Monday, 2 Nov 2015 - AMC

Dow +165.22 at 17828.76, Nasdaq +73.40 at 5127.15, S&P +24.69 at 2104.05

Market started off the week and the trading month of November in a rather bullish manner. The indices bounced from the slight pullback late last week. This suggests the underlying strength in the market. 

Mixed performance around the world with Asia markets suffering some downside especially in Nikkei and Shanghai Composite. Europe markets had a slight positive gains at the start of the week.
  

Market Summary

Industry Watch

Strong: Energy, Health Care, Financials, Industrials, Telecom Services

Weak: Consumer Discretionary, Consumer Staples, Utilities

Other Market Moving Factor:

• Biotechnology and Energy pace market rally
• China's October Manufacturing PMI (49.8; expected 50.0) disappoints while Caixin PMI (48.3; prior 47.6) improves, but remains below 50 (contraction)
• Better than expected PMI readings from Europe (eurozone Manufacturing PMI 52.3; expected 51.6)

[BRIEFING.COM] The stock market charged higher to begin November with the Nasdaq Composite setting the pace. The tech-heavy index surged 1.5% while the S&P 500 (+1.2%) followed right behind. 

Equity indices started the trading day on an inconspicuous note after the overnight session featured some mixed economic data. In China, October Manufacturing PMI missed expectations (49.8; expected 50.0) while final Caixin PMI improved to 48.3 from 47.6, but remained below 50.0, indicating continued contraction. Asian markets ended the day on a broadly lower note, but the investor sentiment improved after European participants joined the fray and the market was treated to mostly better than expected PMI readings from regional economies. The eurozone Manufacturing PMI improved to 52.3 from 52.0 (expected 52.0), helping lift European markets off their opening lows. 

Once the U.S. session got going, an opening trot higher turned into a daylong charge paced by energy and biotechnology as both groups built on their October gains. Biotech names wasted no time, rallying from the opening bell to send the iShares Nasdaq Biotechnology ETF (IBB 338.06, +12.60) higher by 3.9%. For its part, the health care sector spiked 2.1%, but the group was overtaken by the energy sector (+2.4%) during the afternoon. 

The energy sector charged higher with the likes of Chevron (CVX 94.96, +4.08) and ExxonMobil (XOM 85.28, +2.54) extending their post-earnings gains even as crude oil lost 1.0%, sliding to $46.12/bbl, despite little change in the Dollar Index. 

While the final standing did not suggest any underlying weakness, most sectors did not fare nearly as well as energy and health care. To be fair, financials (+1.5%) and industrials (+1.2%) also displayed relative strength, but technology (+0.9%), consumer discretionary (+0.5%), and consumer staples (+0.6%) lagged. 

The consumer staples sector was pressured by beverage names while Sysco (SYY 41.04, -0.21) lost 0.5% despite reporting a one-cent beat. Over on the discretionary side, apparel retailers struggled in the morning, but largely recovered during the afternoon. On a separate note, Chipotle Mexican Grill (CMG 624.00, -16.23) fell 2.5% amid news of an E. coli scare that prompted the closure of 43 stores in Oregon and Washington. 

Unlike stocks, Treasuries slipped in the morning and maintained their losses into the afternoon. The 10-yr note settled on its low with the benchmark yield rising four basis points to 2.19%. 

Today's participation was roughly in-line with average as more than 845 million shares changed hands at the NYSE floor.

Economic data was limited to Construction Spending and ISM: 

• September construction spending jumped 0.6% to a seasonally adjusted annual rate of $1.09 billion while the Briefing.com consensus expected an increase of 0.4% 
  • The uptick in total spending flowed from a 0.6% increase in private construction and a 0.7% increase in public construction spending 
• The Institute for Supply Management (ISM) reported that the October ISM Index registered a 50.1 reading versus 50.2 in September while the Briefing.com consensus expected a downtick to 50.0 
  • This was the lowest reading since May 2013, but there was some expansionary activity below the surface with new orders increasing to 52.9 from 50.1 while the production index rose to 52.9 from 51.8 

Tomorrow's economic data will be limited to the 10:00 ET release of the Factory Orders report for September (Briefing.com consensus -0.9%).

Global Market (currently unavailable)

Macroeconomic Data

Economic Data

from Briefing.com

• ISM Index : 50.1 vs 50.0 (Prior 50.2)
• Construction Spending : 0.6% vs 0.4% (Prior 0.7%)

ISM INDEX

Highlights

• The Institute for Supply Management (ISM) reported that the October ISM Index registered a 50.1 reading versus 50.2 in September. The October reading was a tick above the Briefing.com consensus estimate of 50.0 but a tick below the prior month's reading of 50.2. This is the lowest reading for the ISM Index since May 2013.

