Wednesday, 21 Oct 2015 - AMC

Dow -48.50 at 17168.61, Nasdaq -40.85 at 4840.12, S&P -11.83 at 2018.94

Well that was certainly weakness in the market. The bulls could not hold on to its momentum and we saw more profit-taking along the session. Without any catalyst to support the breakout previously, I think the market is probably going down to re-test it. 

Mixed performance in the world markets as Europe saw green arrows while Asia were rather sluggish. 
  

Market Summary

Industry Watch

Strong: Industrials

Weak: Energy, Financials, Health Care, Technology, Materials

Other Market Moving Factor:

• Health Care sector surrenders opening gain 
• Dow component Boeing (BA) reports better than expected results
• SanDisk (SNDK) to be acquired by Western Digital (WDC) for $86.50/share

[BRIEFING.COM] The stock market ended Wednesday on a lower note after enduring a shaky session. The S&P 500 lost 0.6% after failing to overtake its 100-day moving average (2,038) for the second day in a row. Just like yesterday, the Nasdaq Composite (-0.8%) underperformed while the Dow Jones Industrial Average (-0.3%) displayed relative strength. 

Equities began the day with modest gains, but the S&P 500 notched its high during the opening minutes of the session and returned to its flat line in short order. The index traded just above the unchanged level into the afternoon, but slid to lows shortly after 13:00 ET. The S&P 500 staged a late charge to its flat line, but could not overtake that level, dropping to a new low instead. 

Although the market spent another day inside a relatively narrow range (21 S&P points), the same could not be said about the health care sector, which ended lower by 0.9% after showing a 1.0% gain at the start that briefly morphed into a 2.5% decline. The intraday volatility was brought on by a swoon in the biotech space after Citron Research published a report on Valeant Pharmaceuticals(VRX 118.61, -28.13), calling into question the company's relationship with Philidor RX, which is a specialty pharmacy. According to Citron, Valeant appears to have created a network of specialty pharmacies modeled after Philidor, whose purpose was to generate phantom sales of VRX products. Shares of Valeant were down nearly 40.0% during afternoon action, but they narrowed their loss to 19.2% after a brief trading halt was lifted. Valeant responded to Citron's allegations during the trading halt, calling them "erroneous." It is worth noting that the afternoon rebound was aided by comments from fund manager Bill Ackman of Pershing Square Capital Management who told CNBC that his fund bought an additional two million shares in VRX today. As for the remainder of the biotech space, the iShares Nasdaq Biotechnology ETF (IBB 304.48, -1.48) ended off its low, but still surrendered 0.5%. Notably, Biogen (BIIB 276.34, +10.53) spiked 4.0% after the company beat estimates, raised its guidance, and announced a restructuring plan. 

Similar to the health care sector, energy (-1.0%), materials (-0.9%), and technology (-0.8%) ended among the laggards while most of the remaining sectors fared a bit better. The top-weighted technology sector settled behind the broader market, which masked a 0.2% uptick in the PHLX Semiconductor Index after SanDisk (SNDK 76.78, +1.59) agreed to be acquired by Western Digital (WDC 71.44, -3.42) for $86.50/share. Shares of SanDisk jumped 2.1% while another index component—KLA-Tencor (KLAC 63.98, +10.12)—surged 18.8% after agreeing to be acquired by Lam Research (LRCX 70.79, +0.76) for $67.02/share. 

On the upside, the industrial sector (+0.1%) displayed relative strength throughout the day thanks to a 1.6% gain in Boeing (BA 141.19, +2.31) after the Dow component reported better than expected results and boosted its guidance. 

Unlike stocks, Treasuries advanced into the afternoon, holding the bulk of their gains into the close with the 10-yr yield sliding four basis points to 2.03%. 

Today's participation was in line with average as more than 830 million shares changed hands at the NYSE floor. Economic data was limited to the weekly MBA Mortgage Index, which jumped 11.8% to follow last week's 27.6% plunge. 

Tomorrow, weekly Initial Claims (Briefing.com consensus 265,000) will be released at 8:30 ET while the August FHFA Housing Price Index will cross the wires at 9:00 ET. Also of note, September Leading Indicators (consensus -0.1%) and Existing Home Sales (expected 5.39 million) will be reported at 10:00 ET.

Global Market

ASIA
It was a rather mixed day of trading in the Asia-Pacific region. Japan’s Nikkei (+1.9%) powered higher after its trade balance report for September seemingly bolstered the case for the Bank of Japan to provide more policy stimulus. China’s Shanghai Composite (-3.1%), meanwhile, fell prone to active selling interest following a huge short-term move that had driven it up nearly 13% since September 29.

