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Gary Townsend - Since 2007, a founding partner, CEO and Portfolio Manager of Hill-Townsend Capital LLC, a long/short equity financial sector fund based in Chevy Chase, Maryland. Mr. Townsend has 30 years banking, regulatory, and investment experience. He started his business career in 1978, as... More
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  • U.S. Futures Rebound Modestly; U.S. Equity Trend Moves To Correction 0 comments
    Apr 18, 2013 9:33 AM

    This morning. The U.S. equity markets extended uptrend ended and is now in correction. Wednesday, all major indexes fell sharply on higher volume, erasing most or all of the prior day's gains. All closed below their respective 5-, 10-, and 20-day moving averages. All are lower on the week. The SPX, Nasdaq, and NYSE composite are lower in April.

    Yesterday, the BKX fell -2.01%, underperforming the SPX's -1.43% loss. Momentum and trend indicators suggest that the SPX will likely fall to test support at 1501.48.

    Today, in Asia, the major indexes closed mixed, with distribution in Tokyo, a moderate loss in Hong Kong, and modest gain in Shanghai. Chinese equity markets are in correction. European markets are moderately higher after distributions yesterday. Commodities are mostly higher. Economic reporting is on the latest weeks' jobless claims and at 10:00, the April Philadelphia Fed report. Most commentary focuses on earnings and strong sovereign bond auctions in France and Spain.

    U.S. Treasury yields are higher, with the 10-year at 1.715%, compared to 1.695% the prior day. U.S. repo rates are 19 bps, up from 18 bps the prior day. Spanish and Italian 10-year debt yields are 4.61% and 4.19%, respectively, and continue to trend lower. The U.S. dollar is mixed. U.S. options markets are neutral to bearish. CBOE skew fell -2.74% to 120.70, from 124.10 the prior day.

    The SPX is +44.4% above the 1074.77 October 4, 2011, intraday low, but -2.60% below its record April 13th close. This week, the SPX is down -2.32%. Last week, the SPX rose +2.29%, compared to a loss of -1.01% the prior week. In April, the SPX is down -1.09%, compared to a +3.60% gain in March. In 2013, the SPX is up +8.82%. In 2012, the SPX closed up +13.1%. Next resistance is at 1569.82. First support is at 1538.94.

    This week, the BKX is down -3.01%. Last week, the BKX rose +1.94%, compared to a loss of -2.03% the prior week. In April, the BKX is down -3.13%, compared to a gain of +4.26% in March. This year, the BKX is up +6.32%, 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, June SPX equity futures are higher, but near the middle of a 1550-1554 range. After a fair value adjustment of +0.66 points, SPX equity futures are at 1552.00, up +5.44 points. The SPX opens -0.79% below and +0.62%, +3.81%, and +7.00% above its respective 20-, 50-, 100-, and 200-day moving averages.

    Thursday. On greater and above average volume, U.S. equity markets gapped lower, fell to their early afternoon lows, and rose modestly in the final two hours to close off the session's worst levels. The Nasdaq lost -1.84%, followed by the NYSE composite, SPX, and DJI, which lost -1.52%, -1.43%, -0.94%, respectively. Market breadth was negative, with gainers 0.29:1 losing stocks. All SPX market segments closed at least -0.38% lower. Leaders were health care, utilities, and consumer services. Laggards were financials, oil and gas, and technology, which fell at least -1.88%.

    NYSE volume rose +16.5% to 865.99 million shares, compared to 743.47 million shares the prior day, 1.24x the 20-day moving average volume. Commentary focused on earnings reports.

    From its 1574.57 prior close, the SPX gapped lower to open below 1565 and trended steadily lower to an early afternoon 1543.69 low. The index tested resistance at 1555 several times before the 1552.01 close. Market volatility rose sharply. From its prior 13.96 close, the VIX opened at 15.50 and rose to a mid-morning 17.90 high, but eased lower to close at 16.51, up +18.3%. The all-time closing low was 11.26, set June 30, 1993.

    On +14.5% greater volume, the DJ Transports fell -1.52%, compared to the DJI's -0.94% loss. The index opened at 6020 and fell to 5,920 by mid-morning. The index traded narrowly through early afternoon, then improved modest least to close at 5,949.40, -5.28% below its recent March 14th 6,281.24 all-time high. The index closed -2.58% and -1.75% below its respective 20- and 50-day moving averages, but +3.76%, and +10.1% above its respective 100- and 200-day moving averages.

