Monday, 26 Oct 2015 - AMC

Dow -23.98 at 17622.72, Nasdaq +2.84 at 5034.70, S&P -3.99 at 2071.16

To be honest, I didn't really infer anything from the market. The whole session was just sideway. It just seems that market is waiting for something and I suppose that something is going to be FOMC rate decision on Wednesday... 

Asia markets were showing a mixed performance while Europe markets mostly were in red. 
  

Market Summary

Industry Watch

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

Weak: Energy, Financials, Materials, Technology, Utilities

Other Market Moving Factor:

• Quiet start to the trading week

[BRIEFING.COM] The stock market began the trading week on a quiet note with the S&P 500 (-0.2%) spending the session inside a nine-point range. The benchmark index settled right above the midpoint of that range while the Nasdaq Composite (+0.1%) outperformed throughout the session. 

Generally speaking, the Monday affair was very quiet and free of noteworthy earnings. Accordingly, the benchmark index opened with a two-point loss and traded in sideways fashion until the closing bell. Seven sectors registered losses between 0.2% (consumer staples and industrials) and 2.5% (energy) while consumer discretionary (+0.8%), health care (+0.5%), and telecom services (+0.1%) outperformed. 

Notably, the energy sector fell to the bottom of the leaderboard at the start and remained there throughout the day. The daylong retreat caused the sector to narrow its October gain to 9.0% while crude oil fell 1.4% to $43.98/bbl. 

Elsewhere among cyclical groups, heavily-weighted financials (-0.3%) and technology (-0.3%) underperformed while the consumer discretionary sector (+0.8%) displayed relative strength thanks to a rebound in retail names. The SPDR S&P Retail ETF (XRT 45.23, +0.24) added 0.5%. 

On the downside, the technology sector kept the market under pressure after spiking more than 3.0% on Friday. Chipmakers paced today's pullback with the PHLX Semiconductor Index sliding 2.0%. 

That being said, the Nasdaq was able to overcome the weakness in technology thanks to relative strength in biotech. To that point, the iShares Nasdaq Biotechnology ETF (IBB 317.01, +0.73) advanced 0.2% while the health care sector added 0.5%. 

Unlike stocks, Treasuries inched higher throughout the session with the 10-yr yield slipping three basis points to 2.06%. 

Unsurprisingly, today's participation was below average with fewer than 850 million shares changing hands at the NYSE floor. 

Today's economic data was limited to the New Home Sales report for September, which hit an annualized rate of 468,000. This was down from the revised August rate of 529,000 (from 552,000), and worse than the rate of 550,000 that had been broadly expected by the Briefing.com consensus. The September report was a bit surprising, considering the latest homebuilder surveys have shown strong improvement in current and expected sales growth. The September drop in sales brought inventories back into alignment with sales trends. 

Tomorrow, the September Durable Goods (Briefing.com consensus -1.3%) report will be released at 8:30 ET, August Case-Shiller 20-city Index (expected 0.2%) will be released at 9:00 ET, and October Consumer Confidence (expected 102.5) will be reported at 10:00 ET.

Global Market

ASIA
Markets in the Asia-Pacific region started the new week on a somewhat mixed note. Profit-taking efforts kicked in for some markets while other markets saw only modest gains after some big moves last week. Chinese officials began their fifth plenum planning meetings. Market participants are anxious to hear if officials temper China’s GDP growth target. In the interim, the Shanghai Composite logged a 0.5% gain to begin the week, drawing a measure of support from the PBOC easing measures announced following the close of trading on Friday.

Economic data

• Singapore
• September Industrial Production +0.5% month-over-month (expected +1.0%; prior -3.7%; -4.8% year-over-year (expected -4.6%; prior -7.1%)

