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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 Flat As Indexes Push Toward New Highs 0 comments
    Feb 11, 2013 9:31 AM

    This morning. U.S. equity markets confirmed an uptrend on November 23rd. The SPX subsequently gained +7.72% and progressed to a February 4th 1517.93 5-year high (-0.58% off the 1526.75 September 28, 2007, all-time closing high). Today, U.S. futures are modestly higher. In Asia, most equity markets are closed this week for the Chinese New Year holiday. Economic reporting is light in both Europe and the U.S. European equity markets are moderately higher.

    Technical indicators are generally positive. The SPX, DJI, Nasdaq, and NYSE composite are all above their 20-, 50-, 100-, and 200-day moving averages. Major indexes had bearish price flips Thursday, after bullish price flips Tuesday. Markets appear to be searching for direction. In February, major U.S. indexes are less than +1.00% higher. Continental bourses are more than -2.00% lower.

    Economic reporting focuses on the U.S. December trade balance, consumer credit, and wholesale inventories. In Europe, attention focuses on the possible ECB actions and currency fluctuations. In Spain, scandal threatens the ruling party's hold on a parliamentary majority. Italian parliamentary elections occur on February 24-25.

    U.S. Treasury yields are higher, with the 10-year at 1.976%, compared to 1.950% the prior day. U.S. repo rates are 3 bps, down from 13 bps the prior day. Spanish and Italian 10-year debt yields are 5.41% and 4.59%, respectively, well above their mid-January lows. The U.S. dollar is mixed, as the Euro strengthens and yen weakens. U.S. options markets are neutral. Friday, the CBOE skew rose +0.26% to 125.67, from 125.35 the prior day. Commodities prices are mostly lower.

    Last week, the SPX rose +0.31%, compared to the prior week's +1.14% increase. In February, the SPX is up +1.32%, compared to January's +4.87% rise. The SPX is -0.58% off its 1526.75 September 28, 2007, all-time high. The SPX is +41.2% above the 1074.77 October 4, 2011, intraday low. In 2013, the SPX is up +5.83%. In 2012, the SPX closed up +13.4%. Next resistance is at 1521.03. First support is at 1512.11.

    Last week, the BKX closed up +0.49%. The prior week, the BKX rose +1.13%, compared to +1.20% the week before. In February, the BKX is +2.17%, compared to January's +4.97% increase. This year, the BKX is up +7.25%, outperforming the SPX. Last year, financial stocks outperformed the broader market, as the BKX closed up +30.2%, compared to the +13.4% SPX gain.

    In pre-market futures trading, March SPX equity futures are largely unchanged and are in the bottom of a 1514-1517 range. After a fair value adjustment of +1.73 points, SPX equity futures are at 1514.25, up +0.02 points. The SPX opens at 1517.93, +1.51%, +4.20%, +5.37%, and +8.19% above its respective 20-, 50-, 100-, and 200-day moving averages. On December 18th, the 20-day moving average crossed above its 50-day moving average and on December 20th crossed above the 100-day moving average. The 50-day moving average crossed above its 100-day moving average on August 17th.

    Friday. On lower volume, U.S. equity markets closed with moderate gains. The Nasdaq rose +0.91%, followed by the SPX, NYSE composite, and DJI, which rose +0.57%, +0.47%, and +0.35%, respectively. Market breadth was positive, and up volume led down volume. Most SPX market segments closed higher. Leaders were technology, oil and gas, and consumer services, which rose at least +0.74%. Financials rose +0.39%. Laggards were telecommunications, and utilities, which rose at least +0.01%, and consumer goods, which fell -0.01%. NYSE volume fell -12.9% to 578.05 million shares, 0.83x the 20-day moving average, from 663.69 million shares the prior day.

    Trading desks reported another day of consolidation, with weak activity levels. Desks cite relative macro calm, economic growth improvement, strong earnings, and "reasonable" valuations. Desk flows slowed. Shorting activity remains light. Sentiment remains mixed, as investors cite improving fundamentals, but concern that markets have moved too quickly in the past 8 weeks, or that some tail-risk event could spur a more obvious sell-off.

    From its 1509.93 prior close, the SPX opened strongly and rose in the first half hour to 1516, the level around which the index traded narrowly through the close. The index ended -0.58% off its 1,526.75 September 2007 all-time high. Market volatility fell. From the 13.50 prior close, the VIX opened at 13.15 and fell to a mid-morning 12.89 intraday low. The index rose through late-afternoon to 13.20, but dropped into the close, ending at 13.02, down -3.56%. The VIX is up +4.75% from the January 22nd 12.43 low close. The all-time closing low was 11.26, set June 30, 1993.

