Tuesday, 29 Sept 2015 - AMC

Dow +47.24 at 16049.13, Nasdaq -26.65 at 4517.32, S&P +2.32 at 1884.09

A neither up or down session. Market opened on Tuesday with a slightly bullish manner but eventually lost the steam later on in the session. Perhaps what we saw at the opening was more of short-covering. Following which we saw uncertainty in the market resulted in the volatility. So I won't consider the day to be exactly bullish... 

Markets around the world were mostly closing in red as we saw some spill-over effect from the US markets.  
  

Market Summary

Industry Watch

Strong: Energy, Health Care, Industrials, Materials, Technology

Weak: Consumer Discretionary, Consumer Staples, Financials, Utilities

Other Market Moving Factor:

• Reserve Bank of India cuts key rate by 50 basis points to 6.75%: global equities advance
• Biotechnology rebounds

[BRIEFING.COM] The stock market ended Tuesday on an uninspiring note after surrendering the bulk of its intraday gain. The S&P 500 (+0.1%) added two points after showing an eight-point gain during the opening hour. 

Equity indices rallied at the start, but the rebound from yesterday's 2.6% dive in the S&P 500 hit resistance right beneath the 1,900 level, at which point most sectors began backing away from their morning highs. The health care sector (+0.9%) held the lead throughout the day, but the influential group also retreated from its high as market-wide selling pressure grew heavier during the afternoon. 

That being said, the sector was able to finish in the green while biotech names showed strength in the early going, but the iShares Nasdaq Biotechnology ETF (IBB 289.48, -1.13) surrendered its gain in the afternoon, settling lower by 0.4% to widen this week's decline to 6.7%. Following today's drop, the former high-flying ETF is down 15.4% for September. 

Outside of health care, industrials (+0.6%), financials (+0.4%), and materials (+0.4%) also finished ahead of the broader market while the remaining groups struggled. The consumer discretionary space (-0.3%) underperformed throughout the day amid weakness in apparel retailers and homebuilders. To that latter point, the iShares Dow Jones US Home Construction ETF (ITB 25.71, -0.44) ended lower by 1.7%. 

Elsewhere among cyclical sectors, energy (unch) began the day behind health care, but the commodity-related group retreated into the afternoon even though crude oil rose 1.7% to $45.24/bbl. 

Also of note, the top-weighted technology sector (-0.6%) traded in-line with the market during morning action, but fell to lows in the afternoon. Shares of Apple (AAPL 109.06, -3.38) were largely responsible for the retreat as the stock fell 3.0%. Meanwhile, other large cap components finished closer to their flat lines while high-beta chipmakers outperformed with the PHLX Semiconductor Index climbing 0.7%. 

Taking a look at the bigger picture, the S&P 500 settled 17 points above its low from August 24 with just one trading day remaining in September. The intraday slide from highs invited some demand for volatility protection, but a spike off session lows during the final 30 minutes of the day, pressured the CBOE Volatility Index (VIX 26.54, -1.09) back into the middle of today's range. 

Meanwhile, Treasuries held slim losses during morning action, but they rallied intraday to send the 10-yr yield lower by five basis points to 2.05%. 

Today's participation was ahead of average with more than 980 million shares changing hands at the NYSE floor. 

Economic data was limited to Consumer Confidence and Case-Shiller 20-City Index: 

• The Conference Board's Consumer Confidence Index increased to 103.0 in September from a downwardly revised 101.3 (from 101.5) while the Briefing.com consensus expected a drop to 96.0 
  • The September reading hit its highest level since reaching 103.8 in February 
  • In a clearly unexpected move, consumers shrugged off the negative effects of the downward-trending stock market and instead focused on lower gasoline prices and a generally improving labor market 
• The Case-Shiller 20-city Home Price Index for July rose 5.0% for the second consecutive month, which is what the Briefing.com consensus expected 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while September ADP Employment Change (Briefing.com consensus 200K) will be reported at 8:15 ET. The day's data will be topped off with the 9:45 ET release of the Chicago PMI for September (consensus 52.9).

Global Market

ASIA
Following Wall Street’s lead, major markets in the Asia-Pacific region suffered large losses on Tuesday, none more so than Japan’s Nikkei (-4.1%). The main exception in the region was India’s Sensex (+0.5%). It scored a modest gain following a surprise decision by the Reserve Bank of India to cut its main policy rate by 50 basis points to 6.75%. Economists were expecting a cut of 25 basis points. The rate cut was attributed to concerns about a slowdown in global growth.

