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Gary Townsend - Founding member and Chairman, GBT Capital Management, LLC, a macro long/short fund based in Chevy Chase, Maryland. Also, 2007-2013, a founding partner, CEO and Portfolio Manager of Hill-Townsend Capital LLC, a long/short equity financial sector fund. Mr. Townsend has 35 years... More
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  • Major Indexes Distribute, But Financials Rise With Interest Rates; U.S. Futures, Asia, Europe Mixed Today

    This morning. U.S. futures are modestly mixed after fair value adjustment following another quiet overnight in Asia and Europe. In Asia, equity indexes rose modestly in Shanghai, reversing positively in early afternoon despite poor industrial production (+6.9% versus survey +8.8%). Tokyo was closed. In Europe, indexes opened with moderate losses, but are modestly mixed in early afternoon. European sovereign rates are slightly lower. U.S. Treasury 10-year yields are also lower. The dollar is mixed, though the euro continues to weaken. Commodities are mixed. Economic reporting is light overseas, and in the U.S. focuses on September empire manufacturing, which soared to nearly twice expectations, the strongest since October 2009, and before the open August industrial production and capacity utilization. Attention turns toward the start of 3Q2014 earnings season, this week's FOMC meeting and possible Fed language changes. Tuesday's Nikkei 225 September 2014 (NKU4) equity futures are modestly lower.

    Friday, on above average volume, major U.S. equity indexes distributed and closed with moderate losses that narrowed in the final hour. However, there was a strong interest rate aspect to the day's trade. On higher 10-year yields, utilities and energy were the weakest market segments, while the KBW Bank Index (BKX) notably bucked the trend, gaining +0.64% on 1.6x 15-day average volume, ending just -0.36% off its March 20th high. Also, the DJ Transports (TRAN) traded narrowly around breakeven through the session and closed down a mere -0.04%.

    The S&P 500 (SPX), DJI, Nasdaq, and NYSE composite closed down -0.60%, -0.36%, -0.53%, and -0.59%, respectively. On the week, all lost at least -0.33%. In September, indexes also are at least -0.28%, though financials closed up +1.17% and +1.62% on the week and month respectively. In August, indexes closed up at least +2.98% higher. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +7.42%, +2.48%, +9.36%, and +4.91%, respectively.

    Since August 13, the U.S. equity market outlook is "confirmed uptrend". Subsequent distributions number 1 for the SPX and DJI, and 2 for the Nasdaq and NYSE composite. The SPX closed +2.68% above its August 12th close.

    NYSE volume rose +14.8% to 1.19x its 20-day moving average.

    Other notable indexes closed mixed. The Russell 2000 (RTY) fell -1.00%. The Nasdaq Internet (QNET) index rose +0.13%. The Nasdaq Biotech (NBI) index fell -1.27%. The RTY, QNET, and NBI are down -3.98%, -5.45%, and -2.39%, respectively, from their recent record highs.

    Trading desks suggest that markets will focus this week on disappoint international economic growth (China and Europe) and the direction of Fed policy and expected FOMC language changes. In today's WSJ, Yellen's need to improve her street cred that she is other than an "unwavering dove" suggests a language change. Notably, the IBD reports that the NYSE short interest ratio (total number of short shares sold divided by the NYSE average daily volume) is at a 5-year high (at 4.77, reflecting the number of days required to cover).

    Today is the start of 3Q2014 earnings season. In 2Q2014,498 SPX companies reported respective +5.08% and +1.53% adjusted EPS and revenues surprises. Financials (84 of 84 reporting) lead with respective +9.47% and +2.39% EPS and revenue surprises. In 1Q2014, 499 of 499 SPX companies reported with respective +5.91% EPS and +0.20% revenue surprises.

    In the past 3 months, forward estimates have moved up. Respective estimates for 2014, 2015 and 2016 are now $119.58, $132.93, and $148.03, compared to $118.05, $131.36 and $145.70 at June-end, increases of +1.30%, +1.20% and +1.60%. Price earnings multiples remain elevated. With SPX equities trading at a 17.4x (compared to 17.4x the prior day) average 2014-15 earnings ($126.26), attention focuses on prospective 2014-15 earnings and valuations (17.4x times survey 2014-15 SPX average operating earnings suggests a 2199.22 SPX level in the next year, a +10.1% rise from yesterday's close).

    Technicals worsened as most major indexes surrendered their 20-day moving average. Led by energy and utilities, all SPX market segments closed at least -0.12% lower. SPX market breadth was negative, and up volume lagged down volume. Volatility rose, but ended well off its late intraday high. The CBOE SPX volatility index (VIX) now suggests a 68% probability that the 30-day change in the SPX will be less than ±4.61%.

    Treasury bond markets weakened, with the 10-year U.S. Treasury bond yield rising +6.09 bps to 2.6105%, compared to 2.5496% at the prior close, its highest yield since July 7th. This morning, 10-year U.S. Treasury yields are -1.27 bps lower at 2.5978%, compared to the prior close. World sovereign bond markets are mostly lower, with the German 10-year yield at 1.066%, compared to 1.082% the prior day. Spanish and Italian 10-year debt yields are higher at 2.318% and 2.452%, respectively, compared to 2.346% and +2.458% the prior day.

    U.S. options markets improved to neutral to bullish, compared to bearish to neutral the prior day. The CBOE SKEW is above a neutral 115-120 range, but below 130, a level that correlates well with short-term market tops.

    In pre-market futures trading, September SPX equity futures (SPM4) price are near the top of their 1969-1977 trading range. After a fair value adjustment of -0.01 points, the SPU4 future prices at 1975.00, down -0.99 points. The SPX opens -0.35% below and +0.66% above its respective 20- and 50-day moving averages, and +2.14% and +5.16% above its 200-day moving averages. Initial resistance is 1994.77. Initial support is 1978.29, then 1971.03.

    "Confirmed Uptrend" Market Outlook. Friday's distributions increased the major indexes' count to 2 on the SPX and DJI and 3 on the Nasdaq and NYSE composite, since the August 13th start of the current "confirmed uptrend".

    Based on Nasdaq's August 13th follow-through, the U.S. equity outlook improved to "confirmed uptrend", concluding a brief "in correction" that commenced on August 6th, which followed a period of "uptrend under pressure" that began on July 8th.

    2Q2014 earnings surprised positively, with financials' earnings leading other sectors. On September 5th, the SPX closed at a record 2007.71, up +3.82% compared to its August 12th 1933.75 close.

    On May 27th, the market outlook improved to "confirmed uptrend", ending a period of market "in correction" that began on April 4th. The SPX closed July 24th at a record 1987.01, +8.99% above the 1815.69 close on April 11th, the recent low. On February 3rd, the Nasdaq closed at its 3,996.96 year-to-date low, but then recovered +15.0% to the September 2nd 4,598.19 multi-year record close.

    In Asia, equity markets closed mixed. The Nikkei 225 (NYSEARCA:NKY) was closed for holiday. In China, the Hang Seng (HSI) Index fell -0.97%, and the Shanghai SE composite (SHCOMP) closed up +0.31%, after reversing moderate losses in early afternoon. The NKY, HSI, and SHCOMP 50-day moving averages are above their respective 200-day moving averages. Today's volumes are unavailable.

    Economic reporting focused on August Chinese YoY industrial production, which came in well short of consensus (+6.8% versus 8.8%).

    Last week, the NKY closed up +1.78%, while the HSI closed off -2.55%, and SHCOMP closed up +0.24%. The prior week, the NKY, HSI, and SHCOMP closed up +1.58%, +2.01%, and +0.85%, respectively. In September, the NKY is up +3.40%, the SHCOMP is up +5.50%, and the HSI is down -1.56%. In August, when the NKY and HSI closed down -1.26% and -0.06%, while the SHCOMP gained +0.71%.

    In 2014, the NKY is down -2.11%, the HSI is up +4.51%, and the SHCOMP is up +10.6%. In 2013, the NKY rose +56.7%. The HSI closed up +2.87%. The SHCOMP closed down -6.75%.

    In China, short-term interbank lending rates remain volatile, but the SHIBO 7-day was unchanged at 3.25%, compared to 3.25% the prior day, up from a 2.26% low on March 11th, but down from the February 7th 5.41% recent high.

    Regional relative strength indexes (RSI) have Hong Kong in the bottom of a neutral range, while the NKY and SHCOMP signal overbought. The NKY RSI rose to 69.63 Friday, compared to 68.40 the prior session, up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI ended at 38.95, compared to 44.49 the prior day, down from an overbought 81.00 on July 31st. The SHCOMP's RSI rose to 73.95, compared to 72.92 the prior day. On July 28th, the index's RSI set a record 81.72. On June 27, 2013, the index's RSI fell to a low of 15.27, which was also last year's low index close.

    In Japan, the NKY closed Friday at 15,948.29, compared to 15,909.20 the prior day, -2.11% below its year-end 16,291.31 high and -59.0% below its late-1989 38,915.87 high close. The index gapped lower to open at its 15,885.04 intraday low, then reversed higher and trended higher to an early afternoon 15,984.90 intraday high. The index slipped in mid-afternoon and briefly reversed lower before rallying again in the final hour, especially at the close, to preserve a modest gain.

    In China, in Shanghai, the SHCOMP closed at 2,339.14, compared to 2,311.68 at the prior close, +20.0% above the 1,950.01 June 27, 2013 close, last year's low. The index opened modestly lower and trended lower to a mid-morning 2,321.70 intraday low, then improved and reversed higher in early afternoon and rose to a late 2,340.38 intraday high. Most market segments closed higher. Leaders were technology, materials, and consumer discretionary, which rose at least +0.85%. Laggards were telecommunications, consumer staples, and financials, which fell at least -0.02%.

