Market Direction Summary (01-20-2010)
Dow-30 -122.28 @ 10603.15; S&P 500 -12.19 @ 1138.04; Nasdaq 100 -27.53 @ 1867.95; Russell 2k -9.54 @ 639.61; VIX +1.10 @ 18.68; U.S. Dollar Index +0.91 @ 78.36; 10 Year Tsy Rates -0.48 @ 36.59; Crude Oil -1.32 @ 77.61; Gold -27.10 @ 1111.10; CRB -3.77 @ 279.48; DJ-U.S. Real Estate Index -2.30 @ 179.19
On a day absent of significant bearish events, let it be known that China has awakened and shaken the world’s markets with the potential impact of its lending policies upon the global economic recovery. Contrary to what many appear to believe, ground zero for the new world order may not be located in the western hemisphere.
Oh well, so much for a dramatic introduction… Let us get on to the business of rationalizing and analyzing the markets.
First, I must correct myself. Yesterday was more about passing a technical quiz instead of a test when benchmark equity indexes flirted with support levels near their 20 day moving averages.
Wednesday’s trading session was a pop quiz and the market scored an "F" for missing the China liquidity retraction event. This is not entirely bad as pop quizzes allow us to assess strengths and weaknesses and not take too much for granted before going into full battle.
The real test will be the 50 day moving average upon which, incidentally, all four major equity indexes, (i.e. Dow-30, S&P 500, Nasdaq 100, and Russell 2000) seem to be converging. In the meantime, the DIA, SPY, QQQQ, and IWM have reverted to short-term downtrends. Before the 50 sma (simple moving average) day of judgment arrives, there will likely be more tug of war skirmishes between bulls and bears.
Such indecision by market participants can be confusing, but analyzing patterns of daily price volume relationships does provide us with a few clues. Tuesday signaled that investors were selling into strength and last Friday betrayed market participants overwhelmed with panic as they dumped declining shares on rising volume.
This Wednesday witnessed a dominating but incestuous price volume relationship union between capitulating (40% price down & volume up) and apathetic (42% price down & volume down) sellers. It may not be kosher, but the bottom line is that institutions (falling prices on heavy selling) want to get out of certain stocks while buyers (falling prices on fading volume) are simply disinterested in buying anything for the moment.
Market Direction Drivers (01-20-2010)
Bond Market: December-2010 Producer Price Inflation (PPI) was more or less in line with expectations and accommodates the Fed’s policy to maintain low interest rates. Headline PPI was 0.2% m/m and 4.7% yr/yr while core PPI was flat m/m and up 0.9% yr/yr. Interest rates for the 10 year treasury declined -1.29% while treasury bond ETFs continued to ascend in their new short-term uptrends: [[[IEF] +0.34% and TLT +1.01%.
China’s Lending Policy: Liu Mingkang, chairman of the China Banking Regulatory Commission, confirmed that some banks were asked to reduce lending in order to meet regulatory requirements. Many investors fear that a slow down in China’s economy will impact the global markets. Greater China region exchange traded funds were down: FXI -3.81%; EWT -1.96%; EWH -2.33%; EWS -2.62%; and VNM -3.2%. Industrial metals and mining and basis materials exchange traded funds were also negatively impacted by the announcement: XME -2.75%; SLX -3.12%; XLB -1.78%; and GDX -4.11%.
Financials: The financial sector was visited with several postive earnings reports from key industry players. Bank of New York Mellon Corp. (BK) beat analyst expectations by reporting earnings @ $0.55 per share; State Street Corp. (STT) beat the street by a penny with 4Q-2009 results @ $1.00; Northern Trust Corp. (NTRS) reported $0.83 profit per share which was 27% better than the average analyst estimate; other positive earnings surprises were issued by M&T Bank Corp. (MTB) and Marshall & Ilsley Corp. (MI). And of course. banking giant and bellwether, Bank of America Corp. (BAC) showed improvement as it set aside $10.1bn in credit loss provisions for 4Q vs. an average $12.8bn over the previous 3 quarters. The SPDR Financial Sector (XLF) and Regional Bank Holders (RKH) ETFs displayed impressive relative strength with performances @ -0.26% and +1.35%, respectively.