Economic data

• Japan
• September Trade Balance JPY -115 bln (expected JPY 84 bln; prior JPY -570 bln)
• Exports +0.6% year-over-year (expected +3.4%; prior +3.1%)
• Imports -11.1% year-over-year (expected -11.7%; prior -3.1%)
• All Industries Activity Index -0.2% month-over-month (expected -0.1%; prior -0.1%)
• Australia
• CB Leading Index -0.4% month-over-month (prior +0.3%)
• MI Leading Index +0.1% month-over-month (prior -0.3%)
• New Zealand
• Credit Card Spending +7.3% year-over-year (prior +10.4%)

Equity Markets

• Japan’s Nikkei rallied 1.9%, closing near its high for the day. The move followed the September Trade Balance report, which was accented by weaker than expected exports and a noticeable slump in imports versus the prior month. The takeaway was that the trade data bolstered the potential for the Bank of Japan to provide more policy stimulus. Every sector finished higher, led by the industrials (+3.1%), materials (+2.7%), technology (+2.4%), and financials (+1.7%). Yaskawa Electric Corp (+10.1%), Pioneer Corp (+7.9%), and NTN Corp (+6.4%) led the advancers while Konami Holdings (-4.0%), Tosoh Corp (-2.7%), and Shionogi & Co (-2.1%) brought up the rear. Out of the 225 index members, 213 ended higher, 11 finished lower, and 1 was unchanged.
• Hong Kong’s Hang Seng: closed for holiday (Chung Yeung Day)
• China’s Shanghai Composite declined 3.1% with the entirety of the day’s losses being logged in the afternoon session. There wasn’t a specific news catalyst that turned the tide, although it should be noted that Japan’s exports to China declined 3.5%, reflecting weakness in the Chinese economy. Reports have suggested the sell-off was primarily a case of selling activity kicking in with a short-term overbought market. The small-cap Shenzhen Composite dropped 5.9%. Prior to Wednesday’s retreat, the Shanghai Composite had risen 12.7% since September 29.
• India’s Sensex declined 0.1%, rolling over after an early 0.5% gain. The weakest spots were the health care (-2.2%) and industrials (-1.6%) sectors. Dr Reddy’s Laboratories (-3.5%), State Bank of India (-2.1%), and GAIL India (-1.7%) were the worst-performing issues. Vedanta (+3.8%), Bajaj Auto (+3.3%), and Bharti Airtel (+2.7%) topped the list of winners. Out of the 30 index members, 16 ended higher, 13 finished lower, and 1 was unchanged.
• Australia’s S&P/ASX 200 increased 0.2%, rallying back in the afternoon session from an early 0.8% decline. Gains were led by the gold (+3.9%), metals & mining (+1.5%), and resources (+1.4%) sectors. News that BHP Billiton increased iron ore production by 7% and maintained its full-year guidance reportedly helped underpin the market. Out of the 200 index members, 101 ended higher, 76 finished lower, and 23 were unchanged.
• Regional advancers: South Korea +0.2%, Malaysia +0.1%, Indonesia +0.4%, Singapore +0.2%, Philippines +0.5%
• Regional decliners: Taiwan -0.5%, Thailand -0.2%, Vietnam -0.2%

FX

• USD/CNY +0.01% at 6.3491
• USD/INR +0.2% at 65.1675
• USD/JPY +0.1% at 120.01

EUROPE
Major European indices trade higher across the board with Germany’s DAX (+1.0%) in the lead. European equities have advanced today, but action in the currency market has been subdued with the euro trading flat against the dollar ahead of tomorrow’s European Central Bank policy meeting. Currently, the pair hovers near 1.1350 while the Dollar Index (94.84, -0.07) is lower by 0.1%.

• UK’s September Public Sector Net Borrowing GBP8.63 billion (expected GBP9.40 billion; previous GBP10.79 billion

Closing Prices

• UK’s FTSE: + 0.1%
• Germany’s DAX: + 0.9%
• France’s CAC: + 0.5%
• Spain’s IBEX: + 0.6%
• Portugal’s PSI: -1.2%
• Italy’s MIB Index: -0.4%
• Irish Ovrl Index: + 1.0%
• Greece ASE General Index: + 0.8%

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : 11.8% (Prior -27.6%)
• Crude Inventories : 8.028M (Prior 7.562M) 

Market Internals

NYSE:

Higher Volumes than the day before – 852.4M vs 791.8M 


Decliners outpaced Advancers (adv/dec): 885 / 2175

New Highs outpaced New Lows (highs/lows): 69 / 42

NASDAQ:

Higher Volumes than the day before – 1885.2M vs 1686.3M

Decliners outpaced Advancers (adv/dec): 742 / 2080

New Lows outpaced New Highs (highs/lows): 55 / 77

VOLATILITY S&P500 (VIX)
16.70 +0.95 (+6.03%)

Volume recovers and internals are also showing more bearishness. However the rise in New Lows is not that convincing. VIX bounce up at 15.00 and went to re-test its 200MA. Given the support hold at 15.00, I think we should see a pullback here.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,168.61 -48.50 (-0.28%)

Volume: 107,101,987 (below average of 115,902,014)
Range: 17,153.13 - 17,314.99

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,840.12 -40.85 (-0.84%)
Volume: 431,971,610 (below average of 477,980,672)

Range: 4,836.46 - 4,904.85

S&P 500 INDEX (SPX: CBOE)

2,018.94 -11.83 (-0.58%)

Volume: 610,204,000 (below average of 648,122,407)

Range: 2,017.22 - 2,037.97

The 3 indices are showing a reversal as they ran out of bullish momentum. DOW went down to approach its support level and it is likely to go lower to the next support at around 17,000. NASDAQ got rejected at 4,900 for the third time and went lower as well. Next crucial support for NASDAQ is around 4,800. S&P also went down to its support at 2,020 as it could not go any higher. I think 1,990 is going to be a good support for the index. Given the false breakout, I reckon we should see a re-test in the market with a minor pullback and possibly bounce back from there if we continue to see more confidence.

Commodities

Closing Commodities: WTI Oil Spends The Day In The Red, Nat Gas Falls Over 3%

• The dollar index climbed higher today, which helped weigh on commodities today
• Dec WTI crude oil remained in the red today, ultimately closing out today’s session -2.4% at $45.22/barrel following weekly storage data
• In other energy, Nov nat gas lost 3.2% to $2.40/MMBtu
• After gold sold off earlier today, the precious metals held losses. Dec gold finished the day -0.9% at $1167.10/oz
• Dec silver ended -1% at $15.73/oz, while Dec copper lost -0.4% to $2.36/lb.

Energy Closing Prices

• December crude oil futures fell $1.09 (-2.4%) to $45.22/barrel
• November natural gas closed $0.08 lower (-3.2%) at $2.40/MMBtu
• RBOB Gasoline closed flat at $1.28/gallon
• Heating oil futures closed $0.02 higher at $1.47/gallon

Agriculture Closing Prices

• December corn closed $0.04 higher at $3.81/bushel
• December wheat closed $0.07 higher at $4.98/bushel
• November soybeans closed $0.10 higher at $9.06/bushel
• Sugar #11 closed $0.12 cents higher at 14.18 cents/lb

Metals Closing Prices

• December gold ended today’s session $10.60 lower (-0.9%) at $1167.10/oz
• December silver closed today’s session $0.16 lower (-1%) at $15.73/oz
• December copper closed $0.01 lower (-0.4%) at $2.36/lb

Currencies

Loonie Falls on Bank of Canada Statement

• The Canadian Dollar and antipodean currencies fell today as energy and metals prices dropped and the Bank of Canada lowered its economic outlook
• The U.S. Dollar Index gained 0.12% to 95.03
• EUR/USD: -0.07% to $1.1343
  • The European Central Bank will announce its rate decision tomorrow and release an accompanying statement. ECB President Mario Draghi will give a press conference
• GBP/USD: -0.12% to $1.5426
  • Public sector net borrowing in the U.K. declined more than expected in September to GBP 8.63 bln from a downwardly-revised GBP 10.79 bln in August
    • Government borrowing is down GBP 7.5 bln this year because of rising tax receipts
• USD/CHF: +0.19% to 0.9581
• USD/JPY: +0.05% to 119.90
  • Japan's trade deficit narrowed in September to JPY 115 bln from JPY -570 bln in August, confounding economists' expectations for a surplus
    • Exports grew a smaller-than-expected 0.6% in the year to September after rising 3.1% in August
      • The change in exports to the U.S., the EU, and China were +10.4%, +5.1%, and -3.5%, respectively
  • Japan's All Industries Activity Index declined 0.2% m/m in August after falling a downwardly-revised 0.1% in July
• USD/CAD: +0.99% 1.3118
  • The Bank of Canada held its main policy rate at 0.5% today but downgraded its economic outlook
    • The central bank is now forecasting growth of 2% in 2016 and 2.5% in 2017. The previous forecasts had been 2.3% and 2.6%, respectively
    • The BoC said that lower oil prices are hurting business investment
• AUD/USD: -0.61% to $0.7223
  • The Conference Board's Leading Index fell 0.4% m/m in August, reversing a 0.3% gain in July 
• NZD/USD: -0.29% to $0.6732

