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Gary Townsend - Founding partner 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 Down As ORCL Profits Disappoint 0 comments
    Mar 21, 2013 9:30 AM

    This morning. The U.S. equity markets are in an uptrend and closed yesterday with modest gains on less than average volume. The SPX closed at 1558.71, up +0.67% on the day and -0.41% below its all-time 1565.15 closing high on October 9, 2007. U.S. technical indicators improved at the margin, All major indexes closed above their 20-, 50-, 100-, and 200-day moving averages. Yesterday's FOMC meeting report and follow-on press conference had little market impact.

    Today, world equity markets are mixed, with weakness in Europe, after the ECB set a Monday hard deadline to fix a Cyprus rescue. Asian indexes closed mixed, with better strength in Tokyo, where the new BOJ governor took office. Shanghai rose for a 2nd consecutive session. Hong Kong remains in correction. Economic reporting is focuses on Eurozone PMIs, which disappointed, and the latest weeks' U.S. employment reports.

    U.S. Treasury yields are lower, with the 10-year at 1.953%, compared to 1.958% the prior day. U.S. repo rates are 17 bps, up from 14 bps the prior day. Spanish and Italian 10-year debt yields moved lower to 4.88% and 4.58%, respectively. The U.S. dollar is weaker compared to the Japanese yen and British pound, but stronger compared to the euro. U.S. options markets are neutral to bullish. The CBOE skew fell -2.64% to 123.73, from 127.08 the prior day. Commodities prices are mostly higher.

    The SPX is +45.0% above the 1074.77 October 4, 2011, intraday low. This week, the SPX is down -0.13%, compared to a gain of +0.61% the prior week. In March, the SPX is up +2.91%, compared to a gain of +1.11% and +5.04% in February and January, respectively. In 2013, the SPX is up +9.29%. In 2012, the SPX closed up +13.4%. Next resistance is at 1564.07. First support is at 1550.85.

    This week, the BKX is down -0.70%, compared to a gain of +1.64% the prior week. In March, the BKX is up +5.82%. In February, the BKX closed up +0.28%, compared to January's +4.97% increase. This year, the BKX is up +11.4%, 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 lower and near the bottom of a 1546-1550 range. After a fair value adjustment of +2.81 points, SPX equity futures are at 1545.00, down -7.06 points. The SPX opens +1.55%, +3.04%, +6.56%, and +9.20% 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.

    Wednesday. On decreased volume, U.S. equity markets gapped higher at the open, traded narrowly through the 2:00 FOMC meeting report release, and eased higher in the session's final two hours. The Nasdaq rose +0.78%, followed by the NYSE composite, SPX, and DJI, which rose +0.70%, +0.67%, and +0.39%, respectively. Market breadth was positive, with gainers 2.98:1 losing stocks. Most SPX market segments closed higher. Leaders were consumer services, consumer goods, and health care, which rose at least +0.90%. Financials gained +0.65%. Laggards were technology and industrials, which rose at least +0.18%, and telecommunications, which fell -0.10%. NYSE volume fell -8.03% to 672.90 million shares, +0.88x the 20-day moving average volume.

    Commentary focused on the Cypriot developments, the Eurozone's capacity to make enormous policy errors, and the FOMC report and subsequent Bernanke press conference, which dominated the session's final two hours.

    Trading desks reported a busy afternoon between the FOMC, continuing resolution progress, and Kuroda's taking office. The rally lacked much conviction behind it, benefiting from surprise that damage from Cyprus' problems wasn't more severe. Cypriot banks will probably not reopen this week, and may never, given their condition, in the absence of some agreement this weekend.

    From its 1548.34 prior close, the SPX gapped higher to open above 1556 and traded narrowly through the FOMC release, but rallied to a late 1561.56 intraday high before easing into the close. The SPX closed at 1558.71, up +0.67% and -0.41% below its October 9, 2007 1565.15 all-time high. Market volatility fell. From its 14.39 prior close, the VIX opened below 12.80 and eased after 2:00 to a late session 12.30 intraday low. The VIX ended at 12.67, down -12.0%. The all-time closing low was 11.26, set June 30, 1993.