Greece Sovereign Debt: The prospect of sovereign default continues to shadow the markets as IMF Managing Director Dominique Strauss-Kahn evaluated Greece’s budget issues as "a serious problem." Exchange traded funds representing 2 out the 4 European PIGS traded down today: Spain (EWP) -3.74%; and Italy (EWI) -3.39%.
Real Estate: Lower interest rates, e.g. 30 year mortgages averaging 5% vs. previous week’s 5.13%, are increasing mortgage demand. The Mortgage Banker’s Association (MBA) purchase index gained 4.4% for the week of Jan-15-2010 and its refinance index rose 10.7%. This positive data helped to blunt the recent decline in pending home sales and the home builder’s index. The Mortgage Reit ETF (REM) closed down -0.27% but succeeded in maintaining the support of its January 2010 lows.
December-2009 Housing Starts increased slightly to an annualized rate @ 557k vs. previous month @ 574k and consensus @ 579k. Permits jumped to @ 653k vs. previous month @ 584k. Dissection of its components revealed a 6.9% drop in single -family starts and a 12.2% rise in multi-family starts. Regionally, housing starts were weakest in the Northeast (-19%) and Midwest (-18.5%). The West (-0.9%) was relatively unchanged while the South (+3.3%) showed an actual increase. Despite the relative weakness, the buildup in permits offers a ray of hope for some homebuilders. The SPDR Homebuilders ETF (XHB) was off -1.95% and the iShares Home Construction ETF (ITB) was down -1.47%.
Technology / Semiconductors: ASML Holding NV (ASML), Europe’s top semiconductor equipment manufacturer beat earnings estimates; Cree Inc. (CREE) reported eps @ $0.38 vs. consensus @ $0.29; Rambus (RMBS) settled its legal claims with Samsung and will receive $900mm and strike a new licensing deal. The Semiconductor Holders ETF (SMH) closed down -0.55% but in a show of strength recouped most of its earlier losses.
Transportation: CSX Corp. (CSX), a leading economic indicator proxy and one of the four largest railroad carriers in the U.S., missed estimates by reporting operating earnings @ $583mm vs. consensus @ $613mm. Its stock closed down -6.26% while the Dow Jones Transportation ETF (IYT) was off -0.93%.
ETF New Highs and New Lows (01-20-2010)
ETF 5 Day New Highs: (Note * denotes 250 day new high)
- U.S. Equities (XLV*, IHI*, PPH*)
- International Equities (N/A)
- Commodities (N/A)
- Forex (UUP)
- Bonds (AGG, IEF, MBB, MUB, SHY, TIP, TLT)
- Real Estate (N/A)
ETF 5 Day New Lows: (Note * denotes 250 day new low)
- U.S. Equities (DIA, IWM, QQQQ, SPY, IYZ, XLB, XLE, XLI, XLK, XLP, XLY, CRBQ, CUT, FAN, FDN, GDX, HAP, IAI, IGF, ITA, IYT, KOL, MOO, NLR, PHO, PXR, RTH, SLX, SMH, TAN, XME)
- International Equities (EWC, EWW, EWZ, ILF, ISI, EWG, EWQ, EWU, IEV, VGK, EWA, EWH, EWM, EWS, EWT, EWY, FIX, VNM, EEM, EWX, GAF, GMF, GML)
- Commodities (DBA, DBB, DBC, GLD, JJC, JJG, SLV, USO)
- Forex (BZF, CEW, CYB, DBV, FXA, FXC, FXE, FXF, ICN, XRU)
- Bonds (BWX, HYG, JNK, MUB, WIP)
- Real Estate (ITB, REM, XHB)
Signing off at Hillbent on The Market Direction and ETF Market Trends™…
ETF Market Trends™ Monitor (01-20-2010)
|U.S. Equity ETFs|
|DIA (DJ Industrials)||106.03||-1.06%||53.82%||64||down||up||up|
