Tuesday, 20 Oct 2015 - AMC

Dow -13.43 at 17217.11, Nasdaq -24.50 at 4880.97, S&P -2.89 at 2030.77

What can you say about the market? Flat? Volatile? Market was literally sideway throughout the session. However NASDAQ was showing more weakness in the market. 

Markets around the world were also showing a mixed result as Asia were mostly positive while Europe were slightly to the downside. 
  

Market Summary

Industry Watch

Strong: Financials, Materials, Industrials, Telecom Services

Weak: Consumer Discretionary, Energy, Health Care, Technology

Other Market Moving Factor:

• S&P 500 finds resistance at 100-day moving average (2,039)
• IBM (IBM) beats bottom-line estimates, but misses revenue expectations and lowers guidance
• September Housing Starts (1.206 million; Briefing.com consensus 1.150 million) beat expectations

[BRIEFING.COM] The stock market finished Tuesday on a quiet note after spending the session inside a narrow trading range. The S&P 500 shed 0.1% while the Nasdaq Composite (-0.5%) underperformed throughout the day. 

Just like yesterday, today's affair was very quiet with the S&P 500 spending the majority of the session near its flat line. The benchmark index opened with a modest loss and rallied into the green during morning action, but could not climb above its 100-day moving average (2,039), which served as resistance. The index followed that short-lived rally with a return into the red, where it settled for the day. 

Six sectors ended the day with gains, but top-weighted technology (-0.3%) and health care (-1.5%) struggled, which kept the market under pressure. Notably, the technology sector could not overcome the relative weakness in the shares of IBM (IBM 140.68, -8.54) after Big Blue reported below-consensus revenue and lowered its guidance, which overshadowed a bottom-line beat. 

Staying in the tech sector, chipmakers also struggled with the PHLX Semiconductor Index shedding 0.2%. Micron (MU 17.09, -2.07) was the weakest performer, sliding 10.8%, after Intel (INTC 33.44, -0.15) announced plans to increase its investment in non-volatile memory technology. 

Meanwhile, the health care sector (-1.5%) spent the day behind the remaining groups due to daylong weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 305.96, -9.98) retreated into the afternoon to settle lower by 3.1%, which contributed to the weakness in the Nasdaq Composite. 

On the upside, the telecom services sector (+0.8%) held the lead throughout the session thanks to a 1.2% spike in Verizon (VZ 45.24, +0.54) after the company beat earnings expectations and reaffirmed its full-year revenue growth outlook. 

Similar to telecom services, financials (+0.5%) and industrials (+0.6%) ended the day with solid gains. Travelers (TRV 108.95, +2.63) spiked 2.5%, contributing to the relative strength in financials, while United Technologies (UTX 95.70, +3.65) surged 4.0%, underpinning the industrial space. Transport stocks also rallied alongside the sector with the Dow Jones Transportation Average climbing 0.6%. 

Treasuries notched their lows during morning action and they remained near those levels until the close with the 10-yr yield rising five basis points to 2.07%. 

Just like yesterday, investor participation was a bit below average as fewer than 800 million shares changed hands at the NYSE floor. 

Economic data was limited to Housing Starts, which increased 6.5% in September to 1.207 million from an upwardly revised 1.132 million (from 1.126 million) in August while the Briefing.com consensus expected an increase to 1.150 million. That was the second time in 2015 that total new housing starts topped 1.200 million (1.211 million in June) and the first time that the level has been exceeded on two occasions in one year since 2007. New single-family home construction remained robust in September with starts increasing 0.3% to 740,000 from 738,000 

Tomorrow's economic data will be limited to the weekly MBA Mortgage Index, which will be released at 7:00 ET.

Global Market

ASIA
Markets in the Asia-Pacific region were mixed on Tuesday as participants lacked conviction. Reportedly, that lack of conviction was tied to growth concerns surrounding China, but the Chinese media for one spent some time Tuesday highlighting the potential for improved growth prospects in China’s economy. Notably, China’s Shanghai Composite (+1.1%) outperformed all other major indices in the region, scoring the entirety of its gain in the final 30 minutes of trading.

