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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 Weaken After March ADP Disappoints 0 comments
    Apr 3, 2013 9:14 AM

    This morning. U.S. equity markets are in an uptrend, but are mixed early in 2Q2013. The DJI and SPX closed yesterday at new record closing highs. The Nasdaq and NYSE composite are lower this month. U.S. technical indicators were little changed, with major indexes closing above their respective 5-, 10-, and 20-day moving averages. All closed above their 50-, 100-, and 200-day moving averages. Momentum and trend indicators suggest many indexes are near price exhaustion levels.

    Asian markets closed mixed, with modest losses in China, but a strong rebound in Tokyo after 3 consecutive distributions. European markets are moderately lower ahead of this morning's U.S. economic reports.

    U.S. Treasury yields are little changed, with the 10-year at 1.857%, compared to 1.859% the prior day. U.S. repo rates are 16 bps, down from 22 bps the prior day. Spanish and Italian 10-year debt yields improved to 4.90% and 4.59%, respectively. The U.S. dollar is mixed. U.S. options markets are mixed. CBOE skew rose +1.34% to 122.84, from 121.21 the prior day. Commodities prices are mostly lower.

    The SPX is +46.1% above the 1074.77 October 4, 2011, intraday low. This week, the SPX is up +0.07%. Last week, the SPX gained +0.79%, compared to a loss of -0.24% the prior week. In April, the SPX is up +0.07%. In March, the SPX closed up +3.60%. In 2013, the SPX is up +10.1%. In 2012, the SPX closed up +13.1%. Next resistance is at 1575.22. First support is at 1563.73.

    This week, the BKX is down -0.84%. Last week, the BKX closed down -0.60%, after a loss of -1.56% the prior week. In April, the BKX is off -0.84%, compared to a gain of +4.26% in March. This year, the BKX is up +8.83%, underperforming 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 modestly lower, in the middle of a 1561-1564 range. After a fair value adjustment of -0.50 points, SPX equity futures are at 1564.50, up +0.50 points. The SPX opens +0.96%, +2.82%, +6.50%, and +9.23% above its respective 20-, 50-, 100-, and 200-day moving averages.

    Tuesday. On higher, but below average volume, U.S. equity markets gapped moderately higher, but rallied strongly through mid-session, then weakened through late afternoon to end mixed. The DJI gained +0.61% to close at a new all-time high, followed SPX and Nasdaq, which rose +0.52% and +0.48%, respectively. The NYSE composite lost -0.16%. Despite the record closes, market breadth was negative, with gainers 0.93:1 losing stocks. Most SPX market segments closed higher. Leaders were health care, consumer services, and consumer goods, which rose at least +0.86%. Financials rose +0.62%. Laggards were industrials, oil and gas, and basic materials, which fell at least -0.02%.

    NYSE volume rose +11.6% to 639.45 million shares, 0.89x the 20-day moving average volume.

    Economic reporting was light, with lower than expected March ISM New York and better than expected February factory orders.

    From its record 1562.17 prior close, the SPX traded to 1570 in early trading and rose to a mid-morning 1573.66 intraday high. The index traded narrowly around 1572 through mid-afternoon, but then weakened to 1566 late in the session before rallying to 1570.25 at the close, -0.37% below its previous December 31, 2007 1576.09 all-time intraday high. Market volatility fell. From its 13.58 prior close, the VIX opened at 13.10 and closed at 12.78, down -5.89%. The all-time closing low was 11.26, set June 30, 1993.

    On +56.3% greater volume, the DJ Transports fell -1.22%, compared to the DJI's +0.61% gain. The index traded narrowly higher at the open, but reversed lower by mid-morning and fell to a late 6,071.61 intraday low. The TRAN ended at 6,087.04, -3.09% below its recent March 14th all-time high. The index closed -1.48% below its 20-day moving average, but +1.41%, +8.31%, and +13.8% above its respective 50-, 100-, and 200-day moving averages.

    Technical factors were little changed. SPX relative strength (RSI) rose to 62.83, from 59.65 the prior day, in a neutral range. The CBOE put/call skew rose +1.34% to 122.84, from 121.21 the prior day. U.S. Treasury bond prices were little changed.