Economic data

• India
• Reserve Bank of India cuts main policy rate 50 basis points to 6.75% (expected 7.00%; prior 7.25%)
• Cash Reserve Ratio left unchanged at 4.00% as expected
• Reverse REPO Rate reduced 50 basis points to 5.75% (expected 6.00%; prior 6.25%)

Equity Markets

• Japan’s Nikkei declined 4.1%, suffering large losses on the heels of Wall Street’s weak showing and on concerns about the slowdown in China. Every sector lost ground, led by the health care (-6.6%), communications (-5.9%), and materials (-5.2%) sectors. In turn, all 225 members of the Nikkei were down for the day. The biggest laggards were Kobe Steel (-11.1%), Mitsui & Co. (-9.6%), and Toho Zinc Co (-9.2%). The best-performing stock was Nichirei Corp (-0.4%).
• Hong Kong’s Hang Seng declined 3.0%, but did manage to finish off its lows which had the Index down 3.9% at one point. Growth concerns underpinned the selling efforts. Sands China (-9.4%), CNOOC (-7.7%), and China Petroleum & Chemical Corp (-7.3%) paced the retreat. Out of the 50 index members, only one — China Resources Enterprise (+0.1%) — ended higher.
• China’s Shanghai Composite declined 2.0%, never seeing the light of positive ground in the trading session. The Composite opened lower and stayed lower, following in Wall Street’s footsteps. Reports also attributed some of the weakness to selling by anxious investors in front of China’s 7-day National Holiday that begins this Thursday.
• India’s Sensex increased 0.5%, bucking an otherwise very weak regional trend. The catalyst for the outperformance was the decision by the Reserve Bank of India to cut its main policy rate by a larger than expected 50 basis points to 6.75% (7.00% expected). That cut was pinned on the slowdown in global growth. The financials (+1.8%), consumer discretionary (+1.2%), and industrials (+1.1%) sectors led the advance. Housing Development & Finance Corp (+3.8%), Maruti Suzuki India (+3.2%), and HDFC Bank (+1.8%) were the best-performing issues while Vedanta (-5.5%), Tata Steel (-3.8%), and Hindalco Industries (-3.3%) brought up the rear. Out of the 30 index members, 15 ended higher and 15 finished lower.
• Australia’s S&P/ASX 200 declined 3.8%, settling at its lowest level since July 2013. The weakest links were the energy (-6.7%), resources (-5.9%), and metals & mining (-5.5%) sectors. Out of the 200 index members, 5 ended higher and 195 finished lower.
• Regional advancers: Indonesia +1.4%, Philippines +0.6%
• Regional decliners: Malaysia -0.3%, Singapore -0.1%, Thailand -0.5%, Vietnam -0.7%
• Closed for holiday: South Korea (Chusok Full Moon Fetival); Taiwan (Adjusted Holiday)

FX

• USD/CNY -0.08% at 6.3638
• USD/INR -0.08% at 65.9900
• USD/JPY +0.03% at 119.96

EUROPE
Major European indices trade in mixed fashion with UK’s FTSE (-0.4%) trailing the region.

• Eurozone September Business and Consumer Survey 105.6 (expected 104.1; last 104.1)
• UK’s September CBI Distributive Trades Survey 49 (expected 28; prior 24) while August Mortgage Lending GBP3.40 billion (expected GBP2.90 billion; prior GBP2.80 billion)
• Germany’s August Import Price Index -1.5% month-over-month, as expected; -3.1% year-over-year, as expected
• Spain’s August Retail Sales +3.1% year-over-year (expected 3.3%; prior 4.0%) and September CPI -0.3% month-over-month (expected 0.1%; prior -0.3%); -0.9% year-over-year (consensus -0.6%; last -0.4%)

Closing Prices

• UK’s FTSE: -0.8%
• Germany’s DAX: -0.4%
• France’s CAC: -0.3%
• Spain’s IBEX: + 0.2%
• Portugal’s PSI: -1.4%
• Italy’s MIB Index: -0.2%
• Irish Ovrl Index: -2.6%
• Greece ASE General Index: -0.7%

Macroeconomic Data

Economic Data

from Briefing.com

• Case-Shiller 20-city Index : 5.0% vs 5.0% (Prior 4.9% - Down)
• Consumer Confidence : 103.0 vs 96.0 (Prior 101.3 - Down)

CONSUMER CONFIDENCE

Highlights

• The Conference Board’s Consumer Confidence Index increased to 103.0 in September from a downwardly revised 101.3 (from 101.5) in August. The Briefing.com Consensus expected the index to fall to 96.0.

Key Factors

• That was the best reading since the index reached 103.8 in February.
• In a clearly unexpected move, consumers shrugged off the negative effects of the downward-trending stock market and instead focused on lower gasoline prices and a generally improving labor market.
• The respondents in the University of Michigan Consumer Sentiment Index had the exact opposite view as that index fell to its lowest point since October 2014 in September.
• The Present Situation Index increased to 121.1 in September from 115.8 in August. That was the strongest reading since September 2007.
• The Expectations Index declined to 91.0 from 91.6.
• Stronger confidence levels do not necessarily mean stronger consumption trends. Consumption relies on income growth. As long as income growth accelerates, consumption growth should follow.