Economic data

• China
• September Foreign Direct Investment +9.0% (prior +9.2%)
• South Korea
• September PPI -0.3% month-over-month (prior -0.6%); -4.5% year-over-year (prior -4.5%)

Equity Markets

• Japan’s Nikkei increased 0.4%, recouping nearly half of Monday’s losses. The rebound effort was helped along by gains in the communications (+2.0%), technology (+0.6%), and health care (+0.5%) sectors. Individual standouts included Takara Holdings (+6.6%), Nippon Telegraph $ Telephone (+5.2%), and Nippon Soda (+4.9%). Tuesday’s biggest laggards were Haseko Corp (-7.1%), Tokyo Electric Power (-4.5%), and Asahi Kasei Corp (-4.0%). Out of the 225 index members, 120 ended higher, 92 finished lower, and 13 were unchanged.
• Hong Kong’s Hang Seng declined 0.4% but had been down 1.0% at its lows for the day, which were hit in the afternoon session. China Unicom Hong Kong (-3.0%), China Shenhua Energy (-3.0%), and Sands China (-2.3%) were the worst-performing issues. Hong Kong & China Gas (+1.2%), China Overseas Land & Investment (+0.8%), and Bank of Communications (+0.5%) topped the list of winners. Out of the 50 index members, 11 ended higher, 33 finished lower, and 6 were unchanged.
• China’s Shanghai Composite increased 1.1% with the entirety of the gain achieved in the final 30 minutes of trading. The market was down 0.9% at its lows of the morning. There was no news catalyst for the closing spike, although media reports during the day touting China’s growth prospects were deemed to be sources of support in the comeback from session lows. Some speculative trading flair could be seen in the outperformance of the small-cap Shenzhen Composite (+2.0%) and the start-up laden ChiNext Index (+3.2%).
• India’s Sensex declined 0.2%, fading into negative territory as the afternoon trade progressed. Weakness was concentrated in the materials (-3.9%) sector. The biggest decliners for the day were Vedanta (-6.4%), Tata Steel (-3.1%), and Hindalco Industries (-2.7%). Conversely, Tata Consultancy Services (+1.5%), Infosys (+1.3%), and Tata Motors (+1.2%) were the best-performing issues. Out of the 30 index members, 8 ended higher and 22 finished lower.
• Australia’s S&P/ASX 200 declined 0.7% and closed near its lows for the day. The market was weighed down by weakness in the gold (-3.5%), energy (-3.3%), and resources (-3.0%) sectors, which came on top of growth concerns flowing out of China’s Q3 GDP report on Monday. Separately, minutes from the October RBA meeting highlighted an expectation that growth in Australia should pick up in the September quarter. Out of the 200 index members, 62 ended higher, 122 finished lower, and 16 were unchanged.
• Regional advancers: South Korea +0.5%, Taiwan +0.3%, Indonesia +0.4%, Philippines +0.1%
• Regional decliners: Malaysia -0.8%, Singapore -0.2%, Thailand -0.1%, Vietnam -0.5%

FX

• USD/CNY -0.2% at 6.3485
• USD/INR +0.3% at 64.9950
• USD/JPY +0.1% at 119.63

EUROPE
Major European indices trade lower across the board with Germany’s DAX (-0.2%) showing relative strength. On a separate note, the European Central Bank released its survey on bank lending, which indicated lending standards have eased more than expected during the third quarter as banks use additional liquidity to grant loans.

• Eurozone August Current Account surplus narrowed to EUR17.70 billion from EUR25.60 billion (expected surplus of EUR20.10 billion)
• Germany’s September PPI -0.4% month-over-month (expected -0.1%; prior -0.5%); -2.1% year-over-year (consensus -1.8%; last -1.7%)
• Swiss September Trade Surplus expanded to CHF3.05 billion from CHF2.86 billion (expected surplus of CHF2.51 billion)

Closing Prices

• UK’s FTSE: -0.1%
• Germany’s DAX: -0.2%
• France’s CAC: -0.6%
• Spain’s IBEX: -1.1%
• Portugal’s PSI: + 0.4%
• Italy’s MIB Index: -0.7%
• Irish Ovrl Index: + 0.1%
• Greece ASE General Index: + 1.2%

Macroeconomic Data

Economic Data

from Briefing.com

• Housing Starts : 1206K vs 1150K (Prior 1132K - Up)
• Building Permits : 1103K vs 1170K (Prior 1161K - Down)

HOUSING STARTS & BUILDING PERMITS

Highlights

• Housing starts increased 6.5% in September to 1.207 mln from an upwardly revised 1.132 mln (from 1.126 mln) in August. The Briefing.com Consensus expected housing starts to increase to 1.150 mln.

Key Factors

• That was the second time in 2015 that total new housing starts topped 1.200 mln (1.211 mln in June), and the first time two months have exceeded that level in one year since 2007.
• New single-family home construction remained robust in September. These starts increased 0.3% to 740,000 from 738,000. Over the last three months, new single-family construction has averaged 745,667. That is nearly 100,000 more than the 2014 average.
• Multifamily construction increased 18.3% to 466,000 in September from 394,000 in August. This sector is generally very volatile, and the big September increase is likely to be followed by a sizable pullback in October.
• The number of homes under construction increased 1.4% to 928,000 in September from 915,000 in August. The breakdown of the increase was about even between single-family and multifamily construction. This should help bolster Q3 2015 GDP growth.