    This week, the SPX and DJI are up +.07% and +0.57%, respectively, while the Nasdaq and NYSE composite are down -0.39% and -0.16%. Last week, the SPX, DJI, Nasdaq, and NYSE composite closed up +0.79, +0.46%, +0.69%, and +0.46down -0.24%, -0.01%, -0.13%, and -0.56%, respectively. In March, the SPX, DJI, Nasdaq, and NYSE composite closed up +3.60%, +3.73%, +3.40%, and +2.69%, respectively. In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +10.1%, +11.9%, +7.79%, and +11.2%, respectively. All closed at least +5.91% higher in 2012.

    Immediate SPX support is 1565 and 1559 (the 5- and 10-day moving averages). Resistance is 1576.09 (the SPX record intraday high).

    Distribution day count. 4, 4, 2, and 2 for the SPX, Nasdaq, DJI, and NYSE composite, respectively.

    In Asia, equity markets closed mixed, with Tokyo rebounding after 3 consecutive daily distributions. Hong Kong and Shanghai closed modestly lower and are lower on the year. Markets focused on better than expected U.S. factory orders and the start of the Bank of Japan's two-day policy meeting, its first under the newly appointed governor.

    In Tokyo, the NKY rose +2.99% on a -14.4% volume decrease. The HSI fell -0.14% on a -18.8% volume decrease. The SHCOMP fell -0.11% on a -8.82% volume decrease. The NKY closed +0.60% above its 20-day moving average. The HSI and SHCOMP closed -2.67% and -0.69% below their respective 20-day moving averages.

    This week, the NKY is down -0.29%, the HSI is up +0.17%, and the SHCOMO is down -0.51%. Last week, the NKY closed up +0.48%, the HSI rose +0.83%, while the SHCOMP lost -3.94%, respectively. In April, the NKY is down -0.29%, the HSI is up +0.17%, and the SHCOMP is down -0.51%. In March, the NKY closed is up +7.25%, while the HSI and SHCOMP lost -3.13% and -5.45%, respectively. In 2013, the NKY is up +18.9%. The HSI is down -1.41%. The SHCOMP is down -1.93%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 12,362.20, compared to 12,003.43 at Tuesday's close, -2.16% below its recent March 21st high close. The index gapped higher to open above 12,100 and rallied through 12,200 by mid-session and closed at the intraday high. The index ended +0.60%, +6.23%, +16.0%, and +26.8% above its respective 20-, 50-, 100-, and 200-day moving averages. All market segments closed at least +0.24% higher. Leaders were consumer services, telecommunications, and consumer goods, which rose at least +2.86%. Financials rose +1.04%. Laggards were industrials, technology, and basic materials.

    In China, the Hang Seng closed 22,337.49, compared to 22,367.82 at Tuesday's close, and -6.23% off its January 30th 23,822.06 high. The index opened at its 22,527.12 intraday higher, but reversed lower by mid-morning and then traded narrowly through the close. Most market segments closed lower. Leaders were utilities, technology, and industrials, which rose at least +0.15%. Financials fell -0.15%. Laggards were consumer service, basic materials, and oil and gas, which fell at least -0.43%.

    In Shanghai, the SHCOMP closed at 2,225.30, from 2,227.74 the prior day. The index opened modestly higher and reached a 2,241.28 mid-morning high, but reversed lower by mid-afternoon, when it fell to a late 2217.46 low. The index closed -9.57% below its 2,434.48 February 5th high, but up +13.6% from its December 3rd 1,959.77 low. The SHCOMP closed -2.67% and -4.36% below its respective 20- and 50-day moving averages. Most market segments closed lower. Leaders were telecommunications, financials, and health care, which rose at least +0.38%. Laggards were consumer goods, technology, and consumer services, which fell at least -0.68%.

    In Europe, the major equity indexes are lower, with greater weakness in Italy and Spain. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -0.75%, -0.46%, -0.48%, and -0.21%, respectively. Only the FTSE 100 is above its 20-day moving average. The Euro Stoxx50 is also below its 50-day moving average. All are above their respective 100- and 200-day moving averages. The Spanish IBEX is down -1.38%. The Italian FTSE MIB is down -1.74%.

    Economic reporting is light. News focuses on today's U.S. economic reporting.

    From its prior 2,679.80 close, the Euro Stoxx 50 gapped lower to open at 2,665, then rallied to 2,676.90 by mid-morning. The index fell into the afternoon session to a low of 2,657.25. Currently, the index is at 2,660.16. Most market segments are lower. Leaders are basic materials, technology, and consumer goods, which are up at least +0.07%. Laggards are utilities, financials, and telecommunications, which are at least -1.21% lower.