Equity Markets

• Japan’s Nikkei increased 0.7% after being up 1.4% earlier in the session. Gains in the technology (+1.3%), health care (+1.1%), and materials (+0.8%) sectors helped pace the advance. Panasonic (+6.1%), Hitachi (+6.1%), and Minebea (+5.1%) were the top-performing issues while Nippon Yusen (-3.3%), Haseko (-2.9%), and Yokogawa Electric Corp (-2.4%) were the worst-performing issues. Out of the 225 index members, 169 ended higher, 46 finished lower, and 10 were unchanged.
• Hong Kong’s Hang Seng declined 0.2%, giving back all of a 1.2% opening gain. There wasn’t a specific news catalyst for the turnaround, which was viewed as a general profit-taking effort. China Resources Power Holdings (-4.8%), BOC Hong Kong Holdings (-2.5%), and PetroChina (-2.1%) paced the losers. Sands China (+2.5%), Belle International holdings (+2.3%), and China Resources Land (+2.1%) topped the list of winners. Out of the 50 index members, 18 ended higher, 31 finished lower, and 1 was unchanged.
• China’s Shanghai Composite increased 0.5%, benefiting from a late-day bump to finish in positive territory. The market was up 1.3%, but fell prone to selling efforts through much of the post-lunch session. The early push was helped along by the stimulus measures the PBOC announced after the market closed on Friday. Separately, Chinese officials started the fifth plenum planning session for economic and social policies. It is thought officials could lower the GDP growth target coming out of the meeting.
• India’s Sensex declined 0.4% after being up 0.5% shortly after the start of trading. The Sensex closed near its lows for the day, led by declines in the energy (-1.5%) and financials (-1.2%) sectors. Coal India (-2.5%), Bharti Airtel (-1.9%), and Housing Development & Finance Corp (-1.9%) led all declining issues while Bharat Heavy Electricals (+3.6%), Vedanta (+2.6%), and Bajaj Auto (+2.4%) paced the winners. Out of the 30 index members, 15 ended higher and 15 finished lower.
• Australia’s S&P/ASX 200 declined 0.1% after being 0.6% at the start of trading. A steady retreat took place after the opening push and the market closed at its lows for the session. The telecom services (-1.1%), industrials (-0.7%), and utilities (-0.6%) sectors paced the pullback. Out of the 200 index members, 86 ended higher, 95 finished lower, and 19 were unchanged.
• Regional advancers: South Korea +0.4%, Taiwan +0.8%, Indonesia +0.8%, Singapore +0.5%, Thailand +0.7%, Philippines +1.2%
• Regional decliners: Malaysia -0.2%, Vietnam -0.5%

FX

• USD/CNY +0.02% to 6.3521
• USD/INR +0.2% to 64.9650
• USD/JPY -0.4% to 120.99

EUROPE
Major European indices trade mostly lower while Germany’s DAX (+0.2%) outperforms. According to the Ifo Institute, the Volkswagen scandal has had no impact on Germany’s auto industry as the domestic economy remains vigilant.

• Germany’s October Ifo Business Climate Index 108.2 (expected 107.8; prior 108.5) as Business Expectations rose to 103.8 from 103.3 (expected 102.4) and Current Assessment fell to 112.6 from 114.0 (consensus 113.5)
• UK’s BBA Mortgage Approvals 44,500 (expected 46,200; prior 46,600) and CBI Industrial Trends Orders fell to -18 from -7 (consensus -8)
• Spain’s PPI -3.6% year-over-year (prior -2.2%)

Closing Prices

• UK’s FTSE: -0.4%
• Germany’s DAX: + 0.1%
• France’s CAC: -0.5%
• Spain’s IBEX: + 0.1%
• Portugal’s PSI: -0.2%
• Italy’s MIB Index: -0.5%
• Irish Ovrl Index: -0.7%
• Greece ASE General Index: + 0.8%

Macroeconomic Data

Economic Data

from Briefing.com

• New Home Sales : 468K vs 550K (Prior 529K - Down)

NEW HOME SALES

Highlights

• New home sales declined 11.5% in September to 468,000 from a downwardly revised 529,000 (from 552,000) in August. The Briefing.com Consensus pegged new home sales at 550,000.

Key Factors

• That was the lowest number of new homes sold since 449,000 were sold in November 2014.
• The big drop in new home sales was extremely disappointing. The latest home builder surveys have shown strong improvement in current and expected sales growth. These trends should have resulted in large gains.
• One possibility for the decline is that sales are experiencing a slight pullback month. There was talk among the National Association of Realtors that recent gains in existing home sales were the result of buyers rushing into the market to take advantage of relatively low mortgage rates. With the possibility of a Fed lift off from the zero bound, mortgage rates were expected to increase by the year’s end.
• The problem with that theory is that sales in August, after the revision, don’t look like they were strong enough to have been influenced by a one-time surge in demand. Sales in August were only slightly stronger than the year-to-date average of 509,000. If demand was truly pulled forward, sales should have been much stronger.
• The sharp drop in sales brought inventories back into alignment with sales trends.
• Inventory levels increased 4.2% to 225,000. That represents a 5.8 months’ supply at the current sales rate. Inventories are generally maintained at about a 6 months’ supply during normal buying periods.
• If sales continue along this pace, there would be no reason for home builders to accelerate construction trends.
• The median new home price increased 13.5% to $296,900.

Big Picture

• While sales are still trending above 2013 and 2014 levels, we haven't seen the clear and steady move higher that would indicate a normalizing market.

