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Gary Townsend - Founding partner and Chairman, GBT Capital Management, LLC, a macro long/short fund based in Chevy Chase, Maryland. Also, 2007-2013, a founding partner, CEO and Portfolio Manager of Hill-Townsend Capital LLC, a long/short equity financial sector fund. Mr. Townsend has 35 years... More
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  • U.S. Futures Advance; Asia Closes Mixed, Europe Rallies 0 comments
    Jun 26, 2013 9:30 AM

    This morning. On June 12th, the U.S. equity market trend switched to correction, ending the uptrend that began on April 29th. Tuesday, major U.S. equity indexes posted moderate gains, but remained lower on the week and in June. All major indexes closed below their respective 5-, 10-, 20-, and 50-day moving averages. The SPX closed below its 50-day moving average for a 4th consecutive session. The NYSE composite closed below its 50-day moving average for a 5th consecutive day. Short-term SPX relative strength indicators (RSI) improved to a neutral range.

    Today, in Asia, equity markets closed mixed, but with large intraday swings in Shanghai. In Shanghai, the Shanghai composite's intraday low was -1.86% below the prior close, but rallied to close down only -0.41%. Thursday's Nikkei 225 (NKU3) equity futures are up +1.57%. Chinese equity futures are mixed. In Europe, equities are rallying strongly. Economic reporting focuses on final 1Q2013 GDP, consumer spending, and core PCE. Sovereign long-term interest rates are lower. Commodities are mixed.

    Commentary focuses on worse than expected U.S. GDP revisions, continued equity market volatility, and the Bank of China's recent management of its open market activities.

    U.S. Treasury 10-year yields are 2.527%, compared to 2.608% at the prior close. U.S. repo rates are 3 bps, down from 4 bps the prior day. Spanish and Italian 10-year debt yields are 4.93% and 5.07%, respectively, compared to 4.74% and 4.86%, the prior day. The U.S. dollar is mixed. U.S. options markets worsened to bearish to neutral, from neutral the prior day. CBOE skew remains in a neutral range.

    The SPX closed at 1588.03, up +0.95% from 1573.09 the prior day and now -4.76% below its May 17th record close. The index closed +0.37% above its April 26th close, when the prior corrective trend concluded, but +47.8% above the 1074.77 October 4, 2011, intraday low. This week, the SPX is down -0.28%, compared to a loss of -2.11% the prior week. In June, the SPX is down -2.62%. In May, the index closed up +2.08%. In 2013, the SPX is up +11.4%. In 2012, the SPX closed up +18.1%. Next resistance is at 1587.80. First support is at 1559.36.

    Tuesday, the BKX rose +2.18%, outperforming the SPX. This week, the BKX is up +0.55%, compared to a loss of -0.02% the prior week. In June, the BKX is down -1.82%, compared to a gain of +8.30% the prior month. This year, the BKX is up +17.9%, outperforming the SPX. Last year, financial stocks outperformed the broader market, as the BKX closed up +30.2%, compared to the +13.4% SPX gain.

    In pre-market futures trading, September SPX equity futures are higher, but near the middle of a 1587-1592 range. After a fair value adjustment of -0.42 points, SPX equity futures are at 1588.25, up +7.42 points. The SPX opens -0.63% below it 20-day moving average, but +2.20%, +5.40%, and +12.1% above its respective 50-, 100-, and 200-day moving averages.

    Tuesday. On lower, but above average volume, U.S. equity markets rallied to moderately higher closes. The NYSE composite rose +1.09%, followed by the SPX, Nasdaq, and DJI, which rose +0.95%, +0.82%, and +0.69%, respectively. Market breadth was positive, with gainers 4.20:1 losing stocks. All SPX market segments closed at least +0.43% higher. Leaders were telecommunications, financials, and utilities, which rose at least +1.25%. Laggards were consumer services, consumer goods, and health care.

    NYSE volume fell -16.4% to 809.94 million shares, from 968.43 million shares the prior day, 1.05x the 840.59 million shares 20-day moving average volume. U.S. 10-year yields closed +7.14 bps higher at 2.6082%, from 2.5310% at the prior close and 2.6138% intraday high.

    Futures indicated a higher open. From its prior 1573.09 close, the SPX index opened above 1582, and rose to resistance at 1588, which proved the top until late afternoon, when the index advance to a late 1593.79 intraday high. The index ended at 1588.03, -4.76% off its recent historical high. Market volatility fell. From its prior 20.11 close, the VIX opened near 18.60, rose to an early 19.22 high, and fell back to a late session 17.82 intraday low. The index closed at 18.47, down -8.16%. The all-time closing low was 11.26, set June 30, 1993.

    On -27.7% lower and below average volume, the DJ Transports (TRAN) rose +1.85%, compared to the DJI's +0.69% gain. From its prior 5990.79 close, the index opened above 6,040 and rose to 6,080 by mid-morning, where it traded narrowly until the late session advance to the 6,116.52 intraday high. The index eased in the final minutes to close at 6,101.76, -6.83% below its 6,549.16 May 17th record close. The index closed -2.33% and -2.49% below its respective 20- and 50-day moving averages, and -0.84% below and +7.38% above its respective 100- and 200-day moving averages.

