Tuesday, 4 Aug 2015 - AMC

Dow -47.51 at 17551.29, Nasdaq -9.84 at 5105.54, S&P -4.72 at 2093.32

Market continues to look weak and volatile. Market was moving flat for the first half of the session before it edged lower at the end of the day with a loss. As the market could not break above Monday's close, I suppose that is just a sign of weakness. 

Asia markets remains mixed especially with China continues to be a wild card. Europe markets were mostly flat to downside. Still doesn't see strong confidence in the global market. 

Market Summary

Industry Watch

Strong: Consumer Discretionary, Financials, Health Care, Industrials, Materials

Weak: Energy, Technology, Utilities

Other Market Moving Factor:

• S&P 500 tests 100-day moving average (2,097)
• Apple (AAPL) weighs on technology sector: down nearly 15% from mid-July high

[BRIEFING.COM] The stock market registered its third consecutive decline on Tuesday with the S&P 500 shedding 0.2% while the Dow Jones Industrial Average (-0.3%) underperformed.  

Equity indices spent the first half of the trading day near their flat lines with the S&P 500 bouncing inside a six-point range. The benchmark index made a brief appearance in the green, but could not build on that momentary gain as the top-weighted technology sector (-0.7%) weighed. Specifically, Apple (AAPL 114.64, -3.80) was down as much as 4.4% in the early going, which kept a lid on the market. The tech heavyweight narrowed its loss to 3.2% by the close, ending near levels last seen in late January. 

Similar to Apple, most large cap tech components registered losses while chipmakers also underperformed with the PHLX Semiconductor Index falling 1.1%. Including today's decline, the SOX index is down 7.2% in 2015. 

Unlike technology, most other cyclical sectors traded in the green early on, but their gains faded during the afternoon. The S&P 500 marked a session low during afternoon action after Atlanta Fed President and FOMC voting member Dennis Lockhart said that, barring significant deterioration in economic data, the economy will be ready for a rate hike in September. The stock market recovered rather quickly from the move that occurred after Mr. Lockhart's comments while Treasuries settled near their lows with the 10-yr yield rising six basis points to 2.21%. On a related note, the Dollar Index (97.91, +0.41) charged to a fresh high, climbing 0.4%. The USD/CAD pair was in focus as continued weakness in the Canadian dollar drove the pair to a fresh 11-year high.  

Although the S&P 500 returned to its intraday range, it could not push into the green as only two sectors—consumer discretionary (+0.3%) and materials (+0.4%)—registered gains. The discretionary sector was underpinned by retailers, evidenced by a 0.7% gain in SPDR S&P Retail ETF (XRT 97.89, +0.67). On the earnings front, Coach (COH 31.40, +0.97) spiked 3.2% after beating earnings and revenue estimates.  

On the downside, the energy sector (-0.5%) struggled even as crude oil rose 1.1% to $45.76/bbl. Similarly, telecom services (-0.5%) and utilities (-1.7%) ended the day behind the broader market. The utilities sector ended at the bottom of the leaderboard, snapping its seven-day streak as higher market rates took some shine of the high-yielding sector.  

Today's participation was in-line with average as roughly 790 million shares changed hands at the NYSE floor.  

Economic data was limited to the Factory Orders report for June, which increased an in-line 1.8%. Durable goods orders increased 3.4% in June, which was unrevised from the advance durable goods report. These orders declined 2.3% in May.  

As the advance report already showed, a majority of the increase in orders was the result of a 56.0% increase in defense and nondefense aircraft orders. Excluding transportation, durable goods orders were revised down from a 0.8% gain in the advance report to an increase of 0.6%.  

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while ADP Employment Change for July (Briefing.com consensus 220K) will be announced at 8:15 ET. The Trade Balance for June (consensus -$42.70 billion) will cross the wires at 8:30 ET while the ISM Services Index for July (expected 56.3) will be reported at 10:00 ET.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -0.1%; Hing Kong’s Hang Seng -0.02%; China’s Shanghai Composite +3.7%
China’s Shanghai Composite surged 3.7%, yet that belies the fact that most markets in the Asia-Pacific region finished lower on Tuesday, drafting off the relatively weak showing from Wall Street and the continued decline in commodity prices. China’s strength was attributed to reports that regulators took further steps to curb short selling.