    On +65.5% greater volume, the DJ Transports fell -0.35%, compared to the DJI's +0.39% gain. The index fell to 6,220 in early trading, and traded narrowly around 6,200 through 2:00, but improved in the final two hours to end at 6,218.19, -1.00% below its recent March 14th all-time high. The index closed +2.17%, +5.19%, +12.4%, and +17.3% above its respective 20-, 50-, 100-, and 200-day moving averages.

    Technical factors were little changed. SPX relative strength (RSI) rose to 63.99, from 59.73 the prior day, in a neutral range. The CBOE put/call skew fell -2.64% to 123.73, from 127.08 the prior day. U.S. Treasury bond prices were little changed.

    This week, the DJI is up +0.16%, but the SPX, DJI, Nasdaq, and NYSE composite are down -0.13%, -0.02%, and -0.39%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed up +0.61%, +0.81%, +0.14%, and +0.69%, respectively. In March, the SPX, DJI, Nasdaq, and NYSE composite are up +2.91%, +3.25%, +2.97%, and +2.39%, respectively. In February, the SPX, DJI, and Nasdaq closed up +1.11%, +1.40%, and +0.57%, respectively, while the NYSE composite closed down -0.17%. In January, the SPX, DJI, Nasdaq, and NYSE composite closed up +5.04%, +5.77%, +4.06%, and +5.21%, respectively.

    In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +9.29%, +10.7%, +7.77%, +7.55%, respectively. All closed at least +5.91% higher in 2012.

    Immediate SPX support is 1557 (the 5-day moving average), then 1554 (the 10-day moving average). Resistance is 1564, then 1565 (the SPX record high).

    Distribution day count. 2 and 2 for the SPX and Nasdaq, respectively.

    In Asia, Japanese markets reopened after yesterday's vernal equinox holiday and posted a strong gain. Chinese equity markets closed mixed. In Tokyo, the NKY rose +1.34% on a +17.0% volume increase. The HSI fell -0.14% on a -8.41% volume decrease. The SHCOMP rose +0.30% on a -9.17% volume decrease. Today, the NKY closed +6.32% above its 20-day moving average. The HSI and SHCOMP closed -1.94% below and +0.81% above their respective 20-day moving averages.

    Economic reporting focused on better than expected Chinese flash PMI, prospective BOJ monetary policy under the new governor, who takes office today, Cyprus, and currency developments.

    This week, the NKY is up +0.60%, the HSI is down -1.36%, while the SHCOMP is up +2.01%. Last week, the NKY closed up +2.26%, the HSI closed down -2.42%, and the SHCOMP closed down -1.73%. In March, the NKY is up +9.31%, while the HSI and SHCOMP are down -3.45% and -1.75%, respectively. In February, the NKY ended up +3.78%, while the HSI lost -2.99%, and the SHCOMP closed -0.83% lower. The indexes gained +7.15%, +4.73, and +5.12% the prior month, respectively. In 2013, the NKY is up +21.6%. The HSI is down -1.90%. The SHCOMP is up +2.01%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 12,635.69, compared to 12,468.23 at Tuesday's close. In early trading, the index rallied to its 12,650.26 intraday high, but traded narrowly around 12,620 through most of the session, improving into the close. The index ended +6.32%, +11.5%, +22.1%, and +31.9% above its respective 20-, 50-, 100-, and 200-day moving averages. All market segments closed at least +0.03% higher. Leaders were telecommunications, consumer services, and basic materials, which rose at least +1.57%. Laggards were technology, consumer goods, and financials.

    In China, the Hang Seng closed at 22,225.88, compared to 22,256.44 at the prior close, and -6.70% off its January 30th high. The index moved lower at the open but rallied to an early morning 22,403.79 intraday high. The index reversed lower in early afternoon and fell to a final hour 22,179.50 intraday low before easing higher into the close. Market segments closed mixed. Leaders were utilities, consumer services, and consumer goods, which rose up at least +0.36%. Laggards were basic materials, industrials, and technology, which fell at least -0.73%.

