Monday, 17 Aug 2015 - AMC

Dow +67.78 at 17545.18, Nasdaq +43.46 at 5091.70, S&P +10.90 at 2102.44

In the pre-market, market was showing a lack of strength and we saw the market opened lower. Surprisingly it quickly reverts to the upside in the first 30 minutes. The comeback was rather remarkable in a sense but it lost the momentum along the session as the market looked flat in the afternoon. 

Both Asia and Europe markets were similarly quiet as well and showing a mixed performance, showing a quiet start for the week. 

Market Summary

Industry Watch

Strong: Telecom Services, Utilities

Weak: Consumer Staples, Energy, Financials, Industrials, Technology

Other Market Moving Factor:

• Empire Manufacturing Survey comes in well below expectations (-14.9; Briefing.com consensus 5.0): Treasuries jump
• Biotechnology outperforms

[BRIEFING.COM] The stock market began the trading week on an upbeat, albeit quiet, note with the S&P 500 climbing 0.5%. The benchmark index turned an opening ten-point loss into an eleven-point gain while the Nasdaq Composite (+0.9%) displayed relative strength throughout the session. 

Equity indices faced some short-lived weakness at the start of the session after the August Empire Manufacturing survey came in well below expectations (-14.9; Briefing.com consensus 5.0). The report was met with a rally in the Treasury market while equity futures slipped, leading to the lower open.  

Despite the early pressure, the major averages were back in the green just 90 minutes after the opening bell and they continued inching higher during afternoon action. The health care sector (+1.0%) was among the early pockets of relative strength as biotechnology rallied throughout the day. The iShares Nasdaq Biotechnology ETF (IBB 371.67, +7.61) climbed 2.1%, contributing to the outperformance of the Nasdaq. 

Unlike health care, the remaining countercyclical sectors could not keep pace with the market. The utilities sector (+0.5%) settled just behind while consumer staples (+0.1%) and telecom services (+0.4%) underperformed.  

Over on the cyclical side, energy (-0.1%) and financials (+0.2%) underperformed while the remaining six groups ended in-line with or ahead of the broader market. The consumer discretionary sector (+1.0%) was a noteworthy area of strength thanks to sector-wide support. Retailers climbed with SPDR S&P Retail ETF (XRT 97.60, +0.70) rising 0.7% while homebuilders rallied across the board. The iShares Dow Jones US Home Construction ETF (ITB 29.17, +0.46) gained 1.6%, ending at levels last seen in August 2007.  

Stock-specific news was limited today, but it is worth noting that Zulily (ZU 18.74, +6.17) spiked 49.1% after agreeing to be acquired by Liberty Interactive (QVCA 29.80, -0.46) for $18.75/share. 

On the downside, the energy sector spent the entire trading day near its flat line as crude oil added to its recent losses, falling 1.5% to $41.87/bbl. Including today's decline, WTI crude is now down 11.9% since the end of July. 

As mentioned earlier, today's trading volume was well below average with fewer than 700 million shares changing hands at the NYSE floor.  

Economic data was limited to Empire Manufacturing and NAHB Housing Market Index: 

• The Empire Manufacturing Survey for August registered a reading of -14.9, which was below the prior month's reading of 3.9 and below the Briefing.com consensus estimate, which was pegged at 5.0 
  • New orders fell to -15.7 from -3.7 while shipments declined -13.8 from +8.2 
• The NAHB Housing Market Index for August rose to 61 from 60, which is what the Briefing.com consensus expected 

Tomorrow, July Housing Starts (Briefing.com consensus 1.200 million) and Building Permits (consensus 1.257 million) will both be reported at 8:30 ET. 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +0.5%; Hong Kong’s Hang Seng -0.7%; China’s Shanghai Composite +0.7%
Trading action was mixed among the major indices in the Asia-Pacific region, although regional bourses were decidedly weak, having been buffeted by ongoing concerns regarding the yuan’s devaluation and the indication that Japan’s economy contracted in the second quarter. Vietnam (-2.7%) led the way lower followed by Malaysia (-1.5%) and Singapore (-1.5%).

