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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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  • U.S. Futures Rise On PBOC And eBay News; Asia Ends Mixed, Europe Up Moderately

    This morning. U.S. equity futures are moderately higher and near the top of the pre-market trading range. Market focus remains on the implications of the PIMCO management debacle and unrest in Hong Kong, the world's 5th largest equity market, where growing pro-democracy demonstrations appear likely to continue through the next two day's market holidays. In Asia, equity indexes closed mixed, but lower in Hong Kong, where relative strength indices signal grossly oversold. In Europe, equities are moderately higher, except in London, which is down small. Economic reporting focuses on Chinese manufacturing PMI, which disappointed, but is otherwise light worldwide. Ford's (NYSE:F) $1 billion profit warning focused on economic weakness in Europe and South America. EBAY (NASDAQ:EBAY) announced that it will spin off PayPal, its payments subsidiary. U.S. Treasury 10-year yields are higher. The dollar continues to strengthen. Commodities are mixed. Wednesday's Nikkei 225 December 2014 (NKZ4) equity futures are modestly higher.

    Monday, on modestly higher but below average volume, major U.S. equity indexes sold off early, but improved by mid-session and ended with modest losses, except on the NYSE composite, which distributed. The SPX, DJI, Nasdaq, and NYSE composite fell -0.26%, -0.25%, -0.14%, and -0.46%, respectively. Other notable indexes were mixed. The TRAN rose +0.16%. The Russell 2000 (RTY) fell -0.13%. The Nasdaq Internet (QNET) index fell -0.41%. The Nasdaq Biotech (NBI) index fell -0.10%.

    Last week, the major indexes closed down at least -0.96% compared to a mixed prior week. In September, indexes now mixed. In August, indexes closed up at least +2.98% higher. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +7.28%, +3.24%, +8.04%, and +3.83%, respectively.

    The TRAN closed -2.20% off its September 18th, record high, while the RTY, QNET, and NBI are down -7.39%, -7.79%, and -0.03%, respectively, from their recent record highs.

    NYSE volume rose +36.63% to 0.92x its 20-day moving average.

    Trading desks note a mixed overnight, with weakness in troubled Hong Kong, but strength in Shanghai, where the PBOC announced measure to support its housing market. Europe improved on the PBOC news, and U.S. equity futures also improved subsequently. Otherwise, focus is on Thursday's ECB meeting and Friday's U.S. September jobs report. Market commentary focuses on Ford's profit warning, which raises questions regarding current earnings expectations and the recent rise in market volatility. U.S. equities seem to be consolidating, with opinions that there remains a likely test of the SPX 100-day moving average (1956.64) remains ahead.

    On September 15, the 3Q2014 earnings season commenced and now 19 of 499 SPX companies have reported respective +2.57% and +1.07% adjusted EPS and revenues surprises. In 2Q2014, SPX companies reported respective +5.08% adjusted earnings and +1.52% revenues surprises.

    In the past 3 months, forward estimates have moved up. Respective estimates for 2014, 2015 and 2016 are now $119.44, $132.77, and $147.67, compared to $118.05, $131.36 and $145.70 at June-end, increases of +1.18%, +1.08% and +1.35%. Price earnings multiples remain elevated. With SPX equities trading at a 17.3x (compared to 17.3x the prior day) average 2014-15 earnings ($126.11), attention focuses on prospective 2014-15 earnings and valuations (17.3x times survey 2014-15 SPX average operating earnings suggests a 2176.25 SPX level in the next year, a +10.0% rise from yesterday's close).

    Technicals worsened as the DJI surrendered its 20-day moving average. Led consumer discretionary, most SPX market segments closed lower. Volatility rose, and the CBOE SPX volatility index (VIX) now suggests a 68% probability that the 30-day change in the SPX will be no greater than ±5.54%, compared to ±5.14% the prior session. Treasury bond markets strengthened, with the 10-year U.S. Treasury bond yield falling -5.05 bps to 2.4771%, compared to 2.5276% at the prior close.

    This morning, 10-year U.S. Treasury yields are +3.43 bps higher at 2.5114%, compared to the prior close. World sovereign bond markets are lower, with the German 10-year yield at 0.958%, compared to 0.964% the prior day. Spanish and Italian 10-year debt yields are lower at 2.179% and 2.353%, respectively, compared to 2.223% and 2.404% the prior day.

    U.S. options markets were unchanged at bearish to bullish, compared to bearish to bullish the prior day. The CBOE SKEW rose +0.90% to 131.67, compared to 130.49 the prior day, above a neutral 115-120 range and above 130, a level that correlates well with short-term market tops. The SKEW set record 146.08 close on September 19.

    In pre-market futures trading, September SPX equity futures (SPM4) price near the top of their 1968-1978 trading range. After a fair value adjustment of +0.50 points, the December SPZ4 future prices at 1975.00, up +5.00 points. The SPX opens -0.83% below and +0.05% above its respective 20- and 50-day moving averages, and +1.08% and +4.17% above its 200-day moving averages. Initial resistance is 1984.71. Initial support is 1967.47, then 1957.13.

    Market Outlook "Uptrend Under Pressure" and Distribution Day Count. Monday, the NYSE composite added a distribution day, and the current "uptrend under pressure" outlook continues. A clear follow-through to Wednesday's better rally is required to reconfirm a market uptrend. The major indexes' distributions count are 4 on the SPX and DJI, 6 on the Nasdaq and 7 on the NYSE composite, since the August 13 start of the current "confirmed uptrend".

    2Q2014 earnings surprised positively, with financials' earnings leading other sectors. On September 18, the SPX closed at a record 2011.36, up +2.54% compared to its August 12th 1933.75 close.

    In Asia, equity markets closed mixed, with greater weakness in Hong Kong. The Nikkei 225 (NYSEARCA:NKY) fell -0.84%. In China, the Hang Seng (HSI) Index fell -1.28%, continuing recent weakness, while the Shanghai SE composite (SHCOMP) rose +0.26% gain. The NKY, HSI, and SHCOMP 50-day moving averages are above their respective 200-day moving averages. The HSI closed below its 200-day moving average. Today's volumes are unavailable.

    Commentary focused on today's HSBC manufacturing PMI, PBOC support for Chinese housing markets, and pro-democracy protests and the strong police response in Hong Kong.

    This week, the NKY and HSII are down -0.72% and -1.60%, respectively, while the SHCOMP is up +0.69%. Last week, the SHCOMP closed up +0.78%, while the NKY and HSI closed down -0.56% and -2.58%, respectively. In September, the NKY and SHCOMP closed up +4.86% and +6.62%, respectively, while the HSI fell -7.31%. In August, the NKY fell -1.26%, the HSI fell -0.06%, and the SHCOMP rose +0.71%.

    In 2014, the NKY and HSI are down -0.72% and -1.60%, respectively, while the SHCOMP is up +11.7%. 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 2.85%, compared to 2.90% 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 in the middle of a neutral range, Hong Kong is grossly oversold, and Shanghai in the upper end of a neutral range. The NKY RSI fell to 60.66, compared to 67.30 the prior session, down from 77.29 on September 19th, but up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI fell to 23.40, compared to 26.46 the prior day and down from an overbought 81.00 on July 31st. The SHCOMP's RSI rose to 67.17, compared to 66.16 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 16,173.52, compared to 16,310.64 the prior day, and -1.23% off its September 24th closing yearly high and -58.4% below its late-1989 38,915.87 high close. The index opened at the 16,252.72 intraday high, then trended lower to a late morning 16,058.72 intraday low. The index improved through the afternoon. All market segments closed at least -0.24% lower. Leaders were consumer staples, consumer discretionary, and health care. Financials fell -0.93%. Laggards were utilities, industrials, and energy, which fell at least -1.35%.