Economic data

• Japan
• Monetary Base +32.8% year-over-year (expected 32.2%; prior 34.2%)
• Average Cash Earnings -2.4% year-over-year (expected +0.9%; prior +0.7%)
• South Korea
• July CPI +0.2% month-over-month (expected +0.2%; prior 0.0%); +0.7% year-over-year (expected +0.7%; prior +0.7%)
• Australia
• Reserve Bank of Australia leaves cash rate unchanged at 2.00% as expected
• June Trade Balance AUD -2.933 bln (expected AUD -3.100 bln; prior AUD -2.677 bln)
• Exports +3.0% month-over-month (prior +1.0%)
• Imports +4.0% month-over-month (prior -4.0%)
• June Retail Sales +0.7% month-over-month (expected +0.5%; prior +0.4%); +0.8% quarter-over-quarter (expected +0.4%; prior +0.6%)
• India
• Reserve Bank of India leaves key repo rate unchanged at 7.25% as expected
• Reverse repo rate unchanged at 6.25% (expected 6.25%)
• Cash reserve ratio unchanged at 4.00% (expected 4.00%)

Equity Markets

• Japan’s Nikkei closed on an upswing but still declined 0.1% for the session. Weakness in the technology (-1.9%), materials (-1.3%), and industrials (-0.8%) offset strength in the health care (+2.0%), consumer discretionary (+0.8%), and financials (+0.3%) sectors. Maruha Nichiro (-7.4%), Mitsubishi (-6.9%), and IHI Corp (-6.7%) led individual decliners while Nippon Soda (+6.0%), Kajima Corp (+5.9%), and Sumitomo Dainippon Pharma (+5.2%) paced the winners. Out of the 225 index members, 85 ended higher, 135 finished lower, and 5 were unchanged.
• Hong Kong’s Hang Seng ended just below the unchanged mark in a meandering session that saw it spend most of the time rebounding from an early 0.8% decline. China Mengniu Diary (-4.2%), Tingyi Cayman Islands Holding Corp (-3.0%), and HSBC Holdings (-1.6%) were the worst-performing stocks. China Resources Power Holdings (+4.7%), China Life Insurance (+3.4%), and Sino Land Co (+2.4%) topped the list of winners. Out of the 50 index members, 28 ended higher, 20 finished lower, and 2 were unchanged.
• China’s Shanghai Composite surged 3.7% and finished at its highs for the day. The market rallied on reports regulators have made it even more difficult to sell stocks short. Several brokerages, including Citic Securities, announced they would be suspending their short-selling services on a temporary basis, according to media reports.
• India’s Sensex declined 0.4%, dragged down by weakness in the utilities (-1.9%), technology (-0.8%), energy (-0.6%), and financials (-0.5%) sectors. Hero MotoCorp (-2.7%), Oil & Natural Gas Co (-2.7%), and GAIL India (-2.6%) were the weakest performers. Tata Steel (+3.4%), Hindalco Industries (+3.4%), and Coal India (+2.7%) led all gainers. Out of the 30 index members, 12 ended higher and 18 finished lower.
• Australia’s S&P/ASX 200 increased 0.3% following the RBA’s expected decision to leave its cash rate unchanged at 2.00%. The gains were underpinned by strength in the utilities (+1.5%), healthcare (+1.2%), and consumer discretionary (+1.0%) sectors. Out of the 200 index members, 120 ended higher, 68 finished lower, and 12 were unchanged.
• Regional advancers: South Korea +1.0%, Philippines +0.3%
• Regional decliners: Taiwan -0.2%, Malaysia -1.2%, Indonesia -0.4%, Singapore -0.1%, Thailand -0.9%, Vietnam -1.4%

FX

• USD/CNY +0.01% at 6.2101
• USD/INR -0.4% at 63.7850
• USD/JPY -0.1% at 123.94

EUROPE

Major European indices trade lower across the board with Italy’s MIB (-1.4%) pacing the slide. Elsewhere, Greek banks have faced continued heavy selling pressure following yesterday’s re-opening of the Athens Stock Exchange. Meanwhile, the Athens General Index remains lower by 1.7% after being down as much as 4.9% earlier.