    On -27.1% lower volume, the DJ Transports rose +0.41%, compared to the DJI's +0.35% gain. The index set an early 5,922.89 intraday high, then traded narrowly between 5,900 and 5,910 through the session. The index closed at 5,911.33. The index closed +2.23%, +7.88%, +12.5%, and +14.1% above its respective 20-, 50-, 100-, and 200-day moving averages.

    Technical factors improved, as the SPX closed back above resistance at 1509 and 1507. SPX relative strength (RSI) rose to 66.79, from 63.74 the prior day, moving toward and overbought range. The CBOE put/call skew rose +0.26% to 125.67, from 125.35 the prior day. U.S. Treasury bond prices fell.

    Last week, the SPX and Nasdaq closed up +0.31% and +0.46%, respectively, while the DJI and NYSE composite closed down -0.12% and -0.33%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite rose +0.68%, +0.82%, +0.93%, and +1.13%, respectively. In February, the SPX, DJI, Nasdaq, and NYSE composite are up +1.32%, +0.96%, +1.65%, and +0.58%, respectively.

    In January, the SPX, DJI, Nasdaq, and NYSE composite closed up +5.04%, +5.77%, +4.06%, and +5.21%, respectively. In December, the NYSE composite led with a gain of +0.67%, followed by the DJI and SPX, with respective losses of -0.67%, -0.97%, and -1.66%, respectively. In November, the Nasdaq, NYSE composite, and SPX closed up +1.11%, +0.28%, and +0.47%, while the DJI closed down -2.10%.

    In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +6.43%, +6.78%, +5.77%, +5.82%, respectively. All closed at least +5.91% higher in 2012.

    Immediate SPX support is 1509, then 1507 (the respective 5- and 10-day moving averages). Resistance is 1521 and 1526.75 (the September 28, 2007, all-time high).

    Distribution day count. Lower volume accompanied yesterday's losses, avoiding distributions. Since the uptrend confirmation on November 23rd, the Nasdaq, NYSE composite, and S&P 500 have distribution counts of 4, 3, and 2, respectively.

    In Asia, most equity markets are closed for the Chinese New Year holiday. Friday, in Tokyo, the NKY fell -1.80% on a -18.9% volume decrease. In Hong Kong, the HSI rose +0.16% on a -9.65% volume decrease. In Shanghai, the SHCOMP rose +0.57% on a -9.57% volume decrease. Chinese equity markets will be closed all next week for the New Year holiday.

    Notably, the HSI closed -1.27% below its 20-day moving average, and the NKY and HSI closed lower on the week. The HSI closed -1.27% below its 20-day moving average. The NKY and SHCOMP closed above their respective 20-, 50-, 100-, and 200-day moving averages. Commentary focused on earning concerns, as Sony report its 8th consecutive quarterly loss, despite the weaker yen.

    Last week, the NKY and HSI closed down -0.34% and -2.14%, respectively, while the SHCOMP closed up +0.55%. The prior week, the NKY closed up +2.42%, HSI rose +0.60%, and the SHCOMP soared +5.57%. In February, the NKY, HSI, and SHCOMP are up +0.13%, down -2.17%, and up +1.97%, respectively, compared to gains of +7.15%, +4.73, and +5.12% the prior month. In 2013, the NKY is up +7.29%. The HSI is up +2.46%. The SHCOMP is up +7.20%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 11,153.16, compared to 11,357.07 at Thursday's close, and down -2.71% below its February 6th high. The index opened at 11,1,200, rallied to an early 11,299.71 intraday high, but fell back to trade narrowly around 11,200 through late afternoon, until it faded into the close. The NKY closed +2.22%, +8.79%, +16.5%, and +20.9% above its respective 20-, 50-, 100-, and 200-day moving averages. All market segments closed at least -0.31% lower. Leaders were oil and gas, utilities, and basic materials, which fell at least -0.85%. Financials fell -1.21%. Laggards were telecommunications, technology, and consumer services.

    In China, the Hang Seng closed at 23,215.16, up from 23,177.00 at the prior close, and -2.55% off its January 30th high. The index gapped lower to open at 23,101.09, but immediately recovered to breakeven and traded narrowly higher through the session. The index closed -1.55% and -1.64% below its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were consumer goods, consumer services, and utilities, which rose at least +0.46%. Financials rose +0.31%. Laggards were industrials, technology, and oil and gas, which fell at least -0.26%.

    In Shanghai, the SHCOMP closed at 2,432.40, up from 2,418.53 at the prior close. The index opened slightly lower, but traded narrowly higher through the morning session, then rallied into the afternoon to a mid-session 2,442.72 intraday high. The index eased into the close. The index closed -1.68% below its 2,474.07 March 14, 2012 high, but closed up +23.3% from its December 3rd 1,959.77 low. The SHCOMP closed +3.60% and +9.69% above its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were health care, consumer goods, and oil and gas, which rose at least +1.06%. Laggards were basic materials and telecommunications, which rose at least +0.63%, and financials, which fell -0.36%.

