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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 Advance After Mixed Alcoa; Japan Flat, China Up 0 comments
    Apr 9, 2013 9:18 AM

    This morning. The U.S. equity market uptrend is under pressure, with the SPX, Nasdaq, and NYSE composite lower in 2Q2013. Monday, equities gained moderately, though on weak volume. The SPX recaptured its 5- and 10-day moving averages. The Nasdaq and NYSE composite closed below their 5-, 10-, and 20-day moving averages. All remain above their 50-, 100-, and 200-day moving averages. Momentum and trend indicators suggest many indexes are near price exhaustion levels.

    In Asia, Tokyo closed fractionally lower after 4 consecutive strong daily gains. Hong Kong and Shanghai had moderate gains, though both are lower in 2013. European markets are moderately higher. Commentary focuses on the weaker Japanese yen and the start of earnings season.

    U.S. Treasury yields are higher, with the 10-year at 1.751%, compared to 1.746% the prior day. U.S. repo rates are 17 bps, unchanged from 17 bps the prior day. Spanish and Italian 10-year debt yields are 4.75% and 4.36%, respectively. The U.S. dollar is lower. U.S. options markets are neutral to bullish. CBOE skew rose +0.74% to 119.21, from 118.34 the prior day. Commodities prices are mostly higher.

    The SPX is +45.3% above the 1074.77 October 4, 2011, intraday low. Last week, the SPX fell -1.01%, compared to a +0.79% gain the prior week. In April, the SPX is down -0.39%, compared to a +3.60% gain in March. In 2013, the SPX is up +9.60%. In 2012, the SPX closed up +13.1%. Next resistance is at 1567.88. First support is at 1553.44.

    Last week, the BKX fell -2.03%, following a loss of -0.60% the prior week. In April, the BKX is off -0.96%, compared to a gain of +4.26% in March. This year, the BKX is up +8.70%, 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 higher, but near the middle of a 1559-1563 range. After a fair value adjustment of -1.78 points, SPX equity futures are at 1561.25, up +3.78 points. The SPX opens +0.33%, +2.00%, +5.55%, and +8.39% above its respective 20-, 50-, 100-, and 200-day moving averages.

    Monday. On lower and below average volume, U.S. equity markets reversed early losses by mid-afternoon and rallied to close moderately higher at the day's highs. The SPX gained +0.63%, followed by the Nasdaq, NYSE composite, and DJI, which gained +0.57%, +0.57%, and +0.33%, respectively. Market breadth was positive, with gainers 2.22:1 losing stocks. Most SPX market segments closed higher. Leaders were consumer goods, financials, and consumer services, which rose at least +1.01%. Laggards were technology and health care, which rose at least +0.13%, and telecommunications, which fell at least -0.43%.

    NYSE volume fell -19.7% to 582.78 million shares, 0.81x the 20-day moving average volume.

    Economic reporting focused on Friday's disappointing U.S. March employment report. Trading desks attributed the afternoon's gains to a liquidity "air pocket" after early profit taking in early session.

    From its 1553.28 prior close, futures pointed to modest gains; instead, the SPX fell to a 1548.63 low in early trading, but reversed higher by mid-afternoon and rallied in the final hours to close at the 1563.07 intraday high. The index closed -0.46% below its April 2nd 1570.25 record close. Market volatility fell. From its 13.92 prior close, the VIX rose to 14.50 with the early sell-off, but reversed lower by late morning and closed at 13.19, the intraday low, and off -5.24%. The all-time closing low was 11.26, set June 30, 1993.

    On -34.0% lower volume, the DJ Transports rose +0.90%, compared to the DJI's +0.33% gain. The index moved higher at the open, then traded narrowly around breakeven until early afternoon, then rallied through the afternoon session to close just shy of its 6,092.55 intraday high. The TRAN ended at 6,091.59, -3.02% below its recent March 14th all-time high. The index closed -1.14% below and +1.12% above its respective 20- and 50-day moving averages, but +7.67% and +13.5% above its respective 50-, 100-, and 200-day moving averages.