    In Europe, major equity indexes are modestly mixed, after opening lower, but trading back to mixed in early afternoon. The Euro Stoxx50, FTSE 100, and CAC 40 are down -0.02%, -0.03%, and -0.24%, respectively, while the DAX is up +0.18%. The Spanish IBEX 35 is down -0.34%. The Italian FTSE MIB down -0.95%. Compared to their recent highs, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.39%, -1.30%, -3.61%, and -3.78%, respectively.

    Commentary focuses on currency and commodity price developments, sovereign debt yields, Chinese industrial production, and possible changes in FOMC rate change language.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 59.98, compared to 59.91 at the prior close, in the middle of a neutral (30-70) range. On August 8th, its RSI closed at 28.17, well below its prior February 5th 33.57 low, which coincided with its prior 2014 low. The index's lowest recent RSI level was 25.77 on June 24, 2013, which marked the year's 2,494.54 closing low.

    The Euro Stoxx50 trades -2.39% below its recent June 18th 3,314.80 multi-year high and -38.4% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,235.07 close, the index opened lower and set an early 3,219.80 intraday low, then improved and reversed higher in early afternoon, trading to its 3,239.76 intraday high. The index currently trades at 3,235.15. Market segments are mixed. Leaders are consumer staples, consumer discretionary, and technology, which are up at least +0.22%. Financials are down -0.05%. Laggards are telecommunications, materials, and energy, which are down at least -0.12%.

    Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -1.23%, -0.70%, -1.00%, and -0.98%, respectively. The prior week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +3.14%, +0.52%, +2.41%, and +2.92%, respectively. In September, the Euro Stoxx50, CAC 40, and DAX are up +1.88%, +1.18%, and +2.12%, respectively, while the FTSE 100 is down -0.22%. In August, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +1.93%, +1.33%, +3.18%, and +0.67%, respectively.

    In 2014, the indexes are higher. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +4.07%, +0.83%, +3.19%, and +1.25%, respectively. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

    3Q2014 SPX Earnings. The 3Q2014 quarter earnings season begins today. 2Q2014 earnings season, ended with 498 SPX reporting firms having reported, with respective +5.08% EPS and +1.53% revenue surprises. Financials (84 of 84 reporting) lead with a 9.47% EPS surprise and +2.39% revenue surprise.

    In 1Q2014, of 499 (of 499) reporting companies, 370 or +74.5% surprised positively on earnings, with an average +5.91% surprise average. Of reporting companies, 263 or 53.0% reported sales or revenues above estimates. The average sales/revenue surprise was +0.20%. Energy led with respective +10.0% and -1.01% earnings and revenue surprises. Financials had respective +5.67% and +0.26% earnings and revenue surprises. Consumer staples lagged with respective +0.34% and -0.66% earnings and revenue surprises.

    Valuation. The SPX trades at 18.1x estimated 2013 earnings ($110.15), 16.6x estimated 2014 earnings ($119.57), 14.9x estimated 2015 earnings ($132.93), and 13.4x estimated 2016 earnings ($148.06). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2014, 2015, and 2016 earnings to grow +8.55%, +11.2%, and 11.4%, respectively.

    The KBW Bank Index (BKX) trades at 13.9x 2013 adjusted EPS ($5.16), 13.0x estimated 2014 earnings ($5.52), 12.1x estimated 2015 earnings ($5.95), and 10.8x 2016 earnings ($6.65). Analysts expect 2014, 2015, 2016 EPS will grow +7.03%, +7.67%, and +11.9%, respectively.

    Composite, index, and equity options. Options markets improved to neutral to bullish, compared to bearish to neutral the prior session. Composite options are bullish, index options are bullish, and equity options are neutral. The composite put/call ratio is 0.88, compared to 1.00 the prior day, and better than 5- and 10-period moving averages of 0.92 and 0.94, respectively. The index put/call ratio is 0.92, compared to 1.00 the prior day, and better than its 5- and 10-period moving averages of 1.06 and 1.00, respectively. The equity put/call ratio closed the day at 0.87, compared to 0.99 the prior day, and worse than its 5- and 10-period moving averages of 0.87 and 0.89, respectively.

    NYSE Volume, Breadth Indicators. Volume rose +14.8% to 694.38 million shares, compared to 607.79 million shares the prior day, 1.19x the 585.92 million shares, compared to the 585.92 million shares 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -1,838 (compared to +181 the prior day), or 0.26:1. Up volume was 0.34:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09100%, compared to 0.09060% the prior day. USD 3-month LIBOR is 0.23460%, compared to 0.23410% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 14.16 bps, compared to 13.91 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 13.70 bps, compared to 14.90 bps the prior day, and down from the December 27, 2011, high of 98.800 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.

    · The 3-month Euro basis swap curve is -13.879, compared to -14.274 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and within the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 1.066%, compared to 1.082% the prior day.

    · French 10-year debt yields 1.346%, compared to 1.337% the prior day.

    · Japanese 10-year debt yields are 0.578%, compared to 0.578% the prior day.

    · Spanish 10-year debt yields are 2.318%, compared to 2.346% the prior day. Italian 10-year debt yields are at 2.453%, compared to 2.458% the prior day. On September 5th, Spanish and Italian 10-year yields set lows of 2.043% and 2.254%, respectively. Spanish and Italian 10-year debt yields peaked at 7.62% and 7.26%, respectively, in July 2012 and November 2011.

    · U.S. Treasury yields are lower, with 2- and 10-year maturities yielding 0.556% and 2.598%, respectively, compared to 0.560% and 2.611% Friday. The yield curve narrowed -0.880 bps, with the 2- to 10-year spread at +2.042%, compared to 2.050% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.861% on August 27, 2014, to a high of +2.648% on December 31, 2013.

    · The U.S. dollar is stronger compared to the euro and British pound, but slightly weaker compared to the Japanese yen. The dollar trades at US$84.367, compared to US$84.375 intraday high and US$84.240 the prior day, and better compared to its $81.852 50-day, US$81.009 100-day, and US$80.635 200-day averages. The euro trades at US$1.2922, compared to a US$1.2915 intraday low and US$1.2963 the prior day. The euro trades worse compared to its US$1.3314 50-day and US$1.3492 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥107.25, compared to ¥107.34 the prior day, a multi-year high. The yen trades worse than its 50-day moving average ¥103.18.

    · Citigroup Economic Surprise Index eased to +36.20, compared to 35.50 the prior day, with successive positive readings since August 21st. The index is worse compared to its respective +37.32 5-day and +39.40 10-day moving averages. From a +72.70 high on January 15th, the index subsequently trended lower and turned negative on February 19th and fell to a -45.90 124-week low on April 7th. The index turned briefly positive in the latter half of May, then turned negative on May 29th and remained negative through August 5th. The index turned positive again on August 21st. After a lag, the CESIUSD correlates with EPS revisions.

    · Commodities prices are mixed, with lower energy, higher precious metals, mixed aluminum and copper, and lower agriculture prices.

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +3.98% to 13.31, compared to 12.80 at the prior close. The VIX is +8.07% above the 12.32 20-day moving average. Its 30-day high is 17.57. Its 30-day low is 11.24. Its all-time closing low is 9.31 on December 22, 1993. The long-term average is 20.00.

    · The Euro Stoxx 50 volatility index (V2X) is 16.55, compared to 15.91 at the prior day close. The V2X index trades +0.00% above its 16.55 20-day moving average, -25.3% below the 22.15 30-day high, and +7.56% above the 15.38 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 16.17, up +4.26% compared to 15.51 at the prior close. The VHSI index trades +12.3% above its 14.40 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) fell -4.03% to 127.37, compared to 132.72 the prior session, above a neutral reading (115-120) since March 27th, and well 130, a level that correlates well with short-term market tops. The recent record high was 143.26 on June 20, 2014. Its recent low was 112.47 on May 25, 2013. The index rarely falls below 110, last on July 31, 2009. The index correlates with market tail risks, the cost of buying out-of-the-money, long-dated options, i.e., options not affected by expirations. A rise suggests that investors are buying more puts than calls, a bearish signal.

    U.S. Economic Reporting and News:

    · At 8:30, September empire manufacturing was 27.54, its best since October 2009 and compared to 15.95 survey and 14.69 prior.

    · At 9:15, August MoM industrial production, with +0.3% survey and +0.4% revised prior.

    · August capacity utilization, with 79.3% survey and 79.2 prior.

    · August manufacturing production, with +0.2% survey and +1.0% prior.

    Overseas Economic Reporting and News:

    · China - August YoY industrial production rose +6.9%, compared to +8.8% survey and +9.0% prior. August YoY retail sales rose +11.9%, compared to +12.1% survey and +1.2% prior.

    Notable Company Ratings/News:

    · None.

    Friday's Trade. Major indexes distributed, opening lower and trending down through late afternoon. Notably, the TRAN held at breakeven through the session, while the BKX posted a strong gain on heavy volume. The SPX, DJI, Nasdaq, and NYSE composite fell -0.60%, -0.36%, -0.53%, and -0.59%, respectively. Market breadth was negative, with gainers 0.26x losing stocks. All SPX market segments closed at least -0.12%. Leaders were financials, consumer discretionary, and industrials. Laggards were telecommunications, energy, and utilities, which fell at least -1.20%.

