Tuesday, 10 Nov 2015 - AMC

Dow +27.73 at 17758.21, Nasdaq -12.06 at 5083.24, S&P +3.14 at 2081.72

We saw some short-covering after a nasty sell-off on Monday. I would say market is still rather weak as TRIN is staying above 1 for most of the time. Now it is whether the resistance is strong enough to hold the market down or are we going to see a bounce from here. 

Mixed performance across Europe and Asia markets. Perhaps the markets are still looking tired and Shanghai Composite was down slightly.
  

Market Summary

Industry Watch

Strong: Health Care, Consumer Staples, Utilities

Weak: Technology, Industrials, Energy, Materials, Telecom Services

Other Market Moving Factor:

• S&P 500 on track for fifth consecutive decline
• Apple (AAPL) weighs on technology sector after Credit Suisse note suggests iPhone 6s component orders have been cut by ~10%
• Dollar Index looks to extend last week's gain

[BRIEFING.COM] The stock market ended Tuesday on a mixed note as the Nasdaq Composite (-0.2%) settled with a modest loss while the Dow Jones Industrial Average (+0.2%) and S&P 500 (+0.2%) overcame the weakness in the technology sector (-0.7%), eking out slim gains. 

Equities stumbled at the start of the trading day with the opening move paced by the largest stock in terms of market cap. Specifically, Apple (AAPL 116.73, -3.84) fell 3.2% in reaction to a Credit Suisse report, which indicated the tech giant has cut its orders for iPhone 6s components by as much as 10.0%. Shares of Apple slid below their 100-day moving average (117.33) after struggling with the 200-day average (122.06) over the past few days. Meanwhile, supplier names like CirrusLogic (CRUS 29.43, -2.78), Broadcom (BRCM 51.45, -1.74), AvagoTechnologies (AVGO 119.86, -6.64) lost between 3.3% and 8.6% while the PHLX Semiconductor Index fell 1.8%. 

Apple's weakness kept the technology sector (-0.7%) deep in the red throughout the session, which in turn, weighed on the Nasdaq. Meanwhile, six of the remaining nine sectors settled in the green. That included the health care sector (+1.0%), which gathered steam late in the day while biotechnology recovered from early weakness. The iShares Nasdaq Biotechnology ETF (IBB 331.96, +1.38) climbed 0.4% after being down more than 1.0% in the early going. 

Elsewhere, influential sectors like consumer discretionary (+0.7%) and financials (+0.5%) held slim gains in morning action, but extended higher in the afternoon. Also of note, the energy sector (+0.2%) settled just above its flat line while crude oil rallied 0.8% to $44.21/bbl. Meanwhile, the other commodity-linked sector—materials (-0.7%)—spent the day at the bottom of the leaderboard. 

Staying on the cyclical side, the industrial sector (unch) struggled throughout the day with transport stocks responsible for some of the weakness. However, the Dow Jones Transportation Average returned to unchanged by the end of the day. It is worth noting Norfolk Southern (NSC 88.57, -0.05) shed just 0.1% after surging 11.0% yesterday with today's downtick taking place after CanadianPacific (CP 139.95, -2.23) denied interest in NSC. 

Treasuries snapped their six-day skid with the 10-yr note settling near its high, dropping the benchmark yield three basis points to 2.32%. 

Today's participation was just below average with about 820 million shares changing hands at the NYSE floor. 

Economic data was limited to Import/Export Prices and Wholesale Inventories: 

• Export prices, excluding agriculture, decreased 0.3% in October after decreasing 0.5% (revised from -0.6%) in the prior reading 
  • Excluding oil, import prices decreased 0.3%, which followed last month's decrease of 0.2% (revised from -0.3%) 
• Wholesale inventories increased 0.5% in September on top of an upwardly revised 0.3% increase (from 0.1%) for August 
  • The Briefing.com consensus expected an increase of 0.1% 
  • Wholesale sales increased 0.5% after declining 0.9% in August 
  • The inventory-to-sales ratio held steady versus the prior month at 1.31, but is up from 1.20 in the same period a year ago 

Investors will not receive any economic data tomorrow and the bond market will be closed for Veterans Day.