Economic Data

• Japan
• Q2 GDP -0.4% quarter-over-quarter (expected -0.5%; prior +1.1%); -1.6% annualized (expected -1.9%; prior +4.5%)
• Q2 GDP Price Index +1.6% annualized (prior +3.4%)
• Singapore
• July Non-Oil Exports +2.4% month-over-month (expected -0.8%; prior -2.7%); -0.8% year-over-year (expected -2.1%; prior +4.5%)

Equity Markets

• Japan’s Nikkei increased 0.5% on the heels of the country’s Q2 GDP report, which showed a contraction in economic activity that was not as large as expected. Gains were paced by the consumer staples (+1.3%), health care (+1.2%), and materials (+0.9%) sectors. Kikkoman (+5.1%), Teijin (+4.9%), and Kyowa Hakko Kirin (+3.7%) were the top-performing stocks. Chiyoda (-3.7%), COMSYS Holdings (-3.0%), and SCREEN Holdings (-2.4%) brought up the rear. Out of the 225 index members, 156 ended higher, 58 finished lower, and 11 were unchanged.
• Hong Kong’s Hang Seng declined 0.7%. Kunlun Energy (-2.5%), China Shenhua Energy (-2.5%), and Bank of East Asia (-2.4%) were the biggest laggards. China Mobile (+1.5%) and Want Want China Holdings (+1.2%), meanwhile, were the only stocks that gained more than 1.0%. Out of the 50 index members, 7 ended higher, 42 finished lower, and 1 was unchanged.
• China’s Shanghai Composite increased 0.7%, overcoming a weak start and finishing at its highs for the session. Airline stocks helped pace the positive start to the week, which saw the yuan trade in steadier fashion but still fall slightly against the greenback.
• India’s Sensex declined 0.7%, hurt by a weak showing from the health care (-1.3%), energy (-1.3%), and consumer discretionary (-1.2%) sectors. Cipla Ltd (-4.9%), Hindalco Industries (-2.7%), and Oil and Natural Gas Co (-2.4%) were the worst-performing stocks while State bank of India (+4.2%), Tata Steel (+3.9%), and GAIL India (+2.3%) topped the list of winners. Out of the 30 index members, 11 ended higher and 19 finished lower.
• Australia’s S&P/ASX 200 increased 0.2%, helped by gains in the gold (+3.0%), utilities (+0.9%), and industrials (+0.5%) sectors. Out of the 200 index members, 92 ended higher, 93 finished lower, and 15 were unchanged.
• Regional advancers: None
• Regional decliners: South Korea -0.8%, Taiwan -1.1%, Malaysia -1.5%, Singapore -1.5%, Thailand -0.5%, Vietnam -2.7%, Philippines -1.0%
• Closed for holiday: Indonesia (Independence Day)

FX

• USD/CNY +0.06% at 6.3949
• USD/INR +0.5% at 65.3150
• USD/JPY +0.2% at 124.54

EUROPE

Major European indices have retreated from their opening highs and they now trade lower across the board. Reports from Europe indicate German Chancellor Angela Merkel will face increasing opposition from her parliament with regard to the bailout package for Greece. Furthermore, it remains unclear whether the International Monetary Fund will be included in the final agreement.

• Eurozone June trade surplus expanded to EUR26.40 billion from EUR18.80 billion

Closing Prices

• UK’s FTSE: 0.0%
• Germany’s DAX: -0.4%
• France’s CAC: + 0.6%
• Spain’s IBEX: + 0.2%
• Portugal’s PSI: + 0.8%
• Italy’s MIB Index: + 0.7%
• Irish Ovrl Index: + 0.4%
• Greece ASE General Index: + 1.0%

Macroeconomic Data

Economic Data

from Briefing.com

• Empire Manufacturing : -14.9 vs 5.0 (Prior 3.9) 
• NAHB Housing Market Index : 61.0 vs 61.0 (Prior 60.0)
• Net Long-Term TIC Flows : $103.0B (Prior $93.0B)

Market Internals

NYSE:

Higher Volumes than the day before – 701.4M vs 654.7M 


Advancers outpaced Decliners (adv/dec): 1879 / 1194

New Lows outpaced New Highs (highs/lows): 94 / 145

NASDAQ:

Higher Volumes than the day before – 1504.4M vs 1471.3M

Advancers outpaced Decliners (adv/dec): 1758 / 1102

New Lows outpaced New Highs (highs/lows): 87 / 95

VOLATILITY S&P500 (VIX)
13.02 +0.19 (+1.48%)

Internals reflected some bullishness as volume picked up slightly. Despite so, volume is still significantly lower compare to average. VIX remains under its 50 and 200MAs while holding on to its 20MA. Next support is 12.80 followed by 12.00. It seems that the market is still optimistic as the VIX has been moving between the range 12.00 to 15.00. I suppose complacency would be a issue going forward.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,545.18 +67.78 (+0.39%)

Volume: 73,377,570 (below average of 92,683,601)
Range: 17,341.72 - 17,551.40

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,091.70 +43.46 (+0.86%)
Volume: 360,390,446 (below average of 431,736,834)

Range: 5,022.42 - 5,092.69

S&P 500 INDEX (SPX: CBOE)

2,102.44 +10.90 (+0.52%)

Volume: 426,042,000 (below average of 531,999,369)

Range: 2,079.30 - 2,102.87

The 3 indices managed to pullback from their support level. DOW sits on a support at 17,350 and went up to meet the ascending trend line, looking to break above. It is likely to find another resistance at around 17,620. NASDAQ continues to find a support at 5,010 and broke above its 50MA and previous channel line. Next resistance should be near 5,120 and then 5,160. S&P rebounds from the ascending trend line and broke above 61.8% Fib level. I think it would meet a resistance at around 2,115. With the lack of volume supporting, I reckon the pullback is going to be temporary. 

Commodities

Closing Commodities: WTI Crude Sells Off Into The Close Of Pit Trading

• The dollar index traded in positive territory in afternoon trading, which helped weigh on commodities
• In current trade, the Bloomberg Commodity Index is trading -0.6% at 89.81
• Sept WTI crude oil futures sold off sharply heading into pit trading, ultimately closing the session -1.6% at $41.81/barrel
• Sept nat gas sold off today, losing -2.5% to close at $2.73/MMBtu
• Precious metals held some gains despite the strength in the dollar index
• Dec gold rose +0.5% at $1118.20/oz, while Sept silver +0.6% to $15.30/oz
• Copper was weak all day, finally closing -0.9% at $2.33/lb

Energy

• September crude oil futures fell $0.66 (-1.6%) to $41.81/barrel
• September natural gas closed $0.07 lower (-2.5%) at $2.73/MMBtu
• RBOB Gasoline closed $0.04 lower at $1.65/gallon
• Heating oil futures closed $0.01 lower at $1.55/gallon

Agriculture

• December corn closed $0.02 lower at $3.74/bushel
• September wheat closed $0.07 lower at $5.00/bushel
• November soybeans closed $0.01 higher to $9.17/bushel
• Sugar #11 closed $0.05 cents lower at 10.63 cents/lb

Metals

• December gold ended today’s session $5.60 higher (+0.5%) at $1118.20/oz
• September silver closed today’s session $0.09 higher (+0.6%) at $15.30/oz
• September copper closed $0.02 lower (-0.9%) at $2.33/lb

Currencies

Greenback and Kiwi Rally

• The U.S. Dollar Index shook off the weak Empire Manufacturing data for August and gained 0.31% to 96.82
• EUR/USD: -0.32% to $1.1076
  • The single currency pulled back today on profit-taking activity after a strong finish to last week's trade
  • Doubts linger about the IMF's participation in Greece's third bailout, but this story has not been driving the EUR/USD trade for weeks, at least
  • Greek Prime Minister Alexis Tsipras may undergo a confidence vote in the fall due to his lack of support within his own party, Syriza
• GBP/USD: -0.35% to $1.5590
  • The U.K. will report its PPI for input and output prices on Tuesday
• USD/CHF: +0.13% to 0.9773
• USD/JPY: +0.09% to 124.43
  • Japan's GDP declined 0.4% q/q in the second quarter after increasing by 1.1% in Q1
  • Capital expenditures fell 0.1% q/q versus growth of 2.8% in Q1
• USD/CAD: -0.10% to 1.3085
  • Foreign Securities Purchases totaled +8.51 bln in June after a withdrawal of 5.46 bln in May
• AUD/USD: +0.01% to $0.7378
  • The minutes from the RBA's most recent meeting will be released tonight
• NZD/USD: +0.50% to $0.6573
  • Dairy futures have been rallying for the past few days ahead of the big dairy auction on Tuesday night and this has been supportive of the Kiwi

