Friday, January 31, 2014

30 Jan 2014 AMC - Market bounce with Nasdaq leading

Market Summary

The major averages finished the Thursday session near their highs as the volatile week continued. The Nasdaq surged 1.8% while the S&P 500 gained 1.1% as all ten sectors ended in the green. As a result of the advance, the S&P 500 will enter Friday's session with a slim week-to-date gain of 0.2% while the Nasdaq remains lower by 0.1% for the week. 

Stocks jumped out of the gate and continued climbing steadily into the early afternoon. The S&P 500 notched a session high of 1798.77 just before 13:00 ET, and spent the rest of the trading day near that level. The upbeat start to the session was aided by overnight gains in index futures which rallied while the Japanese yen weakened. The futures market received an additional boost an hour before the cash open when it was reported that fourth quarter GDP rose 3.2%, per the advance estimate. 

The Nasdaq Composite spent the entire session in the lead with the likes of (AMZN 403.01, +18.81), Google (GOOG 1135.39, +28.47), Facebook (FB 61.08, +7.55), and Qualcomm (QCOM 73.26, +2.14) providing support. and Google rallied ahead of their earnings while Facebook and Qualcomm posted respective gains of 14.1% and 3.0% after reporting better-than-expected results. 

Biotechnology also factored into the outperformance of the Nasdaq as the iShares Nasdaq Biotechnology ETF (IBB 249.96, +7.16) rose 3.0%. In turn, this underpinned the health care space (+1.8%), which ended in the lead. 

Similar to health care, other heavily-weighted sectors like consumer discretionary (+1.7%), financials (+1.3%), and technology (+1.5%) ended ahead of the broader market. 

Elsewhere, the energy sector (+0.2%) finished behind the remaining groups as Dow component ExxonMobil (XOM 93.99, -1.12) lagged after missing on earnings. 

Speaking of the Dow (+0.7%), the price-weighted index was unable to keep pace with the broader market as 3M (MMM 128.05, -2.20) and Boeing (BA 126.53, -3.25) weighed. 3M lost 1.7% after reporting in-line earnings on below-consensus revenue while Boeing fell 2.5% after cautious guidance overshadowed its earnings beat. 

Treasuries ended near the middle of their range with the 10-yr yield up two basis points at 2.70%. 

Trading volume was below average as 641 million shares changed hands at the NYSE. 

Today's economic data included initial claims, fourth quarter GDP, and the pending home sales report for December. 
  • Most notably, GDP increased 3.2% in the fourth quarter, according to the advance estimate. That was down from a 4.1% gain in the third quarter but slightly above the consensus estimate of a 3.0% increase. Despite the above-consensus reading, the report was actually a disappointment. Real final sales, which our model was tracking to be near a 4.0% gain, only increased 2.8%. That was the largest increase since a 3.4% gain in Q1 2012, but it was within the same trends that we have been seeing for the past couple of years. Contrary to the headline numbers, there has been no real acceleration in growth over the last few quarters. 
  • Weekly initial claims unexpectedly spiked to 348,000 from an upwardly revised 329,000 (from 326,000) while the consensus expected the claims level to fall to 325,000. 
  • Pending home sales for December tumbled 8.7%, which was worse than the 0.2% decrease forecast by the consensus. The reading followed last month's revised decrease of 0.3% (from +0.2%). 
Tomorrow, December Personal Income, Personal Spending, Core PCE Prices, and the fourth quarter Employment Cost Index will all be released at 8:30 ET while the final reading of the University of Michigan Consumer Survey for January will be reported at 9:55 ET. 
  • Nasdaq Composite -1.3% YTD 
  • Russell 2000 -2.0% YTD 
  • S&P 500 -2.9% YTD 
  • Dow Jones Industrial Average -4.4% YTD

Market Internals

Leaders & Laggards

Technical Updates

Next Day In View

Alvin's Commentaries

Happy Chinese New Year! 

The bull are out and the bears are taking a break. Market started with a bullish bias and rallied all the way to 1pm. Dow slides and went sideways while Nasdaq & S&P500 continued sideways to end Dow +109.82 at 15848.67, Nasdaq +71.69 at 4123.12, S&P+19.99 at 1794.19.