    In China, in Shanghai, the SHCOMP closed at 2,363.87, compared to 2,357.71, compared to 2,347.72 at the prior close, +21.2% above the 1,950.01 June 27, 2013 close, last year's low. The index traded narrowly around 2,360 through the session, with an early 2,354.27 intraday low and late 2,365.46 intraday high. Most market segments closed higher. Leaders were technology, health care, and consumer discretionary, which rose at least +0.34%. Financials rose +0.18%. Laggards were utilities, which rose +0.01%, and consumer staples and telecommunications, which fell at least -0.08%.

    In Europe, major equity indexes opened mostly higher, but are off their best levels of early afternoon. The Euro Stoxx50, CAC 40, and DAX are up +0.80%, +0.95%, and +0.19%, respectively, while the FTSE 100 is down -0.43%. The Spanish IBEX 35 is up +0.73%. The Italian FTSE MIB is up +1.00%. Compared to their recent highs, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -3.08%, -4.02%, -4.33%, and -6.07%, respectively.

    Commentary focuses this week's ECB meeting on October 2nd, Hong Kong protests, economic growth prospects, and currency and commodity price developments. The euro is again weaker compared to the dollar.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 50.68, compared to 46.15 at the prior close, in the lower 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 -3.08% below its recent June 18th 3,314.80 multi-year high and -38.8% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,186.95 close, the index gapped higher and rose to an early afternoon 3,226.35 intraday high. The index currently trades at 3,214.24. Most market segments are higher. Leaders are health care, energy, and utilities, which are up at least +1.37%. Financials are up +0.725. Laggards are materials and technology, which are up at least +0.09%, and consumer discretionary, which is down -0.15%.

    This week, the CAC 40 is up +0.11%, while the Euro Stoxx50, FTSE 100, and DAX are down -0.22%, -0.47%, and -0.53%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -1.64%, -2.76%, -1.49%, and -2.66%, respectively. In September, indexes are mixed, with the Euro Stoxx50 and CAC 40 up +1.16% and +0.42%, respectively, while the FTSE 100 and DAX up are down -2.96% and -0.31%, respectively. In August, the Euro Stoxx50, CAC 40, and DAX are up +2.45%, +1.00%, and +2.36%, respectively, while the FTSE 100 is down -1.91%.

    In 2014, the indexes are mixed. The Euro Stoxx50 and CAC 40 are up +3.33% and +2.41%, respectively, while the FTSE 100 and DAX are down -1.94% and -1.17%. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

    3Q2014 SPX Earnings. The current earnings season began on September 15th, and 19 of 499 SPX companies have reported with respective +2.57% and +1.07% earnings and revenue surprises. Industrials lead with respective +6.65% and +1.86% revenue surprises.

    In 2Q2014 498 SPX firms reported respective +5.14% EPS and +1.53% revenue surprises. Financials (84 of 84 reporting) lead with a 9.47% EPS surprise and +2.45% revenue surprise.

    Valuation. The SPX trades at 18.0x actual 2013 earnings ($110.15), 16.6x estimated 2014 earnings ($119.44), 14.9x estimated 2015 earnings ($132.77), and 13.4x 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 +8.44%, +11.2%, and 11.2%, respectively.

    The KBW Bank Index (BKX) trades at 13.9x actual 2013 adjusted EPS ($5.16), 13.0x estimated 2014 earnings ($5.52), 12.1x estimated 2015 earnings ($5.95), and 10.8x 2016 earnings ($6.66). Analysts expect 2014, 2015, 2016 EPS will grow +6.89%, +7.90%, and +11.9%, respectively.

    Composite, index, and equity options. Options markets are unchanged at bearish to bullish, compared to bearish to bullish the prior session. Composite options are bullish, index options are bullish, and equity options are bearish. The composite put/call ratio is 0.88, compared to 1.12 the prior day, and worse than 5- and 10-period moving averages of 1.00 and 0.96, respectively. The index put/call ratio is 0.66, compared to 0.94 the prior day, and better than its 5- and 10-period moving averages of 0.900 and 0.93, respectively. The equity put/call ratio closed the day at 1.07, compared to 1.25 the prior day, and worse than its 5- and 10-period moving averages of 1.09 and 1.00, respectively.

    NYSE Volume, Breadth Indicators. Volume rose +3.63% to 653.51 million shares, compared to 630.64 million shares the prior day, 0.92x the 708.14 million shares 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -614 (compared to +1,324 the prior day), or 0.67:1. Up volume was 0.38:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09050%, compared to 0.09080% the prior day. USD 3-month LIBOR is 0.23310%, down from 0.23360% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 14.61 bps, compared to 14.71 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 12.30 bps, compared to 12.70 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 -10.485 bps, compared to -10.117 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and below the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 0.958%, compared to 0.964% the prior day.

    · French 10-year debt yields 1.319%, compared to 1.338% the prior day.

    · Japanese 10-year debt yields are 0.531%, compared to 0.524% the prior day.

    · Spanish and Italian 10-year debt yields are lower and are near multi-year lows. Spanish 10-year debt yields are 2.179%, compared to 2.223% the prior day. Italian 10-year debt yields are at 2.353%, compared to 2.404% 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 0.579% and 2.509%, respectively, compared to 0.571% and 2.477% Monday. The yield curve widened +2.360 bps, with the 2- to 10-year spread at +1.930%, compared to 1.906% 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, Japanese yen, and British pound. The dollar trades at US$86.145, compared to US$86.218 intraday high and US$85.591 the prior day, and better compared to its $82.861 50-day, US$81.599 100-day, and US$80.893 200-day averages. The euro trades at US$1.2593, compared to a US$1.2571 intraday low and US$1.2685 the prior day. The euro trades worse compared to its US$1.3145 50-day and US$1.3378 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥109.75, compared to ¥109.50 the prior day. The yen trades worse than its 50-day moving average ¥104.80, and worse than its September 29th 109.50 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index worsened to +24.90, compared to 26.20 the prior session, with consecutive positive readings since August 21st. The index is better compared to its respective +25.20 5-day and +23.94 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. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +7.61% to 15.98, compared to 14.85 at the prior close. The VIX is +19.9% above the 13.32 20-day moving average. Its 30-day high is 17.08. 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 17.65, down -6.13% compared to 18.80 at the prior day close. The V2X index trades +6.17% above its 16.62 20-day moving average, -11.2% below the 19.88 30-day high, and +22.2% above the 14.44 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 20.04, up +5.25% compared to 19.04 at the prior close. The VHSI index trades +30.8% above its 15.32 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) rose +0.90% to 131.67, compared to 130.49 the prior session, above a neutral reading (115-120) and above 130, a level that correlates well with short-term market tops. The record high was 146.08 on September 19, 2014. Its recent low was 112.47 on May 25, 2013. Spikes in excess of 130 correlate well with short-term market tops, as occurred last December, ahead of market declines last January. 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 9:00, September ISM Milwaukee was 63.18, compared to 61.00 survey and 59.63 prior.

    · S&P/CS MoM 20 city composite fell -0.50%, compared to +0.00% survey and -0.20% prior.

    · At 9:45, September Chicago purchasing manager, with 62.0 survey and 64.3 prior.

    Overseas Economic Reporting and News:

    · China - September final HSBC manufacturing PMI was 100.09, compared to 100.20 revised prior.

    · Japan - August YoY construction orders rose +8.6%, compared to 24.4% prior.

    · France - August MoM consumer spending rose +0.7%, compared to -0.2% survey and -0.7% prior.

    · United Kingdom - September Lloyds business barometer was 57, compared to 47 prior. 2Q2014 final GDP was +0.9%, compared to +0.8% survey and prior.

    Notable Company Ratings/News:

    · None.

    Monday's Trade. Equity indexes opened poorly, but found support and rallied by session end with narrow losses. The NYSE composite distributed. The SPX, DJI, Nasdaq, and NYSE composite fell -0.26%, -0.25%, -0.14%, and -0.46%, respectively. Last week, the major indexes closed at least -0.96% lower, compared to the prior week, when indexes closed mixed. In September, indexes are at least -0.14%lower. In 2014, indexes are up at least +2.98%. Market breadth was negative, with gainers 0.67x losing stocks. Most SPX market segments closed lower. Leaders were utilities, which rose +0.54%, and consumer staples and telecommunications, which fell at least -0.04%. Financials fell -0.39%. Laggards were energy, materials, and consumer discretionary, which fell at least -0.42%.