Global Market (temporarily unavailable)

Macroeconomic Data

Economic Data

from Briefing.com

• Export Price ex-agri : -0.3% (Prior -0.5% - Up)
• Import Prices ex-oil : -0.3% (Prior -0.2% - Up)
• Wholesale Inventories : 0.5% vs 0.1% (Prior 0.3% - Up)

EXPORT & IMPORT PRICES 

Highlights

• Lower oil prices led to a 0.5% month-over-month decline in October import prices, according to the Bureau of Labor Statistics, versus a 0.6% decline in September. Excluding fuel, import prices were still down 0.3% month-over-month after an upwardly revised 0.2% decline (from -0.3%) in September. 
• Export prices declined 0.2% in October after declining 0.6% in September. Excluding agriculture, export prices fell 0.3% versus an upwardly revised 0.5% decline (from -0.6%) in September. 

Key Factors

• The monthly decline for October left nonfuel import prices down 3.2% year-over-year. That is the largest year-over-year decline in nonfuel import prices since a 4.2% decrease between September 2008 and September 2009.
• Import fuel prices decreased 2.0% in October after a 5.4% decline in September.
• The October decline in nonfuel import prices was driven by lower prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; autos; and capital goods.
• Nonagricultural export prices are down 6.1% year-over-year.
• The monthly decline in export prices, excluding agriculture, was led by lower prices for nonagricultural industrial supplies and materials, consumer goods, and autos.

Big Picture

• The import price data doesn't necessarily help the Fed's case for a December rate hike. Then again, the Fed continues to think the forces driving down import prices are transitory.   On that note, there hasn't been a monthly advance in the nonfuel import price index since July 2014.

Market Internals

NYSE:

Lower Volumes than the day before – 841.4M vs 973.8M 


Advancers outpaced Decliners (adv/dec): 1746 / 1325

New Lows outpaced New Highs (highs/lows): 31 / 86

NASDAQ:

Higher Volumes than the day before – 1894.0M vs 1843.9M

Decliners outpaced Advancers (adv/dec): 1392 / 1454

New Lows outpaced New Highs (highs/lows): 78 / 103

VOLATILITY S&P500 (VIX)
15.29 -1.23 (-7.45%)

Internals remain in a very narrow range as there is no leadership in the market at the moment. We saw a minor increase in both New Highs and New Lows but the drop in volume is more significant. VIX dropped down back to the support level at 15.00 and also sitting on its 20MA. We have seen the support holding strong previously and so I think we should still continue to see some upticks in the VIX.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,758.21 +27.73 (+0.16%)

Volume: 108,643,007 (below average of 117,038,346)
Range: 17,657.72 - 17,768.66

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,083.24 -12.06 (-0.24%)
Volume: 432,612,705 (below average of 469,337,760)

Range: 5,051.22 - 5,086.89

S&P 500 INDEX (SPX: CBOE)

2,081.72 +3.14 (+0.15%)

Volume: 564,878,000 (below average of 655,293,220)

Range: 2,069.91 - 2,083.67

I think right now it is more on whether the sellers are able to hold the bids from the buyers. DOW went back up to retest the resistance at 17,750. S&P also returned to 2,080 area and it looked like a 5th candle reversal. Both DOW and S&P were holding their lows for the past 2 sessions and more buying strength might put the market back up. NASDAQ seems to hold a support at around 5,050 as well. However a lack of conviction from the bulls might just continue to bring the market lower.

Currencies

Weak China Data Hits Commodity Currencies

• U.S. Dollar Index rallied 0.27% to 99.25  
• EUR/USD: -0.38% to $1.0712
  • French industrial production rose 0.1% in September, in line with forecasts but a sharp deceleration from the 1.7% growth in August
  • Industrial production in Italy returned to growth in September but fell short of forecasts, growing 0.2% versus a 0.5% decline in August
• GBP/USD: -0.05% to $1.5109
  • The U.K.'s BRC Retail Sales Monitor showed that same-store sales unexpectedly fell 0.2% y/y in October. The September reading was +2.6%
• USD/CHF: +0.33% to 1.0069
  • Switzerland's seasonally-adjusted unemployment rate remained at 3.4% in October, in line with expectations
    • Without seasonal adjustments, the UE rate was 3.3% in October, up from September's reading of 3.2%
• USD/JPY: unch at 123.15
  • Japan's adjusted current account surplus narrowed more than expected to JPY 0.78 tln in September from JPY 1.59 tln in August
  • The Economy Watchers Current Index gained to 48.2 in October from 47.5 in September, as expected
• USD/CAD: -0.02% to 1.3269
• AUD/USD: -0.34% to $0.7022
  • Home loans in Australia grew a better-than-expected 2.0% m/m in September after rising a downwardly-revised 1.5% in August
    • The National Australia Bank's Business Confidence Index fell more than expected to 2 in October from 5 in September
• NZD/USD: +0.06% to $0.6530
  • Electronic card retail sales were flat m/m in October, missing expectations for an increase of 0.3% following 0.9% growth in September