    In Shanghai, the SHCOMP closed at 2,324.24, up from 2,317.38 the prior day. The index traded narrowly through the day, rising to 2,330 in early afternoon, but reversing lower in the final hour to set a 2,311.98 intraday low. The index rallied in the final hour to end with a modest gain. The index closed -5.55% below its 2,434.48 February 5th high, but up +18.6% from its December 3rd 1,959.77 low. The SHCOMP closed +0.81% above and -0.14% below its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were health care, technology, and consumer services, which rose at least +0.97%. Laggards were basic materials and oil and gas, which rose at least +0.27%, and financials, which fell -0.08%.

    In Europe, the major equity indexes are moderately lower, as a the ECB set a hard Monday deadline to set Cyprus bailout terms. Cypriot banks remained shuttered. The Eurostoxx50, FTSE 100, CAC 40, and DAX are down -0.81%, -0.79%, -1.17%, and -0.92%, respectively. All are above their respective 20-, 50-, 100-, and 200-day moving averages. The Spanish IBEX is down -0.68%. The Italian FTSE MIB is down -0.08%.

    News flows focused on the Cypriot developments. Economic reporting focused on manufacturing PMIs, which were worse than expected.

    From its prior 2,708.90 close, the Euro Stoxx 50 opened at 2,705 and pulled back to a mid-morning 2,679.35 low. The index improved to 2,687.10 moving into the afternoon session. Most market segments are lower. Leaders are utilities, which are up +1.03%, and industrials and financials, which are down -0.47%. Laggards are consumer services, technology, and basic materials, which are down -1.39%.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.25%, -1.60%, -1.33%, and -1.23%, respectively. Last week, the Euro Stoxx50 fell -0.11%, while the FTSE 100, CAC 40, and DAX rose +0.09%, +0.10%, and +0.71%, respectively. In March, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +2.20%, +0.39%, +1.88%, and +2.61%, respectively. In February, the Euro Stoxx 50, CAC 40, and DAX closed down -2.57%, -0.26%, and -0.44%, respectively, while the FTSE 100 closed +1.34% higher. In 2013, the Euro Stoxx550 FTSE 100, CAC 40, and DAX are up +2.11%, +8.27%, +4.17%, and +4.36%, 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 0.15500%, down from 0.15600% the prior day. USD 3-month LIBOR is 0.28410%, up from 0.28210% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.
    • The US Libor-OIS (LOIS) spread is 14.21 bps, compared to 13.91 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 12.60 bps, unchanged from 12.60 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 -20.22 bps, compared to -19.39 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 4.88%, compared to 4.98% the prior day. The recent low was 4.56% on January 11th. Italian 10-year debt yields are at 4.57%, compared to 4.64% the prior day. Its recent low was 4.13% on January 11th. German 10-year debt yields are 1.39%, compared to +1.39% the prior day.
    • The U.S. government overnight repo rate is 17 bps, up from 14 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 lower, with 2- and 10-year maturities yielding 0.246% and 1.952%, respectively, compared to 0.246% and 1.958% Wednesday. The yield curve narrowed, with the 2- to 10-year spread at +1.706%, compared to 1.712% 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 mixed, weaker compared to the British pound and Japanese yen, but stronger compared to the euro. The dollar trades at US$82.795, compared to a US$83.021 intraday high and US$82.779 the prior day, and better compared to its US$80.915 50-day, US$80.569 100-day, and US$80.938 200-day averages. The euro trades at US$1.2922, compared to a US$1.2880 intraday low and US$1.2933 the prior day. The euro trades worse compared to its US$1.3254 50-day and US$1.3129 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥95.39, compared to ¥96.01 the prior day. The yen trades worse than its 50-day moving average ¥92.76.
    • Citigroup Economic Surprise Index rose to +27.20, from +26.90 the prior day. The index is better compared to its respective +26.28 and +22.71 5-day and 10-day moving averages. From its July 19th -65.30 low, the index improved rapidly and turned positive last September 5th, but the index signaled exhaustion on December 20th, and from 55.76 moved lower to -30.80 on January 30th. The index turned positive on February 25th. After a lag, the CESIUSD correlates with EPS revisions.
    • Commodities prices are mixed, with lower energy, higher precious metals, higher aluminum and copper, and mostly lower agriculture prices.