|SPY (S&P 500)||113.89||-1.02%||65.36%||62||down||up||up|
|QQQQ (Nasdaq 100)||45.92||-1.44%||93.47%||42||down||up||up|
|IWM (Russell 2000)||63.91||-1.45%||24.11%||60||down||up||up|
|VXX (VIX Futures)||27.81||-0.04%||168.87%||3||down||down||down|
|XLP (Consumer Staples)||26.73||-0.74%||27.26%||57||up||up||up|
|XLV (Health Care)||32.72||-0.85%||151.11%||36||up||up||up|
|XLY (Consumer Discrtn)||29.97||-1.35%||2.95%||43||down||up||up|
|CRBQ (Global Commodities)||43.82||-2.43%||5.42%||44||down||up||n/a|
|CUT (Global Timber)||18.30||-1.88%||29.83%||44||down||up||up|
|FAA (Global Wind Energy)||14.85||-3.38%||-36.35%||47||down||down||up|
|FDN (DJ Internet Index)||24.63||-1.60%||-12.10%||41||down||up||up|
|GDX (Gold Miners)||45.73||-4.11%||62.13%||44||down||down||up|
|HAP (Hard Assets Producers)||34.34||-2.39%||-5.59%||50||down||up||up|
|IGF (Global Infrastructure)||35.18||-1.65%||-24.90%||48||down||up||up|
|IGN (GSTI Networking)||27.52||-1.57%||-48.76%||48||up||up||up|
|IHI (Medical Devices)||55.50||-0.78%||1030.85%||39||up||up||up|
|ITA (Aerospace & Defense)||53.46||-1.37%||-21.90%||37||up||up||up|
|NLR (Nuclear Energy)||23.25||-2.80%||22.21%||40||down||up||up|
|OIH (Oil Services)||128.70||-2.25%||28.80%||47||up||up||up|
|PHO (Water Resources)||17.12||-1.95%||-9.98%||45||down||up||up|
|PXR (Emerg Mkts Infrastructure)||44.30||-2.64%||-24.43%||55||down||up||up|
|RKH (Regional Banks)||82.52||1.33%||114.85%||68||up||up||up|
|SEA (Global Shipping)||14.99||-2.15%||16.62%||25||up||up||up|
|TAN (Global Solar Energy)||9.65||-3.98%||169.68%||19||down||up||up|
|XME (Metals & Mining)||54.90||-2.75%||48.92%||44||down||up||up|
|International Equity ETFs|
|EWC (MSCI Canada)||26.12||-2.36%||52.47%||55||down||up||up|
|EWW (MSCI Mexico)||49.50||-2.73%||52.71%||2||down||up||up|
|EWZ( MSCI Brazil)||72.46||-2.89%||65.89%||60||down||down||up|
|ILF (Latin America 40)||46.87||-2.98%||34.48%||40||down||down||up|
|ISI (S&P 1500)||51.24||-1.08%||9.34%||58||down||up||up|
|EWG (MSCI Germany)||21.92||-2.97%||5.16%||40||down||down||up|
|EWQ (MSCI France)||25.85||-3.22%||-21.13%||52||down||down||up|
|EWU (United Kingdom)||16.65||-1.65%||64.83%||86||down||up||up|
|IEV (S&P Europe 350)||39.19||-2.56%||112.82%||57||down||down||up|
|VGK (Vanguard Europe)||49.00||-3.10%||10.13%||51||down||down||up|
|EWA (MSCI Australia)||23.21||-3.25%||8.90%||32||down||up||up|
|EWH (MSCI Hong Kong)||15.54||-2.33%||44.35%||55||down||down||up|
|EWJ (MSCI Japan)||10.23||-2.20%||28.18%||82||up||up||up|
|EWM (MSCI Malaysia)||11.07||-1.42%||-16.25%||30||down||up||up|
|EWS (MSCI Singapore)||11.51||-2.62%||-3.95%||46||down||up||up|
|EWT (MSCI Taiwan)||13.00||-1.96%||28.87%||73||down||up||up|
|EWY (MSCI South Korea)||49.48||-1.86%||28.04%||57||down||up||up|
|FXI (FSTE China)||41.14||-3.81%||100.34%||64||down||down||up|
|IF (Indonesia Fund)||10.12||-2.03%||-7.22%||30||up||up||up|
|IFN (India Fund)||31.92||-2.09%||-40.42%||43||up||up||up|
|EEM (MSCI Emerging Mkts)||41.77||-2.41%||47.46%||50||down||up||up|
|EWX (Emerging Small Caps)||49.11||-1.50%||-34.13%||61||down||up||up|
|GAF (Middle East & Africa)||62.91||-1.66%||-27.38%||49||down||up||up|