Key Factors

• Notwithstanding the dip in the overall reading, there was some important expansionary activity in the new orders index, which rose to 52.9 from 50.1, and the production index, which increased to 52.9 from 51.8.
• In addition, the backlog of orders index rose one point to 42.5. That is still a contractionary reading, yet it connotes a slowing in the pace of contraction from the prior month. 
• Similarly, the exports index ticked up a point to 47.5 -- still in contraction but not as bad as the prior month.
• The main drags on the October PMI reading were the employment index, which fell 2.9 points and slipped into a contraction mode at 47.6, the imports index, which fell 3.5 points and also slipped into a contraction mode at 47.0, and the index for customers' inventories, which dropped 3.5 points to 51.0.

Big Picture

• The demarcation line between expansion and contraction is 50.0.  The October reading is the lowest since May 2013 and is down sharply from the 57.9 reading seen in the same period a year ago.

CONSTRUCTION SPENDING

Highlights

• September construction spending jumped 0.6% to a seasonally adjusted annual rate of $1.09 billion. That was on top of a 0.7% increase in August and above the Briefing.com consensus estimate, which called for a more modest 0.4% increase.

Key Factors

• The uptick in total construction spending flowed from a 0.6% increase in private construction and a 0.7% increase in public construction spending.
• Private construction was paced by a 1.9% jump in residential construction.
• Nonresidential spending, however, declined 0.7% after increasing 0.8% in August. There were declines in most areas, led by a 2.9% drop in communication spending and a 1.2% pullback in commercial spending. Transportation spending was the notable outlier in the report as it jumped 4.1%.
• Public construction spending was driven by a 1.2% gain in the residential sector and a 0.7% increase in the nonresidential space, led by a 2.4% increase educational spending and a 0.3% jump in highway and street spending. Those two areas are the largest areas in public construction spending.

Big Picture

• Total construction spending in September was up 14.1% year-over-year.

Market Internals

NYSE:

Lower Volumes than the day before – 860.9M vs 1140.8M 


Advancers outpaced Decliners (adv/dec): 2527 / 565

New Highs outpaced New Lows (highs/lows): 97 / 28

NASDAQ:

Lower Volumes than the day before – 1884.0M vs 1998.0M

Advancers outpaced Decliners (adv/dec): 2235 / 647

New Highs outpaced New Lows (highs/lows): 93 / 50

VOLATILITY S&P500 (VIX)
14.15 -0.92 (-6.10%)

Internals are rather bullish bias but the drop in volume is not convincing the first statement. On the other hand, it looks like New Highs are rising as well. VIX still could not break above 15.00 and went down which reflects some form of confidence in the market. Nonetheless I am feeling cautious instead of optimism.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,828.76 +165.22 (+0.94%)

Volume: 100,841,495 (below average of 117,276,013)
Range: 17,655.02 - 17,845.90

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,127.15 -20.53 (-0.40%)
Volume: (above average of 478,181,754)

Range: 5,061.47 - 5,130.51

S&P 500 INDEX (SPX: CBOE)

2,104.05 +24.69 (+1.19%)

Volume: 579,601,000 (below average of 655,936,143)

Range: 2,080.76 - 2,106.20

DOW broke above the resistance at 17,750 as it seems to form a breakout but volume was on the weak side. Similarly NASDAQ also broke above 5,100 while S&P manage to form a support at 2,080. Previously we saw some possibility of reversal and maybe this bounce was somehow suggesting a sign of overbought. After all the indices are at the neckline of the double bottom we are seeing in the market, could this be potentially a false breakout?

Currencies

Euro and Swissy Inch Up

• The U.S. Dollar Index fell 0.06% to 96.89 today as FX markets digested better-than-expected manufacturing data from the eurozone and China
• EUR/USD: +0.11% to $1.1020
  • The eurozone's manufacturing purchasing managers' index unexpectedly rose to 52.3 in October from 52.0 in September
    • Germany's manufacturing PMI rose to a better-than-expected 52.1 in October from the prior reading of 51.6
    • Spain's manufacturing PMI missed expectations at 51.3 in October, falling from 51.7 in September
    • Italy's manufacturing PMI beat expectations at 54.1 in October versus 52.7 in September
• GBP/USD: -0.31% to $1.5410 
  • The U.K.'s manufacturing PMI soared to a better-than-expected 55.5 in October from an upwardly revised 51.8 in September
• USD/CHF: -0.14% to 0.9865
  • Swiss retail sales rose 0.2% in September as expected, reversing a 0.6% decline in August
  • The SVME purchasing managers' index unexpectedly fell to 51.3 in October from 51.7 in September
• USD/JPY: +0.10% to 120.74
  • Japan's manufacturing PMI fell less than expected to 52.4 in October from 52.5 in September
• USD/CAD: +0.08% to 1.3099
  • The Royal Bank of Canada's manufacturing PMI fell more than expected to 48.0 in October from 48.6 in September    
• AUD/USD: unch at $0.7136
  • Australia's AIG manufacturing index fell to 50.2 in October from 52.1 in September
  • Building approvals down under rose by a greater-than-expected 2.2% in September after declining a downwardly-revised 9.5% in August
• NZD/USD: -0.89% to $0.6732
• USD/TRY: -3.10% to 2.825
  • The Turkish election handed a clear majority to AKP, the party of President of Recep Tayyip Erdogan