    Technical factors worsened. SPX relative strength (RSI) fell to 47.88, from 55.46 in a neutral range. The CBOE put/call skew fell -2.47% to 120.70, from 124.10 the prior day and just above a neutral range. U.S. Treasury bond prices rose, as the 10-year fell -2.74 bps to end at 1.6950%, up from 1.7224% the prior day.

    This week, the SPX, DJI, Nasdaq, and NYSE composite are down -2.32%, -1.66%, -2.74%, and -2.61%, respectively. Last week, the SPX, DJI, Nasdaq, and NYSE composite closed up +2.29%, +2.06%, +2.84%, and +2.09%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed down -1.01%, -0.09%, -1.95%, and -1.17%. In April, the SPX, Nasdaq, and NYSE composite are down -1.09%, -1.92%, and -1.74%, respectively, while the DJI is up +0.27%. 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 +8.82%, +11.6%, +6.13%, and +5.98%, respectively. All closed at least +5.91% higher in 2012.

    Immediate SPX support is 1542 (the 50-day moving average). Resistance is 1564 (the 20-day moving average).

    Distribution day count. The equity market trend moved to correction on April 17th.

    In Asia, equity markets closed mixed on mixed volume. Tokyo distributed. Hong Kong and Shanghai are in correction from their respective January and March highs. Both are lower in 2013. Commentary focused on economic growth concerns, weak equity and commodities markets the prior day, and a positive Chinese FDI report.

    In Tokyo, the NKY fell -1.22% on a +9.95% volume increase. The NKY closed +3.37% above its 20-day moving average. The HSI fell -0.26% on a -26.1% volume decrease. The SHCOMP rose +0.17% on a +4.85% volume increase. The HSI and SHCOMP are -2.51% and -2.27% below their respective 20-day moving averages.

    This week, the NKY is down -1.97%, while the HSI and SHCOMP are down -2.61% and -0.42%, respectively. Last week, the NKY closed up +5.08%, the HSI rose +1.67%, and the SHCOMP closed down -0.83%. The prior 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 +6.63%, the HSI is down -3.53%, and the SHCOMP is down -1.74%. In March, the NKY closed up +7.25%, while the HSI and SHCOMP lost -3.13% and -5.45%, respectively. In 2013, the NKY is up +25.4%. The HSI is down -5.05%. The SHCOMP is down -3.15%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 13,220.07, compared to 13,382.89 the prior day. The index gapped lower to open at 13,250 and touched the 13,200.85 intraday low at mid-morning. The index rallied strongly by mid-afternoon and rose to 13,377.74 in early afternoon, but then weakened through the session's remainder with a late sell-off marking the distribution. The index ended +3.37%, +9.01%, +18.8%, and +32.3% above its respective 20-, 50-, 100, and 200-day moving averages. All market segments closed at least -0.67% lower. Leaders were health care, financials, and technology. Laggards were consumer goods, industrials, and oil and gas, which fell at least -1.48%.

    In China, the Hang Seng closed at 21,512.52, compared to 21,569.67 at the prior close, and -9.69% off its January 30th 23,822.06 high. The index gapped lower to open below 21,450, but reversed higher by mid-morning to the 21,618.07 intraday high. The index eased lower to test support at 21,460 before improving in the session's final minutes. The index closed -2.51% and -5.04% below its respective 20- and 50-day moving averages. Most market segments closed lower. Leaders were consumer services, utilities, and telecommunications, which rose at least +0.27%. Financials lost -0.28%. Laggards were consumer goods, basic materials, and technology, which fell at least -0.73%.

    In Shanghai, the SHCOMP closed at 2,197.60, compared to 2,193.80 the prior day. The index gapped lower opened below 2,180 and set an early 2,175.57 intraday low, but reversed higher by mid-morning on better than expected FDI to the 2,206.03 intraday high. The index traded narrowly lower through mid-afternoon, but improved in the final two hours to end with a modest gain. The index closed -10.7% below its 2,434.48 February 5th high, but up +12.1% from its December 3rd 1,959.77 low. The SHCOMP closed -2.27% and -4.79% below its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were consumer services, utilities, and technology, which rose at least +0.62%. Laggards were basic materials, health care, and oil and gas, which fell at least -0.06%.