    NYSE volume rose +14.8% to 694.38 million shares, compared to 604.98 million shares the prior day, 1.19x the 585.92 million share 20-day moving average volume. Bond markets weakened. From its prior day 2.5496% close, the U.S. 10-year yield opened lower and fell to an early 2.5054% intraday low, then rose through the session to a late 2.6197% intraday high. The index closed at 2.61.05%, up +6.09 bps from the prior close, and its highest close since July 7th.

    From its prior day 1997.45 close, September 2014 SPX futures (SPM4) suggested a moderately lower open. The index gapped lower to open below 1995 and trended lower through late afternoon, when the index fell to its 1980.26 intraday low. In the final hour, the index improved to 1986 before ending at 1985.54, +2.68% above the August 12th 1933.75 close (which marked the start of the current market uptrend), and +84.7% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    Last week, major indexes closed at least -0.33% lower. The prior week, indexes closed with modest gains, with indexes up at least +0.22%. In September, indexes are also mixed. In August, indexes closed up at least +2.98. In 2014, indexes are up at least +2.48%.

    Other notable indexes closed mixed. The Russell 2000 (RTY) fell -1.00% and closed -3.98% below its March 4th record high. The Nasdaq Internet Index (QNET) rose +0.13%, down -5.45% below its March 6th closing high. The NBI fell -1.27%, closing -2.39% below its August 29th 2,892.71 record high.

    From its prior day record 8,514.67 close, the DJ Transportation index (TRAN) fell -0.04% to close at 8,552.28. Notably, the index traded narrowly around breakeven through the session with an early 8,538.77 intraday low, and late morning 8,579.16 intraday high. Volume fell -6.51% to 11.121 million shares, compared to 11.895 million shares the prior session, and 1.08x the 15-day moving average volume. The TRAN closed +0.97% and +2.57% above its respective 20- and 50-day moving averages, and +4.92% and +10.2% above its respective 100- and 200-day moving averages.

    Market volatility rose but closed well off its intraday high, as the CBOE SPX volatility index (VIX) climbed +3.98% to 13.31, compared to 12.80 at the prior close. In early trading, the VIX rose to 13.80, but fell back to 13.00 by mid-morning, then trended higher to a late afternoon 14.27 intraday high before easing through the final hour. The VIX's all-time closing low is 9.31, on December 22, 1993. Its record high is 89.53 in December 2008. Its lifetime average is 19.93. The CBOE put/call SKEW fell -4.03% to 127.37, compared to 132.72 the prior session, above a neutral 115-120 range, but below 130 for first time in the past 4 sessions, a level that correlates well with short-term market tops. Its record 143.26 high came on June 20th.

    The market's technical factors worsened, as the SPX, DJI, and NYSE composite closed below their respective 20-day moving averages. The SPX relative strength (RSI) fell to 50.75, compared to 57.79 the prior day, in the middle of a neutral range. The latest RSI compares to an oversold 32.85 on August 7th, an overbought 73.73 on June 9th, and an oversold 31.24 on February 3rd, its previous yearly low, when the SPX closed at 1741.89. The RSI compares to an overbought 71.26 on December 31st, when the SPX closed at an earlier record 1848.36 high, and compares to earlier oversold levels of 35.14 on August 27th and 39.19 on October 9th.

    Last week, the SPX, DJI, Nasdaq, and NYSE composite closed down -1.10%, -0.87%, -0.33%, and -1.46%, respectively. The prior week, the SPX, DJI, and Nasdaq closed up +0.22%, +0.23%, +0.98%, and +0.25%, respectively. In September, the SPX, DJI, Nasdaq, and NYSE composite are down -0.89%, -0.65%, -0.28%, and -1.22%, respectively. In August, the SPX, DJI, Nasdaq, and NYSE composite rallied +3.77%, +3.23%, +4.82%, and +2.98%, respectively.

    In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +7.42%, +2.48%, +9.36%, and +4.91%, respectively. In 2013, the SPX, DJI, Nasdaq, and NYSE composite closed up +29.6%, +26.5%, +38.2%, +23.2%, respectively. All closed at least +5.91% higher in 2012.

    KBW Bank Index (BKX). On strong and well above 15-day average volume, the BKX rose +0.64% to 72.62, compared to 71.19 at the prior day's close, its 16th consecutive close above 70 and its best close since July 3rd. The index closed -0.36% below its 72.91 March 20th post-2008 closing high. The index opened higher and to an early 72.93 intraday high, then eased back to breakeven by mid-afternoon, when it steadied and rallied back to nearly 72.70 where it found resistance to the close. Volume rose +33.6% to 62.539 million shares, compared to 40.694 million shares the prior day, and 1.60x the 39.042 million share 15-day moving average.

    Large cap banks outperformed the regional banks, as the KBW regional banking index (KRX) rose +0.29%.

    Last week, the BKX closed up +1.17%, compared to the prior week, when the BKX closed up +0.45%. In September, the BKX is up +1.62%, compared to August, when the BKX rose +1.92%. In 2014, the BKX is up +4.89%, compared to the SPX's +7.42% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +22.7% better than the June 24, 2013, 59.19 close, its worst since May 13, 2013. The index crossed above 50 on December 17, 2012, 60 on May 15, 2013, and 70 on January 8, 2014, but then dropped back below 70 on January 24th, which persisted until March 6th. On April 10th, the BKX fell below 70.00 and then eased consistently to the May 15th 66.81 closing low, its lowest close since early February. On June 5th, the BKX rose back above 70, but again surrendered that level on August 1st, then recovered it on September 2nd.

    The BKX closed +123.1% above the 32.56 intraday low on October 4, 2011, the bottom of that year's correction. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +84.7% in the same period. The BKX index closed -40.0% below its February 20, 2007, record 121.06 high. The BKX is up +290.2% from its 18.62 March 6, 2009, closing low, its low at the end of the 2008-09 financial panic.

    Technical indicators were little changed. The index closed +1.91% and +2.68% above its respective 20- and 50-day moving averages, and +3.63% and +4.26% above its 100- and 200-day moving averages. The 20-day moving average rose +16 bps to 71.28. The 70.75 50-day moving average rose +2 bps. Its 70.10 100-day moving average rose +3 bps, and the 200-day moving average rose +3 bps to 69.68. The 20-day closed (by +0.53 points) below the 50-day, and the gap widened +14 bps. The 50-day moving average closed (by +1.07 points) above the 200-day moving average, and the gap narrowed -1 bp. The 100-day moving average closed (by +0.43 points) above the 200-day moving average, and the gap widened +1 bp.

    The directional movement indicator improved to +11.558, compared to +4.521 the prior day, its 3rd consecutive positive reading. Relative strength rose to 64.49, compared to 61.22 the prior day, in a neutral range, down from an overbought 73.14 on June 9th, but compares to recent lows of 32.95 on February 3rd and 31.08 on November 14, 2012, which is also the date of the BKX's 2012 closing low. Next resistance is 72.98; next support is 72.26.

    SPX, DJI, RTY, TRAN, CCMP, NYA, VIX, SKEW, NKY, EURUSD, USGG10YR, HSI, SHCOMP, SX5E, CAC, DAX, FTSE, JPY, GBP, EUR

    Sep 15 9:27 AM | Link | Comment!
  • U.S. Equities Flat, Though Sovereign Yields Rise; Asia And Europe Mixed In Quiet Sessions

    This morning. U.S. equity futures are fractionally higher, but in the middle of their pre-session range, following a mixed Asian and modestly mixed European trade. For a 2nd consecutive day, European sovereign rates are notably higher, and U.S. Treasury 10-year yields are higher, too, though the dollar is mixed. Commodities are lower. Economic reporting is light worldwide, with attention turning toward the mid-month FOMC meeting and possible Fed language changes. Wednesday's Nikkei 225 September 2014 (NKU4) equity futures are modestly higher.

    Tuesday, on slightly higher, but above average volume, U.S. equity indexes distributed with moderate losses. The S&P 500 (SPX), DJ Industrials (DJI), Nasdaq, and NYSE composite closed down -0.65%, -0.57%, -0.87%, and -0.56%, respectively. This week, indexes are at least -0.56% lower. In September, indexes are at least -0.49% lower. In August, indexes closed up at least +2.98% higher. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +7.58%, +2.64%, +9.00%, and +5.24%, respectively.

    Since August 13, the U.S. equity market outlook is "confirmed uptrend". Subsequent distributions number only 1 for the SPX and DJI, and 2 for the Nasdaq and NYSE composite. The SPX closed +2.83% from its August 12th close.

    NYSE volume rose +0.12% to 1.05x its 20-day moving average.

    Other notable indexes closed lower. The DJ Transports (TRAN) fell -0.69%. The Russell 2000 (RTY) fell -1.18%. The Nasdaq Internet (QNET) index fell -1.85%, while the Nasdaq Biotech (NBI) index fell -1.31%. The TRAN, RTY, QNET, and NBI are down -1.01%, -4.15%, -5.94%, and -2.57%, respectively, from their recent record highs.

    Trading desks report a mixed overnight, with a modestly higher Tokyo close, some weakness in overbought China, a modestly mixed European trade, flat U.S. futures, and a more mixed currency trade. A similarly quiet U.S. trading day seems likely, as both economic reporting and macro developments are light worldwide. Regarding yesterday's trade, indexes distributed and closed near their late afternoon lows, but the more important development was the rise in worldwide sovereign debt yields, with the U.S. 10-year yield ending above 2.5% as concerns grow that the FOMC may modify its "considerable time" language. AAPL's product announcements absorbed much of participants' attention during the session, and the stock traded to new intraday record highs, but closed modestly lower.