    Other notable indexes fell modestly. The Russell 2000 (RTY) fell -0.13% and closed -7.51% below its March 4th record high, with its 50-day moving average -0.31% "death crossed" below its 200-day moving average. The Nasdaq Internet Index (QNET) fell -0.41%, down -8.17% below its March 6th closing high. The Nasdaq Biotech index (NBI) fell -0.10%, closing -0.14% below its August 26th record high.

    NYSE volume rose +3.63% to 653.51 million shares, compared to 630.64 million shares the prior day, 0.92x the 708.14 million share 20-day moving average volume. Bond markets strengthened. From its prior day 2.5276% close, the U.S. 10-year yield moved sideways through mid-session with an early morning 2.5385% intraday high, but moved lower on overseas equity weakness, falling to a late morning 2.4762 intraday low. The index ended at 2.4771%, -5.05 bps from the prior close.

    From its prior day 1982.85 close, September 2014 SPX futures (SPM4) suggested a weak open. The index fell sharply to an early 1964.04 intraday low, where support held, and the index rallied to 1980 by late morning. The index weakened again in mid-afternoon, but found support above 1970, then rallied to the 1981.28 intraday high in the final hour. The index closed at 1977.80, -1.67% below the September 18th record 2011.36 close, and +2.28% above the August 12th 1933.75 close (which marked the start of the current market uptrend), and +84.0% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    From its prior day 8,484.91 close, the DJ Transportation index (TRAN) managed a +0.16% gain and closed at 8,498.08, -2.05% below its September 18th 8,676.19 record close. The index set an early 8,392.18 intraday low, but the index rallied back to breakeven by late morning, then finally reversed higher in the final hour to the session's 8,506.56 intraday high. Volume fell -3.31% to 10.551 million shares, compared to 10.912 million shares the prior session, and 0.81x the 15-day moving average volume. The TRAN closed -0.47% below and +1.25% above its respective 20- and 50-day moving averages, and +3.05% and +8.50% above its respective 100- and 200-day moving averages.

    Market volatility increased, as the CBOE SPX volatility index (VIX) rose +7.61% to 15.98, compared to 14.85 at the prior close, its highest close since August 8th. The VIX set an early 17.08 intraday high, then eased to a late morning 15.45 intraday low before trading narrowly around 16.0 through the close. 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 +0.90% to 131.67, compared to 130.49 the prior session, above a neutral 115-120 range, and above 130, a level that correlates well with short-term market tops. Its record 146.08 high came on September 19th.

    The market's technical factors worsened, as the DJI surrendered its 20-day moving average. The SPX relative strength (RSI) fell to 46.34, compared to 48.07 the prior day, below the middle of a neutral range. The 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 also 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 -1.37%, -0.93%, -1.48%, and -1.74%, respectively. The prior week, the SPX and DJI closed up +0.13% and +0.83%, respectively, while the Nasdaq and NYSE composite closed down -0.07% and -0.76%. In September, the SPX, DJI, Nasdaq, and NYSE composite are down -1.28%, -0.16%, -1.62%, and -2.69%, respectively. In August, the SPX, DJI, Nasdaq, and NYSE composite closed up +3.77%, +3.23%, +4.82%, and +2.98%, respectively.

    In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +7.00%, +2.98%, +7.88%, and +3.35%, 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 better, but below 15-day average volume, the BKX fell moderately. The BKX ended at 71.74, down -0.46% compared to 72.07 at the prior day's close. The index fell to an early 71.34 intraday low, then improved to trade around 71.70 though the close. The index traded as high as 71.93 at mid-session. Volume rose +0.48% to 37.137 million shares, compared to 36.961 million shares the prior day, 0.74x the 50.072 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) fell -0.31%.

    This week, the BKX is down -2.65%, compared to last week, when the BKX rose +2.62%. In September, the BKX is up +0.35%, compared to August, when the BKX rose +1.92%. In 2014, the BKX is up +3.58%, compared to the SPX's +7.00% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +21.2% 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.

    The BKX closed +120.3% 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 +84.0% in the same period. The BKX index closed -40.7% below its February 20, 2007, record 121.06 high. The BKX is up +285.3% 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 -0.81% below and +0.95% above its respective 20- and 50-day moving averages, and +1.64% and +2.52% above its 100- and 200-day moving averages. The 20-day moving average rose +1 bp to 72.32. The 71.06 50-day moving average rose +2 bps. Its 70.58 100-day moving average rose +4 bps, and the 200-day moving average rose +2 bps to 69.97. The 20-day closed (by 1.26 points) above the 50-day, and the positive gap narrowed -1 bp. The 50-day moving average closed (by +1.09 points) above the 200-day moving average, and the gap was unchanged. The 100-day moving average closed (by +0.61 points) above the 200-day moving average, and the gap widened +2 bps.

    The directional movement indicator worsened to -2.910, compared to -0.466 the prior day, its 3rd consecutive negative reading. Relative strength worsened to 48.02, compared to 50.70 the prior day, in a neutral range, down from an overbought 72.57 on September 19th and comparing 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 72.00; next support is 71.41.

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

    Sep 30 9:43 AM | Link | Comment!
  • U.S. Futures Fall With Focus On ECB And U.S. Jobs; Asia Mixed As Hong Kong Protests Beijing Election Plans; Europe Lower

    This morning. U.S. equity futures are moderately lower and near the bottom of the pre-market trading range, continuing the recent greater volatility and generally lower trending consolidation. Market focus remains on the implications of the PIMCO debacle, where the departure of $100 billion or more is expected to follow the departure of founder Bill Gross to Janus Capital. Unrest in Hong Kong, the world's 5th largest equity market, is another ponderable, where growing pro-democracy demonstrations, objecting to Beijing's manipulation of its leadership election, have been met with threats of violence from police authorities. In Asia, equity indexes closed lower in Hong Kong, but up in Tokyo and Shanghai. In Europe, equities are moderately lower though currently slightly better than their mid-afternoon intraday lows. Economic reporting is generally light worldwide. Sovereign rates are mixed. Leveraged fixed income rates are rising, on speculation that certain PIMCO funds must be at least partially liquidated. U.S. Treasury 10-year yields are higher. The dollar continues to strengthen. Commodities are mostly higher. Tuesday's Nikkei 225 December 2014 (NKZ4) equity futures are modestly lower.

    Friday, on lower volume, major U.S. equity indexes recaptured about half the prior day Rosh Hashana sell-off, their worst loss since August 7th. The SPX, DJI, Nasdaq, and NYSE composite rose +0.86%, +0.99%, +1.02%, and +0.72%, respectively. Other notable indexes also rose. The TRAN rose +1.19%. The Russell 2000 (RTY) rose +0.82%. The Nasdaq Internet (QNET) index rose +1.03%. The Nasdaq Biotech (NBI) index rose +1.00%.

    Last week, the major indexes closed down at least -0.96% compared to a mixed prior week. In September, indexes now mixed. In August, indexes closed up at least +2.98% higher. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +7.28%, +3.24%, +8.04%, and +3.83%, respectively.

    The TRAN closed -2.20% off its September 18th, record high, while the RTY, QNET, and NBI are down -7.39%, -7.79%, and -0.03%, respectively, from their recent record highs.

    NYSE volume fell -14.3% to 0.89x its 20-day moving average.

    Trading desks note the absence of narrative changing headlines over the weekend, though Hong Kong become more important overnight. Focus is on Thursday's ECB meeting and Friday's U.S. September jobs report. Chicago Fed President Evans speaks this morning at 9:00 am. Market commentary focuses on the sudden rise in market volatility, with the thought that there remains a likely test of the SPX 100-day moving average (1955.65) remains ahead.