    Volatility, Skew:
     

    • The VIX closed at 12.67, down -12.0% from 14.39 at the prior close. The VIX is +-8.25% below its 13.81 20-day moving average. Its 30-day high is 19.28. Its 30-day low is 11.05. The index's all-time closing low is 11.26 on June 30, 1993. The long-term average is 20.28.
    • At mid-session, the Euro Stoxx 50 volatility index (V2X) is up +4.79% to 19.78, from 20.06 at the prior day's close. The V2X index trades +0.72% above its 19.64 20-day moving average, -23.6% below the 25.90 30-day high, and +33.0% above the 14.88 30-day low.
    • The Hang Seng volatility index (VHSI) closed at 16.18, down -2.18% from 16.54 the prior day. The VHSI index trades +1.57% above its 15.93 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.
    • CBOE skew fell -2.64% to 123.78, from 127.08 at the prior day's close, and above a neutral (115-120) range. Spikes in excess of 130 (as on February 15th and 18th and previously on September 21, and March 12, 15, and 16) correlate well with short-term market tops. The recent high close was 130.46 on February 15th and 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:
     

    • FOMC rate decision left the Federal funds rate at .025%.
    • The latest weeks' initial and continuing jobless claims were 336K and 3053K, respectively, compared to 340K and 3050K survey and 334K and 3048K revised prior.
    • At 9:00, March Markit preliminary PMI, with 54.8 survey and 54.3 prior.
    • January MoM house price index, with +0.7% survey and +0.6% prior.
    • At 10:00, March Philadelphia Fed, with -3.0 survey and -12.5 prior.
    • February MoM existing home sales, with +1.6% survey and +0.4% prior.


    Overseas News:
     

    • China - March HSBC flash manufacturing PMI was 51.7, compared to 50.8 survey and 50.4 prior.
    • Eurozone - March PMI manufacturing was 46.6, compared to 48.2 survey and 47.9 prior. PMI services was 46.5, compared to 48.2 survey and 47.9 prior.
    • France - March preliminary manufacturing PMI was 43.9, compared to 44.2 survey and 43.9 prior. PMI services was 41.9, compared to 44.0 survey and 43.7 prior.
    • Germany - March manufacturing PMI was 48.9, compared to 50.5 survey and 50.3 prior. PMI services was51.6, compared to 55.0 survey and 54.7 prior.


    Company Ratings/News:
     

    • None.


    Price and Selling Exhaustion/Trend Reversal (based on TD sequential):

    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 7 in January, when the index closed at 1514.68, compared to 1498.11 the prior month and 1412.16 four months prior. The sell countdown stemming with the May 2011 perfection rose to 10. The index closed +5.97% in excess of the risk level, suggesting that the uptrend will continue.

    On a weekly basis, the SPX signaled selling exhaustion the week ended June 8th, during which the SPX traded to an intraweek 1266.74 low on June 4th, and then perfected a weekly buy setup with its 1325.66 close. The next week's bullish price flip initiated a sell setup that perfected on August 10th at 1405.87. On January 4th, a bullish price flip initiated a sell setup, which perfected the week ending March 1. On January 31st, the sell countdown associated with August 10th perfection completed and generated a 1525.36 risk level. In the week ending March 15th, the index closed up +0.61% at 1560.70, compared to 1551.18 the prior week and 1519.79 close four weeks prior. The sell countdown associated with the March 8th perfection progressed to 2. The index closed +2.32% above the 1525.36 risk level, suggesting further upside.

    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 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. On January 9th, a bullish price flip initiated a sell setup, which perfected on January 22nd. On March 6th, the sell countdown associated with the January 7th setup perfected and set a 1561.74 risk level, based on the March 6th 18.27 range and 1543.47 intraday high. On March 13th, the sell setup perfected. On Wednesday, the SPX rose +0.67% to close at 1558.71, compared to 1548.34 the prior day and 1563.23 4 days prior. The buy setup progressed to 3. The 2 sell countdown associated with the March 13th perfection was unchanged. The index closed -0.19% below the 1561.74 risk level, based on the SPX's 8.95 point trading range on January 7th 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 February, the BKX +0.28% to end at 53.98, compared to 53.83 at the end of January and 49.60 four months prior. The sell setup rose to 6.