    Technical factors were little changed. SPX relative strength (RSI) rose to 56.89, from 52.71 the prior day, in a neutral range. The CBOE put/call skew rose +0.74% to 119.21, from 118.34 the prior day. U.S. Treasury bond prices fell, as the 10-year rose back to 1.75%, from below 1.70% the prior day.

    Last week, the SPX, DJI, Nasdaq, and NYSE composite closed down -1.01%, -0.09%, -1.95%, and -1.17%, respectively, compared to +0.79, +0.46%, +0.69%, and +0.46%, respectively, the prior week. In April, the SPX, DJI, Nasdaq, and NYSE composite are -0.39%, +0.24%, -1.39%, and -0.61%, 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 +9.60%, +11.5%, +6.71%, and +7.20%, respectively. All closed at least +5.91% higher in 2012.

    Immediate SPX support is 1553, then 1532 (the 50-day moving average). Resistance is 1558 (the 20-day moving average), then 1560 (the 5-day moving averages), and 1576.09 (the SPX record intraday high).

    Distribution day count. 6, 6, 4, and 4 for the SPX, Nasdaq, DJI, and NYSE composite, respectively.

    In Asia, after a strong open, Japanese equity markets closed fractionally lower. Hong Kong and Shanghai closed moderately higher on the day, but lower in 2013. Commentary focuses on Chinese CPI, which was better than expected, the weaker Japanese yen, which trades at nearly ¥100:US$1, and Alcoa's (NYSE:AA) better-than-expected 1Q2013 earnings.

    In Tokyo, the NKY fell -0.002% on a -8.38% volume decrease. The NKY closed +6.00% above its 20-day moving average. The HSI rose +0.70% on a -0.88% volume decrease. The SHCOMP rose +0.64% on a -3.90% volume decrease. The HSI and SHCOMP are -2.31% and -2.115% below their respective 20-day moving averages.

    This week, the NKY is up +2.80%, the HSI is up +0.66%, and the SHCOMO is up +0.02%. Last week, the NKY closed up +3.51%, the HSI fell -2.57%, and the SHCOMP lost -0.51%, respectively. In April, the NKY is up +6.41%, the HSI is down -1.93%, and the SHCOMP is down -0.48%. 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 +26.9%. The HSI is down -3.47%. The SHCOMP is down -1.91%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 13,192.35, compared to 13,192.59 at Monday's new 2013 high close. The index gapped higher to set an early 13,331.39 intraday high, then eased to breakeven by mid-morning and then to a 13,151.73 mid-afternoon intraday low. The index ended fractionally lower, its first decline since April 2nd. The index ended +6.00%, +11.7%, +22.1%, and +34.2% above its respective 20-, 50-, 100-, and 200-day moving averages. Most market segments closed higher. Leaders were oil and gas, industrials, and telecommunications, which rose at least +1.18%. Laggards were utilities, consumer services, and financials, which fell at least -1.41%.

    In China, the Hang Seng closed Tuesday at 21,870.34, compared to 21,718.05 at Monday's close, and -8.19% off its January 30th 23,822.06 high. The index opened at its 21,800 intraday low and rose in early trading to its 21,979.08 intraday high. The index traded narrowly lower through the session's remainder, moderating the day's gain. Most market segments closed higher. Leaders were technology, consumer goods, and basic materials, which rose at least +2.24%. Laggards were financials, which rose +0.53%, and utilities and industrials, which fell at least -0.05%.

    In Shanghai, the SHCOMP closed Tuesday at 2,225.78, from 2,211.59 the prior day. The index opened modestly higher and reached a 2,234.53 mid-morning high, but then traded narrowly lower through the close. The index closed -9.55% below its 2,434.48 February 5th high, but up +13.6% from its December 3rd 1,959.77 low. The SHCOMP closed -2.15% and -4.21% below its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were technology, consumer goods, and basic materials, which rose at least +0.97%. Financials rose +0.80%. Laggards were oil and gas, which rose +0.02%, and telecommunications and health care, which fell at least -0.05%.