    On September 15, the 3Q2014 earnings season commenced and now 18 of 499 SPX companies have reported respective +2.55% and +1.08% adjusted EPS and revenues surprises. In 2Q2014, SPX companies reported respective +5.08% adjusted earnings and +1.52% revenues surprises.

    In the past 3 months, forward estimates have moved up. Respective estimates for 2014, 2015 and 2016 are now $119.45, $132.78, and $147.71, compared to $118.05, $131.36 and $145.70 at June-end, increases of +1.19%, +1.09% and +1.38%. Price earnings multiples remain elevated. With SPX equities trading at a 17.3x (compared to 17.2x the prior day) average 2014-15 earnings ($126.12), attention focuses on prospective 2014-15 earnings and valuations (17.3x times survey 2014-15 SPX average operating earnings suggests a 2181.90 SPX level in the next year, a +10.0% rise from yesterday's close).

    Technicals improved, as the SPX and DJI recaptured their respective 50-day moving averages. Led energy and technology, all SPX market segments closed at least +0.17% higher. Volatility fell, and the CBOE SPX volatility index (VIX) now suggests a 68% probability that the 30-day change in the SPX will be no greater than ±5.14%, compared to ±5.48% the prior session. Treasury bond markets weakened, with the 10-year U.S. Treasury bond yield rising +2.54 bps to 2.5276%, compared to 2.5022% at the prior close.

    This morning, 10-year U.S. Treasury yields are -2.89 bps lower at 2.4987%, compared to 2.5421% to the prior close. World sovereign bond markets are mixed, with the German 10-year yield at 0.970%, compared to 0.972% the prior day. Spanish and Italian 10-year debt yields are lower at 2.248% and 2.438%, respectively, compared to 2.197% and 2.386% the prior day.

    U.S. options markets improved to bearish to bullish, compared to bearish to neutral the prior day. The CBOE SKEW fell -1.32% to 130.49, compared to 132.24 the prior day, above a neutral 115-120 range and again above 130, a level that correlates well with short-term market tops. The SKEW set record 146.08 close on September 19.

    In pre-market futures trading, September SPX equity futures (SPM4) price near the bottom of its 1955-1977 trading range. After a fair value adjustment of -1.05 points, the December SPZ4 future prices at 1957.75, down -17.20 points. The SPX opens -0.64% below and +0.31% above its respective 20- and 50-day moving averages, and +0.31% and +1.39% above its 200-day moving averages. Initial resistance is 1990.74. Initial support is 1970.59, then 1958.33.

    Market Outlook "Uptrend Under Pressure" and Distribution Day Count. Friday, indexes recaptured their 50-day moving averages and rallied to late day intraday highs before easing into the weekend; however, lower volume accompanied the equity rebound after Thursday's distributions. A clear follow-through to Wednesday's better rally is required to reconfirm a market uptrend. The major indexes' distributions count are 4 on the SPX and DJI and 6 on the Nasdaq and NYSE composite, since the August 13 start of the current "confirmed uptrend".

    2Q2014 earnings surprised positively, with financials' earnings leading other sectors. On September 18, the SPX closed at a record 2011.36, up +2.54% compared to its August 12 1933.75 close.

    In Asia, equity markets closed mixed. The Nikkei 225 (NYSEARCA:NKY) rose +0.50%. In China, the Hang Seng (HSI) Index fell -1.90%, continuing recent weakness, while the Shanghai SE composite (SHCOMP) rose +0.43% gain. The NKY, HSI, and SHCOMP 50-day moving averages are above their respective 200-day moving averages. Today's volumes are unavailable.

    In the absence of much economic reporting, commentary focused on today's pro-democracy protests and the strong police response in Hong Kong.

    Last week, the SHCOMP closed up +0.78%, while the NKY and HSI closed down -0.56% and -2.58%, respectively. The prior week, the NKY closed up +2.34%, while the HSI and SHCOMP are down -1.18% and -0.11%, respectively. In September, the NKY and SHCOMP are up +5.22% and +5.89%, respectively, while the HSI is down -4.30%. In August, the NKY fell -1.26%, the HSI fell -0.06%, and the SHCOMP rose +0.71%.

    In 2014, the NKY is up +0.12%, the HSI is down -0.33%, and the SHCOMP is up +11.4%. 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 -45 bps to 2.90%, compared to 3.35% 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 in the upper end of neutral range, Hong Kong is grossly oversold, and Shanghai in the upper end of a neutral range. The NKY RSI rose to 67.30, compared to 65.22 the prior session, down from 77.29 on September 19th, but up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI fell to 26.46, compared to 32.46 the prior day and down from an overbought 81.00 on July 31st. The SHCOMP's RSI rose to 66.16, compared to 64.51 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 16,310.64, compared to 16,229.86 the prior day, -0.39% off its prior day closing yearly high and -58.1% below its late-1989 38,915.87 high close. The index opened at the 16,344.32 intraday high, then trended lower to an early afternoon 16,262.00 intraday low. Most market segments closed higher. Leaders were technology, health care, and utilities, which closed at least +0.68% higher. Laggards were financials, which rose +0.27%, and energy and telecommunications, which fell at least -0.19%.

    In China, in Shanghai, the SHCOMP closed at 2,357.71, compared to 2,347.72 at the prior close, +20.9% above the 1,950.01 June 27, 2013 close, last year's low. The index opened above 2,352 and rose to an early 2,362.99 intraday high, then traded narrowly thought the session's remainder, with a mid-afternoon 2,346.95 intraday low. Most market segments closed higher. Leaders were industrials, utilities, and consumer staples, which rose at least +0.82%. Laggards were materials, which closed up +0.37%, and financials and technology, which fell -0.04%.

    In Europe, major equity indexes opened modestly higher, but then turned lower in early trading and in mid-afternoon are moderately lower and at intraday lows. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.27%, -0.57%, -1.00%, and -0.96%, respectively. The Spanish IBEX 35 is down -1.89%. The Italian FTSE MIB down -1.63%. Compared to their recent highs, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -4.12%, -4.06%, -5.39%, and -6.52%, respectively.

    In the absence of much economic reporting, commentary focuses this week's ECB meeting on October 2nd, Hong Kong protests, economic growth prospects, and currency and commodity price developments. The euro is again weaker compared to the dollar.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 44.63, compared to 51.41 at the prior close, in the lower 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 -4.12% below its recent June 18th 3,314.80 multi-year high and -39.5% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,219.58 close, the index set an early 3,223.07 intraday high, but then eased and trended lower with greater weakness in mid-afternoon. The index currently trades at 3,174.96, just better than its 3,173.53 intraday low. All market segments are at least -0.66% lower. Leaders are energy, materials, and information technology, which are down at least -0.97%. Laggards are consumer discretionary, utilities, and financials.

    Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -1.64%, -2.76%, -1.49%, and -2.66%, respectively. The prior week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +1.18%, +0.45%, +0.44%, and +1.02%, respectively. In September, indexes are mixed, with the Euro Stoxx50 up +0.08%, while the FTSE 100, CAC 40, and DAX up are down -3.01%, -0.69%, and -0.79%, respectively. In August, the Euro Stoxx50, CAC 40, and DAX are up +2.45%, +1.00%, and +2.36%, respectively, while the FTSE 100 is down -1.91%.

    In 2014, the indexes are mixed. The Euro Stoxx50 and CAC 40 are up +2.23% and +1.27%, respectively, while the FTSE 100 and DAX are down -1.99% and -1.64%. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

    3Q2014 SPX Earnings. The current earnings season began on September 15th, and 18 of 499 SPX companies have reported with respective +2.56% and +1.08% earnings and revenue surprises. Industrials lead with respective +6.98% and +2.02% revenue surprises.

    In 2Q2014 498 SPX firms reported respective +5.14% EPS and +1.53% revenue surprises. Financials (84 of 84 reporting) lead with a 9.47% EPS surprise and +2.45% revenue surprise.