The main leaders were Healthcare (+1.82%), Consumer Discretionaries (+1.68%) & Utilities (+1.54%). On Nasdaq, (AMZN 403.01, +18.81), Google (GOOG 1135.39, +28.47), Facebook (FB 61.08, +7.55), and Qualcomm (QCOM 73.26, +2.14) provided the momentum for Nasdaq to end +1.77%.

Market internals shows lots of divergence. VIX remain on the high side closing at 17.29. Volumes we are 654m only. On the technical side, down bounced off the 15,700 support and is attempting to break the 15,900. S&P bounced off the 1,770.

January Barometer is showing brearish note for first week and closing 30 Jan with only 1 more session to go. I do not believe it is enough to end Jan on a positive note. 

Note : My wife flashed the S&P future to me while I am writing this. It is down 1.1% as of 8.45am EST. This has affect my call for the day. 

Market Call: Down
Date: 31 Jan 2014

Thursday, January 30, 2014

29 Jan 2014 AMC - Market down due to Fed cut asset purchase program by $10b

Market Summary

Equities ended broadly lower with small caps leading the weakness. The Russell 2000 lost 1.4% while the S&P 500 fell 1.0% as nine of ten sectors finished in the red. Although today's session generated plenty of excitement, some of the events that played out over the course of the day were set in motion yesterday. 

Shortly after yesterday's session on Wall Street ended, the Central Bank of Turkey shocked the market with a 445-basis point hike to 12.00% in an attempt to halt the rapidly weakening lira. The move worked...for 15 hours. The lira strengthened after the announcement, but spent the remainder of the overnight session in a steady retreat, giving up all of its gains. 

Interestingly, yesterday's news of out of Turkey also gave a boost to U.S. equity futures while weighing on the yen. The moves did not hold as futures spent the night in a steady retreat while the yen rallied. 

The Japanese currency maintained its strength throughout the session, posing a headwind to equities. Dollar/yen spent the entire trading day just above the 102.00 level while yen futures gained 0.6%, extending their 2014 advance to 3.0%. 

Meanwhile, stocks hovered near their opening levels in the morning, but fell to fresh lows after the Federal Open Market Committee released its latest policy statement, which called for another $10 billion reduction to monthly asset purchases. Strikingly, just like losses observed earlier in the day, the post-FOMC retreat was accompanied by more yen strength. 

The materials sector (+0.5%) withstood the broad-based weakness with help from Dow Chemical (DOW 44.77, +1.71), which rallied 4.1% after beating on earnings. Miners also outperformed as the Market Vectors Gold Miners ETF (GDX 23.86, +0.46) gained 2.0%. On a related note, gold futures advanced 0.9% to $1262.00 per troy ounce. 

Elsewhere, the other commodity-related sector, energy, outperformed with a loss of 0.3%. The sector finished well ahead of the broader market thanks to bottom-line beats reported by Marathon Petroleum (MPC 86.85, +3.68) and Valero (VLO 51.50, +1.30). 

Other cyclical groups were mixed with respect to the broader market as technology (-0.9%) outperformed while consumer discretionary (-1.7%), financials (-1.1%), and industrials (-1.0%) lagged. 

On the countercyclical side, health care (-0.9%), telecom services (-0.4%), and utilities (-0.1%) outperformed while consumer staples (-1.8%) ended behind the remaining sectors. 

Treasuries ended on their highs with the 10-yr yield down seven basis points at 2.69%. 

Tomorrow, weekly initial claims and the advance fourth quarter GDP report will be released at 8:30 ET while the December Pending Home Sales report will cross the wires at 10:00 ET. 
  • Nasdaq Composite -3.0% YTD 
  • Russell 2000 -3.5% YTD 
  • S&P 500 -4.0% YTD 
  • Dow Jones Industrial Average -5.1% YTD

Market Internals

Leaders & Laggards

Technical Updates

Next Day in view

Alvin's Commentaries

Market started off with a slight bearish bias. After 2pm FOMC statement of tapering to 10b/month asset purchase program, the market continue to slide further ending all 3 indices in the red. All 9 sectors ended in the red except for Material (+0.41%). Volume is at 736m shares traded on the NYSE. On Thursday we have the unemployment claim and Home sales data. 

