tln)
• July Bank Lending +2.6% year-over-year (expected +2.5%; prior +2.5%)
• July Household Confidence 40.3 (expected 42.2; prior 41.7)
• July Economy Watchers Current Index 51.6 (expected 53.1; prior 51.0)

Equity Markets

• Japan’s Nikkei increased 0.4% and finished near its highs for the day. The health care (+1.3%), consumer staples (+1.2%), and financials (+0.6%) sectors provided leadership. Unitika (+6.7%), Sumco (+6.4%), and Yokogawa Electric (+6.3%) topped the list of individual winners while Mitsui Mining & Smelting (-7.2%), Tokyo Electric Power (-6.2%), and Sumitomo Chemical (-3.8%) paced the decliners. Out of the 225 index members 121 ended higher, 95 finished lower, and 9 were unchanged.
• Hong Kong’s Hang Seng declined 0.1%, failing to ride the belief among mainland markets that a battery of weak data for China raised the prospect of further policy stimulus. Belle International Holdings (-3.0%), Kunlun Energy (-2.4%), and Wharf Holdings (-2.1%) were the worst-performing issues. Sands China (+4.0%), China Merchants Holdings (+3.4%), and China Unicom Hong Kong (+3.2%) were the biggest gainers. Out of the 50 index members, 21 ended higher and 29 finished lower.
• China’s Shanghai Composite surged 4.9% and finished near its highs for the session. The rally followed some disappointing trade balance and PPI data, which fueled speculation the central bank might be obliged to provide more policy stimulus. Separately, the CSI Index jumped 4.5%.
• India’s Sensex declined 0.5%, suffering the entirety of its loss in a final-hour selloff. The energy (-2.0%), materials (-1.0%, and financials (-0.4%) sectors were the biggest drags on the index. Oil & Natural Gas Co. (-3.0%), Tata Motors (-2.6%), and Mahindra & Mahindra (-2.6%) were the worst-performing issues while Bharat Heavy Electricals (+2.1%), Here MotoCorp (+1.4%), and Maruti Suzuki India (+1.1%) were the best-performing issues. Out of the 30 index members, 9 ended higher and 21 finished lower.
• Australia’s S&P/ASX 200 increased 0.6% on the heels of Friday’s 2.4% decline. Support was provided by the financial shares, although the utilities (+1.7%), consumer discretionary (+1.3%), and industrials (+1.0%) sectors were the best-performing areas. JB Hi-Fi Ltd (+10.6%) topped the list of winners while Ansell (-15.8%) was the biggest loser. Out of the 200 index members, 130 ended higher, 52 finished lower, and 18 were unchanged.
• Regional advancers: Taiwan +0.3%, Vietnam +1.8%, Philippines +0.02%
• Regional decliners: South Korea -0.4%, Malaysia -1.7%, Indonesia -0.5%, Thailand -0.8% · Closed for holiday: Singapore (National Day)

FX

• USD/CNY unch at 6.2097
• USD/INR +0.1% at 63.8788
• USD/JPY +0.4% at 124.75

EUROPE

Major European indices trade mostly higher while UK’s FTSE (-0.5%) underperforms amid weakness in mining names following China’s trade data. Elsewhere, Greek officials are reportedly nearing a deal with Eurozone creditors ahead of an August 20 payment to the European Central Bank. The third bailout program is expected to pass the Greek parliament by August 13.

• Eurozone August Sentix Investor Confidence ticked down to 18.4 from 18.5 (expected 20.2)

Closing Prices

• UK’s FTSE: + 0.3%
• Germany’s DAX: + 1.0%
• France’s CAC: + 0.8%
• Spain’s IBEX: + 1.2%
• Portugal’s PSI: + 0.5%
• Italy’s MIB Index: + 1.1%
• Irish Ovrl Index: + 0.0%
• Greece ASE General Index: + 2.1%

Macroeconomic Data

Economic Data

from Briefing.com

• No Economic Data

Market Internals

NYSE:

Higher Volumes than the day before – 868.5M vs 831.4M 


Advancers outpaced Decliners (adv/dec): 2352 / 737

New Highs outpaced New Lows (highs/lows): 82 / 78

NASDAQ:

Lower Volumes than the day before – 1760.2M vs 1993.9M

Advancers outpaced Decliners (adv/dec): 1961 / 870

New Lows outpaced New Highs (highs/lows): 56 / 82

VOLATILITY S&P500 (VIX)
12.23 -1.16 (-8.66%)

Internals are surprisingly bullish and New Lows is showing a significant dip for the past few sessions. But New Highs did not really pace up. VIX went down to its support level around 12.00. I will be watching whether the support is going to hold this time round again? It seems that VIX has been hitting the support level and always bounce back from the point. That is certainly a significant support.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,615.17 +241.79 (+1.39%)

Volume: 92,426,375 (below average of 92,466,300)
Range: 17,375.18 - 17,629.13

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,101.80 +58.26 (+1.16%)
Volume: 435,821,906 (above average of 431,903,216)

Range: 5,081.11 - 5,112.47

S&P 500 INDEX (SPX: CBOE)

2,104.18 +26.61 (+1.28%)

Volume: 536,952,000 (above average of 530,490,908)

Range: 2,080.98 - 2,105.35

DOW formed a reversal and broke above its previous support at around 17,580. Even so, the 50MA is about to cross below the 200MA, forming a death cross. The resistance is likely to be around 17,650. NASDAQ gap up and went to test its resistance at 5,100 while sitting on 50MA. S&P also formed a reversal and broke above all 3 - 20, 50 and 100MAs. Next resistance is around 2,110/2,115.  

Commodities

Closing Commodities: Commodities Hold Gains, WTI Oil Closes Near $45

• Commodities largely help gains today, while a slide in the dollar index helped provide broad market strength
• Energy futures gained, including Sept crude oil, which rose +2.5% to $44.95/barrel and Sept nat gas, which gained +1.4% to $2.84/MMBtu
• Metals rallied as well, with copper and silver futures displaying a nice move
• Sept silver gained +3% to $15.28/oz, while Sept copper rallied +3% to $2.40/lb
• Dec gold climbed +0.9% to $1104.50/oz

Energy

• September crude oil futures rose $1.08 (+2.5%) to $44.95/barrel
• September natural gas closed $0.04 higher (+1.4%) at $2.84/MMBtu
• RBOB Gasoline closed $0.07 higher at $1.69/gallon
• Heating oil futures closed $0.05 higher at $1.59/gallon

Agriculture

• December corn closed $0.18 higher at $4.02/bushel
• September wheat closed $0.16 higher at $5.26/bushel
• November soybeans closed $0.32 higher to $9.96/bushel
• Sugar #11 closed $0.09 cents lower at 10.57 cents/lb

Metals

• December gold ended today’s session $10.30 higher (+0.9%) at $1104.50/oz
• September silver closed today’s session $0.46 higher (+3.1%) at $15.28/oz
• September copper closed $0.07 higher (+3.0%) at $2.40/lb

Currencies

Dollar and Yen Decline

• After touching a 3-month high on Friday, the U.S. Dollar Index fell to a 1-week low today. Both Vice Fed Chair Stanley Fischer and Atlanta Fed President Dennis Lockhart spoke publicly and the market interpreted their remarks as somewhat more dovish than expectations. Lockhart's hawkish remarks last week sent the yield curve flattening
  • U.S. Dollar Index: -0.39% to 97.17
• EUR/USD: +0.50% to $1.1022
  • Sentix Investor Confidence for the eurozone fell to 18.4 in August from 18.5 July. The market had been expecting a jump
• GBP/USD: +0.63% to $1.5592
• USD/JPY: +0.29% to 124.58
  • Japan’s current account deficit narrowed to 0.559 tln yen in June from 1.881 tln in May
  • Bank Lending grew a better-than-expected 2.6% y/y in July versus 2.5% in June
  • Household Confidence unexpectedly fell to 40.3 in July from 41.7 in June
• USD/CHF: -0.01% to 0.9831
• USD/CAD: -0.89% to 1.2019
• AUD/USD: -0.15% to $0.7407
• NZD/USD: -0.13% to $0.6611
• USD/RUB: -1.61% to 62.97
  • Russia's GDP declined 4.6% q/q in Q2, more than expected and more than the 2.2% fall in Q1. The recession is being driven by lower energy prices