    Valuation. The SPX trades at 18.0x actual 2013 earnings ($110.15), 16.6x estimated 2014 earnings ($119.45), 14.9x estimated 2015 earnings ($132.78), and 13.4x estimated 2016 earnings ($147.71). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2014, 2015, and 2016 earnings to grow +8.44%, +11.2%, and 11.2%, respectively.

    The KBW Bank Index (BKX) trades at 14.0x actual 2013 adjusted EPS ($5.16), 13.1x estimated 2014 earnings ($5.52), 12.1x estimated 2015 earnings ($5.95), and 10.8x 2016 earnings ($6.66). Analysts expect 2014, 2015, 2016 EPS will grow +6.92%, +7.88%, and +11.9%, respectively.

    Composite, index, and equity options. Options markets improved to bearish to bullish, compared to bearish to neutral the prior session. Composite options are neutral, index options are bullish, and equity options are bearish. The composite put/call ratio is 1.12, compared to 1.14 the prior day, and worse than 5- and 10-period moving averages of 1.04 and 0.96, respectively. The index put/call ratio is 0.94, compared to 1.00 the prior day, and better than its 5- and 10-period moving averages of 1.00 and 0.95, respectively. The equity put/call ratio closed the day at 1.25, compared to 1.24 the prior day, and worse than its 5- and 10-period moving averages of 1.08 and 0.98, respectively.

    NYSE Volume, Breadth Indicators. Volume fell -14.3% to 630.64 million shares, compared to 735.97 million shares the prior day, 0.89x the 706.30 million shares 20-day moving average. Market breadth was positive, and up volume led down volume. Advancing stocks led by +1,324 (compared to -2,046 the prior day), or 2.51:1. Up volume was 3.46:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09050%, compared to 0.09080% the prior day. USD 3-month LIBOR is 0.23310%, down from 0.23360% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 14.71 bps, compared to 14.71 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 12.70 bps, compared to 12.20 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 -9.070 bps, compared to -9.093 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and below the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 0.970%, compared to 0.972% the prior day.

    · French 10-year debt yields 1.339%, compared to 1.337% the prior day.

    · Japanese 10-year debt yields are 0.524%, compared to 0.523% the prior day.

    · Spanish and Italian 10-year debt yields are lower and are near multi-year lows. Spanish 10-year debt yields are 2.248%, compared to 2.197% the prior day. Italian 10-year debt yields are at 2.438%, compared to 2.386% 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 0.571% and 2.511%, respectively, compared to 0.575% and 2.528% Friday. The yield curve narrowed -1.220 bps, with the 2- to 10-year spread at +1.941%, compared to 1.953% 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 Japanese yen, but weaker compared to the euro and British pound. The dollar trades at US$85.571, compared to US$85.798 intraday high and US$85.640 the prior day, and better compared to its $82.753 50-day, US$81.538 100-day, and US$80.865 200-day averages. The euro trades at US$1.2703, compared to a US$1.27.04 intraday high and US$1.2684 the prior day. The euro trades worse compared to its US$1.3163 50-day and US$1.3390 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥109.36, compared to ¥109.29 the prior day. The yen trades worse than its 50-day moving average ¥104.63, and worse than its September 26th 109.29 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index worsened to +26.20, compared to 26.90 the prior session, with consecutive readings since August 21st. The index is better compared to its respective +24.42 5-day and +24.64 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. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) fell -5.05% to 14.85, compared to 15.64 at the prior close. The VIX is +13.2% above the 13.12 20-day moving average. Its 30-day high is 16.69. 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 18.59, up +5.60% compared to 17.60 at the prior day close. The V2X index trades +12.2% above its 16.57 20-day moving average, +12.2% below the 18.86 30-day high, and +28.7% above the 14.44 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 19.04, up 23.9% compared to 15.37 at the prior close. The VHSI index trades +26.6% above its 15.04 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) fell -1.32% to 130.49, compared to 132.24 the prior session, above a neutral reading (115-120) and above 130, a level that correlates well with short-term market tops. The record high was 146.08 on September 19, 2014. Its recent low was 112.47 on May 25, 2013. Spikes in excess of 130 correlate well with short-term market tops, as occurred last December, ahead of market declines last January. 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, August personal income rose +0.3%, compared to +0.3% survey and +0.2% prior.

    · August personal spending rose +0.5%, compared to +0.4% survey and +0.0% revised prior.

    · August PCE MoM deflator rose +0.0%, compared to -0.1% survey and +0.1% prior.

    · August MoM core PCE +0.1%, compared to +0.0% survey and +0.1% prior.

    · At 10:00, August MoM pending home sales, with -0.5% survey and +3.3% revised prior.

    · At 10:30, September Dallas Fed Manufacturing activity, with 10.5 survey and 7.1 prior.

    Overseas Economic Reporting and News:

    · Eurozone - September economic confidence was 99.9, compared to 99.9 survey and 100.6 prior.

    · Spain - August YoY retail sales fell -0.9%, compared to -0.2% revised prior.

    Notable Company Ratings/News:

    · None.

    Friday's Trade. Following Thursday's Rosh Hashana sell-off, on Friday, equity indexes recaptured about half their losses. The SPX, DJI, Nasdaq, and NYSE composite rose +0.86%, +0.99%, +1.02%, and +0.72%, respectively. Last week, the major indexes closed at least -0.96% lower, compared to the prior week, when indexes closed mixed. In September, indexes are also mixed compared to August, when indexes closed up at least +1.92%. In 2014, indexes are up at least +3.24%. Market breadth was negative, with gainers 2.51x losing stocks. All SPX market segments closed at least +0.17% higher. Leaders were energy, technology, and consumer discretionary, which rose at least +1.07%. Laggards were consumer staples, health care, and utilities.

    Other notable indexes rose. The Russell 2000 (RTY) rose +0.82% and closed -7.39% below its March 4th record high, with its 50-day moving average -0.25% "death crossed" below its 200-day moving average. The Nasdaq Internet Index (QNET) rose +1.03%, down -7.79% below its March 6th closing high. The Nasdaq Biotech index (NBI) rose +1.00%, closing -0.03% below its August 26th record high.

    NYSE volume fell -14.3% to 706.30 million shares, compared to 735.97 million shares the prior day, 0.89x the 706.30 million share 20-day moving average volume. Bond markets weakened. From its prior day 2.5637% close, the U.S. 10-year yield trended lower through the session to a late 2.5004% intraday low. The index ended at 2.5022%, down -6.15 bps from the prior close.

    From its prior day 1998.30 close, September 2014 SPX futures (SPM4) suggested a moderately higher open. The index rose to 1970 in early trading and moved narrowly into early afternoon, then strengthened to a late afternoon 1986.37 intraday high before easing into the close. The index closed at 1982.85, -1.42% below the September 18th record 2011.36 close, and +2.54% above the August 12th 1933.75 close (which marked the start of the current market uptrend), and +84.5% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    From its prior day 8,384.74 close, the DJ Transportation index (TRAN) rallied +1.19% and closed at 8,484.91, -2.20% below its September 18th 8,676.19 record close. The index opened modestly higher and rose through late afternoon to its 8,502.44 intraday high before easing to the close. Volume fell -18.0% to 10.912 million shares, compared to 13.314 million shares the prior session, and 0.84x the 15-day moving average volume. The TRAN closed -0.57% below and +1.12% above its respective 20- and 50-day moving averages, and +2.99% and +8.43% above its respective 100- and 200-day moving averages.

    Market volatility fell, as the CBOE SPX volatility index (VIX) fell -5.05% to 14.85, compared to 15.64 at the prior close, its highest close since August 8th. The VIX opened above 15.60 and set an early 15.98 intraday high, but then reversed lower and fell to a late afternoon 14.31 intraday low. 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 fell -1.32% to 130.49, compared to 132.24 the prior session, above a neutral 115-120 range, and again above 130, a level that correlates well with short-term market tops. Its record 146.08 high came on September 19th.