Market Call: Flat to the Upside
Date: 30 Jan 2014

Tuesday, January 28, 2014

28 Jan 2014 AMC - DOW breaks it's 5 day loosing streak, AAPL slides after earnings

The stock market halted its three-day slide on Tuesday as the S&P 500 gained 0.6%. The tech-heavy Nasdaq (+0.4%) also finished in the green, but couldn't keep pace with the S&P 500 as Apple (AAPL 506.50, -44.00) weighed following its quarterly report. 

Although the largest tech company beat on earnings and revenue, investors were not pleased by below-consensus iPhone sales. In addition, disappointing guidance for the second quarter also factored into the stock's 8.0% loss. 

The remainder of the technology sector (-0.7%) was a bit more mixed as large-cap names like Google (GOOG 1123.01, +21.78), Oracle (ORCL 37.10, +0.61), and Intel (INTC 24.90, +0.18) posted solid gains while Seagate (STX 51.52, -6.53) tumbled 11.3% after missing earnings estimates. 

Outside of technology, most other cyclical groups finished ahead of the broader market. Financials (+1.3%) ended in the lead while the materials (+0.5%) sector was the only cyclical underperformer. U.S. Steel (X 25.34, -0.11) lost 0.4% after reporting mixed earnings. 

Elsewhere, the discretionary sector advanced 0.8% with help from homebuilders after DR Horton (DHI 23.00, +2.06) reported better-than-expected results. The stock surged 9.8% while the broader iShares Dow Jones US Home Construction ETF (ITB 24.52, +0.90) jumped 3.8%. 

Also of note, the industrial sector (+0.9%) rallied as transports provided support. The Dow Jones Transportation Average gained 1.1%, finishing just above its 50-day moving average. 

On the countercyclical side, consumer staples (+0.7%) and health care (+1.3%) took part in the broad rally while telecom services (UNCH) and utilities (+0.4%) lagged. 

Treasuries ended little changed despite showing early losses. The benchmark 10-yr yield settled at 2.75%. 

Participation was well below average as only 609 million shares changed hands at the NYSE. So far in January, only six sessions have generated above-average volume with five taking place on days when the market ended lower. 

Today's economic data included three reports. 
  • Durable goods orders fell 4.3% in December after increasing a downwardly revised 2.6% (from 3.4%). The consensus expected durable goods orders to increase 2.1%. Boeing (BA 137.09, -0.27) reported solid aircraft orders in December, and that was expected to carry overall durable goods orders higher for the month. Yet, the official Census data showed aircraft orders, defense and nondefense, down 16.7%. A large portion of the decline was due to seasonal adjustments that naturally occur in December. Excluding transportation, durable goods orders fell 1.6% which was well below the 0.6% gain expected by the consensus. These orders were revised down from an originally reported 1.2% gain in November to a 0.1% increase. 
  • The November Case-Shiller 20-city Home Price Index rose 13.6% while a 13.8% increase had been expected by the consensus. This followed the previous month's increase of 13.6%. 
  • The January Conference Board's Consumer Confidence Index increased to 80.7 from a downwardly revised 77.5 (from 78.1) in December. The consensus pegged the Consumer Confidence Index at 77.5. The strengthening in consumer confidence stands in contrast to what the preliminary reading for the January University of Michigan Consumer Sentiment Index showed. That index dropped on weakness in the labor market, increased volatility in equity prices, and higher gasoline prices. 
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC will release its latest policy directive at 14:00 ET. 
  • Nasdaq Composite -1.9% YTD 
  • Russell 2000 -2.1% YTD 
  • S&P 500 -3.0% YTD 
  • Dow Jones Industrial Average -3.9% YTD

Market Internals

Leaders and laggards

Technical Updates

Next day in view

Alvin's commentaries

Dow ended it's 5 days loosing streak while both Nasdaq & S&P500 ended their 3 days loosing streak. While Nasdaq ended in the green, it lags behind the other 2 indices as AAPL weigh in (-7.99%) with it's earnings report. Sector wise, Healthcare & Financial lead by 1.33% & 1.32%. Volumes were at 622m on the NYSE. On the technical side, all 3 indices is showing a reversal candlestick pattern. On Wednesday there will be the FOMC statement at 2pm, I will be expecting not much action on the opening bell until 2pm. 