|GMF (Emerging Asia Pacific)||74.68||-2.32%||-26.19%||47||down||up||up|
|GML (Emerging Latin America)||78.74||-2.78%||42.19%||35||down||up||up|
|GUR (Emerging Europe)||46.28||-2.26%||-11.93%||53||up||up||up|
|DBB (Base Metals)||22.28||-2.75%||26.05%||44||down||up||up|
|UNG (Natural Gas)||9.92||-1.68%||-36.89%||18||down||up||down|
|BZF (Brazilian Real)||25.93||-1.33%||-29.83%||20||down||down||up|
|CEW (Emerging Currency)||22.11||-1.03%||-42.30%||31||down||down||up|
|CYB (Chinese Yuan)||25.28||-0.12%||-41.96%||33||lateral||lateral||lateral|
|DBV (G10 Currencies)||23.50||-1.43%||-42.11%||29||down||up||up|
|FXA (Australian Dollar)||91.00||-1.78%||-1.46%||17||down||down||up|
|FXB (British Pound)||162.35||-0.60%||-30.56%||47||up||down||up|
|FXC (Canadian Dollar)||95.18||-1.58%||36.11%||68||down||up||up|
|FXF (Swiss Franc)||95.29||-1.19%||8.70%||65||down||down||up|
|FXM (Mexican Peso)||78.52||-0.81%||-48.64%||29||up||up||up|
|FXY (Japanese Yen)||108.75||-0.11%||-54.51%||66||up||down||up|
|ICN (Indian Rupee)||25.40||-0.31%||-20.22%||0||down||up||up|
|UUP (U.S. Dollar)||23.12||1.23%||25.45%||67||up||up||down|
|XRU (Russian Ruble)||33.52||-0.78%||-37.80%||71||up||down||up|
|AGG (Investment Grade)||104.37||0.26%||-17.34%||85||up||down||up|
|BWX (Int’l Tsy Bonds)||56.66||-1.51%||32.13%||11||down||down||up|
|EMB (Emerging Markets Bonds)||102.53||0.12%||46.09%||86||up||up||up|
|HYG (Hi Yld Corp)||88.99||-0.14%||-2.74%||37||down||up||up|
|IEF (7-10 Yr Tsy)||90.20||0.34%||-55.40%||37||up||down||down|
|JNK (Hi Yld Bonds)||39.63||-0.60%||-13.43%||0||down||up||up|
|MBB (Mortgage Bonds)||107.24||0.01%||38.12%||47||up||up||up|
|MUB (Nat’l Muni Bond)||103.24||0.04%||-2.19%||79||up||up||up|
|SHY (1-3 Yr Tsy)||83.45||0.00%||42.64%||17||up||down||down|
|TIP (Tsy Inflation Protect)||105.09||0.15%||-18.17%||39||up||up||up|
|TLT (20 Yr+ Tsy)||91.74||1.01%||-14.51%||94||up||down||down|
|WIP (Int’l Inflation Protect)||56.18||-1.32%||-43.07%||8||down||down||up|
|FIO (Industrial Office)||24.16||-0.17%||-31.68%||95||up||up||up|
|ICF (Cohen & Steers)||52.68||-1.33%||128.09%||63||up||up||up|
|ITB (Home Construction)||12.77||-1.50%||-45.99%||60||up||up||up|
|IYR (DJ US Real Estate)||46.11||-1.09%||-8.27%||74||up||up||up|
|REM (Mortgage Reits)||14.87||-0.13%||-5.09%||100||down||up||up|
|REZ (Residential Index)||30.92||-1.25%||17.81%||84||up||up||up|
|RTL (Retail Index)||21.67||0.00%||-100.00%||n/a||up||up||up|
*PMI measures strength of % daily trading range on scale of 0 to 100
**ST = Short-Term Trend; MT = Intermediate Trend; LT = Long-Term or Primary Trend
***Vol% measures % change in daily volume vs. average daily volume
Market Momentum Diary: 01-20-2010
|% Stocks > Mov Avg||20-Day MA||50-Day MA||200-Day MA|
|Daily Market Stats||NYSE||NASDAQ|
|52 Week New Highs||238||58|
|52 Week New Lows||3||6|
Hillbent Market Direction Resources
- Investor’s Selected Reading: N/A
- Economic Calendar Events: Refer to U.S. Calendar or International Calendar
- Postive & Negative Earnings Surprises: Refer to Hillbent’s earnings summary report for a detailed analysis of positive & negative earnings surprises
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