    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 22nd, the sell countdown associated with the September 21st perfection completed. On March 15th, the BKX closed at 57.52, up +1.64% from 56.59 the prior week and 55.11 four weeks prior. The sell setup progressed to 2. The index closed +1.04% above the 56.93 risk level, which is based on the prior week's 1.08 point range and 55.85 high.

    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. 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, which perfected on February 13th. On March 14th, the sell setup closed above 57.22 and perfected. Wednesday, the index closed at 57.12, compared to 56.84 the prior day and 57.27 four days prior. The buy setup progressed to 2. The 2 sell countdown associated with the March 14th setup was unchanged. The index closed +7.94% 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 February at 15.51, compared to 14.28 at the end of January and 18.60 at the end of October. The buy setup rose to 2.

    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 fell -10.3% to end at 11.30, compared to 12.59 the prior week, and 12.46 4 weeks prior. The buy setup progressed to 2. The buy countdown associated with the August 10th perfection rose progressed to 12.

    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. On March 1st, a bearish flip initiated a buy setup. On March 11th, the buy countdown associated with the January 16th perfection completed, and set a 10.41 risk level. On March 15th, the buy setup associated with March 1st flip perfected. Wednesday, the VIX fell -12.0% to 12.67, compared to 14.39 at the prior close and 11.30 at the 4 days' prior close. The sell setup progressed to 3. The 2 buy countdown associated with the March 15th setup was unchanged. The VIX closed +21.7% above the risk 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 February at 1.3067, compared to 1.3579 the prior month and 1.2860 4 months prior. The sell setup rose to 7. The 8 sell countdown is unchanged.

    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 March 15th, the index rose +0.55% to end at 1.3076, from 1.3005 the prior week and 1.3360 4 weeks prior. The buy setup progressed to 5. Since February 1st, the 9 sell countdown associated with the September 28th perfection is unchanged. The cross closed -2.28% 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. On January 24th, a bullish price flip initiated a sell setup which rose to an unperfected 9 on February 5th. On February 14th, a bearish price flip initiated a sell setup, which subsequently perfected on February 26th. With Wednesday's +0.40% higher close, the EURUSD cross ended at 1.2933, compared to 1.2882 the prior day and 1.3005 four days prior. The buy setup progressed to 3. The 6 buy countdown was unchanged. The cross closed -3.89% below the risk level.

    USGG10YR - On a monthly basis, the USGG10YR began a downward trend from 5.0506% in May 2006, perfecting a sell setup in April 2008 (at 3.7295%) and completing the associated buy countdown in June 2011 (at 3.1600%), when it produced a 1.1121% risk factor. A subsequent 9 buy setup perfected in May 2012, with the rate at 1.5578%. In September 2012, a bullish price flip initiated a sell setup. The rate ended February at 1.8756%, compared to 1.9849% the prior month and 1.6335% 4 months prior. The sell setup rose to 6.

    On a weekly basis, the index perfected a buy setup on June 8th, but subsequent trends were weak until a December 7th bullish rate flip initiated a sell setup, which perfected on February 1st, when the rate ended at 2.0149%. The rate has subsequently shown little trend, and the associated sell setup is unchanged at 1. The rate ended the most recent week at 1.9895%, compared to 2.0427% the prior Friday and 2.0017% four weeks prior. The bearish price flip canceled a 2 sell setup and initiated a buy setup. The sell countdown associated with the February 1st perfection is unchanged at 1.

    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%, a bullish rate flip that initiated 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 February 20th, a bearish rate flip initiated a buy setup, which perfected on March 4th. On Wednesday, the rate ended at 1.9581%, compared to 1.9017% the prior day and 2.0296% four days prior. The buy setup progressed to 5. The 4 buy countdown associated with the March 4th perfection was unchanged. Resistance is 2.0504%.