Market Call: Abstain
Date: 29 Jan 2014

27 Jan 2014 AMC- DOW down 5 days in a row, first DFDM in 2014

Market Summary

The major averages followed last week's sharp losses with another shaky performance. The Dow Jones Industrial Average and S&P 500 posted respective declines of 0.3% and 0.5% while the Nasdaq (-1.1%) and Russell 2000 (-1.5%) underperformed. 

Stocks displayed gains at the open but the early strength faded during the initial hour as the Nasdaq headed into the red. The other indices followed suit and the broad retreat continued until about 12:20 ET when stocks reversed and spent the afternoon in a steady climb. Moderate selling pressure returned during the final hour, knocking the indices off their afternoon highs. 

Although there was no news responsible for the turn, the morning selling coincided with a strengthening yen while the session low in equities matched the high point for the Japanese currency. Once the yen began weakening again, a rally in equities ensued. Similarly, the selling observed during the last 30 minutes of action coincided with the yen gaining strength once again. 

The Dow and S&P 500 held up relatively well compared to the tech-heavy Nasdaq. The index suffered after being hit with a one-two punch of selling interest as large cap tech names and biotechnology retreated. The tech sector (-1.0%) finished at the bottom of the leaderboard while the iShares Nasdaq Biotechnology ETF (IBB 238.60, -5.42) lost 2.2% and also pressured the health care sector (-0.8%). 

Even though technology underperformed, its largest component, Apple (AAPL 550.50, +4.43) added 0.8% ahead of its after-hours earnings report. 

Elsewhere among cyclical groups, the industrial sector (+0.2%) drew strength from Caterpillar (CAT 91.29, +5.12) after the Dow component reported above-consensus results and announced a $10 billion buyback program. Transports, however, did not take part in the rally. The bellwether complex lost 0.8% after plunging 4.1% on Friday. 

On the countercyclical side, health care (-0.8%) lagged while consumer staples (-0.3%), telecom services (+0.1%), and utilities (+0.2%) outperformed. 

The early selling fueled a scramble for downside protection, which sent the CBOE Volatility Index (VIX 17.51, -0.63) as high as 18.99%. However, the subsequent rebound invited many to lift their hedges. As a result, the near-term volatility measure ended lower by 3.5%. 

Treasuries finished on their lows with the benchmark 10-yr yield up five basis points at 2.77%. 

Participation was a bit above average as 764 million shares changed hands at the NYSE. 

Today's economic data was limited to the December New Home Sales, which fell 7.0% to 414,000 from a downwardly revised 445,000 (from 464,000) while the consensus pegged the reading at 457,000. Total sales in 2013 increased 16.3% to 428,000 from 368,000 in 2012. That was the most new homes sold since 485,000 sales registered in 2008. Although that may seem like a lot, more than a million new homes were sold each year from 2003 to 2006. 

We hypothesized that the strong sales performance in October and November was due to buyers rushing into the market to take advantage of relatively low interest rates in a rising interest rate environment. The large December decline adds evidence to this theory as the push forward in demand dried up and sales levels returned to where they were during the lackluster summer period. Another drop in January would deliver more credence to the contention that gains in October and November were not from sustainable demand growth. 

Tomorrow, December Durable Orders will be released at 8:30 ET while the November Case-Shiller 20-city Index and January Consumer Confidence will cross the wires at 9:00 ET and 10:00 ET, respectively. 
  • Nasdaq Composite -2.2% YTD 
  • Russell 2000 -3.1% YTD 
  • S&P 500 -3.6% YTD 
  • Dow Jones Industrial Average -4.5% YTD

Market Internals

Leaders & Laggards

Technical Updates

Next Day In View

Alvin's Commentaries

There you have it, DOW is down 5 days in a row & the first DFDM in 2014. 4 more sessions to the end of Jan and the January Barometer is likely to show Jan to be a loss. Market started with a bearish bias but reversed at 12pm just to sell down at the last hour. Technology & Healthcare are the biggest losers last night. GOOG, MSFT & ORCL lost more than 1.67%. Only Industrial and Utilities stays in the positive side slightly. 776m shares traded last night on the NYSE. AAPL releases their earnings AMC which brought their share price down $44. This will weight in heavily on the Nasdaq. With the FOMC statement coming out tomorrow, I am expecting some profit taking tonight given the 5 days sell down.