Big Picture

• Despite the unseasonable cold winter that disrupted construction trends in the beginning of the year, housing starts are currently on pace to top 2014 levels by nearly 100,000.

Market Internals

NYSE:

Lower Volumes than the day before – 791.8M vs 826.0M 


Advancers outpaced Decliners (adv/dec): 1885 / 1174

New Highs outpaced New Lows (highs/lows): 62 / 17

NASDAQ:

Higher Volumes than the day before – 1686.3M vs 1610.1M

Decliners outpaced Advancers (adv/dec): 1373 / 1454

New Highs outpaced New Lows (highs/lows): 56 / 54

VOLATILITY S&P500 (VIX)
15.75 +0.77 (+5.14%)

Volume remain weak and weaker. Even so, internals are pointing towards bullishness. I am feeling rather skeptical about it. The support at 15.00 continues to hold in VIX and that could suggest some uncertainty in the market. Perhaps we are seeing a false breakout...

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,217.11 -13.43 (-0.08%)

Volume: 106,670,969 (below average of 115,645,562)
Range: 17,147.99 - 17,264.88

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,880.97 -24.50 (-0.50%)
Volume: 387,512,326 (below average of 477,066,897)

Range: 4,866.60 - 4,909.37

S&P 500 INDEX (SPX: CBOE)

2,030.77 -2.89 (-0.14%)

Volume: 563,655,000 (below average of 646,356,462)

Range: 2,026.61 - 2,039.12

DOW formed a long-legged doji while sitting on its support, which likely to reflect the uncertainty in the market. NASDAQ saw a bearish harami as it could not break above the resistance at 4,900. Maybe we might see a pullback from here. S&P seems to suggest a sideway to some potential upside as it is forming a support at 2,020. I would market is not really as bullish and some form of consolidation is expected.

Commodities

Closing Commodities: Oil Prices Recover Back Into Positive Territory

• WTI oil prices recovered back above $46/barrel following the earlier sell-off
• By the end of today’s session, Dec crude oil gained $0.04 to close at $46.31/barrel
• Nov nat gas held gains and finished +1.6% at $2.48/MMBtu
• Silver spiked mid-day and held up decently, closing +0.3% at $15.89/oz Dec gold finished +0.4% at $1177.70/oz
• In base metals, Dec copper rose one cent to $2.37/lb

Energy Closing Prices

• December crude oil futures rose $0.41 (+0.9%) to $46.31/barrel
• November natural gas closed $0.04 higher (+1.6%) at $2.48/MMBtu
• RBOB Gasoline closed $0.02 higher at $1.28/gallon
• Heating oil futures closed flat at $1.45/gallon

Agriculture Closing Prices

• December corn closed $0.04 higher at $3.77/bushel
• December wheat closed $0.04 higher at $4.91/bushel
• November soybeans closed $0.05 higher at $8.96/bushel
• Sugar #11 closed $0.20 cents lower at 14.06 cents/lb

Metals Closing Prices

• December gold ended today’s session $5.00 higher (+0.4%) at $1177.70/oz
• December silver closed today’s session $0.05 higher (+0.3%) at $15.89/oz
• December copper closed $0.01 higher (+0.4%) at $2.37/lb

Currencies

Loonie Recovers Post-Election Losses

• The Canadian dollar slid following the Conservative party's loss in the general election yesterday, which removed Stephen Harper from the role of prime minster after almost a decade in power. Despite the victory by the more left-leaning Liberal party, the loonie has recovered significant ground today
• The U.S. Dollar Index fell 0.04% to 94.89 today, clawing back overnight losses after strong housing market data out of the U.S 
  • Housing starts in the U.S. rose to an annual rate of 1206K in September, beating out the Briefing.com consensus of 1150K. The pace in August was1132K (revised up from 1126K)
• EUR/USD: +0.09% to $1.1339
  • Germany's producer price index was down 0.4% m/m, more than forecasts but better than the 0.5% fall in August
    • The PPI declined 2.1% in the year to September, marking the 26th straight month of year-on-year declines
  • The eurozone's current account surplus fell more than expected in August, dropping to EUR 17.7 bln from an upwardly-revised EUR 25.6 bln in July
• GBP/USD: -0.15% to $1.5442
• USD/CHF: +0.01% to 0.9564
  • Switzerland's trade surplus widened to CHF 3.047 bln in September from a downwardly-revised CHF 2.862 bln in August
• USD/JPY: +0.34% to 119.92
• USD/CAD: -0.28% to 1.2987
  • Wholesale sales in Canada fell 0.1% m/m in August, worse than expected but in line with the change in July
• AUD/USD: +0.14% to $0.7258
  • The Reserve Bank of Australia released the minutes from its October board meeting today. The RBA saw the boom in property prices as the greatest risk to economic stability and noted that the job market was doing better than expected
    • Interest rate futures are pricing in a 1 in 3 chance for a rate cut at the RBA's November meeting
• NZD/USD: -0.72% to $0.6748
  • New Zealand's GlobalDairyTrade Price Index fell 3.1% in October after gaining 9.9% in September
    • The crucial role of dairy production in New Zealand's economy meant that the Kiwi got walloped on the release