Big Picture

• Consumer confidence 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 confidence levels.

Market Internals

NYSE:

Lower Volumes than the day before – 1016.0M vs 1053.5M 


Decliners outpaced Advancers (adv/dec): 1361 / 1741

New Lows outpaced New Highs (highs/lows): 3 / 478

NASDAQ:

Lower Volumes than the day before – 2281.7M vs 2374.9M

Decliners outpaced Advancers (adv/dec): 1072 / 1784

New Lows outpaced New Highs (highs/lows): 16 / 336

VOLATILITY S&P500 (VIX)
26.83 -0.80 (-2.90%)

Internals still point to bearishness as Decliners slightly outpaced Advancers and New Lows remains overwhelming. VIX closed a tad higher despite it could not break above Monday's high. As it continues to stay above 25.00, I believe it would be hard for the bulls to step in.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

16,049.13 +47.24 (+0.30%)

Volume: 121,158,086 (above average of 112,906,505)
Range: 15,942.37 - 16,118.89

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,517.32 -26.65 (-0.59%)
Volume: 548.7M (above average of 457,387,089)

Range: 4,487.06 - 4,596.06

S&P 500 INDEX (SPX: CBOE)

1,884.09 +2.32 (+0.12%)

Volume: 735,886,000 (above average of 632,697,938)

Range: 1,871.91 - 1,899.48

NASDAQ was leading the downside while DOW and S&P seemed to be lagging. DOW barely managed to close above 16,000 as it is likely to go down and test the support around 15,930. NASDAQ went down to test its support level at around 4,490 and we might see some short covering here. Meanwhile S&P is approaching its support at 1,850-1,870 area. If the indices manage to stay above their support levels, I think we should see more short-covering in the next few sessions.  

Commodities

Closing Commodities: Natural Gas Slides Lower, Losing 3% Today

• The dollar index is modestly higher, which has helped weigh on commodities
• WTI crude oil prices climbed higher today and ended the session +1.7% at $45.24/barrel
• In other energy, Nov natural gas slid lower today, ultimately losing 3% in the session to finish at $2.59/MMBtu
• Metals were mixed today with Dec gold fell -0.4% to $1127.00/oz, while Dec silver rose +0.4% to $14.59/oz
• Dec copper slid -1.3% to $2.25/lb.

Metals

• December gold ended today’s session $4.40 lower (-0.4%) at $1127.00/oz
• December silver closed today’s session $0.06 higher (+0.4%) at $14.59/oz
• December copper closed $0.03 lower (-1.3%) at $2.25/lb

Agriculture

• December corn closed $0.02 higher at $3.89/bushel
• December wheat closed $0.02 lower at $5.04/bushel
• November soybeans closed $0.07 higher at $8.84/bushel
• Sugar #11 closed $0.01 cents higher at 11.76 cents/lb

• Energy
• November crude oil futures rose $0.77 (+1.7%) to $45.24/barrel
• November natural gas closed $0.08 lower (-3.0%) at $2.59/MMBtu
• RBOB Gasoline closed $0.02 higher at $1.35/gallon
• Heating oil futures closed $0.03 higher at $1.53/gallon

Currencies

Greenback and Loonie Sell Off

• The U.S. Dollar Index fell 0.09% today to 95.95
  • The Conference Board's Consumer Confidence Index rose to 103.0 in September from 101.3 in August. The Briefing.com consensus was for 96.0
  •  The Case-Shiller 20-City Index showed y/y price growth of 5.0% (0.6% m/m) for July. The reading was in line with the Briefing.com consensus and the growth in the year to June
• EUR/USD: +0.11% to $1.1245
  • Economic confidence in the eurozone rose to its highest level since June 2011 in September, with the European Commission's Business and Consumer Survey rising to 105.6 from a reading of 104.1 in August
    • Services Sentiment unexpectedly rose to 12.0 in September from 10.0 in August
    • Industrial Sentiment rose to -2.0 in September from -3.7 in August. Economists had forecast a decline
• GBP/USD: -0.08% to $1.5155
  • In the U.K., the CBI Distributive Trades Survey of 119 retailers rose to 49 in September from 24 in August. The reading far exceeded economists' estimates 
    • Mortgage approvals jumped to a better-than-expected 71.03K in August from 69.01 in July
    • Net mortgage lending in August was GBP 3.4 bln versus GBP 2.8 bln in July. That reading beat the estimate of every economist in a Reuters poll
• USD/CHF: -0.23% to 0.9722
• USD/JPY: -0.12% to 119.78
  • One of Japanese Prime Minister Shinzo Abe's closest advisers is making noises about further stimulus:
    • While the adviser, Etsuro Honda, said he was not convinced himself on the necessity of further easing, he did say that “I think they are considering whether they should move on additional QQE or not in a very serious way.”
• USD/CAD: +0.19% to 1.3424
  • Canada's Raw Materials Price Index fell a better-than-expected 6.6% m/m in August versus a preliminary estimate of -6.0%
  • The Canadian dollar made a fresh post-crisis low against the greenback
• AUD/USD: +0.19% to 0.6992
• NZD/USD: +0.52% to 0.6346
• USD/RUB: -1.34% to 65.53
  • Russia's GDP shrank 4.6% q/q in the second quarter