Market Internals

NYSE:

Lower Volumes than the day before – 840.8M vs 1004.8M 


Decliners outpaced Advancers (adv/dec): 1155 / 1909

New Highs outpaced New Lows (highs/lows): 56 / 50

NASDAQ:

Lower Volumes than the day before – 1751.1M vs 2152.0M

Decliners outpaced Advancers (adv/dec): 1109 / 1772

New Highs outpaced New Lows (highs/lows): 102 / 67

VOLATILITY S&P500 (VIX)
15.29 +0.83 (+5.74%)

Volume started to drop and internals are pointing towards bearishness. New Highs dipped as this reflects a lack in bullish strength. VIX also retraced back to previous support level at 15.00. I reckon market is showing some form of correction.  

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,623.05 -23.65 (-0.13%)

Volume: 116,658,091 (below average of 117,718,816)
Range: 17,602.51 - 17,660.70

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,034.70 +2.84 (+0.06%)
Volume: 418,687,218 (below average of 480,576,678)

Range: 5,012.74 - 5,045.17

S&P 500 INDEX (SPX: CBOE)

2,071.18 -3.97 (-0.19%)

Volume: 602,332,000 (below average of 656,225,626)

Range: 2,066.53 - 2,075.14

I think the indices are forming inside day candlestick pattern which is likely to indicate a possible reversal. DOW and S&P could not break above last Friday's high and starting to lose the bullish strength. I suppose the 200MA is going to be a crucial support. NASDAQ continues to sit on the support around 5,010 and the consecutive long-legged doji might suggest some consolidation too.

Commodities

Closing Commodities: Natural Gas Drops 10% On Supply/Weather Outlook

• Energy futures were weak today led by natural gas futures which tanked
• Dec natural gas futures dropped a sharp 9.6% today, ending at $2.06/MMBtu
• Ample supply and near-term weather forecasts continue to pressure prices
• Dec WTI crude oil dropped 1.3% today to end at $44.03/barrel. In electronic trade, crude is back below $44/barrel
• Metals, however, closed out the day with some gains
• Dec gold rose +0.3% today to $1166.10/oz, while Dec silver climbed +0.6% at $15.91/oz

Energy Closing Prices

• December crude oil futures fell $0.56 (-1.3%) to $44.03/barrel
• December natural gas closed $0.13 lower (-5.2%) at $2.36/MMBtu
• RBOB Gasoline closed $0.02 lower at $1.28/gallon
• Heating oil futures closed $0.03 lower at $1.48/gallon

Agriculture Closing Prices

• December corn closed $0.05 higher (+1.3%) at $3.85/bushel
• December wheat closed $0.20 higher (+4.1%) at $5.10/bushel
• November soybeans closed $0.07 lower (-0.7%) at $8.86/bushel
• Sugar #11 closed $0.36 cents higher at 14.64 cents/lb

Metals Closing Prices

• December gold ended today’s session $3.20 higher (+0.3%) at $1166.10/oz
• December silver closed today’s session $0.09 higher (+0.6%) at $15.91/oz
• December copper closed $0.01 higher (+0.4%) at $2.36/lb

Currencies

Greenback Holding Recent Gains Despite Weak New Home Sales: The Dollar Index has been trading in a tight range over the course of the U.S. trading session. The greenback came under early selling pressure as New Home Sales data saw a double digit decline. But the DXY held 96.70 and continues to do so over the session. Trade is likely to remain quiet as markets await the latest Fed directive (Wed). But we do have Durable Orders and Consumer Confidence due out tomorrow.

• The euro was able to steady itself at the 1.10 level and was able to move over 60 pips from the low. The single currency is showing signs of stabilizing following the post-ECB sell off. Money Supply and Private Loans data is due out tomorrow morning but it is unlikely to have a big impact on the euro trade.
• The pound is sitting on its 200 sma (1.5360) in uneventful trade. The Q3 GDP number will be released tomorrow with expectations for a 0.6% increase from Q2. This is a slight decline from the Q2 sequential increase of 0.6%.
• The yen is sitting on the 121 level. The yen has been under some pressure in the risk on environment but it has been able to hold the 121 level throughout the course of the trading sessions.

Bonds

Easy Does It

• It was a pretty easy-going session on Monday for the Treasury market, which saw greater interest at the back end of the curve than the front end.  By and large, there wasn't much movement during normal trading hours as most of the day's modest gains were forged in the overnight trade.
  • 2-yr -2 bps at 0.63%
  • 5-yr -2 bps at 1.39%
  • 10-yr -3 bps at 2.06%
  • 30-yr -4 bps at 2.87%
    
• A wait-and-see attitude prevailed through most of Monday as traders were looking ahead to the Federal Open Market Committee's policy decision on Wednesday while keeping a close eye on the present-day performance of the stock market
  • The major indices were mixed and demonstrating relatively good resilience to selling efforts when the Treasury market settled today, although the small-cap Russell 2000 (-0.6%) remained in a noticeable spot of underperformance vis-a-vis the Dow (-0.1%), Nasdaq (+0.04%), and S&P 500 (-0.2%)
    