• Eurozone June PPI -0.1% month-over-month, as expected; -2.2% year-over-year, as expected
• UK’s July Construction PMI fell to 57.1 from 58.1 (expected 58.4)
• Spain’s Unemployment Change -74,000 (expected -45,600; prior -94,700)

Closing Prices

• UK’s FTSE: 0.0%
• Germany’s DAX: + 0.1%
• France’s CAC: -0.2%
• Spain’s IBEX: -1.1%
• Portugal’s PSI: -0.6%
• Italy’s MIB Index: -1.0%
• Irish Ovrl Index: 0.0%
• Greece ASE General Index: -1.2%

Macroeconomic Data

Economic Data

from Briefing.com

• Factory Orders : 1.8% vs 1.8% (Prior -1.1% - Down)

FACTORY ORDERS

Highlights

• Factory orders increased 1.8% in June after declining a downwardly revised 1.1% (from -1.0%) in May. The Briefing.com Consensus expected factory orders to increase 1.8%.

Key Factors

• Durable goods orders increased 3.4% in June, which was unrevised from the advance durable goods report. These orders declined 2.3% in May.
• As the advance report already showed, a majority of the increase in orders was the result of a 56.0% increase in defense and nondefense aircraft orders.
• Excluding transportation, durable goods orders were revised down from a 0.8% gain in the advance report to an increase of 0.6%.
• Orders of nondefense capital goods excluding aircraft were revised down and increased 0.7% (from 0.9%) in June after declining 0.8% in May. Shipments, however, were revised up to 0.3% gain from a previously reported 0.1% decline. That should help bolster second quarter GDP growth when the second estimate is released at the end of the month.
• Nondurable goods orders increased 0.4% in June after being flat in May.

Big Picture

• That was only the second monthly increase in factory orders thus far in 2015.

Market Internals

NYSE:

Lower Volumes than the day before – 817.2M vs 832.3M 


Decliners outpaced Advancers (adv/dec): 1366 / 1676

New Lows outpaced New Highs (highs/lows): 111 / 208

NASDAQ:

Higher Volumes than the day before – 1810.3M vs 1785.2M

Decliners outpaced Advancers (adv/dec): 1403 / 1436

New Lows outpaced New Highs (highs/lows): 88 / 130

VOLATILITY S&P500 (VIX)
13.00 +0.44 (+3.50%)

Internals aren't exactly directional. Volume is taking a dip as participation rate drops. VIX went up to test its ascending trend line and it is likely to tick higher after finding a support at around 12.00.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,550.69 -47.51 (-0.27%)

Volume: 99,063,734 (above average of 92,305,215)
Range: 17,505.50 - 17,635.78

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,105.55 -9.83 (-0.19%)
Volume: 411.5M (below average of 431,502,392)

Range: 5,092.46 - 5,125.90

S&P 500 INDEX (SPX: CBOE)

2,093.32 -4.72 (-0.22%)

Volume: 545,885,000 (above average of 527,542,323)

Range: 2,088.60 - 2,102.51

DOW seems to close below its ascending trend line and next line of support is likely to be 17,500 and 17,460. That is also the neckline for the head and shoulder in DOW. NASDAQ is on the verge of breaking lower its 20MA and formed a head and shoulder pattern too. Next support level is around 5,075 and 5,060. S&P broke below its 61.8% Fib support level as well as its 20 and 50MAs. These are all pointing to the market is about to crash lower. 