Bonds

Flight to Quality Spurs Treasuries Higher

• U.S. Treasuries rallied today as global growth concerns continued to dominate the minds of investors and the major equity indices failed to bounce after Monday's mauling. San Francisco Fed President Williams raised concerns about an overheating property market after the close on Monday. Given that San Francisco is home to one of the hottest real estate markets in the U.S., Williams would have the best vantage point to spot the froth in housing than any other FOMC member. The Conference Board's measure of consumer sentiment was surprisingly resilient in September given the negative headlines and stock market volatility in late August
• Yield Check:
  • 2-yr: -4 bps to 0.64%
  • 5-yr: -6 bps to 1.37%
  • 10-yr: -5 bps to 2.04%
  • 30-yr: -3 bps to 2.84%

• News:
  • The Case-Shiller 20-City Index showed y/y price growth of 5.0% (0.6% m/m) for July. The reading was in line with the Briefing.com consensus and the growth in the year to June 
  • The Conference Board's Consumer Confidence Index rose to 103.0 in September from 101.3 in August. The Briefing.com consensus was for 96.0
    • In a clearly unexpected move, consumers shrugged off the negative effects of the downward-trending stock market and instead focused on lower gasoline prices and a generally improving labor market
    • The Present Situation Index rose to 121.1 from 115.8 in August (highest since 2007). The Expectations Index fell to 91.0 from 91.6
    • Respondents saying that jobs are "plentiful" grew from 22.1% to 25.1%, while those saying jobs are "hard to get" increased from 21.7% to 24.3%
  • Economic confidence in the eurozone rose to a 4-year high in September, with the European Commission's Business and Consumer Survey rising to 105.6 from a reading of 104.1 in August
  • On Monday evening, San Francisco Fed President Williams said that “I am starting to see signs of imbalances emerge in the form of high asset prices, especially in real estate, and that trips the alert system”
    • He also said that the decision not to act at the September meeting was a "close call" and that the Fed would likely hike rates this year

• Commodities:
  • WTI crude: +1.78% to $45.22/bbl.
  • Gold: -0.30% to $1,128.30/troy oz.
  • Copper: +0.40% to $2.2605/lb.

• Currencies:
  • EUR/USD: +0.23% to $1.1258
  • USD/JPY: -0.30% to 119.55

• Data Out Wednesday:
  • MBA Mortgage Index for the week ending 9/26 (07:00 ET)
  • September ADP Employment Change (08:15 ET)
  • September Chicago PMI (09:45 ET)
  • Crude Inventories for the week ending 9/26 (10:30 ET)
• Fed Speakers:
  • New York Fed President Dudley (FOMC voter) (08:35 ET)
  • St. Louis Fed President Bullard (non-FOMC voter) (15:10 ET)

Treasury Yields:

• 2 Year Note 0.64% -0.03
• 5 Year Note 1.37% -0.05
• 10 Year Note 2.05% -0.05
• 30 Year Bond 2.85% -0.02

2/30 Spread: 221 bps ( +1 ) …  2/10 Spread: 141 bps ( -2 )

Preview for Wednesday 30 Sept, 2015

Economic Data

Wednesday (30 Sept) :

• MBA Mortgage Index : (Prior 13.9%)
• ADP Employment Change : 200K (Prior 190K)
• Chicago PMI : 52.7 (Prior 54.4)
• Crude Inventories : (Prior -1.925M) 

Earnings Highlights 

Wednesday (30 Sept) :
BMO - PAYX
AMC - None

Summary

As the market is approaching the August's low, I would be expecting to see some short-covering activities especially after the recent selling. But with 30th of September being statistically bearish (considered as one of the worst trading day of the year), we should see the market set up for some covering after tomorrow session.

Tomorrow is likely to be another volatile session as we will see both ADP employment data and Chicago PMI releasing, together with speech from Fed Chair Yellen and other Fed speakers like Dudley and Bullard.

Direction for Wednesday 30 Sept, 2015: Down

2015 Daily Directional Accuracy: 98/153  (64.05%) 

2015 Weekly Directional Accuracy: 23/36 (63.89%)