    The 2Q2014 earnings season began June 18th and is now largely complete as 498 of 500 SPX companies have reported with respective +5.08% and +1.52% adjusted EPS and revenues surprises. Financials (84 of 84 reporting) lead with respective +9.47% and +2.38% EPS and revenue surprises. In 1Q2014, 499 of 499 SPX companies reported with respective +5.91% EPS and +0.20% revenue surprises.

    Forward estimates have moved up. Respective estimates for 2014, 2015 and 2016 are now $119.60, $132.78, and $147.67, respectively compared to $118.05, $131.36 and $145.70 at June-end, respective increases of +1.31%, +1.08% and +1.35%. Price earnings multiples remain elevated. With SPX equities trading at a 17.3x (compared to 17.5x the prior day) average 2014-15 earnings ($126.19), attention focuses on prospective 2014-15 earnings and valuations (17.3x times survey 2014-15 SPX average operating earnings suggests a 2188.01 SPX level in the next year, a +10.0% rise from yesterday's close).

    Technicals were worsened. Led by utilities and telecommunications, all SPX market segments closed at least -0.30% lower. SPX market breadth was negative, and up volume lagged down volume. Volatility rose, and the CBOE SPX volatility index (VIX) now suggests a 68% probability that the 30-day change in the SPX will be less than ±4.68%. Treasury bond markets weakened, with the 10-year U.S. Treasury bond yield rising +3.24 bps to 2.5036%, compared to 2.4712% at the prior close.

    This morning, 10-year U.S. Treasury yields are +2.34 bps higher at 2.5270%, compared to the prior close. World sovereign bond markets are weaker, with the German 10-year yield at 1.065%, compared to 0.996% the prior day. Spanish and Italian 10-year debt yields are higher at 2.296% and 2.425%, respectively, compared to 2.200% and +2.367% the prior day.

    U.S. options markets were unchanged at neutral to bullish, compared to neutral to bullish the prior day. The CBOE SKEW rose +2.99% to 136.88, compared to 132.91 the prior day, above a neutral 115-120 range and well above 130, a level that correlates well with short-term market tops. The SKEW closed at a record 143.60 on June 20th.

    In pre-market futures trading, September SPX equity futures (SPM4) price are near the middle their 1986-1992 trading range. After a fair value adjustment of -2.41 points, the SPU4 future prices at 1987.50, down -0.16 points. The SPX opens +0.94% and +1.57% above its respective 20- and 50-day moving averages, and +3.22% and +6.23% above its 200-day moving averages. Initial resistance is 1998.10. Initial support is 1981.70, then 1974.95.

    "Confirmed Uptrend" Market Outlook. Yesterday's distributions increased the major indexes' count to 1 on the SPX and DJI and 2 on the Nasdaq and NYSE composite, since the August 13th start of the current "confirmed uptrend".

    Based on Nasdaq's August 13th follow-through, the U.S. equity outlook improved to "confirmed uptrend", concluding a brief "in correction" that commenced on August 6th, which followed a period of "uptrend under pressure" that began on July 8th.

    2Q2014 earnings surprised positively, with financials' earnings leading other sectors. On September 5th, the SPX closed at a record 2007.71, up +3.82% compared to its August 12th 1933.75 close.

    On May 27th, the market outlook improved to "confirmed uptrend", ending a period of market "in correction" that began on April 4th. The SPX closed July 24th at a record 1987.01, +8.99% above the 1815.69 close on April 11th, the recent low. On February 3rd, the Nasdaq closed at its 3,996.96 year-to-date low, but then recovered +15.0% to the September 2nd 4,598.19 multi-year record close.

    In Asia, equity markets closed mixed. The Nikkei 225 (NYSEARCA:NKY) rose +0.25%, but reversed early losses to end near its intraday high. In China, the Hang Seng (HSI) Index reopened after the prior day's holiday and trended lower through the session to end down -1.93%. The Shanghai SE composite (SHCOMP) closed off -0.35%, after narrowing mid-session losses. The NKY, HSI, and SHCOMP 50-day moving averages are above their respective 200-day moving averages. Today's volumes are unavailable.

    Commentary focused on the currency and commodity developments.

    This week, the NKY is up +0.77%, while the HSI is down -2.12%, and SHCOMP is off -0.35%. Last week, the NKY, HSI, and SHCOMP closed up +1.58%, +2.01%, and +0.85%, respectively. In September, the NKY is up +2.36%, the SHCOMP is up +4.56%, and the HSI is down -2.12%. In August, when the NKY and HSI closed down -1.26% and -0.06%, while the SHCOMP gained +0.71%.

    In 2014, the NKY is down -3.08%, the HSI is up +6.00%, and the SHCOMP is up +9.56%. In 2013, the NKY rose +56.7%. The HSI closed up +2.87%. The SHCOMP closed down -6.75%.

    In China, short-term interbank lending rates remain volatile, but the SHIBO 7-day was unchanged at 3.15%, compared to 3.15% the prior day, up from a 2.26% low on March 11th, but down from the February 7th 5.41% recent high.

    Regional relative strength indexes (RSI) have Tokyo and Hong Kong in a neutral range, while the SHCOMP signals overbought. The NKY RSI rose to 64.26, compared to 62.77 the prior session, up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI ended at 47.30, compared to 62.78 Tuesday, down from an overbought 81.00 on July 31st. The SHCOMP's RSI fell to 72.33, compared to 75.47 the prior day. On July 28th, the index's RSI set a record 81.72. On June 27, 2013, the index's RSI fell to a low of 15.27, which was also last year's low index close.

    In Japan, the NKY closed at 15,788.78, compared to 15,749.15 the prior day, -3.08% below its year-end 16,291.31 high and -59.4% below its late-1989 38,915.87 high close. The index gapped lower and set an early 15,664.79 intraday low, then traded narrowly at that level until early afternoon, when it rallied and reversed higher by mid-afternoon, moving to a late 15795.60 intraday high. Most market segments closed higher. Leaders were energy, utilities, and consumer staples, which rose at least +0.83%. Financials rose +0.60%. Laggards were industrials and consumer discretionary, which rose at least +0.2%, and materials, which fell -0.39%.

    In China, in Shanghai, the SHCOMP closed at 2,318.31, compared to 2,326.53 at the prior close, +18.9% above the 1,950.01 June 27, 2013 close, last year's low. The index gapped lower to open below 2,316 and fell to an early 2,306.58 intraday low. The index traded narrowly around 2,314 through the session, successfully testing support again in early afternoon, then rallying to nearly 2,322 in late afternoon. Market segments closed mixed. Leaders were utilities, materials, and industrials, which rose at least +0.15%. Laggards were telecommunications, financials, and energy, which fell at least -0.40%.

    In Europe, major equity indexes are modestly mixed in mid-afternoon, but near their intraday lows. The FTSE 100 is up +0.01%, while the Euro Stoxx50, CAC 40, and DAX are down -0.07%, -0.05%, and -0.18%, respectively. The Spanish IBEX 35 is down -0.23%. The Italian FTSE MIB down -0.23%. Compared to their recent highs, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.14%, -0.94%, -3.23%, and -3.55%, respectively.

    Commentary focuses on currency and commodity price developments, rising sovereign debt yields, and possible changes in FOMC rate change language.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 61.69, compared to 62.18 at the prior close, in the upper end of a neutral (30-70) range. On August 8th, its RSI closed at 28.17, well below its prior February 5th 33.57 low, which coincided with its prior 2014 low. The index's lowest recent RSI level was 25.77 on June 24, 2013, which marked the year's 2,494.54 closing low.

    The Euro Stoxx50 trades -2.14% below its recent June 18th 3,314.80 multi-year high and -38.2% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,245.43 close, the index opened lower to a mid-morning 3,225.68 intraday low, then rallied back to a mid-session 3,248.02 intraday high. Through the afternoon, the index found resistance at 3,245 and currently trades at 3,243.31. Most market segments are lower. Leaders are financials, utilities, and energy, which are up at least +0.06%. Laggards are industrials, telecommunications, and consumer discretionary, which are down at least -0.35%.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -0.96%, -0.36%, -0.81%, and -0.55%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +3.14%, +0.52%, +2.41%, and +2.92%, respectively. In September, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +2.15%, +0.16%, +1.57%, and +2.36%, respectively. In August, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +1.93%, +1.33%, +3.18%, and +0.67%, respectively.

    In 2014, the indexes are higher. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +4.34%, +1.20%, +3.59%, and +1.48%, respectively. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

    2Q2014 SPX Earnings. The 2nd quarter earnings season began June 18th and is now largely complete, with 498 of 500 SPX reporting firms having reported, with respective +5.08% EPS and +1.52% revenue surprises. Financials (84 of 84 reporting) lead with a 9.47% EPS surprise and +2.39% revenue surprise.

    In 1Q2014, of 499 (of 499) reporting companies, 370 or +74.5% surprised positively on earnings, with an average +5.91% surprise average. Of reporting companies, 263 or 53.0% reported sales or revenues above estimates. The average sales/revenue surprise was +0.20%. Energy led with respective +10.0% and -1.01% earnings and revenue surprises. Financials had respective +5.67% and +0.26% earnings and revenue surprises. Consumer staples lagged with respective +0.34% and -0.66% earnings and revenue surprises.

    Valuation. The SPX trades at 18.1x estimated 2013 earnings ($110.15), 16.6x estimated 2014 earnings ($119.60), 15.0x estimated 2015 earnings ($132.78), and 13.5x estimated 2016 earnings ($147.67). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2014, 2015, and 2016 earnings to grow +8.58%, +11.0%, and 11.2%, respectively.

