Monday, February 10, 2014

10 Feb 2014 AMC- Market moves sideways ahead of Yellen's testimony

Market Summary

The stock market began the new trading week on a subdued note. The Dow Jones Industrial Average, Nasdaq, and S&P 500 posted gains between 0.1% and 0.5% with the Nasdaq Composite ending in the lead. 

Overall, the session had a ‘wait-and-see' feel as many participants stuck to the sidelines ahead of tomorrow's Humphrey-Hawkins testimony on monetary policy. Although Fed Chair Janet Yellen is expected to strike a similar tone to the latest FOMC policy statement, the testimony will be the first public appearance for the new Fed Chair. Janet Yellen's prepared remarks will be released at 8:30 ET while the Q&A before the House Financial Services Committee is scheduled to begin at 10:00 ET. 

The limited participation was reflected in today's trading volume as only 640 million shares changed hands at the NYSE. In fact, the final tally marked the lowest daily volume since January 28. 

Seven out of ten sectors posted gains with health care (+0.9%) ending in the lead. The group outperformed throughout the session thanks in part to the relative strength of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 250.72, +4.39) advanced 1.8% and also provided support to the Nasdaq Composite. 

Like health care, the remaining countercyclical sectors also finished in the green, posting gains between 0.4% and 0.7%. 

Things were a bit more mixed on the cyclical side where financials (+0.1%), technology (+0.3%), and materials (+0.4%) outperformed while consumer discretionary (-0.04%), energy (-0.6%), and industrials (-0.6%) lagged. 

Notably, the industrial sector was pressured by broad weakness among transports. The Dow Jones Transportation Average fell 1.0% as 17 of its 20 components ended in the red. The bellwether complex lagged for the second consecutive session after coming up short of its 50-day moving average (7272) on Friday. 

Elsewhere, the energy sector finished behind the remaining groups as large components like Chevron (CVX 111.69, -0.36) and ExxonMobil (XOM 89.52, -1.06) lagged. The two Dow members lost 0.3% and 1.2%, respectively. 

Treasuries settled modestly higher with the 10-yr yield off one basis point at 2.67%. 

Tomorrow, the wholesale inventories report for December will be released at 10:00 ET. 
  • Nasdaq Composite -0.7% YTD 
  • S&P 500 -2.6% YTD 
  • Russell 2000 -3.7% YTD 
  • Dow Jones Industrial Average -4.7% YTD

Market Internals

Leaders & Laggards

Technical Update

Next Day in View

Alvin's commentaries

Last night things are going sideways, perhaps waiting to see what Yellen is going to say. Market internals shows that it was divergence everywhere, TRIN up while VIX down. As usual, market started with some bearish bias (futures were down before opening bell) and reversed around 10am till the closing bell to end flat. Everyone is on a 'wait and see' attitude now. Based on the weekly technical candle (bullish reversal hammer pattern), Yellen's speech tonight could just be the catalyst to do that.

Market Call: Up
Date: 11 feb 2014

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