    In Europe, the majorequity indexes are mostly higher. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.28%, +0.44%, +0.66%, and +0.07%, respectively. The Euro Stoxx50 and CAC 40 are below their respective 20- and 50-day moving averages. The DAX is below its 20-day moving average. The Spanish IBEX 35 is down -0.50%. The Italian FTSE MIB is down -0.04%.

    Economic reports are light. Commentary focused on a Euro finance ministers' meeting, which will discuss financial assistance to Cyprus.

    From its prior 2,630.30 close, the Euro Stoxx 50 traded modestly lower to a first hour 2,623.28 intraday low, but reversed higher to a late-morning 2,641.58 intraday high. The index currently trades at 2,638.48. Market segments are mixed. Leaders are health care, utilities, and financials, which are up at least +0.23%. Laggards are telecommunications, consumer goods, and oil and gas, which are down at least -0.15%.

    Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -2.94%, -1.31%, -3.29%, and -2.31%, respectively. The prior week, the Euro Stoxx50, CAC 40, and DAX fell -1.24%, -0.12%, and -0.31%, respectively. In February, the Euro Stoxx 50, CAC 40, and DAX are down -2.42%, -1.56%, -1.52%, respectively, while the FTSE 100 is up +0.14. In January, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +2.54%, +6.43%, +2.51%, and +2.15%, respectively. In December, the Euro Stoxx50, FTSE 100, CAC 40, and DAX ended up +2.86, +1.45%, +3.73%, and +2.00%, respectively. In 2013, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.07%, +6.58%, +0.91%, and +0.60%, respectively. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

    Libor, LOIS, Currencies, Treasuries, Commodities:
     

    • USD LIBOR is 0.15400%, up from 0.15300% the prior day. USD 3-month LIBOR is 0.29310%, up from 0.29300% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.
    • The US Libor-OIS (LOIS) spread is 15.66 bps, compared to 16.20 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 12.50 bps, up from 12.40 bps the prior day, and down from the December 27, 2011, high of 98.80 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.
    • The 3-month Euro basis swap is -17.618 bps , compared to -18.344 bps the prior day, but up from a trough of -147.00 bps on December 14th and within a normal -10 bps and -40 bps range.
    • Spanish 10-year debt yields are 5.41%, compared to 5.36% the prior day. The recent low was 4.56% on January 11th. Italian 10-year debt yields are at 4.59%, compared to 4.55% the prior day. Its recent low was 4.13% on January 11th. German 10-year debt yields are 1.66%, compared to +1.63% the prior day.
    • The U.S. government overnight repo rate is 3 bps, down from 13 bps the prior day. The January 2,, 2013, 45 bps rate was the highest since late 2008. The 0.00 bps low was on January 31, 2009.
    • U.S. Treasury yields are higher, with 2- and 10-year maturities yielding 0.254% and 1.976%, respectively, compared to 0.250% and 1.950% Friday. The yield curve widened, with the 2 to 10 year spread at +1.722%, compared to 1.700% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.174% on July 24, 2012, to a high of +1.998% on March 19, 2012.
    • The U.S. dollar is weaker compared to the Japanese yen and British pound, but weaker compared to the euro. The dollar trades at US$80.246, compared to a US$80.347 intraday high and US$79.941 the prior day, and better compared to its US$79.810 50-day, US$79.983 100-day, and US$80.934 200-day averages. The euro trades at US$1.3409, compared to a US$1.3412 intraday high and US$1.3365 the prior day. The euro trades better compared to its US$1.3260 50-day and US$1.3083 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥93.42, compared to ¥92.68 the prior day. The yen trades worse than its 50-day moving average ¥87.63.
    • Citigroup Economic Surprise Index improved to -12.50, from -30.00 the prior day, its 13th negative reading in the past 14 sessions, and compares to a recent November 13th 60.70 peak. The index is worse than its respective -26.30 5-day and -22.50 10-day moving averages. From its July 19th -65.30 low, the index improved rapidly and turned positive on September 5th, but the index signaled exhaustion on December 20th, and from 55.76 has subsequently moved rapidly lower. After a lag, the CESIUSD correlates with EPS revisions.
    • Commodities prices are mostly lower, with lower energy, lower precious metals, higher aluminum and copper, and mostly lower agriculture prices.