    In Europe, the major equity indexes are moderately higher after yesterday's distributions. On the day, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.87%, +0.45%, +0.89%, and +0.46%, respectively. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are below their respective 20- and 50-day moving averages. Only the FTSE 100 is above its 100-day moving average. All remain above their respective 200-day moving averages. Today, the Spanish IBEX is up +1.34%. The Italian FTSE MIB is up +1.13%.

    Economic reporting is light. Focus is on earnings reports.

    From its prior 2,553.49 prior close, the Euro Stoxx50 opened at 2,560 and rallied to 2,580 by late morning. The index currently trades at 2,574.87. Most market segments are higher. Leaders are technology, basic materials, and telecommunications, which are up +1.50%. Financials are up +0.96%. Laggards are industrials, which are up +0.01%, and utilities and consumer goods, which are down at least -0.03%.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.84%, -1.81%, -2.66%, and -2.66%, respectively. Last week, the Euro Stoxx50, CAC 40, and DAX closed down -0.76%, -1.10%, -0.87%, and -0.91%, respectively, after gains of +2.27%, +2.23%, +2.19%, and +1.44% the prior week. In April, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.84%, -2.23%, -2.71%, and -3.299%, 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, CAC 40, and DAX are down -2.28%, -0.30%, and -0.97%, respectively, while the FTSE 100 is up +6.29%. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

    Libor, LOIS, Currencies, Treasuries, Commodities:
     

    • USD LIBOR is 0.15700%, unchanged from 0.15700% the prior day. USD 3-month LIBOR is 0.27610%, unchanged from 0.27710% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.
    • The US Libor-OIS (LOIS) spread is 14.71 bps, compared to 14.61 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 13.10 bps, unchanged from 13.10 bps the prior day, and down from the December 27, 2011, high of 98.80 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.
    • The 3-month Euro basis swap is -17.121, compared to -17.890 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 4.61%, compared to 4.68% the prior day, and below the recent April 10th 4.639% low. Italian 10-year debt yields are at 4.19%, compared to 4.25% the prior day. Its recent low was 4.13% on January 25th. German 10-year debt yields are 1.26%, compared to 1.23% the prior day, compared to the April 5th recent 1.212% low yield. The record low was 1.167% on July 20, 2012.
    • The U.S. government overnight repo rate is 19 bps, unchanged from 18 bps the prior day. The January 2,, 2013, 45 bps rate was the highest since late 2008. The 0.00 bps low was on January 31, 2009.
    • U.S. Treasury yields are higher, with 2- and 10-year maturities yielding 0.230% and 1.715%, respectively, compared to 0.226% and 1.695% Wednesday. The yield curve narrowed, with the 2- to 10-year spread at +1.486%, compared to 1.469% 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 +1.804% on March 11, 2013.
    • The U.S. dollar is mixed, weaker compared to the euro and British pound, and stronger compared to the Japanese yen. The dollar trades at US$82.506, compared to a US$82.482 intraday low and US$82.684 the prior day, and better compared to its $82.085 50-day, US$80.943 100-day, and US$80.958 200-day averages. The euro trades at US$1.3065, compared to a US$1.3074 intraday high and US$1.3032 the prior day. The euro trades mixed compared to its US$1.3067 50-day and US$1.3156 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥98.37, compared to ¥98.12 the prior day. The yen trades worse than its 50-day moving average ¥94.99.
    • Citigroup Economic Surprise Index improved to -3.70, from -4.10 the prior day. The index is better compared to its respective +3.96 and +7.53 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 and moved to a March 25th high of 30.20, but turned negative again on April 17th. After a lag, the CESIUSD correlates with EPS revisions.
    • Commodities prices are mostly higher, with higher energy, higher precious metals, lower aluminum and copper, and mostly higher agriculture prices.