    This week, the Euro Stoxx50, CAC 40, and DAX are up +1.44%, +0.78%, +1.52%, and +1.68%, respectively. Last week, the Euro Stoxx50, CAC 40, and DAX fell -2.15%, -1.03%, -1.47%, respectively, while the FTSE 100 rose +0.30%. In March, the Euro Stoxx50 closed off -0.36%, while the FTSE 100, CAC 40, and DAX gained are up +0.80%, +0.23%, and +0.69%, 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 +0.98%, +9.56%, +4.04%, and +4.12%, 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%, unchanged from 0.15400% the prior day. USD 3-month LIBOR is 0.28110%, down from 0.28260% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.
    • The US Libor-OIS (LOIS) spread is 14.11 bps, compared to 13.886 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 12.90 bps, up from 12.80 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 -18.131 bps, compared to -18.157 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 4.89%, compared to 4.94% the prior day. The recent low was 4.73% on March 12th. Italian 10-year debt yields are at 4.58%, compared to 4.62% the prior day. Its recent low was 4.13% on January 25th. German 10-year debt yields are 1.30%, compared to 1.31% the prior day, and just better than a 6-month low yield.
    • The U.S. government overnight repo rate is 16 bps, down from 22 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 mixed, with 2- and 10-year maturities yielding 0.238% and 1.857%, respectively, compared to 0.238% and 1.857% Tuesday. The yield curve narrowed, with the 2- to 10-year spread at +1.619%, compared to 1.621% 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 stronger compared to the Japanese yen and euro, but weaker compared to the British pound. The dollar trades at US$82.920, compared to a US$83.065 intraday high and US$82.924 the prior day, and better compared to its US$81.468 50-day, US$80.750 100-day, and US$80.974 200-day averages. The euro trades at US$1.2817, compared to a US$1.2790 intraday low and US$1.2820 the prior day. The euro trades worse compared to its US$1.3166 50-day and US$1.3136 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥93.48, compared to ¥93.44 the prior day. The yen trades better than its 50-day moving average ¥93.61.
    • Citigroup Economic Surprise Index is 13.60, up from 12.20 the prior day. The index is worse compared to its respective +18.98 and +23.71 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, lower precious metals, lower aluminum and copper, and mostly higher agriculture prices.


    Volatility, Skew:
     

    • The VIX closed at 12.78, down -5.89% from 13.58 at the prior close. The VIX is -0.78% below its 12.88 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 down -0.39% to 19.54, from 20.16 at the prior day's close. The V2X index trades +1.78% above its 19.20 20-day moving average, -24.6% below the 25.90 30-day high, and +31.4% above the 14.88 30-day low.
    • The Hang Seng volatility index (VHSI) closed at 14.51, down -3.52% from 15.04 the prior day. The VHSI index trades -7.53% below its 15.69 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.
    • CBOE skew rose +1.34% to 122.84, from 121.21 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 closes were 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:
     

    • At 8:15, March ADP employment change was 158K, compared to 200K survey and 198K prior, and the lowest since October 2012.
    • At 10:00, March ISM non-manufacturing composite, with 55.5 survey and 56.0 prior.


    Overseas News:
     

    • China - March non-manufacturing PMI was 55.6, compared to 54.5 prior. HSBC services PMI improved to 54.3, from 52.1 prior.
    • Hong Kong - March purchasing managers' index was 50.5, compared to 51.2 prior.
    • United Kingdom - March PMI construction was 47.2, compared to 48.0 survey and 46.8 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 8 in March, when the index closed at 1569.19, compared to 1514.68 the prior month and 1416.18 four months prior. The sell countdown stemming with the May 2011 perfection rose to 11. The index closed +9.78% 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 27th, the index closed up +0.79% at 1569.19, compared to 1556.89 the prior week and 1518.20 close four weeks prior. The sell countdown associated with the March 8th perfection progressed to 4. The index closed +2.87% 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 Tuesday, the SPX rose +0.52% to close at 1570.25, compared to 1562.17 the prior day and 1563.77 4 days prior. The sell setup progressed to 7. The 4 sell countdown associated with the March 13th perfection was unchanged. The index closed +0.54% above the 1561.74 risk level, based on the SPX's March 5th +18.27 point trading range and 1543 high.

    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 March, the BKX rose +4.26% to end at 56.28, compared to 53.98 at the end of February and 49.56 four months prior. The sell setup rose to 7.