    Volatility, Skew:
     

    • The VIX fell -3.56% to 13.02, from 13.50 at the prior close. The VIX is -2.49% below its 13.35 20-day moving average. Its 30-day high is 22.72, set December 28th. Its 30-day low is 12.29.
    • At mid-session, the Euro Stoxx 50 volatility index (V2X) is down -0.22% to 18.52, from 18.56 at the prior day's close. The V2X index trades +10.5% above its 16.76 20-day moving average, -14.4% below the 21.62 30-day high, and +27.5% above the 14.52 30-day low.
    • Friday, the Hang Seng volatility index (VHSI) closed at 14.25, up +0.21% from 14.22 the prior day. It is closed for the Chinese New Year. The VHSI index trades +4.01% above its 13.70 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.
    • CBOE skew rose +0.26% to 125.67, from 125.35 the prior day's close, and above a neutral (115-120) range. Spikes in excess of 130 (as last on September 21, but previously on March 12, 15, and 16) correlate well with short-term market tops. The recent high close was 130.60 on September 21st. The recent low was 113.23 on November 14th. 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. news and economic reporting:
     

    • None.


    Overseas News:
     

    • Most Asian markets are closed for Chinese New Year.
    • France - December industrial production fell -0.1%, compared to -0.2% survey and +0.5% prior.
    • United Kingdom - January Lloyds employment confidence was -45, compared to -45 prior.


    Company Ratings/News:
     

    • None.


    Price and Selling Exhaustion/Trend Reversal:
     