    Volatility, Skew:
     

    • The VIX closed at 16.51, up +18.3% from 13.96 at the prior close. The VIX is +21.7% above its 13.57 20-day moving average. Its 30-day high is 17.90. 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 -6.76% to 21.22, from 22.75 at the prior day's close. The V2X index trades +2.56% above its 20.69 20-day moving average, -9.68% below the 23.42 30-day high, and +42.6% above the 14.88 30-day low.
    • The Hang Seng volatility index (VHSI) closed at 17.68, down -0.34% from 17.74 the prior day. The VHSI index trades +8.10% above its 16.35 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.
    • CBOE skew fell to 120.70, down -2.74% from 124.10 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:
     

    • The latest weeks' initial and continuing jobless claims were 352K and 3068K, respectively, compared to 350K and 3075K survey and 348K and 3103K revised prior.
    • At 10:00, April Philadelphia Fed, with 3.0 survey and 2.0 prior.
    • March leading indicators, with +0.1% survey and +0.5% prior.


    Overseas News:
     

    • China - Actual YoY FDI rose +5.7%, compared to +1.7% survey and +6.3% prior.
    • United Kingdom - March MoM retail sales ex auto fuel fell -0.8%, compared to -0.6% survey and +2.1% revised prior.


    Company Ratings/News:
     

    • BBT - Adjusted EPS of $0.69, compared to $0.683 estimate. Revenues were $2.460 billion, compared to the $2.456 billion estimate.
    • FITB - Adjusted EPS of $0.44, compared to $0.391 estimate. Revenues were $1.631 billion, compared to the $1.600 billion estimate.
    • MS - Adjusted EPS of $0.61, compared to $0.560 estimate. Revenues were $8.475 billion, compared to $8.348 billion estimate.


    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 12th, the index closed up +2.29%% at 1588.85, compared to 1553.28 the prior week and 1560.70 close four weeks prior. The sell countdown associated with the March 8th perfection progressed to 5. The index closed +3.35% 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 fell -1.43% to close at 1552.01, compared to 1574.57 the prior day and 1593.37 4 days prior. The buy setup progressed to 3. The 8 sell countdown associated with the March 13th perfection was unchanged. The index closed -0.62% below 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 12th, the BKX closed at 56.21, compared to 55.14 the prior week and 57.52 four weeks prior. The buy setup progressed to 2. The index closed -1.26% 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. Wednesday, the index closed at 54.52, down -2.01% from 55.64 the prior day and 56.84 four days prior. The buy setup progressed to 3. The buy countdown associated with the March 14th setup progressed to 8. The index closed +3.02% 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 -13.4% to end at 12.06, from 13.92 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. Wednesday, the VIX rose +18.3% to 16.51, compared to 13.96 at the prior close and 12.24 at the 4 days' prior close. The sell setup rose to 3. The 8 buy countdown associated with the March 15th perfection was unchanged. The VIX closed +58.6% 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 12th, 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 sell countdown associated with the September 28th perfection progressed to 10. The cross closed -2.55% 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. On April 4th, a bullish price flip initiated a sell setup, which perfected on April 12th. With Wednesday's -1.10% lower close, the EURUSD cross ended at 1.3032, compared to 1.3178 the prior day and 1.3099 four days prior. The sell setup progressed to 2. The sell countdown associated with the April 12th perfection was unchanged. The cross closed -3.15% 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 1.7208%, compared to 1.7128% the prior Friday and 1.9895% four weeks prior. The sell setup progressed to 2. 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 April 9th, the buy setup perfected. On April 15th, the buy countdown associated with the March 4th perfection completed and set a 1.6098% risk level, based on the April 5th 10.61 bps range between the intraday high and low rate and 1.7159% close. On Wednesday, the rate ended at 1.6950%, compared to 1.7224% the prior day and 1.7887% four days prior. The buy setup progressed to 4. The rate ended +5.29% above the risk level.