    The market's technical factors improved as the SPX and Nasdaq recaptured their respective 50-day moving averages. The SPX relative strength (RSI) rose to 48.07, compared to 41.26 the prior day, moving into the lower end of a neutral range. The 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 also 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 -1.37%, -0.93%, -1.48%, and -1.74%, respectively. The prior week, the SPX and DJI closed up +0.13% and +0.83%, respectively, while the Nasdaq and NYSE composite closed down -0.07% and -0.76%. In September, the DJI is up +0.09%, while the SPX, Nasdaq, and NYSE composite are down -1.02%, -1.49%, and -2.24%, respectively. In August, the SPX, DJI, Nasdaq, and NYSE composite closed up +3.77%, +3.23%, +4.82%, and +2.98%, respectively.

    In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +7.28%, +3.24%, +8.04%, and +3.83%, 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 greater and above 15-day average volume, the BKX rebounded somewhat from the prior day distribution and recaptured +0.64% of the prior day -1.58% loss. The BKX ended at 72.07, compared to 71.61 at the prior day's close. The index traded narrowly above breakeven through mid-afternoon, then rallied to its 72.16 intraday high, then eased mildly to the close. Volume fell -35.8% to 36.961 million shares, compared to 57.605 million shares the prior day, 0.74x the 50.072 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) rose +0.48%.

    Last week, the BKX is down -2.20%, compared to last week, when the BKX rose +2.62%. In September, the BKX is up +0.81%, compared to August, when the BKX rose +1.92%. In 2014, the BKX is up +4.06%, compared to the SPX's +7.28% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +21.8% 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.

    The BKX closed +121.06% 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 +84.5% in the same period. The BKX index closed -40.5% below its February 20, 2007, record 121.06 high. The BKX is up +287.1% 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 -0.64% below and +0.31% above its respective 20- and 50-day moving averages, and +1.39% and +4.431% above its 100- and 200-day moving averages. The 20-day moving average rose +4 bps to 72.31. The 71.04 50-day moving average rose +4 bps. Its 70.54 100-day moving average rose +5 bps, and the 200-day moving average rose +3 bps to 69.95. The 20-day closed (by 1.27 points) above the 50-day, and the positive gap was unchanged. The 50-day moving average closed (by +1.09 points) above the 200-day moving average, and the gap widened 1 bp. The 100-day moving average closed (by +0.59 points) above the 200-day moving average, and the gap widened +2 bps.

    The directional movement indicator worsened to -0.466, compared to -0.391 the prior day, its 2nd consecutive negative reading. Relative strength improved to 50.70, compared to 46.86 the prior day, in a neutral range, down from an overbought 72.57 on September 19th and comparing 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 72.29; next support is 71.73.

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

    Sep 29 9:24 AM | Link | Comment!
  • U.S. Futures Up, But Fade After Gross Leaves PIMCO; Asia And Europe Mixed

    This morning. U.S. equity futures are moderately higher, but off their best levels of the morning, following reports that PIMCO's Gross is moving to Janus Capital, with immediate effect. In Asia, equity indexes closed mixed, but Tokyo substantially narrowed early losses and closed modestly lower after closing yesterday overbought at the year's high. In Europe, equities are moderately higher, but also weakened following the PIMCO news. Economic reporting is generally light worldwide, though with inconsequential final 2Q2014 revisions to U.S. GDP and PCE. Sovereign rates are mostly lower. Leveraged fixed income rates are rising, following the PIMCO news, on speculation that certain funds will be closed and liquidated. U.S. Treasury 10-year yields are higher. The dollar continues to strengthen. Commodities are mostly lower. Monday's Nikkei 225 December 2014 (NKZ4) equity futures are modestly higher.

    Thursday, on slightly higher volume, major U.S. equity indexes suffered their worst loss since August 7th. The SPX, DJI, Nasdaq, and NYSE composite fell -1.62%, -1.54%, -1.94%, and -1.50%, respectively. Other notable indexes also fell. The TRAN fell -1.39%. The Russell 2000 (RTY) fell -1.60%. The Nasdaq Internet (QNET) index fell -1.98%. The Nasdaq Biotech (NBI) index fell -2.07%.

    This week, the major indexes are down at least -1.93% compared to a mixed prior week. In September, indexes now at least -0.89% lower. In August, indexes closed up at least +2.98% higher. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +6.36%, +2.23%, +6.95%, and +3.09%, respectively.

    The TRAN closed -3.36% from its September 18th, record high, while the RTY, QNET, and NBI are down -8.14%, -8.73%, and -1.03%, respectively, from their recent record highs.

    NYSE volume rose +0.32% to 1.05x its 20-day moving average.

    Trading desks noted generally positive action in Asia and Europe after yesterday's Wall Street sell-off. Regarding yesterday's weakness, the analysis is that the sell-off has been a couple of weeks in the making, with Wednesday's strength a break in a downward trend. Equities fell through their 50-day moving averages with relative ease, but the 100-day moving average (SPX 1954.50) will likely prove a stiffer test, as it did when the SPX last touched that level on August 8th. Overall, there's little substantive that's changed in the underlying narrative. Consolidation seems to be the most salient characteristic of the market's several month's sideways trade.

    On September 15, the 3Q2014 earnings season commenced and now 16 of 499 SPX companies have reported respective +0.59% and +0.91% adjusted EPS and revenues surprises. In 2Q2014, SPX companies reported respective +5.08% adjusted earnings and +1.52% revenues surprises.

    In the past 3 months, forward estimates have moved up. Respective estimates for 2014, 2015 and 2016 are now $119.43, $132.81, and $147.82, compared to $118.05, $131.36 and $145.70 at June-end, increases of +1.17%, +1.10% and +1.45%. Price earnings multiples remain elevated. With SPX equities trading at a 17.2x (compared to 17.3x the prior day) average 2014-15 earnings ($126.12), attention focuses on prospective 2014-15 earnings and valuations (17.2x times survey 2014-15 SPX average operating earnings suggests a 2163.55 SPX level in the next year, a +10.1% rise from yesterday's close).

    Technicals worsened, as the SPX and NYSE composite closed below their respective 50-day moving averages. Led by technology and financials, all SPX market segments closed at least -0.56% lower. Volatility rose sharply, and the CBOE SPX volatility index (VIX) now suggests a 68% probability that the 30-day change in the SPX will be no greater than ±5.42%. Treasury bond markets weakened, with the 10-year U.S. Treasury bond yield falling -6.15 bps to 2.5022%, compared to 2.5637% at the prior close.

    This morning, 10-year U.S. Treasury yields are +3.99 bps higher at 2.5421%, compared to the prior close. World sovereign bond markets are mostly stronger, with the German 10-year yield at 0.957%, compared to 0.973% the prior day. Spanish and Italian 10-year debt yields are lower at 2.155% and 2.153%, respectively, compared to 2.351% and 2.360% the prior day.

    U.S. options markets worsened to bearish to neutral, compared to neutral to bullish the prior day. The CBOE SKEW rose +4.21% to 132.24, compared to 126.90 the prior day, above a neutral 115-120 range and again above 130, a level that correlates well with short-term market tops. The SKEW set record 146.08 close on September 19.

    In pre-market futures trading, September SPX equity futures (SPM4) price are the middle of its 1959-1968 trading range. After a fair value adjustment of -3.76 points, the December SPZ4 future prices at 1962.25, up +4.76 points. The SPX opens -1.52% and -0.52% below its respective 20- and 50-day moving averages, and +0.59% and +3.65% above its 200-day moving averages. Initial resistance is 1986.88. Initial support is 1955.55, then 1945.10.

    Market Outlook "Uptrend Under Pressure" and Distribution Day Count. Yesterday, indexes closed below their 50-day moving averages and at intraday lows, but the sell-off, which notably occurred on Rosh Hashana, was not sufficiently convincing that the current uptrend, which began on August 13th has ended and is again in correction. Following Wednesday's rally, a clear follow-through is required to reconfirm a market uptrend. The major indexes' distributions count are 4 on the SPX and DJI and 6 on the Nasdaq and NYSE composite, since the August 13 start of the current "confirmed uptrend".