    • SPX - On a monthly basis,the SPX initiated a buy setup in June 2008, with the month's 1404.05 high setting the resistance level. The setup perfected at 735.09 in February 2009. A sell setup ensued in May 2009. In September 2010, a follow-on setup began. The May 2009 setup perfected in January 2010. Its countdown completed in January 2012, closing at 1312.41 and setting a 1429.36 risk level. The follow-on setup perfected in May 2011. In March 2012, the index closed at 1408.47, above resistance, suggesting further upside. In September 2012, the index closed at 1440.67, above the 1429.36 risk level and suggesting the likelihood of further upside. In October and November, the index closed below the risk level, but above 1404.05 support. Also, the follow-on countdown rose to 8 in September 2012, but hasn't subsequently progressed. In August 2012, the index initiated a new sell setup, which progressed to 6 in January, when the index closed at 1498.11, compared to 1426.19 the prior month and 1440.67 four months prior. The sell countdown stemming with the May 2011 perfection rose to 9. The index closed +4.81% in excess of the 1429.36 risk level, suggesting that the uptrend will continue. On a weekly basis, the SPX perfected a sell setup the week ending February 10th, when it closed at 1342.64. On March 30th, the index completed a sell countdown with a 1408.47 close, setting a resistance level of 1446.74. The index signaled selling exhaustion the week ended June 8th, during which the SPX traded to an intraweek 1266.74 low on June 4th, when it perfected a weekly buy setup. The next week's bullish price flip initiated a sell setup that perfected on August 10th at 1405.87. On January 31st, the sell countdown associated with August 10th perfection completed and generated a 1525.36 risk level. In the week ending February 8th, the index closed up +0.31% at 1517.93, compared to 1513.17 the prior week and 1472.05 close four weeks prior. The sell setup rose to 6. The index closed -0.49% below the 1525.36 risk level. On a daily basis, the SPX perfected a sell setup on August 15th at 1405.53, and completed its sell countdown on September 13th, with its 1459.99 close. The completion generated a 1492.18 risk level. The index showed weak subsequent trend until November 19th, when a bullish price flip initiated a sell setup with support at 1359.88, the open and intraday low. The index perfected the setup on November 30th with its 1416.18 close, initiating a sell countdown, which completed on January 7th. After a bearish price flip on January 8th, a bullish price flip on January 9th initiated a sell setup, which perfected on January 22nd and validated a 9-13-9 sell pattern, suggesting the likelihood of a market top in the next 12 trading sessions. On Friday, the SPX rose +0.57% to close at 1517.93, compared to 1509.39 the prior day and 1495.71 4 days prior. The bullish price flip canceled a 1 buy setup and initiated a sell setup. The sell countdown stemming from the January 22nd perfection rose to 7. The index closed +2.78% above the January 7th 1476.89 risk level, based on the SPX's 8.95 point trading range on January 6th and high of 1467.94.
    • BKX - On a monthly basis, the BKX perfected a buy setup in December 2007, but has yet to complete its associated buy countdown, which is has been a deferred 13 since April 2011. That same month, the BKX initiated a buy setup, but the setup has remained unperfected since December 2011, when the index closed at 39.38. The buy countdown would complete with a close below 28.72, the February 2009 close with an 8 buy countdown. In September 2012, it initiated a sell setup, which rose to 3 in November. In January, the BKX rose +4.97% to end at 53.83, compared to 51.28 at the end of December and 49.58 four months prior. The sell setup rose to 5. On a weekly basis, the BKX recorded a completed buy countdown December 2, 2011. A bullish price flip in the week ending December 16th initiated a sell setup, which perfected the week of February 10th, when the index closed at 44.53. A bearish price flip ensued the week of April 13th, and a buy setup perfected the week of June 8th, when the index closed at 40.86. A bullish price flip occurred on July 27th, and the sell setup perfected on September 21st. Subsequent trends were weak until December 7, when the index initiated a new sell setup, which perfected on February 1st. On February 8th, the BKX closed at 55.00, up +0.49% from 54.73 the prior week and 53.18 four weeks prior. The sell countdown associated with the September 21st perfection rose to 11. On a daily basis, the BKX signaled selling exhaustion on June 4th, then rallied to 44.65 on June 19th, when it perfected a sell setup. The index completed a sell countdown on August 8th, and on August 15th, perfected a daily follow-on sell setup. On September 6th, the BKX initiated a new setup with its +2.93% gain, which broke through resistance at 47.75. On September 14th, the index completed a sell countdown, followed on September 19th, with an unperfected sell setup. A sell countdown began on September 28th. A bullish price flip on December 6th, was followed on December 14th by a bearish price flip, initiating a buy setup. On December 17th, the 50.62 close above the November 1st 50.45 close and above the prior two days' close completed a sell countdown and initiated a sell setup. Friday, the index closed up +0.29% at 55.00, compared to 54.84 the prior day and 54.06 four days prior. The sell setup rose to 6. The index closed +3.93% above the 52.92 risk level, which is based on the index's October 5th 0.88 point intraday range and 52.04 intraday high.
    • VIX - On a monthly basis, the VIX perfected an upward setup on January 31, 2008, and reached an upward setup of 7 on October 31, 2008. In January, the VIX fell -23.9%, after rising +13.6% in December, and falling -14.7% in November. The VIX ended January at 14.28, compared to 18.02 at the end of December and 22.72 at the end of September. The bearish price flip canceled last month's bullish price flip, and initiated a buy setup. On a weekly basis, the VIX perfected a buy setup on January 27th, and a sell setup on June 8th, followed by another perfected buy setup on August 10th. Last week, the VIX rose +0.93% to end at 13.02, compared to 12.90 the prior week, and 13.36 4 weeks prior. The buy setup rose to 6. The buy countdown associated with the August 10th perfection was unchanged at 10. On a daily basis, the VIX reached an sell countdown of 11 on June 4th, and subsequently exhibited a more distinct downward trend with a perfected setup on August 17th, followed by a perfected sell setup on August 31st. Subsequently, the VIX exhibited little in the way of a distinct trend. On November 23rd, the index perfected a sell setup. On January 16th, the VIX perfected the buy setup begun on December 31st. On January 18th, a bearing flip initiated a new buy setup and a buy countdown stemming from the January 16th setup perfection. Friday, the VIX fell -3.56% to close at 13.02, compared to 13.50 at the prior close and 14.67 at the 4 days' prior close. The bearish price flip canceled a 1 sell setup and initiated buy setup. The buy countdown associated with the January 16th perfection increased to 5. The VIX closed -7.13% below the 14.02 support level.