    The KBW Bank Index (BKX) trades at 13.9x 2013 adjusted EPS ($5.16), 13.0x estimated 2014 earnings ($5.52), 12.1x estimated 2015 earnings ($5.94), and 10.8x 2016 earnings ($6.63). Analysts expect 2014, 2015, 2016 EPS will grow +6.98%, +7.62%, and +11.6%, respectively.

    Composite, index, and equity options. Options markets was unchanged at neutral to bullish, compared to neutral to bullish the prior session. Composite options are bullish, index options are neutral, and equity options are neutral. The composite put/call ratio is 0.88, compared to 0.88 the prior day, and better than 5- and 10-period moving averages of 0.95 and 0.95, respectively. The index put/call ratio is 1.12, compared to 1.11 the prior day, and worse than its 5- and 10-period moving averages of 1.10 and 1.08, respectively. The equity put/call ratio closed the day at 0.80, compared to 0.80 the prior day, and better than its 5- and 10-period moving averages of 0.90 and 0.91, respectively.

    NYSE Volume, Breadth Indicators. Volume rose +0.12% to 602.72 million shares, compared to 601.97 million shares the prior day, 1.05x the 571.52 million shares 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -1,643 (compared to +730 the prior day), or 0.30:1. Up volume was 0.27:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09100%, compared to 0.09100% the prior day. USD 3-month LIBOR is 0.23360%, compared to 0.23230% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 13.81 bps, compared to 13.91 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 15.40 bps, compared to 15.40 bps the prior day, and down from the December 27, 2011, high of 98.800 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.

    · The 3-month Euro basis swap curve is -15.354 bps, compared to -16.881 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and within the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 1.065%, compared to 0.996% the prior day.

    · French 10-year debt yields 1.319%, compared to 1.340% the prior day.

    · Japanese 10-year debt yields are 0.550%, compared to 0.536% the prior day.

    · Spanish and Italian 10-year debt yields are lower and near multi-year lows. Spanish 10-year debt yields are 2.296%, compared to 2.200% the prior day. Italian 10-year debt yields are at 2.425%, compared to 2.367% the prior day. Spanish and Italian 10-year debt yields peaked at 7.62% and 7.26%, respectively, in July 2012 and November 2011.

    · U.S. Treasury yields are higher, with 2- and 10-year maturities yielding 0.560% and 2.518%, respectively, compared to 0.556% and 2.5041% Monday. The yield curve widened +1.030 bps, with the 2- to 10-year spread at +1.958%, compared to 1.948% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.861% on August 27, 2014, to a high of +2.648% on December 31, 2013.

    · The U.S. dollar is mixed compared to the euro, Japanese yen, and British pound. The dollar trades at US$84.174, compared to US$84.046 intraday low and US$84.278 the prior day, and better compared to its $81.606 50-day, US$80.871 100-day, and US$80.573 200-day averages. The euro trades at US$1.2933, compared to a US$1.2923 intraday low and US$1.2937 the prior day. The euro trades worse compared to its US$1.3354 50-day and US$1.3520 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥106.65, compared to ¥106.20 the prior day. The yen trades worse than its 50-day moving average ¥102.86, and worse than its January 1st 105.31 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index improved to +38.50, compared to 38.00 the prior day, with successive positive readings since August 21st. The index is mixed compared to its respective +40.52 5-day and +37.92 10-day moving averages. From a +72.70 high on January 15th, the index subsequently trended lower and turned negative on February 19th and fell to a -45.90 124-week low on April 7th. The index turned briefly positive in the latter half of May, then turned negative on May 29th and remained negative through August 5th. The index turned positive again on August 21st. After a lag, the CESIUSD correlates with EPS revisions.

    · Commodities prices are lower, with lower energy, lower precious metals, lower aluminum and copper, and lower agriculture prices.

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +6.64% to 13.50, compared to 12.66 at the prior close. The VIX is +9.41% above the 12.34 20-day moving average. Its 30-day high is 17.57. Its 30-day low is 11.24. Its all-time closing low is 9.31 on December 22, 1993. The long-term average is 20.00.

    · The Euro Stoxx 50 volatility index (V2X) is 16.39, compared to 15.88 at the prior day close. The V2X index trades -2.99% below its 16.89 20-day moving average, -26.0% below the 22.15 30-day high, and +6.53% above the 15.38 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 15.58, up +6.57% compared to 14.62 at the prior close. The VHSI index trades +8.24% above its 14.39 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) rose +2.99% to 136.88, compared to 132.91 the prior session, above a neutral reading (115-120) since March 27th, and well 130, a level that correlates well with short-term market tops. The recent record high was 143.26 on June 20, 2014. Its recent low was 112.47 on May 25, 2013. The index rarely falls below 110, last on July 31, 2009. The index correlates with market tail risks, the cost of buying out-of-the-money, long-dated options, i.e., options not affected by expirations. A rise suggests that investors are buying more puts than calls, a bearish signal.

    U.S. Economic Reporting and News:

    · At 7:00, the latest week's MBA mortgage applications fell -7.2%, compared to +0.2% prior.

    · At 10:00, July MoM wholesale inventories, with +0.5% survey and +0.3% prior.

    · July MoM wholes trade sales, with +0.6% survey and +0.2% prior.

    Overseas Economic Reporting and News:

    · France - July MoM industrial production rose +0.2%, compared to -0.5% survey and +1.2% revised prior. July manufacturing production fell -0.3%, compared to -0.3% surve and +1.6% prior.

    · Spain - July YoY industrial output rose +1.0%, compared to +0.4% survey and +2.8% revised prior.

    Notable Company Ratings/News:

    · None.

    Tuesday's Trade. Major indexes distributed and closed near their late intraday lows. Indexes opened lower, but found support by mid-morning. A mid-afternoon rally failed, and indexes sold off through the final two hours to end with moderate losses. Volumes rose on all the major exchanges. The SPX, DJI, Nasdaq, and NYSE composite fell -0.65%, -0.57%, -0.87%, and -0.56%, respectively. Market breadth was negative, with gainers 0.30x losing stocks. All SPX market segments closed at least -0.30% lower. Leaders were consumer staples, health care, and industrials. Laggards were financials, telecommunications, and utilities, which fell at least -1.00%.

    NYSE volume rose +0.12% to 602.72 million shares, compared to 601.97 million shares the prior day, 1.05x the 571.52 million share 20-day moving average volume. Bond markets weakened. From its prior day 2.4712% close, the U.S. 10-year yield trended higher through the day, with a mid-morning 2.5063% intraday high. The index ended at 2.5036%, up +3.24 bps from the prior close.

    From its prior day 2001.54 close, September 2014 SPX futures (SPM4) suggested a modestly lower open. The index fell through 2000 at the open and found support at 1992 by mid-morning, then traded narrowly through early afternoon, when an attempted rally brought the index back to 2000 before petering on profit taking. The index fell sharply through late session, when the SPX fell to a late 1984.61 intraday low. The index improved through the final half hour to end at 1988.44, +2.83% above the August 12th 1933.75 close (which marked the start of the current market uptrend), and +85.0% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    This week, major indexes are at least -0.67% lower. Last week, indexes closed with modest gains, with indexes up at least +0.06%. In September, indexes are at least -0.49%. In August, indexes closed up at least +2.98. In 2014, indexes are up at least +2.64%.

    Other notable indexes also closed lower. The Russell 2000 (RTY) fell -0.18% and closed -4.15% below its March 4th record high. The Nasdaq Internet Index (QNET) fell -1.85%, down -5.94% below its March 6th closing high. The NBI fell -1.31%, closing -2.57% below its August 29th 2,892.71 record high.

    From its prior day record 8,574.19 close, the DJ Transportation index (TRAN) fell -0.69% to close at 8,514.67. The index opened below 8,560 then traded narrowly around 8,550 through mid-afternoon before falling to a late 8,509.29 intraday low. Volume rose +1.02% to 9.504 million shares, compared to 9.364 million shares the prior session, and 0.92x the 15-day moving average volume. The TRAN closed +1.12% and +2.35% above its respective 20- and 50-day moving averages, and +4.79% and +10.0% above its respective 100- and 200-day moving averages.

    Market volatility fell, as the CBOE SPX volatility index (VIX) rose +6.64% to 13.50, compared to 12.66 at the prior close. The VIX moved higher to 13.00 in early session and moved narrowly through mid-afternoon before spiking to a late 13.91 intraday high. The VIX's all-time closing low is 9.31, on December 22, 1993. Its record high is 89.53 in December 2008. Its lifetime average is 20.01. The CBOE put/call SKEW rose +2.99% to 136.88, compared to 132.91 the prior session, above a neutral 115-120 range and above 130 for the 2nd consecutive session, a level that correlates well with short-term market tops. Its record 143.26 high came on June 20th.

    The market's technical factors worsened, as the NYSE composite closed below its 20-day moving average. The SPX relative strength (RSI) fell to 53.52, compared to 61.85 the prior day, in a neutral range. The latest RSI compares to an oversold 32.85 on August 7th, an overbought 73.73 on June 9th, and an oversold 31.24 on February 3rd, its previous yearly low, when the SPX closed at 1741.89. The RSI compares to an overbought 71.26 on December 31st, when the SPX closed at an earlier record 1848.36 high, and compares to earlier oversold levels of 35.14 on August 27th and 39.19 on October 9th.