Bonds

Treasuries Climb Higher 

• U.S. Treasuries gained ground and the yield curve steepened today as investors braced themselves for the European Central Bank's statement and ECB President Draghi's press conference on Thursday. Crude oil traded lower and U.S. stocks traded down after bumping up against some major technical resistance over the past two sessions
• Yield Check:
  • 2-yr: -2 bps to 0.61%
  • 5-yr: -3 bps to 1.36%
  • 10-yr: -4 bps to 2.03%
  • 30-yr: -5 bps to 2.87%

• News:
  • Vice President Joe Biden said that he will not be a candidate in the 2016 presidential campaign
  • The MBA Mortgage Index for the week ending 10/17 rose 11.8% after falling 27.6% in the prior week

• Commodities:
  • WTI crude: -2.23% to $45.26/bbl.
    • The weekly EIA inventory data showed a build of 8 mln barrels of crude oil versus expectations for a build of 3-4 mln barrels
  • Gold: -0.86% to $1,167.40/troy oz.
  • Copper: -0.30% to $2.3585/lb.

• Currencies:
  • EUR/USD: -0.09% to $1.1342
  • USD/JPY: +0.11% to 119.97

• Data Out Thursday:
  • Initial Jobless Claims for the week ending 10/17 and Continuing Jobless Claims for the week ending 10/10 (08:30 ET)
  • August FHFA Housing Price Index (09:00 ET)
  • September Existing Home Sales (10:00 ET)
  • September Leading Indicators (10:00 ET)
  • Natural Gas Inventories for the week ending 10/17 (10:30 ET)
  • Former Federal Vice Chair Donald Kohn participates in a discussion on "The politics of the Fed: Past, present and future" before the Brookings Institution – 10:30 ET)
• Treasury Auction:
  • $7 bln 30-year TIPS (reopening) (results at 13:00 ET)

Treasury Yields (not available)

Preview for Thursday 22 Oct, 2015

Economic Data

Thursday (22 Oct) :

• Initial Claims : 265K
• Continuing Claims : 2185K
• FHFA Housing Price Index : (Prior 0.6%)
• Existing Home Sales : 5.38M (Prior 5.31M)
• Leading Indicators : -0.1% (Prior 0.1%)
• Natural Gas Inventories : (Prior 100 bcf)

Earnings Highlights 

Thursday (22 Oct) :

BMO - AB ACAT ACOR ADPT ADS AEP ALK APOL ASPS BCC BEN BHE BMS BNCL CAB CAM CAT CBU CHCO COR CRS CY DAN DGX DHR DLX DNKN DOWDPS DST EQM EQT FAF FCX FNB GMT GPK GRA HBAN HUB.B IIIN IVC JNS LAZ LLY LUV MCD MHO MINI MJN MMM MNRO NDAQ NUE NWE ORI OSIS OSTK PCP PDS PENN PH PHM PJC POOL PRLB PTEN QSR R RCI RS RTN SASR SIRI SJR SNA SQNS STC SWK TCB TCK TROW TZOO UA UAL UNP USG UTEK UTL WAB WBC WCC WRLD XRS
During Mkt Hours - HTLD
AMC - EGHT ACTG ALGN GOOG ALTR AMZN T ATHN BAS BJRI BYD BMTC BCR COF CBI CHE CYN CLNE CYT DECK DV ETFC WIRE FCB FII FFIN FFBC FTNT FET FSL GIMO GHL HBHC HURN IG JBSS JNPR KLAC LSTR LHO LOGM MKTO MXIM MMSI MSFT MTX NBHC NTGR N PACB P PEB PGI PFG QLIK QLGC QSII RMD SBCF SHBI SHOR SSD SKX SWN SPNC SPSC SFG SRCL SYK SMCI SIVB SYNA TRN UCTT UACL VRSN WRE

Summary

I suppose market is likely to stay volatile meantime. It looks like market is getting technical right now and let's see if the bears might step into the play on Thursday. If not, we should see the market retrace soon.

We are going to expect big earnings day tomorrow from DOW components such as McDonald, Caterpillar, 3M and tech companies Alphabet (parent company of Google), Amazon and Microsoft. On top of that, unemployment claims is something to look into as well.

Direction for Thursday 22 Oct, 2015: Down

2015 Daily Directional Accuracy: 108/167  (64.67%) 

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