    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. 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. The sell countdown associated with the December 21st perfection completed April 5th. For the week ending April 12th, the index closed up +5.08% at 13,485.14, compared to 12,833.64 the prior week and 12,560.95 four weeks' prior. The index closed +32.3% 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, which perfected on Aril 15th. Thursday, the index fell -1.22% to 13,220.07, compared to 13,382.89 the prior day and 13,485.14 four days prior. The buy setup progressed to 3. The 8 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. A buy setup initiated the following week and perfected on April 5th, initiating a sell countdown. On April 12th, the index closed at 22,089.05, compared to 21,726.90, from 22,533.11 four weeks prior. The index closed -7.75% 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 April 5th, a bearish price flip initiated a buy setup. On Thursday, the HSI fell -0.26% to 21,512.52, from 21,569.67 the prior day and 22,089.05 four days prior. The buy setup progressed to 4. The index closed -9.92% 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 12th, the index closed the week up +1.67% at 2,206.78, compared to 2,225.30 the prior week and 2,278.40 four weeks prior. The buy setup progressed to 3. 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. On March 26th, a bearish price flip initiated a buy setup, which perfected on April 9th and canceled a deferred sell countdown. Thursday, the index rose +0.17% to 2,197.60, from 2,193.80 at the prior close and 2,206.78 4 days prior. The 3 buy countdown associated with the April 9th perfection was unchanged.

    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 12th, the index rose +1.86% to close at 2,633.47, compared to 2,585.28 the prior week and 2,725.72 at the 4 weeks' prior close. The buy setup progressed to 2. 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. Wednesday, the index fell -2.14% to 2,553.49, from 2,609.30 the prior day and 2,633.47 at the prior 4 days' close. The buy setup progressed to 2. The buy countdown associated with the March 28th perfection progressed to 7. The index closed -6.33% below the risk level.

    1Q2013 Earnings. Of 73 reporting companies, 52 or 71.2% surprised positively on earnings, with a +3.49% surprise average. Of reporting companies, 37 or 50.7% have reported sales and revenues in excess of estimates.

    Valuation. The SPX trades at 15.2x 2012 earnings ($103.41), 14.0x estimated 2013 earnings ($110.69), and 12.6x estimated 2014 earnings ($123.42). 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 bearish. Composite options are neutral, index options are neutral, and equity options markets are bearish. The composite put/call ratio is 1.19, compared to 0.88 the prior day, and worse compared to its 5- and 10-period moving averages of 1.04 and 0.99, respectively. The index put/call ratio rose to 1.15, up from 0.67 the prior day, and worse compared to its 5- and 10-period moving averages of 0.94 and 0.88, respectively. The equity put/call ratio closed the day at 1.21, compared to 1.08 the prior day, and worse compared to its 5- and 10-period moving averages of 1.12 and 1.05, respectively.

    NYSE Indicators. Volume rose +16.5% to 865.99 million shares, from 743.47 million shares the prior day, 1.24x the 695.98 million share 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged decliners by -1,670 (compared to +1,938 the prior day), or 0.29:1. Up volume was 0.10 down volume.

    BKX. Volume rose +50.6%, and the KBW bank index closed at 54.52, down -2.01% from 55.64 at the prior close. Volume rose to 94.691 million shares, from 62.898 million shares the prior day, or 1.63:1x the 58.159 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KRX fell -1.62%.

    This week, the BKX is off -3.01%. Last week, the BKX closed up +1.94%, compared to a loss of -2.08% the prior week. In April, the BKX is down -3.13%. 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 +6.32%, worse than the SPX's +8.82% rise. In 2012, the index rose +30.2%, compared to a +13.4% rise in the SPX.

    The BKX has closed above 50 since December 17th. The BKX closed -5.92% below its 57.95 April 23, 2010 close (the post-2008 high point), but +67.4% above the 32.56 low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +44.4% in the same period.

    Technical indicators worsened. The index closed -2.58% and -1.95% below its respective 20- and 50-day moving averages. The index closed +1.80%, and +7.38% above its respective 100- and 200-day moving averages. 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 declined -11 bps. The 50-day moving average rose +1 bp. Its 100-day moving average rose +6 bps, and the 200-day moving average rose +5 bps. The 20-day closed (by +0.36 points) above the 50-day, and the gap narrowed -12 bps. The 50-day moving average closed (by +4.83 points) above the 200-day moving average, and the gap declined -4 bps. The 100-day moving average closed (by +2.787 points) above the 200-day moving average since March 19th, and the gap widened +12 bp.

    The directional movement indicator worsened to -17.044, from -9.870 the prior day. Relative strength fell to 40.96, from 48.26 the prior day and moving toward the bottom of a neutral range. Next resistance is 55.31; next support is at 53.89.

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