    Last week, the SPX, DJI, and Nasdaq closed up +0.22%, +0.23%, +0.98%, and +0.25%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed up +0.75%, +0.57%, +1.65%, and +0.90%, respectively. In September, the DJI and Nasdaq are up +0.08% and +0.26%, respectively, while the SPX and NYSE composite are down -0.09% and -0.35%. In August, the SPX, DJI, Nasdaq, and NYSE composite rallied +3.77%, +3.23%, +4.82%, and +2.98%, respectively.

    In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +8.29%, +3.23%, +9.95%, and +5.84%, respectively. In 2013, the SPX, DJI, Nasdaq, and NYSE composite closed up +29.6%, +26.5%, +38.2%, +23.2%, respectively. All closed at least +5.91% higher in 2012.

    KBW Bank Index (BKX). On lower, but above 15-day average volume, the BKX fell -1.02% to 71.09, compared to 71.82 at the prior day's close, its 13th consecutive close above 70. The index closed -2.50% below its 72.91 March 20th post-2008 closing high. The index gapped lower to open below 71.50, and fell to a mid-morning 70.95 intraday low before finding support. The index improved through mid-afternoon to nearly 71.45, but trended lower through the final two hours. Volume fell -0.29% to 39.295 million shares, compared to 39.411 million shares the prior day, and 0.95x the 37.3229 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) fell -0.97%.

    This week, the BKX is down -1.00%, compared to last week, when the BKX closed up +0.45%. In September, the BKX is down -0.56%, compared to August, when the BKX rose +1.92%. In 2014, the BKX is up +2.64%, compared to the SPX's +7.58% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +20.1% better than the June 24, 2013, 59.19 close, its worst since May 13, 2013. The index crossed above 50 on December 17, 2012, 60 on May 15, 2013, and 70 on January 8, 2014, but then dropped back below 70 on January 24th, which persisted until March 6th. On April 10th, the BKX fell below 70.00 and then eased consistently to the May 15th 66.81 closing low, its lowest close since early February. On June 5th, the BKX rose back above 70, but again surrendered that level on August 1st, then recovered it on September 2nd.

    The BKX closed +118.3% above the 32.56 intraday low on October 4, 2011, the bottom of that year's correction. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +85.0% in the same period. The BKX index closed -41.3% below its February 20, 2007, record 121.06 high. The BKX is up +281.8% from its 18.62 March 6, 2009, closing low, its low at the end of the 2008-09 financial panic.

    Technical indicators were little changed. The index closed +0.39% and +0.53% above its respective 20- and 200-day moving averages, and +1.54% and +2.12% above its 50- and 100-day moving averages. The 20-day moving average rose +12 bps to 70.81. The 70.71 50-day moving average fell -1 bp. Its 70.01 100-day moving average rose +1 bp, and the 200-day moving average rose +2 bps to 69.61. The 20-day closed (by +0.10 points) below the 50-day, and the gap widened +12 bps. The 50-day moving average closed (by +1.10 points) above the 200-day moving average, and the gap narrowed -3 bps. The 100-day moving average closed (by +0.40 points) above the 200-day moving average, and the gap narrowed -1 bp.

    The directional movement indicator worsened to -0.971, compared to +5.651, its first negative reading since August 21st. Relative strength fell to 51.86, compared to 60.66 the prior day, in a neutral range, down from an overbought 73.14 on June 9th, but compares to recent lows of 32.95 on February 3rd and 31.08 on November 14, 2012, which is also the date of the BKX's 2012 closing low. Next resistance is 71.51; next support is 70.81.

    SPX, DJI, RTY, TRAN, CCMP, NYA, VIX, SKEW, NKY, EURUSD, USGG10YR, HSI, SHCOMP, SX5E, CAC, DAX, FTSE, JPY, GBP, EUR

    Sep 10 9:11 AM | Link | Comment!
  • World Equity Markets Quiet As Sovereign Yields Rise; Attention On AAPL And BABA

    This morning. In another quiet pre-session, U.S. equity futures are modestly lower, but near the middle of their range, following a mixed Asian and modestly lower European trades. European sovereign rates are notably higher, U.S. Treasury 10-year yields are higher, too, as the dollar continues to strengthen. Commodities are mixed. Economic reporting is light worldwide, with attention turning toward the mid-month FOMC meeting and possible Fed language changes, today's AAPL product announcements, and the BABA IPO. Wednesday's Nikkei 225 September 2014 (NKU4) equity futures are modestly lower.

    Monday, on lower, but above average volume, U.S. equity indexes closed modestly mixed, after narrowing moderate mid-session losses. The Nasdaq rose +0.20%, while the S&P 500 (SPX), DJ Industrials (DJI), and NYSE composite closed down -0.31%, -0.15%, and -0.60% respectively. Last week, indexes closed modestly higher with gains of at least +0.22%. In September, indexes are modestly mixed. In August, indexes closed up at least +2.98% higher. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +8.29%, +3.23%, +9.95%, and +5.84%, respectively.

    Since August 13, the U.S. equity market outlook is "confirmed uptrend". Subsequent distributions number only 1 for the Nasdaq and NYSE composite.

    NYSE volume fell -1.28% to 1.05x its 20-day moving average.

    Other notable indexes closed mixed. The DJ Transports (TRAN) fell -0.32%. The Russell 2000 (RTY) rose +0.19%. The Nasdaq Internet (QNET) index rose +0.60%, while the Nasdaq Biotech (NBI) index rose +0.85%. The TRAN, RTY, QNET, and NBI are down -0.32%, -3.01%, -4.16%, and -1.28%, respectively, from their recent record highs.

    Trading desks report a quiet overnight, with mixed action and thin volumes in Asia and a modestly weaker Europe. The recent surge in the relative strength of the dollar is a focus in both regions, as are suddenly weaker sovereign bond markets. Attention focuses on AAPL's product announcements at mid-session. Yesterday's markets were similarly quiet and uneventful, though interrupted by the early afternoon publication of a San Francisco Fed paper warning of a possible more aggressive Fed tightening next year.

    The 2Q2014 earnings season began June 18th and is now largely complete as 498 of 500 SPX companies have reported with respective +5.08% and +1.52% adjusted EPS and revenues surprises. Financials (84 of 84 reporting) lead with respective +9.47% and +2.38% EPS and revenue surprises. In 1Q2014, 499 of 499 SPX companies reported with respective +5.91% EPS and +0.20% revenue surprises.

    Forward estimates have moved up. Respective estimates for 2014, 2015 and 2016 are now $119.62, $132.80, and $147.67, respectively compared to $118.05, $131.36 and $145.70 at June-end, respective increases of +1.33%, +1.10% and +1.35%. Price earnings multiples remain elevated. With SPX equities trading at a 17.5x (compared to 17.5x the prior day) average 2014-15 earnings ($126.21), attention focuses on prospective 2014-15 earnings and valuations (17.5x times survey 2014-15 SPX average operating earnings suggests a 2202.60 SPX level in the next year, a +10.1% rise from yesterday's close).

    Technicals were little changed. Led by energy, most SPX market segments closed lower. SPX market breadth was negative, and up volume lagged down volume. Volatility fell, and the CBOE SPX volatility index (VIX) now suggests a 68% probability that the 30-day change in the SPX will be less than ±4.39%. Treasury bond markets weakened, with the 10-year U.S. Treasury bond yield rising +1.25 bps to 2.4712%, compared to 2.487% at the prior close.

    This morning, 10-year U.S. Treasury yields are +2.52 bps higher at 2.4964%, compared to the prior close. World sovereign bond markets are weaker, with the German 10-year yield at 0.995%, compared to 0.953% the prior day. Spanish and Italian 10-year debt yields are higher at 2.184% and 2.345%, respectively, compared to 2.088% and +2.298% the prior day.

    U.S. options markets improved to neutral to bullish, compared to neutral the prior day. The CBOE SKEW fell -3.33% to 132.91, compared to 137.49 the prior day, above a neutral 115-120 range and well above 130, a level that correlates well with short-term market tops. The SKEW closed at a record 143.60 on June 20th.

    In pre-market futures trading, September SPX equity futures (SPM4) price are above first resistance but near the top of their 1996-2003 trading range. After a fair value adjustment of -0.06 points, the SPU4 future prices at 1999.00, down -1.44 points. The SPX opens +0.94% and +1.57% above its respective 20- and 50-day moving averages, and +3.22% and +6.23% above its 200-day moving averages. Initial resistance is 2007.27. Initial support is 1995.70, then 1989.87.

    "Confirmed Uptrend" Market Outlook. Based on Nasdaq's August 13th follow-through, the U.S. equity outlook improved to "confirmed uptrend", concluding a brief "in correction" that commenced on August 6th, which followed a period of "uptrend under pressure" that began on July 8th. Since August 13th, the distribution count is 1 for the Nasdaq and NYSE composite. There have been no other index distributions.

    2Q2014 earnings continue to surprise positively, with financials' earnings leading other sectors. On September 5th, the SPX closed at a record 2007.71, up +3.82% compared to its August 12th 1933.75 close.

    On May 27th, the market outlook improved to "confirmed uptrend", ending a period of market "in correction" that began on April 4th. The SPX closed July 24th at a record 1987.01, +8.99% above the 1815.69 close on April 11th, the recent low. On February 3rd, the Nasdaq closed at its 3,996.96 year-to-date low, but then recovered +15.0% to the September 2nd 4,598.19 multi-year record close.

    In Asia, equity markets closed mixed. The Nikkei 225 (NYSEARCA:NKY) rose +0.28%. In China, the Hang Seng (HSI) Index was closed. The Shanghai SE composite (SHCOMP) reopened after yesterday's holiday, but closed unchanged. The NKY, HSI, and SHCOMP 50-day moving averages are above their respective 200-day moving averages. Today's volumes are unavailable.