    • EUR, USD Cross - On a monthly basis, Euro Dollar cross perfected a downward setup on May 30, 2008, at 1.554. Subsequent monthly trends were weak until December 31, 2009, with a monthly decline of -4.56% that brought the index to 1.4321. The downward move continued until July 2010, when from 1.2238, the index rose +7.10%, with an unperfected downward setup in August 2010. The index failed to establish much strong upward momentum, however, peaking at the end of April 2011 at 1.4807, but then trending lower to test the July 2010 lows, when in August 2012, the index completed a buy countdown. In recent months, the trend has been higher, with an upward setup of 3. The cross ended January at 1.3579, compared to 1.2986 the prior month and 1.2579 4 months prior. The sell setup rose to 5. The buy countdown is 8. On a weekly basis, the cross perfected a buy setup on January 6th, followed by another buy setup and completed countdown on June 1, 2012, when the cross closed at 1.2434. After several weeks without much trend, the index initiated an sell setup the week ended August 3rd, when it closed at 1.2387, and the setup perfected on September 28, with a 1.2860 close. On January 18th, the index completed a sell setup at 1.336. The week of February 8th, the index fell -1.70% to end at 1.3365, compared to 1.3640 the prior week and 1.3343 4 weeks prior. The sell countdown associated with the September 28th perfection rose was unchanged at 9. The cross closed -0.12% below the 1.3381 risk level, which is based on the April 6, 2012 1.3381 high and 0.298 day's range. On a daily basis, the EURUSD cross perfected a sell setup on September 12th. The subsequent trend was lower until a buy setup initiated on November 2nd and perfected on November 14th with a 1.2736 close. The index initiated a buy setup the following day and perfected the setup on November 27th at 1.2943. On January 11th, the sell countdown stemming from the November 27th completed, setting a 1.3393 risk level. With Friday's -0.25% lower close, the EURUSD cross was 1.3365, compared to 1.3398 the prior day and 1.3514 four days prior. The cross closed -0.21% below the risk level. The buy setup rose to 3.
    • USGG10YR - On a monthly basis, the USGG10YR perfected a buy countdown on February 29th, and a buy setup on May 31st. The subsequent trend has been weak. The rate ended January at 1.9849%, compared to 1.6156% the prior month and 1.5484% 4 months prior. The sell setup rose to 5. The buy countdown pertaining to the May 2012 perfection was unchanged at 3. On a weekly basis, the index perfected a buy setup on June 8th, but subsequent trends have been weak, with a sell countdown of 8, unchanged since November 16th. On December 7th, a bullish rate flip initiated a sell setup, which perfected on February 1st. The rate ended the most recent week at 1.9499%, down from 2.0149% the prior Friday and 1.8677% four weeks prior. On a daily basis, the USGG10YR completed a downward setup on May 8th, followed by two downward countdowns on May 17th and June 4th. Subsequent trends were weak until August 3rd, when the rate rose nearly 9 bps to end at 1.5905%, initiating a new upward setup. This setup perfected on August 15th, when the rate ended at 1.8155%. A new downward setup commenced on August 21st, when the rate rose to 1.8610% before ending at 1.7984%, below the prior 4 day's close of 1.8155%. The downward setup perfected on August 31st, when the rate ended at 1.5484%. The trend reversed upward on September 3rd, and the upward setup reached an unperfected 9 on September 18th. After a late October intraday spike to 1.861%, the trend was lower until November 16th, when the rate closed at 1.580%. A bullish price flip on December 7th initiated a sell setup. On December 12th, the rate completed a sell countdown, with a 1.9213% risk level, based on the October 25th 1.8542% high and 0.0671% intraday range. On December 19th, the rate perfected its sell setup and initiated a sell countdown. On January 9th, a bearish price flip initiated a buy setup. On Friday, the rate ended at 1.9499%, compared to 1.9568% the prior day and 1.9548% four days prior. The buy setup rose to 3. The sell countdown associated with the December 19th perfection was unchanged at 9.
    • NKY - On a monthly basis, the NKY perfected a buy setup on April 30, 2009, and subsequently has traded narrowly. In November, the index rose +5.80%, following an increase of +1.50% in October. On November 30th, a bullish price flip initiated a sell setup. The index closed January at 11,138.66, up from 10,395.18 the prior month and 8,928.29 four months prior. The sell setup rose to 3. The sell countdown associated with the April 2009 perfection was unchanged at 11. On a weekly basis, the NKY perfected a sell setup on March 9th, and a subsequent buy setup on June 1st with a countdown of 8. The index initiated a sell setup on October 26th, and on December 21st, the sell setup perfected, initiating a sell countdown. Notably, on December 28th, the index closed at 10,395.18, +2.01% above 10,190.35 resistance (its April 4th weekly high), suggesting further upside. On February 8th, the index closed down -0.34% at 11,153.16, compared to 11,191.34 the prior week and 10,801.57 four weeks' prior. The sell countdown rose to 8. The index closed +9.45% above resistance. On a daily basis, the NKY perfected an upward setup on March 27th, and two consecutive downward setups on April 12th, and May 14th, with completed downward countdowns on May 16th and June 4th. The index rallied through August 21st, but then strung together multiple lower closes, perfecting a downward setup on September 5th. The index subsequently rallied, initiating a sell setup on September 7th, which it perfected on September 20th. A buy setup commenced on September 21st, which was perfected on October 3rd. Subsequent trend and momentum were weak until November 15th, when a bullish price flip initiated a sell setup and countdown. The sell setup perfected on November 30th. The associated sell countdown completed on December 28th, when it set a 10,544.28 resistance level. On January 4th, the index opened after the New Year's holiday, and closed above resistance, suggesting further upside. Friday, the index fell -1.80% to 11,153.16, compared to 11,357.07 the prior day and 11,260.35 four days prior. The bearish price flip canceled a 2 sell setup rose and initiated a buy setup. The index closed +5.57% above resistance.