Bonds

Government Yields Jump Higher 

• Treasuries moved lower in a curve-steepening move today as housing start and building permit data for September showed that the housing market has been unaffected by the financial market volatility in August. The steady drumbeat of economic data that has so far failed to show significant deterioration in the economic outlook is outweighing the "divisions in the FOMC" narrative from last week. That story, prompted by public remarks from Fed Governors Brainard and Tarullo in which they questioned the advisability of using progress on the employment front as a sufficient condition for policy normalization
• Yield Check:
  • 2-yr: +3 bps to 0.63%
  • 5-yr: +4 bps to 1.38%
  • 10-yr: +5 bps to 2.07%
  • 30-yr: +4 bps to 2.92%

• News:
  • U.S. housing starts rose 6.5% in September to 1.207 mln from an upwardly-revised 1.132 mln (from 1.126 mln) in August. The Briefing.com consensus expected housing starts to increase to 1.150 mln
    • That was the second time in 2015 that total new housing starts topped 1.200 mln (1.211 mln in June), and the first time two months have exceeded that level in one year since 2007
    • New building permits fell to 1.103 mln in September from 1.161 mln in October. The Briefing.com consensus was for 1.170 mln new permits. The initial reading for September was 1.17 mln
  • A report from the European Central Bank dampened speculation for an expansion of that central bank's asset purchase program. The report showed banks' credit standards easing for the sixth straight quarter
  • The blackout period preceding the October FOMC 27-28 begins tonight

• Commodities:
  • WTI crude: -0.15% to $46.21/bbl.
  • Gold: +0.36% to $1,177.0/troy oz.
  • Copper: unch at $2.3675/lb.

• Currencies:
  • EUR/USD: +0.13% to $1.1344
  • USD/JPY: +0.30% to 119.87

• Data Out Wednesday:
  • MBA Mortgage Index for the week ending 10/17 (07:00 ET)
  • Crude Inventories for the week ending 10/17 (10:30 ET)

Treasury Yields:

• 2 Year Note 0.66% +0.05
• 5 Year Note 1.40% +0.05
• 10 Year Note 2.08% +0.04
• 30 Year Bond 2.92% +0.03

2/30 Spread: 226 bps ( -2 ) …  2/10 Spread: 142 bps ( -1 )

Preview for Wednesday 21 Oct, 2015

Economic Data

Wednesday (21 Oct) :

• MBA Mortgage Index : (Prior -27.6%)
• Crude Inventories : (Prior 7.562M) 

Earnings Highlights 

Wednesday (21 Oct) :

BMO - ABB ABG ABT ANGI AOS APH ARMH BA BABY BHI BIIB BKU CS CSL EMC GLBL GM GNTX HLI IPG ITW KMB KNL KO LAD LL MAN MKTX NLSN NTRS NYCB OC PII SCL SEIC SLGN STJ SVU SYNT TMO TUP UNF WFT WIT WMS
During Mkt Hours - CNFL
AMC - ALGT AMP AWH AXP BDN BRCM BRKL BUFF CA CCI CLB CLGX CMRE CNMD CTXS CVBF CYS DLB DTLK EBAY EEFT EFX EGBN ELY EWBC EXPO FBHS FTK FWRD GGG GLF HNI IBKC IPCM KALU KMI KNX LOGI LRCX LVS MKSI MLNX MSA NCOM NOW PFPT PLCM RHI RJF SGMO SLG SLM SNDK SON SXT TBI TCBI TSCO TXN TYL UIS UMPQ URI VMI

Summary

Another relatively quiet day as we are not seeing any significant or major economic data that might move the market. However it looks like the upside movement is limited as the strength is lacking. I think what we are seeing now should probably be market noises. And it is better to be stay cautious.

Not much of economic data again tomorrow besides the crude oil inventories. Well, that might influence the market as well since I am seeing some correlation between oil prices and market movement.

Direction for Wednesday 21 Oct, 2015: Down

2015 Daily Directional Accuracy: 107/166  (64.46%) 

2015 Weekly Directional Accuracy: 24/38 (63.16%)