    Commentary focused on the currency developments, as the Japanese yen weakened to its worst levels since late 2008.

    This week, the NKY is up +0.51%, while the HSI is down -0.20%, and SHCOMP is fractionally higher. Last week, the NKY, HSI, and SHCOMP closed up +1.58%, +2.01%, and +0.85%, respectively. In September, the NKY, HSI, and SHCOMP are up +2.10%, +1.81%, and +4.93%, respectively, compared to August, when the NKY and HSI closed down -1.26% and -0.06%, while the SHCOMP gained +0.71%.

    In 2014, the NKY is down -3.33%, the HSI is up +8.08%, and the SHCOMP is up +9.95%. In 2013, the NKY rose +56.7%. The HSI closed up +2.87%. The SHCOMP closed down -6.75%.

    In China, short-term interbank lending rates remain volatile, and the SHIBO 7-day fell -5 bps to 3.15%, compared to 3.20% the prior day, up from a 2.26% low on March 11th, but down from the February 7th 5.41% recent high.

    Regional relative strength indexes (RSI) have Tokyo and Hong Kong in a neutral range, while the SHCOMP is signaling overbought. The NKY RSI rose to 62.77, compared to 61.10 the prior session, up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI ended Monday at 62.78, compared to 64.80 the prior day, down from an overbought 81.00 on July 31st. The SHCOMP's RSI rose to 75.47, compared to 75.46 the prior day. On July 28th, the index's RSI set a record 81.72. On June 27, 2013, the index's RSI fell to a low of 15.27, which was also last year's low index close.

    In Japan, the NKY closed at 15,749.15, compared to 15,705.11 the prior day, -3.33% below its year-end 16,291.31 high and -59.5% below its late-1989 38,915.87 high close. The index opened at its 15,795.82 intraday high, then traded narrowly around 15,770 through the session with a late morning 15,736.13 intraday low. Market segments closed mixed. Leaders were telecommunications, materials, and technology, which rose at least +0.32%. Laggards were financials, consumer staples, and energy, which fell at least -0.70%.

    In China, in Shanghai, the SHCOMP closed Tuesday at 2,326.53, compared to 2,326.43 at the prior close, +19.3% above the 1,950.01 June 27, 2013 close, last year's low. The index traded narrowly around breakeven through the session, after recovering quickly from an early 2,316.41 intraday low. Market segments closed mixed. Leaders were health care, consumer discretionary, and industrials, which rose at least +0.70%. Laggards were consumer staples, financials, and telecommunications, which fell at least -0.35%.

    In Europe, major equity indexes are modestly mixed in mid-afternoon, but near their intraday lows. The FTSE 100 is up +0.05%, while the Euro Stoxx50, CAC 40, and DAX are down -0.31%, -0.22%, and -0.25%, respectively. The Spanish IBEX 35 is down -0.68%. The Italian FTSE MIB down -0.08%. Compared to their recent highs, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.63%, -1.02%, -2.77%, and -2.93%, respectively.

    Commentary focuses on Euro weakness and commodity price developments.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 64.66, compared to 66.78 at the prior close, in the upper end of a neutral (30-70) range. On August 8th, its RSI closed at 28.17, well below its prior February 5th 33.57 low, which coincided with its prior 2014 low. The index's lowest recent RSI level was 25.77 on June 24, 2013, which marked the year's 2,494.54 closing low.

    The Euro Stoxx50 trades -1.63% below its recent June 18th 3,314.80 multi-year high and -37.9% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,267.54 close, the index opened lower, rose to an early 3,268.24 intraday high, then moved lower to support at 3,260, which held through mid-afternoon. The index then stepped down to its 3,255.08 intraday low and currently trades at 3,257.13. Most market segments are lower. Leaders are health care, which is up +0.08%, and telecommunications and materials, which are down at least -0.01%. Financials are down -0.31%. Laggards are technology, energy, and utilities, which are down at least -0.38%.

    This week, the DAX is up +0.10%, while the Euro Stoxx50, FTSE 100, and CAC 40 are down -0.44%, -0.45%, and -0.34%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +3.14%, +0.52%, +2.41%, and +2.92%, respectively. In September, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +2.69%, +0.07%, +2.06%, and +3.02%, respectively. In August, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +1.93%, +1.33%, +3.18%, and +0.67%, respectively.

    In 2014, the indexes are higher. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +4.89%, +1.11%, +4.08%, and +2.14%, respectively. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

    2Q2014 SPX Earnings. The 2nd quarter earnings season began June 18th and is now largely complete, with 498 of 500 SPX reporting firms having reported, with respective +5.08% EPS and +1.52% revenue surprises. Financials (84 of 84 reporting) lead with a 9.47% EPS surprise and +2.39% revenue surprise.

    In 1Q2014, of 499 (of 499) reporting companies, 370 or +74.5% surprised positively on earnings, with an average +5.91% surprise average. Of reporting companies, 263 or 53.0% reported sales or revenues above estimates. The average sales/revenue surprise was +0.20%. Energy led with respective +10.0% and -1.01% earnings and revenue surprises. Financials had respective +5.67% and +0.26% earnings and revenue surprises. Consumer staples lagged with respective +0.34% and -0.66% earnings and revenue surprises.

    Valuation. The SPX trades at 18.2x estimated 2013 earnings ($110.15), 16.7x estimated 2014 earnings ($119.62), 15.1x estimated 2015 earnings ($132.80), and 13.6x estimated 2016 earnings ($147.67). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2014, 2015, and 2016 earnings to grow +8.60%, +11.0%, and 11.2%, respectively.

    The KBW Bank Index (BKX) trades at 13.9x 2013 adjusted EPS ($5.16), 13.0x estimated 2014 earnings ($5.52), 12.1x estimated 2015 earnings ($5.94), and 10.8x 2016 earnings ($6.63). Analysts expect 2014, 2015, 2016 EPS will grow +6.98%, +7.62%, and +11.6%, respectively.

    Composite, index, and equity options. Options markets improved to neutral to bullish, compared to neutral the prior session. Composite options are bullish, index options are neutral, and equity options are neutral. The composite put/call ratio is 0.88, compared to 1.02 the prior day, and better than 5- and 10-period moving averages of 0.94 and 0.95, respectively. The index put/call ratio is 1.11, compared to 1.24 the prior day, and worse than its 5- and 10-period moving averages of 1.02 and 1.05, respectively. The equity put/call ratio closed the day at 0.80, compared to 0.94 the prior day, and better than its 5- and 10-period moving averages of 0.91 and 0.93, respectively.

    NYSE Volume, Breadth Indicators. Volume fell -2.79% to 609.75 million shares, compared to 617.68 million shares the prior day, 1.07x the 572.53 million shares 20-day moving average. Market breadth was positive, and up volume led down volume. Advancing stocks led by +774 (compared to -1,038 the prior day), or 1.68:1. Up volume was 1.79:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09100%, compared to 0.09100% the prior day. USD 3-month LIBOR is 0.23230%, compared to 0.23310% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 13.78 bps, compared to 14.23 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 15.40 bps, compared to 16.90 bps the prior day, and down from the December 27, 2011, high of 98.800 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.

    · The 3-month Euro basis swap curve is -16.899 bps, compared to -18.750 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and within the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 0.995%, compared to 0.953% the prior day.

    · French 10-year debt yields 1.350%, compared to 1.366% the prior day.

    · Japanese 10-year debt yields are 0.536%, compared to 0.531% the prior day.

    · Spanish and Italian 10-year debt yields are lower and near multi-year lows. Spanish 10-year debt yields are 2.184%, compared to 2.088% the prior day. Italian 10-year debt yields are at 2.345%, compared to 2.298% the prior day. Spanish and Italian 10-year debt yields peaked at 7.62% and 7.26%, respectively, in July 2012 and November 2011.

    · U.S. Treasury yields are lower, with 2- and 10-year maturities yielding 0.548% and 2.496%, respectively, compared to 0.528% and 2.471% Friday. The yield curve widened +0.440 bps, with the 2- to 10-year spread at +1.948%, compared to 1.943% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.861% on August 27, 2014, to a high of +2.648% on December 31, 2013.

    · The U.S. dollar is extending its recent gains compared to the euro, Japanese yen, and British pound. The dollar trades at US$84.335, compared to US$84.519 intraday high and US$84.232 the prior day, and better compared to its $81.523 50-day, US$80.828 100-day, and US$80.556 200-day averages. The euro trades at US$1.2890, compared to a US$1.2860 intraday low and US$1.2895 the prior day. The euro trades worse compared to its US$1.3368 50-day and US$1.3528 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥106.21, compared to ¥106.03 the prior day. The yen trades worse than its 50-day moving average ¥102.76, and worse than its January 1st 105.31 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index improved to +38.00, compared to 37.90 the prior day, with successive positive readings since August 21st. The index is better compared to its respective +41.52 5-day and +36.80 10-day moving averages. From a +72.70 high on January 15th, the index subsequently trended lower and turned negative on February 19th and fell to a -45.90 124-week low on April 7th. The index turned briefly positive in the latter half of May, then turned negative on May 29th and remained negative through August 5th. The index turned positive again on August 21st. After a lag, the CESIUSD correlates with EPS revisions.

    · Commodities prices are mixed, with higher energy, higher precious metals, higher aluminum and copper, and mostly lower agriculture prices.