    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 February at 11,559.36, up from 11,138.66 the prior month and 9,446.01 four months prior. The sell setup rose to 4. 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. For the week ending March 15th, the index closed up +2.26% at 12,560.95, compared to 12,283.62 the prior week and 11,173.83 four weeks' prior. The sell countdown progressed to 11. The index closed +23.3% 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 risk level. On January 4th, the index opened after the New Year's holiday, and closed above resistance, suggesting further upside. Though the index subsequently moved higher, it was without strong trend until a March 4th bullish price flip initiated a sell setup. On March 15th, the sell setup perfected with its close above the March 12th 12,461.97 intraday high. Thursday, the index rose +1.34% to 12,635.69, from 12,468.23 the prior day and 12,381.19 four days prior. The buy setup progressed to 2. The sell countdown associated with the March 15th perfection progressed to 2. The index closed +19.8% above the risk level.

    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. After four consecutive month increases, the HSI ended February at 23,020.27, compared to 23,729.53 the prior month and 22,030.39 four months prior. The sell setup rose to 6. The sell countdown stemming from the May 2011 perfection completed and set a 27,194.16 risk level.

    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 March 15th, the index closed at 22,533.11, compared to 23,091.95 the prior week and 23,444.56 four weeks prior. The buy setup rose to 6. The 10 sell countdown stemming from the November 9th perfection was unchanged. The index closed -7.12% 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 Thursday, the HSI fell -0.14% to 22,225.88, compared to 22,256.44 the prior day, and 22,533.11 four days prior. The buy setup progressed to 7. The index closed -6.93% below the risk level.

    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. In May 2011, the SHCOMP assumed a downward trend and perfected a buy setup on January 31, 2012. The associated buy countdown rose to 6 in November 2012, but is subsequently unchanged. In December, a bullish price flip initiated a sell setup. In February, the index closed at 2,365.59, compared to 2,385.42 the prior month and 2,068.88 four months prior. The sell setup rose to 3.

    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 December 14th, a bullish price flip initiated a sell setup at 2,059.47. That setup perfected on February 8th, with a 2,432.40 close, up +18.1%. On March 15th, the index closed the week down -2.42% at 2,278.40, compared to 2,318.61 the prior week and 2,432.40 four weeks prior. The buy setup progressed to 2. The 1 sell countdown associated with the February 8th perfection was unchanged.

    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. Thursday, the index rose +0.30% to 2,324.24, compared to 2,317.38 at the prior close and 2,278.40 4 days prior. The sell setup progressed to 2. The sell countdown associated with the January 14th perfection is a deferred 13.

    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 7 in February. The index closed at 2,633.55, compared to 2,702.98 the prior month and 2,503.64 four months prior.

    On a weekly basis, the index trends are more pronounced, having perfected an sell setup on March 16th (at 2,511.42), followed by a buy setup initiation on March 30th, which perfected on May 25th, when the index closed at 2,161.87, down -13.9%. On June 15th, a bullish price flip initiated a sell setup with a 2,181.23 close. The index subsequently rallied to perfect a sell setup on August 10th, when it closed at 2,362.69, up +9.29%. A bullish price flip the week of November 23rd (2,557.03 close) initiated a sell setup that perfected on January 18th at 2,709.59, up +5.97%. The sell countdown associated with the August 10th perfection also completed on January 18th, when the index closed at 2,709.59, up +24.2% over the June 15th bullish price flip. Since January 18th, the subsequent trend is lower. In the week ended March 8th, the index rose +4.28% to close at 2,728.78, compared to 2,616.75 the prior week and 2,630.30 at the 4 weeks' prior close. The bullish price flip canceled a 4 buy setup and initiated a sell setup. The sell countdown stemming from the January 18th perfection progressed to 2.