Commodities

Closing Commodities: Energy Futures Hold Some Gains Despite Reversal In Dollar Index

• The dollar index rallied off its morning lows, which helped weigh on select commodities such as precious metals
• Energy held some gains with Sept crude oil closing $0.51 higher at $45.76/barrel and Sept natural gas ending $0.06 higher to finish at $2.81/MMBtu
• Precious metals finished the day mostly flat
• Dec gold rose $1.40 in floor trading today to $1090.70/oz, while Sept silver rose $0.04 to $14.55/oz
• Copper gained 0.8% to $2.36/lb

Energy

• September crude oil futures rose $0.51 to $45.76/barrel
• September natural gas closed $0.06 higher at $2.81/MMBtu
• RBOB Gasoline closed $0.01 higher at $1.69/gallon
• Heating oil futures closed $0.02 higher at $1.55/gallon

Agriculture

• December corn closed $0.02 higher at $3.79/bushel
• September wheat closed $0.05 lower at $4.94/bushel
• November soybeans closed $0.08 higher to $9.43/bushel
• Sugar #11 closed $0.12 higher at 11.01 cents/lb

Metals

• December gold ended today’s session $1.40 higher at $1090.70/oz
• September silver closed today’s session $0.04 higher (+0.3%) at $14.55/oz
• September copper closed $0.02 higher (+0.8%) at $2.36/lb

Currencies

RBA Removes Concerns on Aussie Valuation: The Dollar Index is attempting to brush off a steady flow of weak U.S. economic data. The DXY has been able to hold 97 but headwinds continue to grow as data fails to support the case for a September rate hike. However, the jobs report Friday still lingers and a strong report could erase some of this trend. Factory Orders this morning were in line with expectations but a revision lower to the prior month has many viewing this as yet another miss. 

• The euro is showing some signs of being able to move up and test 1.10 for resistance. The weakness in the dollar has helped and the single currency has also been boosted by positive comments emanating from a meeting between Greece and EU creditors. The euro is trading at 1.0968 and is now approx 36 pips off the session lows.
• The pound is rallying hard off the 1.5560 level. Sterling has run approx 60 pips over the last 30 minutes as it sees some buying interest. It will be key for the pound to hold this 1.56 level and build a base for a test of the 1.57-1.58 area. Thursday's BoE interest rate decision and inflation report stand as key potential catalysts for sterling.
• The yen continues to straddle the 124 level in relatively uneventful trade. Yen has remained in the 123.80-124.10 area over the course of the session. The Bank of Japan has an interest rate meeting on Thursday evening but there is little expected in the way of news. 
• The Aussie dollar has been one of the more notable movers this morning. The RBA met early this morning and left its rates unchanged at 2.00% which was widely expected. What surprised markets though was the central bank omitting its statement about its currency being over valued. This was the first time in 18 meetings that the central bank did not mention this concern. Many are taking it as the first signs of a tightening phase for the central bank. This has led the Aussie to rally from 0.7263 to 0.7428.

Bonds

Take That:

• A day that began innocently enough on some profit taking took on a more meaningful tone late in the session after Atlanta Fed President Lockhart -- a voting FOMC member -- told The Wall Street Journal that he thought September could be an appropriate time for a rate hike and that the bar is high in his own estimation for not raising rates.
  
• The front of the curve bore the brunt of the Lockhart-related selling interest and understandably so given its higher sensitivity to changes in the fed funds rate
  • 2-yr: +7 bps to 0.74%
  • 5-yr: +8 bps to 1.60%
  • 10-yr: +6 bps to 2.21%
  • 30-yr: +4 bps to 2.89%
    
• With the spike in yield for the 2-yr note, the 2-10 spread actually came in a basis point from Monday's settlement to 147 basis points
  
• Lockhart's remarks had a cascading effect in that they breathed life back into a listless dollar, which took the wind out of a rally effort by WTI crude futures, disintegrated the small gain that had been seen in the euro, and knocked the major stock averages to new session lows.
  • WTI crude futures, up 2.4% at their best level of the day, settled up 1.1% at $45.76/bbl
  • The US Dollar Index, down 0.1% in front of Lockhart's remarks, was up 0.4% as of this post
    • USD/JPY +0.3% to 124.33
    • EUR/USD -0.6% to 1.0893
      
• In other developments, the June Factory Orders report didn't cause much of a stir in the Treasury market since the headline numbers were largely in-line with estimates
  • June orders up 1.8% (Briefing.com consensus +1.8%)
  • May orders revised to -1.1% (from -1.0%)
  • An upward revision for shipments of nondefense capital goods, excluding aircraft, to 0.3% from -0.1% will help in computations for second estimate of Q2 GDP
    