    • HSI - On a monthly basis, the HSI perfected a downward countdown on March 31, 2009, and two subsequent perfected upward setups on December 31, 2009 and May 31, 2011. The index has yet to reach its 24,923.28 price exhaustion target. The index has risen in each of the past four months and ended January at 23,729.53, compared to 22,656.92 the prior month and 21,641.82 four months prior. The sell setup rose to 5, with a countdown of 12. On a weekly basis, the HSI perfected an upward setup on March 2nd, and subsequently traded to a low close of 18,185.59 on June 4th. After a period of weak trend, the index established a new sell setup and countdown in the week ending September 14th. The index perfected the setup on November 9th, and initiated a new sell setup on December 7th, which perfected on February 1st. On February 8th, the index closed at 23,215.16, compared to 23,721.84 the prior week and 23,264.07 four weeks prior. The bearish price flip initiated a buy sell setup. The sell countdown stemming from the November 9th perfection was unchanged at 10. The index closed -4.31% below resistance at 24,260.77, the April 29, 2011, intraweek high. On a daily basis, the HSI perfected a sell setup and completed an upward countdown on August 8th. After September 5th's lower close, the index perfected a buy setup. A sell setup commenced on September 9th, followed by a completed countdown on October 24th, with a trend of 22,071.74, and another perfected setup on October 25th. It completed another sell countdown on December 6th. The index perfected another sell setup on December 14th, and completed the associated countdown on January 23rd, when it set a 23,881.32 risk level. On Friday, the HSI closed up +0.16% at 23,215.16, compared to 23,177.00 the prior day, and 23,685.01 four days prior. The buy setup rose to 4. The index closed -2.79% below resistance.
    • SHCOMP - On a monthly basis, the SHCOMP perfected a buy setup on September 30, 2008, and subsequently rallied to an August 31, 2009, high, but without perfecting a subsequent sell setup. Since then, the SHCOMP resumed a downward trend perfecting another buy setup on January 31, 2012. The index ended January 2013 at 2,385.42, above support at 1,987.13, and compared to 2,269.13 the prior month and 2,086.17 four months prior. The sell setup rose to 2. The current monthly buy countdown was unchanged at 6. On a weekly basis, the SHCOMP last perfected a buy setup on April 8, 2011. The index has subsequently trended lower, with a downward perfected setup on September 23, 2011, and January 6, 2012 countdown completion, when it closed at 2,163.40. The index rallied to a high of 2,476.22 during the week ending March 16th, but without perfecting an upward setup. On July 13th, the index perfected a buy setup. In subsequent weeks, it traded below the sales exhaustion target of 2148.45 to a 1980.12 close on November 30th, when the buy countdown reached 11. On February 8th, the index closed the week up +0.55% at 2,432.40, compared to 2,419.02 the prior week and 2,243.00 four weeks prior. The sell setup perfected and initiated a sell countdown. On a daily basis, the SHCOMP perfected a buy setup and a completed a downward countdown on June 28th, but sold through the 2,170.95 exhaustion target on July 23rd to the September 5th 2037.68 closing low. On August 20th, the index perfected a buy setup carryover from August 2nd, and the index perfected another buy setup on August 27th, with completed buy countdowns September 5th and 24th. On September 25th, the index perfected another buy setup. The buy countdown was completed on November 19th. On November 8th, when the index initiated a buy setup at 2,091.25. The index perfected that buy setup on November 20th at 2,004.17. On December 4th, a bullish price flip initiated a sell setup. On January 14th, the sell setup that began on December 25th perfected; also, the bullish price flip initiated a follow-on sell setup. Friday, the index rose +0.57% to 2,432.40, compared to 2,418.53 at the prior close and 2,428.15 4 days prior. The bullish price flip canceled a 1 buy setup and initiated a sell setup. The sell countdown associated with the January 14th perfection was unchanged at 9.
    • SX5E - On a monthly basis, the Euro Stoxx50 last perfected an sell setup on May 31, 2007. It perfected a buy setup on September 30, 2008. The buy countdown completed in May 2012. A bullish price flip in August initiated a sell setup, which rose to 6 in January. The index closed at 2,705.09, compared to 2,635.91 the prior month and 2,454.26 four months prior. On a weekly basis, the index trends are more pronounced, having perfected an sell setup on March 9th, followed by a buy setup on May 25th, followed by a weekly close 2119.19, below the sales exhaustion target. The index subsequently rallied to perfect a sell setup on August 10th. The upward countdown reached 10 on September 14th. A bullish price flip the week of November 23rd initiated a sell setup that closed the following week at 2,575.25, above the price exhaustion target of 2,563.46. On January 18th, the sell setup that began on November 23rd perfected. Also, the sell countdown that began August 10th completed. In the week ended February 8th, the index fell -2.94% to close at 2,630.30, compared to 2,708.97 the prior week and 2,717.79 at the 4 weeks' prior close. The bearish price flip cancelled a sell setup and initiated a buy setup. The countdown stemming from the January 18th perfection was unchanged at 1. On a daily basis, the index perfected a downward setup on May 14th, when it closed at 2,201.95. The index subsequently rallied through a perfected sell setup on June 18th and completed its sell countdown on July 24th. On September 13th, the index perfected an upward setup. Daily trends were weak through November 16th, without sustained upward or downward setups and countdowns. Strong gains on November 19th initiated an upward setup. On November 29th, the index perfected an upward setup. On January 3rd, the index completed the associated countdown and set a 2,786.57 risk level, based on the prior day's 2,711.25 high and 51.46 intraday range. Friday, the index rose +1.25% to 2,630.30, compared to 2,597.92 the prior day and 2,625.17 at the prior 4 days' close. The bullish price flip cancelled a 6 buy setup. The index closed -5.61% below the risk level.