Market Call: FLAT to upside
Date: 28 Jan 2014

Monday, January 27, 2014

24 Jan 2014 AMC - Market suffers huge decline which wipe out Jan to date gain due to China data

 Market summary

Equities endured a rough end to the abbreviated week with the S&P 500 seeing its largest weekly loss since June 2012. The benchmark index fell 2.1%, extending its January decline to 3.1%. 

The market spent the entire session in a steady slide amid continued concerns regarding China. Furthermore, participants kept a close eye on the foreign exchange market where emerging market currencies weakened while the Japanese yen saw its second consecutive day of gains. Dollar/yen fell below the 102.50 level after trading near 104.50 on Wednesday. The yen strength came about after Bank of Japan officials said the Japanese economy remains on track and there is no need for additional easing at this time. In turn, this posed a headwind to yen-based carry trades, which played a significant part in last year's market rally. 

Like yesterday, the weakness began overnight; however, unlike yesterday, the aggressive selling did not start until the European session kicked off. Regional indices saw broad losses with peripheral markets leading the slide. Spain's IBEX plunged 3.6% while Italy's MIB fell 2.3%. 

The overseas weakness set the tone for a lower start in U.S. equities with cyclical sectors leading the decline. Consumer discretionary (-1.9%) and technology (-2.1%) finished just ahead of the broader market thanks to the relative strength of Starbucks (SBUX 74.98, +1.59) and Microsoft (MSFT 36.80, +0.75) after both beat their bottom-line estimates. 

Staying on the earnings theme, most of the reports received between yesterday's close and today's open were ahead of expectations but that mattered little to the broader market. However, Kansas City Southern's (KSU 99.49, -17.79) seven-cent miss mattered quite a bit as the stock plunged 15.2% while also weighing on the Dow Jones Transportation Average, which tumbled 4.1%. This marked the largest one-day loss for the bellwether complex since September 2011 as the broad liquidation resulted in 17 of 20 components posting losses in excess of 2.0%. Due to the sharp losses, the industrial sector (-3.1%) ended at the bottom of the leaderboard. 

Elsewhere, financials (-2.3%) and materials (-2.7%) lagged while energy (-2.1%) ended in-line. 

Meanwhile, defensive sectors—sans health care—outperformed with losses between 0.9% and 1.1%. Procter & Gamble (PG 79.18, +0.94) contributed to the relative strength of the consumer staples sector after reporting a one-cent beat. For its part, the health care sector lost 2.3%. 

Treasuries booked gains with the 10-yr yield ending lower by five basis points at 2.73%. 

The aggressive selling fueled strong demand for volatility protection as indicated by a 30.0% surge in the CBOE Volatility Index (VIX 17.89, +4.12), which ended at its highest level since October 15. 

For the second day in a row, the selloff was accompanied by above-average volume as 902 million shares changed hands at the NYSE. 

Monday's data will be limited to the December New Home Sales report, which will be released at 10:00 ET. 
  • Nasdaq Composite -1.2% YTD 
  • Russell 2000 -1.7% YTD 
  • S&P 500 -3.1% YTD 
  • Dow Jones Industrial Average -4.2% YTD 
Week in Review: From Highs to Lows in Less Than a Week 

On Monday, bond and equity markets were closed for Martin Luther King Jr. Day. 

Tuesday saw the major averages begin the abbreviated week on a mixed note as the Nasdaq added 0.7% while the Dow Jones Industrial Average shed 0.3%. For its part, the S&P 500 rose 0.3% as eight of ten sectors finished in the green. Stocks began the day with solid gains but the early strength faded quickly when the S&P 500 was unable to extend above the 1850 level during the opening minutes. That rejection emboldened sellers, who promptly drove the indices to their lows. Adding insult to injury was the fact that mostly better-than-expected earnings reported ahead of the opening bell failed to entice buyers. 