    In Europe, the major equity indexes are moderately higher, though the Euro Stoxx50 remains lower on the year. On the day, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.60%, +0.46%, +0.63%, and +0.21%, respectively. All remain below their respective 20- and 50-day moving averages, though the Euro Stoxx50 is also below its 100-day moving average. All others are above their respective 100- and 200-day moving averages. The Spanish IBEX is up +1.25%. The Italian FTSE MIB is up +1.16%.

    Economic reporting focuses on Alcoa's (AA) better than expected earnings.

    From its prior 2,589.25 close, the Euro Stoxx50 opened at nearly 2,605 and traded to a mid-morning 2,614.16 intraday high before easing back to 2,600 by mid-session. The index currently trades at 2,605.80. Most market segments are higher. Leaders are utilities, financials, and telecommunications, which are up at least +1.46%. Laggards are consumer services, technology, and consumer goods, which are down at least -0.05%.

    This week, the Euro Stoxx50, CAC 40, and DAX are up +0.70%, +0.83%, +0.67%, and +0.25%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX fell -1.48%, -2.53%, -1.82%, and -1.75%. In April, the Euro Stoxx50, CAC 40, and DAX are down -0.79%, -1.71%, -1.17%, and -1.50%, respectively. 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 2013, the Euro Stoxx50 is down -1.24%, while the FTSE 100, CAC 40, and DAX are up +6.85%, +1.29%, and +0.86%, 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%, unchanged from 0.15500% the prior day. USD 3-month LIBOR is 0.27810%, down from 0.27940% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.
    • The US Libor-OIS (LOIS) spread is 14.43 bps, compared to 14.74 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 12.50 bps, down 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 -16.807 bps, compared to -16.934 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 4.75%, compared to 4.75% the prior day. The recent low was 4.73% on March 12th. Italian 10-year debt yields are at 4.36%, compared to 4.34% the prior day. Its recent low was 4.13% on January 25th. German 10-year debt yields are 1.27%, compared to 1.24% the prior day, and just better than a 6-month low yield. The record low was 1.167% on July 20, 2012.
    • The U.S. government overnight repo rate is 17 bps, unchanged from 17 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 0.230% and 1.751%, respectively, compared to 0.230% and 1.746% Monday. The yield curve widened, with the 2- to 10-year spread at +1.521%, compared to 1.516% 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 euro, British pound, and Japanese yen. The dollar trades at US$82.564, compared to a US$82.471 intraday low and US$82.752 the prior day, and better compared to its US$81.693 50-day, US$80.811 100-day, and US$80.985 200-day averages. The euro trades at US$1.3036, compared to a US$1.3068 intraday high and US$1.2962 the prior day. The euro trades worse compared to its US$1.3130 50-day and US$1.3145 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥98.98, compared to ¥99.36 the prior day. The yen trades worse than its 50-day moving average ¥94.19.
    • Citigroup Economic Surprise Index fell to 2.90, down from 4.00 the prior day. The index is worse compared to its respective +6.86 and +14.58 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 mostly higher, with higher energy, lower precious metals, higher aluminum and copper, and mixed agriculture prices.

    Volatility, Skew:

    • The VIX closed at 13.19, down -5.24% from 13.92 at the prior close. The VIX is +1.40% above its 13.01 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 -5.99% to 20.20, from 21.49 at the prior day's close. The V2X index trades +3.64% above its 19.49 20-day moving average, -22.0% below the 25.90 30-day high, and +35.8% above the 14.88 30-day low.
    • The Hang Seng volatility index (VHSI) closed at 16.75, down -0.89% from 16.90 the prior day. The VHSI index trades +6.80% below its 15.68 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.
    • CBOE skew rose +0.74% to 119.21, from 118.34 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 7:30, March NFIB small business optimism was 89.5, with survey of 89.8 and 90.8 prior.
    • At 10:00, February wholesale inventories, with +0.5 survey and +1.2% prior. Wholes MoM sales, with +1.3% survey and -0.8% prior.