Bonds

Treasuries Mount Relief Rally 

• Treasuries finally put an end to their ten-day sell-off that had pushed up the 5-year note yield up by as much as 44 basis points. A lackluster relief rally in equities and weak commodity prices helped end the trend that was fueled by the October FOMC statement that put traders on watch for December liftoff and the strong October jobs report that has moved the probability of said liftoff to 68% 
• Yield Check:
  • 2-yr: -3 bps to 0.86%
  • 5-yr: -4 bps to 1.70%
  • 10-yr: -2 bps to 2.32%
  • 30-yr: -1 bp to 3.09%

• News:
  • U.S. export prices excluding agriculture fell 0.3% m/m versus the September's change of -0.6%
    • Import Prices excluding oil fell 0.4% m/m in October after declining 0.3% in September
  • Wholesale inventories increased 0.5% in September on top of an upwardly revised 0.3% increase (from 0.1%) for August. The Briefing.com consensus was 0.1% 
  • Neel Kashkari, the man who ran the Troubled Asset Relief Program (TARP) during the 2008 financial crisis, will replace Narayana Kocherlakota as president of the Minneapolis Fed. He will not vote until 2017 
  • The $24 bln 10-year note auction was met with a lower than average bid-to-cover ratio but a greater than average indirect bid. The when-issued security was trading at 2.310% prior to the results, meaning that the auction stopped through by 0.6 basis points
    • High yield: 2.304%
    • Bid-to-cover: 2.58
    • Indirect bid: 60.5%
    • Direct bid: 14.3% 

• Commodities:
  • WTI crude: +0.84% to $44.24/bbl.
  • Gold: -0.06% to $1,087.50/troy oz.
  • Copper: -0.52% to $2.2185/lb.

• Currencies:
  • EUR/USD: -0.39% to $1.0711
  • USD/JPY: +0.06% to 123.23

• Data out Thursday (Tomorrow is Veterans Day)
  • MBA Mortgage Index for the week ending 11/7 (07:00 ET)
  • Initial Jobless Claims for the week ending 11/7 and Continuing Jobless Claims for the week ending 10/31 (08:30 ET)
  • September JOLTS – Job Openings (10:00 ET)
  • Crude Inventories for the week ending 11/7 (10:30 ET)
  • October Treasury Budget (14:00 ET)
• Fed Speakers:
  • St. Louis Fed President Bullard (non-FOMC voter, will vote in 2016) – “Rethinking Monetary Policy” (9:05 ET)
  • Fed Chair Yellen gives welcome remarks (09:30 ET)
  • Richmond Fed President Lacker (FOMC voter) participates in panel (09:45 ET)
  • Chicago Fed President Evans (FOMC voter) (10:15 ET)
  • New York Fed President Dudley (FOMC voter) (11:45 ET)
  • Fed Vice Chair Fischer (18:00 ET)
• Treasury Auction:
  • $16 bln 30-year bond auction (results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.87% -0.02
• 5 Year Note 1.72% -0.03
• 10 Year Note 2.32% -0.04
• 30 Year Bond 3.10% -0.02

2/30 Spread: 223 bps ( UNCH ) … 2/10 Spread: 145 bps ( -2 )

Preview for Wednesday 11 Nov, 2015

Economic Data

Wednesday (11 Nov) : Veteran's Day

• No Economic Data 

Earnings Highlights 

Wednesday (11 Nov) :

BMO - ADT AGI AVOL CAE CBYL GIB CYRN EGRX ENZY EROS M MGIC MTOR NAT STKL ELOS TOUR
AMC - WUBA AVNW BLCM CDNA CIVI CLCD DTRM ECR FLO FNV FRPT MIDD NEFF NTES HLTH PLKI RNDY SHLX SFS SPKE SPTN SYNC TGB TTEK YY

Summary

Well we are starting to see some short covering in the market and I expect to see more coming the next few sessions. However it looks to me that the buying strength is still lacking and maybe we might see some downside before some dip buyers jump in. It is better to stay cautious as the market is getting defensive.

Prepare for another quiet session as we see the bonds markets and banks are closed for Veteran's Day celebration. There is no economic data releasing as well.

Direction for Wednesday 11 Nov, 2015: Down

2015 Daily Directional Accuracy: 114/178  (64.04%) 

2015 Weekly Directional Accuracy: 25/41 (60.98%)