• Other central bank action:
  • Reserve Bank of Australia left cash rate unchanged at 2.00%, as expected
  • Reserve Bank of India left key repo rate unchanged at 7.25%, as expected
    
• Coming up on Wednesday:
  • MBA Mortgage Index (07:00 a.m. ET)
  • ADP Employment Change for July (08:15 a.m. ET)
  • June Trade Balance (08:30 a.m. ET)
  • July ISM Services Index (10:00 a.m. ET)
  • EIA's weekly crude inventory report (10:30 a.m. ET)

Treasury Yields:

• 2 Year Note 0.74% +0.06
• 5 Year Note 1.60% +0.08
• 10 Year Note 2.23% +0.07
• 30 Year Bond 2.90% +0.04

2/30 Spread: 216 bps ( -2 ) …  2/10 Spread: 149 bps ( +1 )

Preview for Wednesday 5 August, 2015

Economic Data

Wednesday (5 Aug) : 

• MBA Mortgage Index : (Prior 0.8%)
• ADP Employment Change : 220K (Prior 237K)
• Trade Balance : -$42.7B (Prior -$41.9B)
• ISM Services : 56.3 (Prior 56.0)
• Crude Inventories : (Prior -4.203M) 

Earnings Highlights

Wednesday (5 Aug) :
BMO - AMSC ANSS ARIA ARQL ATRO ATHM AVA AVT AVOL BLT CSTE CCG CRME CLDT CHK CLH CTSH CRK CNNX CFMS CSTM CEQP CMLP CONE DNR DISCA DISH D EPC EE ENBL DAVE FI GLPG GDP GTN GSIG HSC HCA HFC ICON ICE INXN SNAK ITG KATE KELYA KERX LG LDOS LGIH LINC LIOX LPLA LL MWE MSO MEMP MSI DNOW PRGO RL PCLN PPP PWR SALE RDC SPNS SBGI SODA ONCE SPAR SE SPB STCK SCMP SUP SRDX TMHC THR TWX USAC VLP VIRT VC VSI VOYA WD WCG WEN WIX
AMC - FOXA ACXM AEGR HIVE MITT AGU ATSG ALB ALDR LNT AYA UHAL ACAS AWK ANDE NLY AMTG AAOI AREX ARCW ARNA ATO AVG AXLL AXON BWXT BZUN ABX BIOS BLUE BPMC BRKR CJES CPE CSII CSLT CBS CDI CLDX CTL CFCLNE CODI CNAT CLR CORT CXW COUP BREW CCRN CSGS CUTR DPM DXCM FANG DCO DNB ECHO ETP ETE ENS EQC EVTC FRT FGL FNGN FIT FLT FMC FOXF RAIL FTD BGC GKOS GDDY GBDC GPOR HABT HGR HR HLF HRTG HI HDP IAG INOV ICPT XENT IILG IL IVR IO IRWD ITRI JACK JRVR JAZZ JONE KAI KW GMCR KND LADR LDRH LGCY LHCG LMOS MNTX MRO MCHX MRIN DOOR MED MELI MG MFLX MUSA MYRG NHI NP NKTR NNBR NOG NWPX OME OPK OSUR PACB PRXL PDLI PNNT PFSI PMT PFMT PGTI PHH PRAA PSIX POWR PRI PRU QLTY STR RYN RLD RP REG REXR RLJ FUEL RST RGLD SD SGMO SWM SQNM MCRB SHOR SGI SBY SSNI SF SGY BEE SLF SEMI SXL SUN TTEC TS TSLA TSO TLLP TTPH TC TRNX RIG TCAP TTMI TUMI TRQ UIL ECOL VVC VEC WTI WTW WGL WSR WK WPX XNPT XPO ZGNX ZU

Summary
Market seems rather neutral to me right now as it can go anywhere. This week employment number is likely to give the catalyst needed.

It is going to take some significant news to bring the rally back. But looking at the market now, that is quite unlikely. If the support doesn't hold, market is most likely to stay down.

Direction for Wednesday 5 Aug, 2015: Down

2015 Daily Directional Accuracy: 74/120  (61.67%) 

2015 Weekly Directional Accuracy: 17/28 (60.71%)