    2Q2014 earnings surprised positively, with financials' earnings leading other sectors. On September 18, the SPX closed at a record 2011.36, up +4.01% compared to its August 12 1933.75 close.

    In Asia, equity markets closed mixed. The Nikkei 225 (NYSEARCA:NKY) lost -0.88%, though from an overbought range the prior day, and closed well off its opening intraday low. In China, the Hang Seng (HSI) Index fell -0.38%, continuing recent weakness, while the Shanghai SE composite (SHCOMP) managed a modest +0.11% gain with a late rally. The NKY, HSI, and SHCOMP 50-day moving averages are above their respective 200-day moving averages. Today's volumes are unavailable.

    In the absence of much economic reporting, commentary focused on yesterday's U.S. Rosh Hashana losses, and currency and commodity developments.

    This week, the SHCOMP closed up +0.78%, while the NKY and HSI closed down -0.56% and -2.58%, respectively. Last week, the NKY closed up +2.34%, while the HSI and SHCOMP are down -1.18% and -0.11%, respectively. In September, the NKY and SHCOMP are up +5.22% and +5.89%, respectively, while the HSI is down -4.30%. In August, the NKY fell -1.26%, the HSI fell -0.06%, and the SHCOMP rose +0.71%.

    In 2014, the NKY is up +-0.38%, the HSI is up +1.60%, and the SHCOMP is up +11.0%. 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 -15 bps to 3.35%, compared to 3.50% 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 returning from overbought to the upper end of neutral range, Hong Kong oversold, and Shanghai in the upper end of a neutral range. The NKY RSI fell to 65.22, compared to 72.92 the prior session, down from 77.29 on September 19th, but up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI fell to 32.46, compared to 33.88 the prior day and down from an overbought 81.00 on July 31st. The SHCOMP's RSI rose to 64.51, compared to 64.08 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 16,229.86, compared to 16,374.14 the prior day, -0.38% off its prior day closing yearly high and -58.3% below its late-1989 38,915.87 high close. The index opened at the 16,087.95 intraday low, but the index immediately improved to 16,180 and trended higher to a late 16,251.67 intraday high. All market segments closed at least -0.26% lower. Leaders were industrials, financials, and telecommunications. Laggards were materials, utilities, and health care, which fell at least -1.31%.

    In China, in Shanghai, the SHCOMP closed at 2,347.72, compared to 2,345.10 at the prior close, +20.4% above the 1,950.01 June 27, 2013 close, last year's low. The index opened below 2,340 and fell to an early 2,329.96 intraday low, but improved and reversed higher by late morning, fell again to support at 2,340 in mid-afternoon, then rallied modestly higher through the close. Most market segments closed higher. Leaders were telecommunications, materials, and consumer staples, which rose at least +0.47%. Laggards were financials, technology, and energy, which fell at least -0.08%.

    In Europe, major equity indexes opened modestly lower, but reversed higher by late morning and have rallied to moderate mid-afternoon intraday highs. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.70%, +0.31%, +0.95%, and +0.33%, respectively. The Spanish IBEX 35 is up +0.62%. The Italian FTSE MIB up +1.12%. Compared to their recent highs, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.69%, -3.40%, -4.37%, and -5.07%, respectively.

    In the absence of much economic reporting, commentary focuses on macro developments, economic growth prospects, and currency and commodity price developments. The euro is again weaker compared to the dollar.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 52.33, compared to 47.53 at the prior close, in 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 -2.69% below its recent June 18th 3,314.80 multi-year high and -38.6% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,202.31 close, the index set an early 3,188.39 intraday low, but by late morning reversed higher and rallied to a mid-afternoon 3,225.82 intraday high. The index currently trades at 3,225.18. All market segments are at least +0.06% higher. Leaders are health care, energy, and financials, which are up at least +0.90%. Laggards are telecommunications, consumer discretionary, and materials.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.46%, -2.60%, -1.43%, and -2.13%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +1.18%, +0.45%, +0.44%, and +1.02%, respectively. In September, indexes are mixed, with the Euro Stoxx50, CAC 40, and DAX up +1.57%, +0.38%, and +0.75%, respectively, while the FTSE 100 is down -2.34%. In August, the Euro Stoxx50, CAC 40, and DAX are up +2.45%, +1.00%, and +2.36%, respectively, while the FTSE 100 is down -1.91%.

    In 2014, the indexes are mixed. The Euro Stoxx50 and CAC 40 are up +3.75% and +2.378%, respectively, while the FTSE 100 and DAX are down -1.31% and -0.11%. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

    3Q2014 SPX Earnings. The current earnings season began on September 15th, and 18 of 499 SPX companies have reported with respective +2.56% and +1.08% earnings and revenue surprises. Industrials lead with respective +6.98% and +2.02% revenue surprises.

    In 2Q2014 498 SPX firms reported respective +5.14% EPS and +1.53% revenue surprises. Financials (84 of 84 reporting) lead with a 9.47% EPS surprise and +2.45% revenue surprise.

    Valuation. The SPX trades at 17.8x estimated 2013 earnings ($110.15), 16.5x estimated 2014 earnings ($119.43), 14.8x estimated 2015 earnings ($132.81), and 13.3x estimated 2016 earnings ($147.82). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2014, 2015, and 2016 earnings to grow +8.42%, +11.2%, and 11.3%, respectively.

    The KBW Bank Index (BKX) trades at 13.9x 2013 adjusted EPS ($5.16), 13.0x estimated 2014 earnings ($5.51), 12.0x estimated 2015 earnings ($5.95), and 10.8x 2016 earnings ($6.66). Analysts expect 2014, 2015, 2016 EPS will grow +6.88%, +7.88%, and +11.9%, respectively.

    Composite, index, and equity options. Options markets worsened to bearish to neutral, compared to neutral to bullish the prior session. Composite options are neutral, index options are neutral, and equity options are bearish. The composite put/call ratio is 1.14, compared to 0.87 the prior day, and worse than 5- and 10-period moving averages of 0.98 and 0.94, respectively. The index put/call ratio is 1.00, compared to 0.79 the prior day, and worse than its 5- and 10-period moving averages of 0.97 and 0.95, respectively. The equity put/call ratio closed the day at 1.24, compared to 0.92 the prior day, and worse than its 5- and 10-period moving averages of 1.00 and 0.94, respectively.

    NYSE Volume, Breadth Indicators. Volume rose a slight +0.32% to 735.97 million shares, compared to 733.595 million shares the prior day, 1.05x the 699.31 million shares 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -2,046 (compared to +554 the prior day), or 0.20:1. Up volume was 0.10:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09080%, compared to 0.09090% the prior day. USD 3-month LIBOR is 0.23510%, down from 0.23410% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 14.86 bps, compared to 14.71 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 12.20 bps, compared to 12.30 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 -9.181 bps, compared to -8.110 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and near the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 0.952%, compared to 0.973% the prior day.

    · French 10-year debt yields 1.334%, compared to 1.339% the prior day.

    · Japanese 10-year debt yields are 0.523%, compared to 0.525% the prior day.