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +4.71% to 12.66, compared to 12.09 at the prior close. The VIX is +2.30% above the 12.09 20-day moving average. Its 30-day high is 17.57. Its 30-day low is 11.24. Its all-time closing low is 9.31 on December 22, 1993. The long-term average is 20.00.

    · The Euro Stoxx 50 volatility index (V2X) is 15.75, compared to 15.85 at the prior day close. The V2X index trades -7.79% below its 17.08 20-day moving average, -28.9% below the 22.15 30-day high, and +2.37% above the 15.38 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 14.62, up +1.32% compared to 14.43% at the prior close. The VHSI index trades +1.57% above its 14.39 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) fell -3.33% to 132.91, compared to 137.49 the prior session, above a neutral reading (115-120) since March 27th, and well 130, a level that correlates well with short-term market tops. The recent record high was 143.26 on June 20, 2014. Its recent low was 112.47 on May 25, 2013. The index rarely falls below 110, last on July 31, 2009. The index correlates with market tail risks, the cost of buying out-of-the-money, long-dated options, i.e., options not affected by expirations. A rise suggests that investors are buying more puts than calls, a bearish signal.

    U.S. Economic Reporting and News:

    · At 7:30, August NFIB small business optimism was 96.1, compared to 96.0 survey and 95.7 prior.

    Overseas Economic Reporting and News:

    · Japan - August consumer confidence fell to 41.2, compared to 42.3 survey and 41.5 prior. August preliminary YoY machine tool orders rose 35.6, compared to 37.7% prior.

    · United Kingdom - July MoM industrial production rose +0.5%, compared to +0.2% survey and +0.3% prior. MoM manufacturing production rose +0.3%, compared to +0.3% survey and prior.

    Notable Company Ratings/News:

    · None.

    Monday's Trade. The day was another inconsequential one and ended mixed. Equity indexes opened lower, but initially found support until mid-morning, then stepped down again through mid-afternoon. At about 1:30, a San Francisco Fed paper suggested that markets should assume a somewhat more aggressive monetary policy adjustment following the end of QE in December, sending markets to moderate mid-afternoon lows. Markets shrugged off the analysis and improved through the final two hours to narrow the day's losses. Volume declined. The Nasdaq rose +0.20%, while the SPX, DJI, and NYSE composite fell -0.31%, -0.15%, and -0.60%, respectively. Market breadth was negative, with gainers 0.61x losing stocks. Most SPX market segments closed lower. Leaders were technology and health care, which rose at least +0.05%, while financials fell -0.01%. Laggards were telecommunications, utilities, and energy, which fell at least -0.65%.

    Last week, indexes closed with modest gains, with index up at least +0.06%. In September, indexes are modesty mixed. In August, indexes closed up at least +2.98. In 2014, indexes are up at least +3.23%.

    Other notable indexes closed higher. The Russell 2000 (RTY) rose +0.19% and closed -3.01% below its March 4th record high. The Nasdaq Internet Index (QNET) rose +0.60%, down -4.16% below its March 6th closing high. The NBI rose +0.85%, closing -1.28% below its August 29th 2,892.71 record high.

    NYSE volume fell -1.28% to 60.1.97 million shares, compared to 609.75 million shares the prior day, 1.05x the 571.21 million share 20-day moving average volume. Bond markets weakened. From its prior day 2.4587% close, the U.S. 10-year yield eased to a late morning 2.4194% intraday low, then rose sharply to a mid-afternoon 2.4784% intraday high. The index trended higher through the session's remainder and moved higher in the final hour to end at 2.4712%, up +1.25 bps from the prior close.

    From its prior day 1997.65 close, September 2014 SPX futures (SPM4) suggested a modestly lower open. The index traded around 2006 in early trading, then eased to 2002, where it traded narrowly through early afternoon, when the San Francisco Fed paper sent markets lower to the mid-afternoon 1995.60 intraday low. The index improved through the final two hours and closed at 2001.54, +3.51% above the August 12th 1933.75 close (which marked the start of the current market uptrend), and +86.2% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    From its prior day record 8,549.79 close, the DJ Transportation index (TRAN) fell -0.32% to close at 8,574.19, compared to the record 5,601.80 close the prior day. The index set an early 8,607.65 in early trading, but reversed lower by mid-morning and trended lower to a mid-afternoon 8,554.91 intraday low. The index improved through the final two hours. Volume rose +3.61% to 9.361 million shares, compared to 9.035 million shares the prior session, and 0.89x the 15-day moving average volume. The TRAN closed +2.05% and +3.14% above its respective 20- and 50-day moving averages, and +5.64% and +10.9% above its respective 100- and 200-day moving averages.

    Market volatility fell, as the CBOE SPX volatility index (VIX) rose +4.71% to 12.66, compared to 12.09 at the prior close. The VIX opened at 12.60, set an early 12.40 intraday low, then rose to 12.90 by mid-morning and the 13.09 intraday high by mid-afternoon. The index eased through the final two hours. The VIX's all-time closing low is 9.31, on December 22, 1993. Its record high is 89.53 in December 2008. Its lifetime average is 20.01. The CBOE put/call SKEW rose +5.64% to 137.49, compared to 130.15 the prior session, above a neutral 115-120 range and above 130 for the first time since June 18th, a level that correlates well with short-term market tops. Its record 143.26 high came on June 20th.

    The market's technical factors were little changed. The SPX relative strength (RSI) fell to 61.85, compared to 66.37 the prior day, in a neutral range. The latest RSI compares to an oversold 32.85 on August 7th, an overbought 73.73 on June 9th, and an oversold 31.24 on February 3rd, its previous yearly low, when the SPX closed at 1741.89. The RSI compares to an overbought 71.26 on December 31st, when the SPX closed at an earlier record 1848.36 high, and compares to earlier oversold levels of 35.14 on August 27th and 39.19 on October 9th.

    Last week, the SPX, DJI, and Nasdaq closed up +0.22%, +0.23%, +0.98%, and +0.25%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed up +0.75%, +0.57%, +1.65%, and +0.90%, respectively. In September, the DJI and Nasdaq are up +0.08% and +0.26%, respectively, while the SPX and NYSE composite are down -0.09% and -0.35%. In August, the SPX, DJI, Nasdaq, and NYSE composite rallied +3.77%, +3.23%, +4.82%, and +2.98%, respectively.

    In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +8.29%, +3.23%, +9.95%, and +5.84%, respectively. In 2013, the SPX, DJI, Nasdaq, and NYSE composite closed up +29.6%, +26.5%, +38.2%, +23.2%, respectively. All closed at least +5.91% higher in 2012.

    KBW Bank Index (BKX). On lower, but above 15-day average volume, the BKX was unchanged at 71.82, compared to 71.81 at the prior day's close, its 12th consecutive close above 70. The index closed -1.49% below its 72.91 March 20th post-2008 closing high. The index opened higher and set an early 72.03 intraday high, but reversed lower by late morning and trended lower to a mid-afternoon 71.55 intraday low. The index improved through the final two hours to end with a fractional gain. Volume fell -1.70% to 39.411 million shares, compared to 40.092 million shares the prior day, and 1.07x the 36.955 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) rose +0.41%.

    This week, the BKX is up +0.01%, compared to last week, when the BKX closed up +0.56%. In September, the BKX is up +0.45%, compared to August, when the BKX rose +0.45%. In 2014, the BKX is up +3.70%, compared to the SPX's +8.29% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +21.3% better than the June 24, 2013, 59.19 close, its worst since May 13, 2013. The index crossed above 50 on December 17, 2012, 60 on May 15, 2013, and 70 on January 8, 2014, but then dropped back below 70 on January 24th, which persisted until March 6th. On April 10th, the BKX fell below 70.00 and then eased consistently to the May 15th 66.81 closing low, its lowest close since early February. On June 5th, the BKX rose back above 70, but then again surrendered that level on August 1st, then recovered it on September 2nd.

    The BKX closed +120.6% above the 32.56 intraday low on October 4, 2011, the bottom of that year's correction. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +86.2% in the same period. The BKX index closed -40.7% below its February 20, 2007, record 121.06 high. The BKX is up +285.1% from its 18.62 March 6, 2009, closing low, its low at the end of the 2008-09 financial panic.

    Technical indicators were little changed. The index closed +1.60% and +1.56% above its respective 20- and 200-day moving averages, and +2.61% and +3.21% above its 50- and 100-day moving averages. The 20-day moving average rose +15 bps to 70.69. The 70.72 50-day moving average rose +2 bps. Its 70.00 100-day moving average rose +3 bps, and the 200-day moving average rose +3 bps to 69.59. The 20-day closed (by -0.03 points) below the 50-day, and the negative gap narrowed -13 bps. The 50-day moving average closed (by +1.13 points) above the 200-day moving average, and the gap narrowed -1 bp. The 100-day moving average closed (by +0.41 points) above the 200-day moving average, and the gap was unchanged.

    The directional movement indicator improved to +5.651, compared to +3.596, compared to +9.058 the prior day, with positive readings since August 21st. Relative strength eased higher to 60.66, compared to 60.58 the prior day, in a neutral range, down from an overbought 73.14 on June 9th, but compares to recent lows of 32.95 on February 3rd and 31.08 on November 14, 2012, which is also the date of the BKX's 2012 closing low. Next resistance is 72.05; next support is 71.57.

    SPX, DJI, RTY, TRAN, CCMP, NYA, VIX, SKEW, NKY, EURUSD, USGG10YR, HSI, SHCOMP, SX5E, CAC, DAX, FTSE, JPY, GBP, EUR

    Sep 09 9:18 AM | Link | Comment!
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