    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 (2,155.65 close) and completed its sell countdown on July 20th (2,237.33 close) On September 13th, the index perfected a sell setup with a 2,543.22 close. Daily trends were weak through November 16th, without sustained upward or downward setups and countdowns. Strong gains on November 19th initiated an upward setup with a 2,495.21 close. On November 29th, the index perfected an upward setup at 2,581.69. On January 3rd, the index completed the associated countdown (with a 2,701.22 close) and set a 2,786.57 risk level, based on the prior day's 2,711.25 high and 51.46 intraday range. On March 14th, the March 4th sell setup perfected and initiated a sell countdown. Wednesday, the index rose +1.38% to 2,708.90, compared to 2,671.96 the prior day and 2,744.70 at the prior 4 days' close. The buy setup progressed to 3. The 2 sell countdown was unchanged. The index closed -3.68% below the risk level.

    4Q2012 Earnings. Earnings reports are positive, beating on both EPS and sales/revenues. Of 484 reporting companies, 358 or 74.2% surprised positively on earnings, beating by an average +5.09%. Of reporting companies, 307 or 64.0% have reported sales and revenues in excess of estimates.

    Valuation. The SPX trades at 15.1x estimated 2012 earnings ($103.41), 14.1x estimated 2013 earnings ($110.54), and 12.7x estimated 2014 earnings ($123.34). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013 and 2014 earnings to grow +6.98% and +11.5%, respectively.

    Options. Options markets are neutral to bullish. Composite options are bullish, index options are bullish, and equity options markets are neutral. The composite put/call ratio is 0.73, compared to 0.97 the prior day, and better compared to its 5- and 10-period moving averages of 0.83 and 0.86, respectively. The index put/call ratio fell to 0.62, from 0.81 the prior day, and better compared to its 5- and 10-period moving averages of 0.83 and 0.91, respectively. The equity put/call ratio closed the day at 0.89, compared to 1.11 the prior day, and worse compared to its 5- and 10-period moving averages of 0.88 and 0.87, respectively.

    NYSE Indicators. Volume fell -8.03% to 672.90 million shares, from 731.69 million shares the prior day, 0.88x the 767.88 million share 20-day moving average. Market breadth was positive, and up volume led down volume. Advancing stocks led decliners by +1,495 (compared to -465 the prior day), or 2.98:1. Up volume was 3.33:1 down volume.

    BKX. Volume fell -12.6%, and the KBW bank index closed at 57.125, down +0.49% from 56.84 at the prior close. Volume fell to 63.549 million shares, from 72.715 million shares the prior day, or 0.89:1x the 71.261 million share 15-day moving average. The index gapped higher to open at 57.20 and traded narrowly between 57.05 at mid-morning to a 57.33 high in mid-afternoon. The index eased at the close.

    Large cap banks underperformed the regional banks, as the KRX rose +0.70%.

    This week the BKX is down -0.70%. Last week, the BKX rose +1.64%, compared to a gain of +4.51% the prior week. In March, the BKX is up +5.82%, compared to +0.28% and +4.97% in February and January, respectively. For the year, the BKX is up +11.4%, better than the SPX's +9.29% 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 -1.43% below its 57.95 April 23, 2010 close (the post-2008 high point), and +75.4% above the 32.56 low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +45.0% in the same period.

    Technical indicators improved at the margin. The index closed +2.78%, +4.31%, +9.43%, and +15.1% above its respective 20-, 50-, 100-, and 200-day moving averages. All have positive slopes. 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 13 bps. The 50-day moving average rose 7 bps. Its 100-day moving average rose 7 bps, and the 200-day moving average rose +6 bps. The 20-day closed (by +0.82 points) above the 50-day, and the gap widened +3 bps. The 50-day moving average closed (by +5.15 points) above the 200-day moving average, and the gap expanded by +1 bp. The 100-day moving average closed (by +2.59 points) above the 200-day moving average since March 19th, and the gap was unchanged.

    The directional movement indicator narrowed to +13.843, from +14.581 the prior day. Relative strength rose to 63.71, from 61.80 the prior day and moving toward the middle of a neutral range. Next resistance is 57.29; next support at 56.99.

    Themes: SPX, DJI, TRAN, CCMP, NYA, RTA, SX5E, UKX, CAC, DAX, IBEX, MIB, NKY, HSI, SHCOMP, VIX, SKEW, V2X, VHSI
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