    · Spanish and Italian 10-year debt yields are lower and are near multi-year lows. Spanish 10-year debt yields are 2.145%, compared to 2.153% the prior day. Italian 10-year debt yields are at 2.353%, compared to 2.360% 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 mixed, with 2- and 10-year maturities yielding 0.555% and 2.497%, respectively, compared to 0.551% and 2.502% Thursday. The yield curve narrowed -0.930 bps, with the 2- to 10-year spread at +1.942%, compared to 1.951% 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, Japanese yen and British pound. The dollar trades at US$85.341, compared to US$85.374 intraday high and US$85.195 the prior day, and better compared to its $82.646 50-day, US$81.478 100-day, and US$80.838 200-day averages. The euro trades at US$1.2732, compared to a US$1.2697 intraday low and US$1.2751 the prior day. The euro trades worse compared to its US$1.3180 50-day and US$1.3401 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥109.14, compared to ¥108.75 the prior day. The yen trades worse than its 50-day moving average ¥104.47, and worse than its September 24th 109.04 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index improved to +26.90, with positive readings since August 21st, compared to +26.90 the prior day. The index is worse compared to its respective +23.18 5-day and +25.64 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. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +17.9% to 15.64, compared to 13.27 at the prior close. The VIX is +20.5% above the 12.98 20-day moving average. Its 30-day high is 16.69. 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 17.33, down -1.35% compared to 17.57 at the prior day close. The V2X index trades +4.73% above its 16.55 20-day moving average, -6.04% below the 18.44 30-day high, and +20.0% above the 14.44 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 15.37, down -0.39% compared to 15.43 at the prior close. The VHSI index trades +2.71% above its 14.97 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) rose +4.21% to 132.24, compared to 126.90 the prior session, above a neutral reading (115-120) and above 130, a level that correlates well with short-term market tops. The record high was 146.08 on September 19, 2014. Its recent low was 112.47 on May 25, 2013. Spikes in excess of 130 correlate well with short-term market tops, as occurred last December, ahead of market declines last January. 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, final 2Q2014 GDP was 4.6%, compared to +4.6% survey and +4.2% prior.

    · Final 2Q2014 personal consumption was 2.5%, compared to +2.9% survey and +2.5% prior.

    · Final 2Q2014 GDP price index was 2.1%, compared to +2.1% survey and +2.1% prior.

    · Final 2Q2014 core QoQ PCE was 2.0%, compared to +2.0% survey and +2.0% prior.

    · At 9:55, September final University of Michigan confidence, with 84.8 survey and 84.6 prior.

    Overseas Economic Reporting and News:

    · France - September consumer confidence was 86, compared to 86 survey and prior.

    · Germany - GfK consumer confidence was 8.3, compared to 8.5 survey and 8.6 prior.

    · Italy - September business confidence was 95.1, compared to 95.3 survey and 95.4 revised prior.

    Notable Company Ratings/News:

    · None.

    Thursday's Trade. In a typical Rosh Hashana (sell on Rosh Hashana, buy on Yom Kippur) trading, equity indexes fell sharply on slightly greater volume with indexes' worst trading day since early August. The SPX, DJI, Nasdaq, and NYSE composite fell -1.62%, -1.54%, -1.94%, -1.50%, respectively. This week, the major indexes are at least -1.93% lower, compared to the prior week, when indexes closed mixed. In September, indexes are at least -0.89% lower, compared to August, when indexes closed up at least +1.92%. In 2014, indexes are up at least +2.23%. Market breadth was negative, with gainers 0.20x losing stocks. All SPX market segments closed at least -0.56% lower. Leaders were utilities, telecommunications, and consumer staples. Laggards were health care, financials, and technology, which fell at least -1.58%.

    Other notable indexes fell. The Russell 2000 (RTY) fell -1.60% and closed -8.14% below its March 4th record high, with its 50-day moving average -0.22% "death crossed" below its 200-day moving average. The Nasdaq Internet Index (QNET) fell -1.98%, down -8.73% below its March 6th closing high. The Nasdaq Biotech index (NBI) fell -2.08%, closing -1.03% below its August 26th record high.

    NYSE volume rose only +0.32% to 735.97 million shares, compared to 733.59 million shares the prior day, 1.05x the 699.31 million share 20-day moving average volume. Bond markets strengthened. From its prior day 2.5637% close, the U.S. 10-year yield trended lower through the session to a late 2.5004% intraday low. The index ended at 2.5022%, down -6.15 bps from the prior close.

    From its prior day 1998.30 close, September 2014 SPX futures (SPM4) suggested a weak open. The index fell steadily through mid-morning through the 1976 50-day moving average, but support failed there and the index trended lower through the afternoon to end at the intraday low. The index closed at 1965.99, -2.26% below the September 18th record 2011.36 close, and +1.67% above the August 12th 1933.75 close (which marked the start of the current market uptrend), and +82.9% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    From its prior day 8,503.2 close, the DJ Transportation index (TRAN) fell -1.39% and closed at 8,384.74, -3.36% below its September 18th 8,676.19 record close. The index dropped sharply to a mid-morning 8,365.66 intraday low, then traded narrowly through the afternoon. Volume fell -5.87% to 13.314 million shares, compared to 14.144 million shares the prior session, and 0.94x the 15-day moving average volume. The TRAN closed -1.70% and -0.02% below its respective 20- and 50-day moving averages, and +1.88% and +7.24% above its respective 100- and 200-day moving averages.

    Market volatility rose, as the CBOE SPX volatility index (VIX) rose +17.9% to 15.64, compared to 13.27 at the prior close, its highest close since August 8th. The VIX opened above 14.00, rose to an early afternoon 16.69, then trended lower to the close. 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 +4.21% to 132.24, compared to 126.90 the prior session, above a neutral 115-120 range, and again above 130, a level that correlates well with short-term market tops. Its record 146.08 high came on September 19th.

    The market's technical factors worsened as all closed below their respective 20-day moving averages, and the SPX, Nasdaq, and NYSE composite closed below their respective 50-day moving averages, as well. The SPX relative strength (RSI) fell to 41.26, compared to 53.82 the prior day, moving into the lower end of a neutral range. The 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 also 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.

    This week, the SPX, DJI, Nasdaq, and NYSE composite are down -2.21%, -1.93%, -2.47%, and -2.43%, respectively. Last week, the SPX and DJI closed up +0.13% and +0.83%, respectively, while the Nasdaq and NYSE composite closed down -0.07% and -0.76%. In September, the SPX, DJI, Nasdaq, and NYSE composite are down -1.87%, -0.89%, -2.48%, and -2.93%, respectively. In August, the SPX, DJI, Nasdaq, and NYSE composite closed up +3.77%, +3.23%, +4.82%, and +2.98%, respectively.

    In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +6.36, +2.23%, +6.95%, and +3.09%, 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 greater and above 15-day average volume, the BKX distributed with a -1.58% loss to 71.61, compared to 72.76 at the prior day's close. The index opened below 72.60 and fell to nearly 71.60 by mid-morning, then traded back to 72.00 through early afternoon before weakening into the close and intraday low. Volume rose +3.37% to 57.605 million shares, compared to 47.201 million shares the prior day, 1.15x the 50.281 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) fell -1.46%.

    This week, the BKX is down -2.82%, compared to last week, when the BKX rose +2.62%. In September, the BKX is up +0.17%, compared to August, when the BKX rose +1.92%. In 2014, the BKX is up +3.39%, compared to the SPX's +6.36% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +21.0% 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.

    The BKX closed +119.9% 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 +82.9% in the same period. The BKX index closed -40.9% below its February 20, 2007, record 121.06 high. The BKX is up +284.6% from its 18.62 March 6, 2009, closing low, its low at the end of the 2008-09 financial panic.

    Technical indicators worsened, as the index surrendered its 20-day moving average. The index closed -0.91% below and +0.86% above its respective 20- and 50-day moving averages, and +1.58% and +2.41% above its 50- and 100-day moving averages. The 20-day moving average rose +1 bp to 72.27. The 71.00 50-day moving average was unchanged. Its 70.49 100-day moving average rose +3 bps, and the 200-day moving average rose +2 bps to 69.92. The 20-day closed (by 1.27 points) above the 50-day, and the positive gap widened +1 bp. The 50-day moving average closed (by +1.08 points) above the 200-day moving average, and the gap narrowed -2 bps. The 100-day moving average closed (by +0.57 points) above the 200-day moving average, and the gap widened +2 bps.

    The directional movement indicator worsened to -0.3913, compared to +9.141 the prior day, its first negative reading since September 10th. Relative strength fell to 46.86, compared to 57.21 the prior day, in a neutral range, down from an overbought 72.57 on September 19th and comparing 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 72.31; next support is 71.26.

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

    Sep 26 9:28 AM | Link | Comment!
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