Bonds

Governments Gain on Empire State

• U.S. Treasuries gained ground today after the Empire State manufacturing gauge showed extreme softness in New York State's economy. Later, the NAHB Housing Market Index for August came out in line with estimates, but the Treasury market had already seen all it need to see and yields held lower for the rest of the session
• Yield Check:
  • 2-yr: -2 bps to 0.71%
  • 5-yr: -5 bps to 1.55%
  • 10-yr: -5 bps to 2.15%
  • 30-yr: -4 bps to 2.80%

• News:
  • The Empire State general business conditions index dropped to -14.9 in August from a reading of +3.9 in July. The Briefing.com consensus estimate was +5.0
    • The new orders and shipments indices fell to -15.7 and -13.8, respectively, while the inventories index fell to -17.3
    • That was lowest reading since April of 2009
    • According to economists, the bad reading could have been the result of either an unwind of inventories that had been built up in the first half of the year or an effect of the appreciating U.S. dollar
  • The NAHB Housing Market Index rose to 61 in August, its highest level since November 2005. The Briefing.com consensus was also 61, and the July reading was 60
  • 257 bln RMB of foreign exchange left Chinese commercial banks in July versus 93 bln RMB in August
    • That outflow partially explains the timing of China's decision to let market forces dictate the value of the yuan
  • German Chancellor Angela Merkel said that she was confident that the IMF would participate in Greece's third bailout worth 86 bln euro, despite the IMF having said that its participation would require deep haircuts to Greece's debt 

• Commodities:
  • WTI crude: -1.25% to $41.97/bbl.
  • Gold: +0.32% to $1,1116.30/troy oz.
  • Copper: -1.23% to $2.3225/lb.

• Currencies:
  • EUR/USD: -0.27% to $1.1080
  • USD/JPY: +0.08% to 124.41

• Data Out Tuesday:
  • July Housing Starts (08:30 ET)
  • July Building Permits (08:30 ET)

Treasury Yields:

• 2 Year Note 0.72% -0.01
• 5 Year Note 1.58% -0.03
• 10 Year Note 2.16% -0.04
• 30 Year Bond 2.81% -0.03

2/30 Spread: 209 bps ( -2 ) …  2/10 Spread: 144 bps ( -3 )

Preview for Tuesday 18 August, 2015

Economic Data

Tuesday (18 Aug) :

• Housing Starts : 1200K (Prior 1174K)
• Building Permits : 1257K (Prior 1343K)

Earnings Highlights

Tuesday (18 Aug) :
BMO - CMCM DANG DKS EROS HAIN HD TJX TSL VPG WMT
AMC - ADI DV LZB PLAB RPD SINA TEDU WB

Summary
The strong comeback in the morning was nonetheless shocking as I didn't expect the pullback to be that strong. Last week we saw some uncertainty in the market as to whether to break lower or bounce back higher and judging from Monday session, it looks like market is not going down for the time being.

After Hours Report (Briefing)
Futures are slightly higher after hours: S&P 500 futures are +0.14 from fair value of 2,098.51 and Nasdaq100 futures are +1.33 from fair value of 4,561.87.

Tomorrow morning before the open two economic reports are scheduled to be released: 1) Housing Starts (Consensus 1200K), and 2) Building Permits (Consensus 1257K)

Direction for Tuesday 18 Aug, 2015: Up

2015 Daily Directional Accuracy: 81/128  (63.28%) 

2015 Weekly Directional Accuracy: 18/30 (60.00%)