Bonds

Government Yields Pop on Investors' Higher Risk Appetite

• U.S. Treasuries sold off today as equity markets sharply reversed the selling that began with last Wednesday's reversal lower. Long-dated Treasuries (10's and 30's) also touched significant technical targets (their 200-day moving averages) last week that prompted profit-taking. The U.S. Treasury will auction $64 bln of coupon securities over the next three days
• Yield Check:
  • 2-yr: unch at 0.73%
  • 5-yr: +4 bps to 1.62%
  • 10-yr: +7 bps to 2.23%
  • 30-yr: +8 bps to 2.90%

• News:
  • The Shanghai Composite rallied 4.92% overnight, its biggest gain in a month
  • Fed Vice Chair Stanley Fischer appeared in an interview on Bloomberg Television
    • He said that low inflation in the U.S. continues to be a problem, although part of it is transitory, owing to lower commodity prices 
    • The Fed fund futures market's implied probability of a rate hike at the September 16-17 meeting edged lower today to 52%
  • Atlanta Fed President Lockhart also spoke publicly, saying that liftoff for rates is near 
    • He noted that if the Fed had a single mandate (just for price stability rather than price stability and full employment), it might be doing even more to get inflation up to its 2% target
    • The market interpreted his remarks as more dovish than last week's, when he said that he would need to see a "significant deterioration" in economic conditions to vote against a hike
  • Greece and its official creditors were said to be finalizing the text of a deal on the country's third bailout for 80-90 bln euro

• Commodities:
  • WTI crude: +2.05% to $44.77/bbl.
  • Gold: +0.72% to $1,102.00/troy oz.
  • Copper: +2.57% to $2.3925/lb.

• Currencies:
  • EUR/USD: +0.46% to $1.1019
  • USD/JPY: +0.33% to 124.62

•  Data Out Tuesday:
  • Q2 Productivity and Unit Labor Costs – Preliminary (08:30 ET)
  • June Wholesale Inventories (10:00 ET)
• Treasury Auction:
  • $24 bln 3-year note auction (results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.73% UNCH
• 5 Year Note 1.62% +0.03
• 10 Year Note 2.24% +0.06
• 30 Year Bond 2.89% +0.06

2/30 Spread: 216 bps ( +6 ) …  2/10 Spread: 151 bps ( +6 )

Preview for Tuesday 11 August, 2015

Economic Data

Tuesday (11 Aug) :

• Productivity - Prelim : 1.4% (Prior -3.1%)
• Unit Labour Costs - Prelim : -0.1% (Prior 6.7%)
• Wholesale Inventories : (Prior 0.8%)

Earnings Highlights

Tuesday (11 Aug) :
BMO - WMS ACM AER ARCO ARES CGIX CFMS EGRX FMSA JASO MGIC MBUU MTLS QIWI RRGB RTK TW VPG ZBRA
AMC - EPAY CBYL CIVI CDXS CSC CREE CYBR EVDY EXEL FOGO FOSL FRPT HMIN INGN LMNS MYGN OPWR PE FENG SLW SYMC TAHO VIAV ZFGN

Summary
Aside the lack of economic data on Monday, I feel the pullback we saw in the market was somewhat temporary. I assumed there would be some short-covering after the sell-off last week but I just don't think that we should see the market returns to rally. And as the market is still in a downtrend, I reckon the strength of the pullback is more or less limited.

Direction for Tuesday 11 Aug, 2015: Down

2015 Daily Directional Accuracy: 77/123  (62.60%) 

2015 Weekly Directional Accuracy: 18/29 (62.07%)