    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 28nd, the BKX closed at 56.28, down -0.60% compared to 57.52 the prior week and 54.15 four weeks prior. The sell setup progressed to 4. The index closed -1.14% below the 56.93 risk level, which is based on the February 22nd 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. On March 19, a bearish price flip initiated a buy setup with a 56.84 close. On April 1st, the buy setup perfected. Tuesday, the index closed at 55.81, down -0.04% from 55.83 the prior day and 56.63 four days prior. The buy countdown associated with the March 14th setup progressed to 2. The index closed +5.46% 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 March at 12.70, compared to 15.51 at the end of February and 15.36 at the end of November. The buy setup progressed to 3.

    On a weekly basis, the VIX perfected a buy setup on January 27, 2012, and a sell setup on June 8th, followed by another perfected buy setup on August 10th. Last week, the VIX fell -6.41% to end at 12.70, compared to 13.57 the prior week, and 15.36 4 weeks prior. The buy setup progressed to 4. The 12 buy countdown associated with the August 10th perfection was unchanged.

    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. Tuesday, the VIX fell -5.89% to 12.78, from 13.58 at the prior close and 12.77 at the 4 days' prior close. The bearish price flip canceled a 3 buy setup and initiated a sell setup. The 3 buy countdown associated with the March 15th setup was unchanged. The VIX closed +22.8% above the risk level.

    EUR, USD Cross - On a monthly basis, Euro Dollar cross perfected a buy setup on May 30, 2008, at 1.554. Subsequent monthly trends were weak until December 31, 2009, when 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 buy 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 retest the July 2010 lows. In March, a bearish price flip canceled a sell setup and initiated a buy setup. The cross ended March at 1.2819, down -1.87% compared to 1.3057 the prior month and 1.2960 4 months prior. The buy countdown progressed to 9.

    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 28th, the index fell -0.67% to end at 1.2989, from 1.3076 the prior week and 1.3194 4 weeks prior. The buy setup progressed to 6. Since February 1st, the 9 sell countdown associated with the September 28th perfection is unchanged. The cross closed -4.23% 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 Tuesday's -0.23% lower close, the EURUSD cross ended at 1.2820, compared to 1.2849 the prior day and 1.2780 four days prior. The sell setup progressed to 2. The 10 buy countdown was unchanged. The cross closed -4.60% 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 March at 1.8487%, compared to 1.8808% the prior month and 1.6901% 4 months prior. The sell setup rose to 7.

    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 1.8487, compared to 1.9615% the prior Friday and 1.8412% four weeks prior. The buy setup rose to 3. 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 Tuesday, the rate ended at 1.8590%, compared to 1.8314% the prior day and 1.9094% four days prior. The buy setup progressed to 5. The 7 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 (at 8,828.26), but subsequently traded narrowly until November, 2012, when the index rose +5.80%, following an increase of +1.50% in October, and initiated a sell setup. The index closed March 12,397.91, up +7.25% from 11,559.36 the prior month and 10,395.18 four months prior, its sixth consecutive monthly gain. The sell setup rose to 5. The 11 buy countdown associated with the April 2009 perfection was unchanged.

    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 29th, the index closed up +0.48% at 12,397.91, compared to 12,338.53 the prior week and 11,606.38 four weeks' prior. The 12 sell countdown progressed was unchanged. The index closed +21.6% above resistance.

    On a daily basis, the November 15th bullish price flip initiated a sell setup, which perfected on November 30th. The associated sell countdown completed on December 28th. 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. On March 27th, a bearish price flip initiated a buy setup. Wednesday, the index rose +2.99% to 12,362.20, compared to 12,003.43 the prior day and 12,335.96 four days prior. The bullish price flip canceled a 5 buy setup and initiated a sell setup. The 2 sell countdown associated with the March 15th perfection was unchanged.

    HSI - On a monthly basis, the HSI perfected a buy countdown on March 31, 2009, and two subsequent perfected upward setups on December 31, 2009 and May 31, 2011. In February, the index closed at 23,020.27, completing the sell countdown stemming from the May 2011 perfection. The completed countdown set a 27,194.16 risk level. After five consecutive monthly increases, the HSI fell in February and again in March. The index ended March at 22,299.63, compared to 23,020.27 the prior month and 22,880.22 four months prior. The sell setup rose to 7.

    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 28th, the index closed at 22,299.63, compared to 22,115.30 the prior week and 22,880.22 four weeks prior. The buy setup progressed to 8. The 10 sell countdown stemming from the November 9th perfection was unchanged. The index closed -8.08% 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 Wednesday, the HSI fell -0.14% to 22,337.49, from 22,367.82 the prior day, and 22,311.08 four days prior. The sell setup progressed to 7. The index closed -6.46% 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 March, the index closed at 2,236.62, compared to 2,365.59 the prior month and 1,980.12 four months prior. The sell setup rose to 4.