Bonds

Treasuries Fall on Greater Risk Appetite and Better Economic Data

• U.S. Treasuries lost ground today as better-than-expected data out of Europe and East Asia sent sovereign yields higher around the globe. The U.S. Dollar Index traded lower to 96.71 but recovered to end unchanged at 96.95. U.S. equities popped again, with the S&P 500 climbing 1.27% to 2,105.84
• Yield Check:
  • 2-yr: +2 bps to 0.75%
  • 5-yr: +4 bps to 1.56%
  • 10-yr: +4 bps to 2.18%
  • 30-yr: +3 bps to 2.95%

• News:
  • U.S. Construction spending grew 0.6% m/m in September, ahead of the Briefing.com consensus of 0.4%. Spending rose 0.7% in August
    • The uptick in total construction spending flowed from a 0.6% increase in private construction and a 0.7% increase in public construction spending
  • The Institute of Supply Management's manufacturing index fell to a two-year low, indicating a decelerating expansion in that sector as energy production has struggled and a strong-dollar has weighed on exports. The ISM manufacturing index declined to 50.1 in October from 50.2 for the prior month. The Briefing.com consensus had expected a sharper decline to 50.0
    • The employment subindex fell to 47.6 from 50.5, leading to some concern for the October Employment Situation Report due out Friday
    • The new-orders subindex rose to 52.9 from 50.1

• Commodities:
  • WTI crude: -0.92% to $46.16/bbl.
  • Gold: -0.60% to $1,134.50/troy oz.
  • Copper: -0.28% to $2.311/lb.

• Currencies:
  • EUR/USD: unch at $1.1009
  • USD/JPY: +0.14% to 120.79

• Data Out Tuesday:
  • September Factory Orders (10:00 ET)
  • October Auto and Truck Sales( 17:00 ET)

Treasury Yields:

• 2 Year Note 0.77% +0.02
• 5 Year Note 1.57% +0.05
• 10 Year Note 2.20% +0.04
• 30 Year Bond 2.95% +0.02

2/30 Spread: 218 bps ( UNCH ) …  2/10 Spread: 143 bps ( +2 )

Preview for Tuesday 7 Nov, 2015

Economic Data

Tuesday (3 Nov) :

• Factory Orders : -0.9% (Prior -1.7%)
• Auto Sales : (Prior 5.8M)
• Truck Sales : (Prior 8.9M)

Earnings Highlights 

Tuesday (3 Nov) :

BMO - FLWS AYR ALE AMAG AMSC AFSI ANAC ANIP ADM ARNA ARIA AUDC AXLL BLMN CBM CDK CIT CIE CPPL CNNX CEQP DISCA DW EMR EXPD EXLP EXH FSS FIS FI FTR GCAP GEL GLT GTN GLDD HYH HRS HCP HW HTH H INCY IART K KMT KVHI LPX MMP HZO MLM MHFI MPG MBLY MOS NNN NSM NMM NRZ NXST NI NTi NCLH DNOW NS NWN NXTM OZM ODP OESX OXFD PERI RRGB SALE RDC RHP SGNT SMG SRE SERV S STFC SRI SUM SSH SUP NGLS TASR TGH MDCO TICC TWI TRP TZOO UNT UAM VSH VPG VMC WPC WNR WNRL WLK WLKP ZBRA ZTS
AMC - ACHC AKR ATVI ABCO Y AFG AWR AMSG ANAD AIV WTR ARR ARWR ASH BW BIO BKH CVC CSU CSV CTLT CBS CERN CKP CHEF CIM CBPO CHUY XEC DAC DVA DKL DK DENN DVN DHT FANG DPLO DEI ECYT ENPH ENSG EPIQ ERA ETSY EVRI FARO FFG FIVN FLTX FOGO FTAI FMI GHDX GMED GRPN HHS HCI HL HLF HRZN IAG IPHS IOSP IVR IRWD ITRI XXIA JCOM KTWO KEG KFRC KRNT LLNW MCUR MTZ MXL MPO MYGN NVGS NYMT NFX OAS OCLR OKE OKS ORA OFIX PACD PZZA PKD PAYC PCTI PAA PAGP PBPB QUAD RLOC RP REGI RPAI RXN RIGL SSNI SLW SUPN TMH TX TSLA TSRA TDW TSLX TRUP X UNTD USNA VNDA WBMD WR XOXO ZAGG ZEN ZG ZNGA

Summary

Maybe the sellers didn't step in to take the control. However it looks to me that the buying is not that convincing judging from the low volume. I feel the market is more or less overbought and we are likely to see a topping pattern. To me this doesn't feel quite right and cautious is the key right now.

Direction for Tuesday 3 Nov, 2015: Down

2015 Daily Directional Accuracy: 111/173  (64.16%) 

2015 Weekly Directional Accuracy: 25/40 (62.50%)