    4Q2012 Earnings. Earnings reports are positive, beating on both EPS and sales/revenues. Of 342 reporting companies, 255 or 74.6% surprised positively on earnings, beating by an average +5.22%. Of reporting companies, 228 or 67.1% have reported sales and revenues in excess of estimates.

    Valuation. The SPX trades at 14.7x estimated 2012 earnings ($103.41), 13.7x estimated 2013 earnings ($110.66), and 12.3x estimated 2014 earnings ($123.57). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2012 and 2013 earnings to exceed actual 2011 earnings ($96.97) by +8.89% and +16.5%, respectively.

    Options. Options markets are neutral. Composite options are neutral, index options are neutral, and equity options markets are neutral. The composite put/call ratio is 0.90, compared to 1.02 the prior day, and better compared to its 5- and 10-period moving averages of 0.97 and 0.96, respectively. The index put/call ratio fell to 1.21, from 1.26 the prior day, and mixed compared to its 5- and 10-period moving averages of 1.23 and 1.13, respectively. The equity put/call ratio closed the day at 0.76 compared to 0.93 the prior day, and is better than its 5- and 10-period moving averages of 0.86 and 0.88, respectively.

    NYSE Indicators. Volume fell -12.9% to 578.05 million shares, from 663.69 million shares the prior day, 0.83x the 663.69 million share 20-day moving average. Market breadth was positive, and up volume led down volume. Advancing stocks led decliners by +1,051 (compared to -426 the prior day), or 2.11:1. Up volume was 1.97:1 times down volume.

    BKX. Volume fell -17.6%, and the KBW bank index closed at 55.00, up from 54.84 at the prior close. Volume fell to 45.523 million shares, from 55.275 million shares the prior day, or 0.77:1x the 59.067 million share 15-day moving average. The index traded narrowly lower through mid-session, but improved to a mid-afternoon 55.02 intraday high. The index weakened to 54.85 in the final hour but rallied into the close. Large cap banks outperformed the regional banks, as the KRX rose +0.22%.

    Last week, the BKX closed up +0.46%. Last week, the BKX rose +1.13%, compared to compared to +1.20% the prior week. In February, the BKX is up +2.17%. In January, the BKX rose +4.97%, compared to +5.60% and -2.10% in December and November, respectively. The index rose +0.04% in October, and +5.06% and +3.67% in September and August, respectively. For the year, the BKX is up +7.25%, well ahead of the SPX's +6.43% rise. In 2012, the index rose +30.2%, compared to a +13.4% rise in the SPX.

    The BKX has closed above 50 since December 17th. The BKX closed -5.09% below its 57.95 April 23, 2010 close (the post-2008 high point), but +68.9% above the 32.56 low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, which is up +41.2% in the same period. Technical indicators are positive as the index closed +1.86%, +5.77%, +8.16%, and +13.8% above its 20-, 50-, 100-, and 200-day moving averages. Its 20-, 50-, 100-, and 200-day moving averages have a positive slope. The 20-day moving average crossed above its 50-day moving average on December 21st. The index has closed above its 100-day moving average since August 7th. The 20-day moving average rose +7 bps. The 50-day moving average rose +13 bps. Its 100-day moving average rose +4 bps, and the 200-day moving average rose +6 bps. The 20-day closed (by +2.00 points) above the 50-day, but the gap narrowed -6 bps. The 50-day moving average closed (by +3.67 points) above the 200-day moving average. The 100-day moving average closed (by +2.52 points) above the 200-day moving average since March 19th, and the gap was unchanged.

    The directional movement indicator is positive, and narrowed to 15.737, from 16.214 the prior day. Relative strength rose to 65.71, from 64.55 the prior day, in a neutral range. Next resistance is 55.09; next support at 54.83.

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