    Overseas News:

    • Australia - March NAB business conditions were -7, compared to -3 prior.
    • China - March YoY CPI was +2.1%, compared to +2.5% survey and +3.2% prior.
    • France - March Bank of France business sentiment was 93, compared to 95 survey and prior.
    • United Kingdom - February MoM industrial production rose +1.0%, compared to +0.4% survey and -1.3% revised 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 April 5th, the index closed down -1.01% at 1553.28, compared to 1569.19 the prior week and 1551.18 close four weeks prior. The 4 sell countdown associated with the March 8th perfection was unchanged. The index closed +1.83% 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 Monday, the SPX rose +0.63% to close at 1563.07, compared to 1553.28 the prior day and 1570.25 4 days prior. The buy setup progressed to 4. The sell countdown associated with the March 13th perfection progressed to 5. The index closed +0.09% 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 April 5th, the BKX closed at 55.14, down -2.03% compared to 56.28 the prior week and 56.59 four weeks prior. The bearish price flip canceled a 4 sell setup and initiated a buy setup. The index closed -3.14% 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. Monday, the index closed at 55.74, up +1.01% from 55.14 the prior day and 55.81 four days prior. The 4 buy countdown associated with the March 14th setup was unchanged. The index closed +5.33% 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 rose +9.61% to end at 13.92, from 12.70 the prior week, and 12.59 4 weeks prior. The bullish price flip cancelled a 4 setup progressed and initiated a sell setup. 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. Monday, the VIX fell -5.24% to 13.19, from 13.92 at the prior close and 12.78 at the 4 days' prior close. The sell setup rose to 5. The buy countdown associated with the March 15th setup progressed to 4. The VIX closed +26.7% 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 April 5th, the index rose +1.34% to end at 1.2991, from 1.2819 the prior week and 1.3005 4 weeks prior. The buy setup progressed to 7. Since February 1st, the 9 sell countdown associated with the September 28th perfection is unchanged. The cross closed -2.91% 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 Monday's +0.14% higher close, the EURUSD cross ended at 1.3009, compared to 1.2991 the prior day and 1.2820 four days prior. The sell setup progressed to 5. The 10 buy countdown was unchanged. The cross closed -2.97% 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 1.7128, compared to 1.8487% the prior Friday and 2.0427% four weeks prior. The bearish rate flip canceled a 3 buy setup and initiated a sell 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 Monday, the rate ended at 1.7460%, compared to 1.7128% the prior day and 1.8590% four days prior. The buy setup perfected. The buy countdown associated with the March 4th perfection progressed to 11. 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 April 5th, the index closed up +3.51% at 12,833.64, compared to 12,397.91 the prior week and 12,283.62 four weeks' prior. The sell countdown progressed completed. The index closed +25.9% 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. Tuesday, the index fell -0.002% to 13,192.35, from 13,192.59 the prior day and 12,362.20 four days prior. The sell setup progressed to 5. The 5 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 April 5th, the index closed at 21,726.90, from 22,299.63 the prior week and 23,091.95 four weeks prior. The buy setup perfected and canceled a 10 sell countdown (stemming from the November 9th perfection), and initiated a buy countdown. The index closed -9.26% 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 Tuesday, the HSI rose +0.70% to 21,870.34, from 21,718.05 the prior day and 22,367.82 four days prior. The buy setup progressed to 3. The index closed -8.42% 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 April 3rd, the index closed the week down -0.51% at 2,225.30, compared to 2,236.62 the prior week and 2,318.61 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, 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. Tuesday, the index rose +0.64% to 2,225.78, from 2,211.59 at the prior close and 2,234.40 4 days prior. The buy setup perfected. 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 April 5th, the index fell -1.48% to close at 2,585.28, compared to 2,624.02 the prior week and 2,728.78 at the 4 weeks' prior close. The bearish price flip canceled a 4 sell setup and initiated a buy setup. 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. Monday, the index rose +0.15% to 2,589.25, from 2,585.28 the prior day and 2,679.80 at the prior 4 days' close. The sell setup progressed to 2. The index closed -5.02% below the risk level.