• Another spot of concentration was oil.  Crude prices remained on the defensive, piercing the $44.00/bbl mark and settling down 1.4% at $43.98/bbl
  • Natural gas was the biggest laggard of note in the commodity space, declining 9.0% to $2.08/MMBtu on concerns about excess supply which have been exacerbated lately by warmer-than-normal temperatures
    
• The lone piece of data today was the New Home Sales report for September and it was quite disappointing
  • New home sales declined 11.5% month-over-month to a seasonally adjusted annual rate of 468,000, which was well below the Briefing.com consensus estimate of 550,000.  Furthermore, August new home sales were revised down to 529,000 from 552,000.
  • The September decline was driven a by a huge 61.8% decline in sales in the Northeast, yet all regions saw sales decline versus Augus
    • Midwest -8.3%
    • South -8.7%
    • West -6.7%
  • The months supply of inventory jumped to 5.8 months at the current sales pace versus 4.9 months in August
  • The median new home price was up 2.7% month-over-month to $296,900 and up 13.5% from the same period a year ago
    
• The weak housing data provided some underlying support for the Treasury market, yet it didn't cause any rush of buying interest in its wake
  
• The US Dollar Index (-0.3% at 96.84) lost some ground today after last week's big uptick as both the yen and euro bounced back a bit from their recent losses against the greenback
  • USD/JPY -0.4% at 121.01
  • EUR/USD +0.3% at 1.1051
    
• Looking ahead to Tuesday
  • Featured economic reports out of the US on Tuesday include the September Durable Orders report (08:30 ET), the August Case-Shiller Home Price Index (09:00 ET), and the October Consumer Confidence report (10:00 ET)
  • The UK will report its preliminary reading for third quarter GDP (05:30 ET) 
  • Start of the two-day Federal Open Market Committee meeting
  • Apple (AAPL) earnings report after Tuesday's close

Treasury Yields:

• 2 Year Note 0.66% UNCH
• 5 Year Note 1.41% -0.02
• 10 Year Note 2.07% -0.02
• 30 Year Bond 2.87% -0.03

2/30 Spread: 221 bps ( -3 ) …  2/10 Spread: 141 bps ( -2 )

Preview for Tuesday 27 Oct, 2015

Economic Data

Tuesday (27 Oct) :

• Durable Orders : -1.3% (Prior -2.3%)
• Durable Goods - ex transportation : 0.2% (Prior -0.2%)
• Case-Shilled 20-city Index : 5.0% (Prior 5.0%)
• Consumer Confidence : 102.5 (Prior 103.0)

Earnings Highlights 

Tuesday (27 Oct) :

BMO - CAS ARG AIXG AKS ALR BABA AHGP ARLP AME AXE AVX BAX BEAV BPBMY CPLA CNC COH CMCSA CVLT CNX GLW CRY CTG CMI CYNO DD ERJ STAY FCH FMER FBC F FELE FDP GK GPI GRUB HCA HSII ONE HUN ICLR IIVI IMGN IR IPI IPGP JBLU LRN LXK LPT MGLN MMC MAS MNI MDC MDSO MRK MSM NCI NAP NMM NVS PCAR PCRX BTU PFE POL POR PCH PROV RDN QSR RAI SCHN SEE SIR ST SPG SPR SAVE SUI TMUS AMTD TNC TXT TREX TWIN UCBI UTHR UPS WDR WM WAT WSO WYN YNDX
During Mkt Hours - HTLD
AMC - ABAX AFL AKAM APC ANAD AAPL AJG AIZ ATRC AXS BGS BLDP BGFV BBOX BKFS BXMT CHRW CAI CLMS CNI CBG CINF CLD CMP CEB CUZ CVA CROX DDR BOOM EIX EQR ETH EXAC XCO ESRX FEIC FNF FISV FFIC FSP GNMK GILD HLIT HTS HIW INFN IPHI IPCM JBT KAI KKR MAC MDWD MRCY NBR NATI NCR NVMI NUVA OMI OI PNRA PEGA PEI PSB QTS RSYS RGC RPXC RUBI SFLY SKYW SM STAG STLY SYA SKT TER TSS TRU TRMK TWTR SLCA ULTI UMBF UHS VDSI VRSK VCRA WNC WSH XOOM ZLTQ

Summary

Tomorrow is going to be the start of the 2-day FOMC meeting. I am expecting another quiet session on Tuesday albeit some profit-taking. It looks to me that the market is still feeling rather weak at the moment and we should see some downside before it goes for another rally? Well that have to depend on the FOMC statement releasing on Wednesday. I think it is better to be cautious now.

Direction for Tuesday 27 Oct, 2015: Down

2015 Daily Directional Accuracy: 109/170  (64.12%) 

2015 Weekly Directional Accuracy: 25/39 (64.10%)