    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 29th, the index closed the week down -3.94% at 2,236.62, compared to 2,328.28 the prior week and 2,359.51 four weeks prior. The bearish price flip canceled a 1 sell setup and initiated a buy setup. The 1 sell countdown associated with the February 8th perfection was unchanged.

    On a daily basis, 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. Wednesday, the index fell -0.11% to 2,225.30, from 2,227.74 at the prior close and 2,236.62 4 days prior. The buy setup progressed to 7. 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 8 in March. The index closed at 2,624.02, compared to 2,633.55 the prior month and 2,575.25 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 28th, the index fell -2.15% to close at 2,624.02, compared to 2,681.67 the prior week and 2,616.75 at the 4 weeks' prior close. The sell setup progressed to 4. The 3 sell countdown stemming from the January 18th perfection was unchanged.

    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. On March 18th, a bearish price flip initiated a buy setup, which perfected on March 28th, and initiated a buy countdown. Tuesday, the index rose +2.13% to 2,679.80, compared to 2,624.02 the prior day and 2,649.28 at the prior 4 days' close. The bullish price flip initiated a sell setup. The index closed -4.41% below the risk level.

    1Q2013 Earnings. Earnings reports are positive, beating on both EPS and sales/revenues. Of 19 reporting companies, 14 or 73.7% surprised positively on earnings, beating by an average +1.32%. Of reporting companies, 10 or 52.6% 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 ($110.69), and 12.6x estimated 2014 earnings ($123.54). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013 and 2014 earnings to grow +6.87% and +11.6%, respectively.

    Options. Options markets are mixed. Composite options are bullish, index options are bullish, and equity options markets are bearish. The composite put/call ratio is 0.86, compared to 1.01 the prior day, and better compared to its 5- and 10-period moving averages of 0.89 and 0.89, respectively. The index put/call ratio fell to 0.74, from 0.83 the prior day, and better compared to its 5- and 10-period moving averages of 0.81 and 0.78, respectively. The equity put/call ratio closed the day at 0.96, compared to 1.08 the prior day, and worse compared to its 5- and 10-period moving averages of 0.95 and 0.97, respectively.

    NYSE Indicators. Volume rose +11.6% to 639.45 million shares, from 572.99 million shares the prior day, 0.89x the 716.75 million share 20-day moving average. Despite the day's index gains, market breadth was negative, and up volume lagged down volume. Advancing stocks lagged decliners by -111 (compared to -1,155 the prior day), or 0.93:1. Up volume was 0.86:1 down volume.

    BKX. Volume rose +23.6%, and the KBW bank index closed at 55.81, down -0.04% from 55.83 at the prior close. Volume rose to 45.386 million shares, from 36.727 million shares the prior day, or 0.74:1x the 61.036 million share 15-day moving average. The index moved higher at the open and set an early 56.04 intraday high, but reversed lower moving into the session's final hour, and fell to a late 55.67 intraday low.

    Large cap banks outperformed the regional banks, as the KRX fell -0.77%.

    This week, the BKX is down -0.84%, compared to a -1.56% loss the prior week. In March, the BKX gained +4.26%, compared to +0.28% and +4.97% in February and January, respectively. For the year, the BKX is up +8.83%, worse than the SPX's +10.1% 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 -3.69% below its 57.95 April 23, 2010 close (the post-2008 high point), and +71.4% above the 32.56 low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +46.1% in the same period.

    Technical indicators were little changed, as the index closed below 5-, 10-, and 20-day moving averages. The index closed -1.25%, +1.03%, +5.85%, and +11.3% 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 +5 bps. The 50-day moving average rose +4 bps. Its 100-day moving average rose +6 bps, and the 200-day moving average rose +6 bps. The 20-day closed (by +1.27 points) above the 50-day, and the gap was unchanged. The 50-day moving average closed (by +5.08 points) above the 200-day moving average, and the gap narrowed -2 bps. The 100-day moving average closed (by +2.56 points) above the 200-day moving average since March 19th, and the gap was unchanged.

    The directional movement indicator improved to -0.978, from -1.022 the prior day. Relative strength fell to 45.39, from 48.60 the prior day and moving toward the middle of a neutral range. Next resistance is 56.01; next support is at 55.64.

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