The market endured an uninspiring Wednesday session, which unfolded in similar fashion to Tuesday's affair. Once again, the major averages ended mixed with the Dow Jones Industrial Average (-0.3%) coming out on the losing end while the Nasdaq (+0.4%) and S&P 500 (+0.1%) eked out modest gains. The price-weighted Dow spent the entire session in the red as 19 of its 30 components registered losses. Most notably, the second-largest index member, IBM (IBM 179.64, -3.09), plunged 3.3% after beating its Capital IQ earnings estimate by 13 cents on below-consensus revenue. Despite the bottom-line beat, the report was scrutinized due to the company accounting for a lower tax rate than in previous quarters. 

On Thursday, the S&P 500 snapped its modest two-day win streak with its second-largest decline of the month. The index lost 0.9% as nine of ten sectors registered losses. Although stocks sold off throughout the day, the weakness actually started during the overnight futures session when three China-related developments began fueling the risk-off sentiment: 
  • The HSBC flash PMI reading for January was below expectations at 49.6. The sub-50 reading is indicative of manufacturing activity contracting; and the January reading marked a six-month low for the series. 
  • Financial Times report indicated Chinese authorities are working to prevent a default of a $500 million high-yield investment trust, failure of which could trigger an unnerving fallout in China's shadow banking system. 
  • An SEC administrative law judge issued a ruling that censures the accounting arms of the "Big Four" in China for six months due to their unwillingness to turn over requested documents involving US-listed Chinese companies under investigation for accounting fraud. 
The three developments did enough damage to sentiment that a slate of mostly better-than-expected earnings could not halt the day-long slide. The discretionary sector (-0.7%) finished just ahead of the broader market after last year's top S&P 500 component, Netflix (NFLX 386.08, -2.64), surged 16.5% in reaction to its bottom-line beat and above-consensus guidance.

Market Internals

Leaders & Laggards

On Friday, the Dow Jones Industrial Average dropped 2%, or 318 points, its worst one-day percentage drop since June 20. It also fell 3.5% for the week, its worst weekly decline since Nov. 25, 2011, with the pain compressed into four sessions after Monday’s holiday. Similarly, the S&P 500 Index  shed 2.6% on the week, with the Nasdaq Composite Index declining 1.7%.

The four-worst performing sectors on the S&P 500 Index for 2014 are the same ones that hit their 52-week highs on Dec. 31. Since the beginning of the year, the materials sector has fallen 5.1%, consumer discretionary stocks are down 5%, while industrials and energy stocks have both shed 4.9%. The S&P 500, on the other hand, is down 3.1%.

Technical Updates

Weekly Updates

Next week in view

Alvin's commentaries

The disappointing China PMI report has led the market to wipe out all it's gain in Jan and left the major indices in red. The recent highlight on China's shadow banking is fueling the decline and the recent case of HSBC being issued a sell rating for overstating their assets ($92b) is filling the market with negative news.

On Friday, the market started with with a bearish bias and continue to slide for the rest of the session. Only a few stocks, namely MSFT (+2.07%), PG (+1.20%) & MRK (+0.74%) is able to stay on the positive territory. The four worst hit sector on the S&P500 were Industrial (XLI -3.11%), Materials (XLB -2.68%), Healthcare (XLV -2.35%) & Financials (XLF (-2.27%). S&P is down 2.09%. Overall volumes were high with 909m shares traded on NYSE. DVOL outpace UVOL by 11:1 & VIX is up to Jan high of 18. The market is clearly worried. Potential catalyst this week will be the FOMC statement this Wednesday & AAPL earning scheduled for 27th Jan AMC.

On the Technical side, both DJIA broke its 16000 support level and S&P500 broke its 1800 level. Moving forward, the 15,700 on DJIA, 4,100 on COMP & 1,775 on S&P500 will be the next support to look out for. 

This week I am not expecting a major reversal towards the upside given the bearish sentiment on week 3. I am expecting some short covering today and the FOMC statement on Wednesday to set the tone for the rest of the week. Bearing in mind that the market is already fearful, I am not expecting week 4 to be bullish. 

Direction for Week 4 - Flat to downside

Market call - Flat to upside
27th Jan 2014