    1Q2013 Earnings. Earnings began in earnest after the April 8th market close, when Alcoa (AA) surprised with EPS of $0.11, +37.5% better than the +$0.08 consensus, though revenues fell -0.86% short of estimates. JPM commences the bank's earning season with its release on April 12th. Of 22 reporting companies, 16 or 72.7% surprised positively on earnings, but by a disappointing +0.10% surprise average. Of reporting companies, 11 or 50.0% have reported sales and revenues in excess of estimates.

    Valuation. The SPX trades at 15.0x estimated 2012 earnings ($103.41), 14.0x estimated 2013 earnings ($110.69), and 12.6x estimated 2014 earnings ($123.59). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013 and 2014 earnings to grow +7.04% and +11.7%, respectively.

    Options. Options markets are neutral to bullish. Composite options are neutral, index options are bullish, and equity options markets are neutral. The composite put/call ratio is 0.91, compared to 1.04 the prior day, and better compared to its 5- and 10-period moving averages of 0.99 and 0.94, respectively. The index put/call ratio fell to 0.81, from 0.855 the prior day, and better compared to its 5- and 10-period moving averages of 0.90 and 0.86, respectively. The equity put/call ratio closed the day at 0.94, compared to 1.15 the prior day, and worse compared to its 5- and 10-period moving averages of 1.03 and 0.99, respectively.

    NYSE Indicators. Volume fell -19.7% to 582.78 million shares, from 725.55 million shares the prior day, 0.81x the 716.81 million share 20-day moving average. Market breadth was positive, and up volume led down volume. Advancing stocks led decliners by +1,136 (compared to -129 the prior day), or 2.22:1. Up volume was 3.57:1 down volume.

    BKX. Volume fell -25.7%, and the KBW bank index closed at 55.74, up +1.09% from 55.14 at the prior close. Volume fell to 47.944 million shares, from 64.544 million shares the prior day, or 0.87:1x the 55.297 million share 15-day moving average. The index moved lower in early trading to the 54.77 intraday low, but reversed higher in early afternoon and ended at the intraday high.

    Large cap banks outperformed the regional banks, as the KRX rose +0.68%.

    This week, the BKX is up +1.09%. Last week, the BKX closed off -2.03%, compared to a loss of -0.60% the prior week. In April, the BKX is down -0.96%. 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 +8.70%, worse than the SPX's +9.60% 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 -3.81% below its 57.95 April 23, 2010 close (the post-2008 high point), but +71.2% above the 32.56 low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +45.3% in the same period.

    Technical indicators improved, as the index recaptured its 5-day moving average, but remained below its 10- and 20-day moving averages. The index closed -1.13% below and +0.70% above its 20- and 50-day moving averages, but +5.21% and +10.6% above its respective 100- and 200-day moving averages. On April 2nd, the 20-day moving average switched to a negative 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 fell -4 bps. The 50-day moving average rose +3 bps. Its 100-day moving average rose +8 bps, and the 200-day moving average rose +5 bps. The 20-day closed (by +1.02 points) above the 50-day, and the gap narrowed -8 bps. The 50-day moving average closed (by +4.97 points) above the 200-day moving average, and the gap narrowed -2 bps. The 100-day moving average closed (by +2.59 points) above the 200-day moving average since March 19th, and the gap widened +2 bps.

    The directional movement indicator improved to -9.818, from -16.546 the prior day. Relative strength rose to 49.83, from 43.45 the prior day and moving toward the middle of a neutral range. Next resistance is 56.06; next support is at 55.09.

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