    The broader market's technical factors improved. SPX relative strength (RSI) improved to a neutral 41.55, from 36.90 the prior day. The CBOE put/call skew fell -0.73% to 115.23, from 116.08 the prior day.

    This week, the SPX, DJI, Nasdaq, and NYSE composite are down -0.28%, -0.26%, -0.28%, and -0.32%, respectively. Last week, the SPX, DJI, Nasdaq, and NYSE composite closed down -2.11%%, -1.80%, -1.94%, and -2.65%, respectively. In June, the SPX, DJI, Nasdaq, and NYSE composite are down -2.62%, -2.35%, -3.13%, and -3.36%, respectively. In May, the SPX, DJI, Nasdaq, and NYSE composite closed up +2.08%, +1.86%, +3.82%, and +0.29%, respectively.

    In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +11.4%, +12.6%, +10.9%, +6.46%, respectively. All closed at least +5.91% higher in 2012. Immediate SPX resistance is 1595. Immediate support is 1580 (the 100-day moving average), then 1570.

    Distribution day count. The current corrective downtrend began on June 12th, following an uptrend that began on April 29th.

    In Asia, equity markets closed mixed. The Japanese Nikkei (NKY) closed down -1.04%, following the prior day's +0.72% gain. The Hang Seng (HSI) rose +2.43%, following the prior day's +0.21% gain, its best advance since January. The Shanghai composite (SHCOMP) lost -0.41%, following a -0.18% loss the prior day. Volumes are unavailable.

    The NKY's RSI fell to 41.84, from 43.57 the prior day, in a neutral range, but up from a low of 34.42 on June 13th, and down from an overbought 82.61 on May 22nd. The HSI's RSI rose to 32.25, from 20.18 the prior day. The SHCOMP's RSI fell to 15.34, from 15.73 the prior day, suggesting a grossly oversold condition.

    Commentary focused on currency moves, regional equity , market volatility, and the Bank of China's open market practices.

    This week, the NKY is down -2.99%, while the HSI is up +0.37% and the SHCOMP is down -5.87%. Last week, the NKY closed up +4.28%, the HSI lost -3.37%, and the SHCOMP lost -4.11%. In June, the NKY is down -6.83%. The HSI is down -9.17%. The SHCOMP is down -15.2%. The NKY and HSI closed -6.51% and -3.65% lower in May, respectively, their first monthly declines since October. The SHCOMP rose +5.63%. In 2013, the NKY is up +23.5%. The HSI is down -10.2%. The SHCOMP is down -14.0%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 12,834.01, down from 12,969.34 the prior day. The index traded higher through mid-morning, when it set its 13,189.84 intraday high, but reversed lower by mid-session, finding support at 12,850. The index rallied back to breakeven, where it traded narrowly through most of the afternoon, but then weakened into the close, ending just better than its 12,826.51 intraday low. The index ended -17.9% below its recent May 22nd 15,627.26 closing high, but up +54.7% above its 8,295.63 July 18, 2012 low. The index closed -2.81% and -7.01% below its respective 20- and 50-day moving averages, but -0.34% and +15.2% above its respective 100- and 200-day moving averages. All market segments closed at least -0.14% lower. Leaders were consumer services, basic materials, and telecommunications. Financials lost -1.09%. Laggards were oil and gas, health care, and technology, which fell at least -1.65%.

    In China, the HSI closed at 20,338.55, compared to 19,855.72 at the prior close. The index closed -14.6% below its January 30th 23,882.06 high, but +11.8% above its 18,185.59 June 4, 2012 low. The index opened just shy of 20,100, but traded back to 20,000 through most of the morning. The index strengthened into the afternoon and rallied more strongly after mid-afternoon, ending just short of its 20,354.18 intraday high. The index ended -5.18% and -8.15% below its respective 20- and 50-day moving averages. All market segments closed at least +1.00% higher. Leaders were financials, consumer goods, and technology, which gained at least +2.47%. Laggards were oil and gas, basic materials, and utilities.

    In Shanghai, the SHCOMP closed at 1,951.50, compared to 1,959.51 at the prior close. The index opened at 1,955 and fell to a late morning 1,923.05 intraday low. The index improved through the afternoon, narrowing the day's losses. The index closed -20.7% below its 2,434.48 February 5th high, and only -0.42% below its recent December 3rd 1,959.77 closing low. The SHCOMP closed -11.3% and -12.0% below its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were health care, technology, and consumer services, which rose at least +1.29%. Laggards were oil and gas, financials, and telecommunications, which fell at least -1.23%.

    In Europe, the major equity indexes are extending yesterday's gains. The Euro Stoxx50, CAC 40, FTSE 100, and DAX are up +2.17%, +0.92%, +1.90%, and +1.66%, respectively. The Spanish IBEX 35 is up +2.41%. The Italian FTSE MIB is up +1.90%. From its 2,543.37 prior day's close, the Euro Stoxx50 opened modestly lower, but immediately reversed higher to an early afternoon 2,601.10 intraday high. The index currently trades at 2,598.05. All market segments are at least +1.19% higher. Leaders are technology, health care, and financials, which are up at least +2.91%. Laggards are consumer goods,, industrials, and oil and gas.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +1.95%, +0.74%, +1.67%, and +2.01%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -4.42%, -3.05%, -3.87%, and -4.17%, respectively. In June, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -6.15%, -6.40%, -5.81%, and -4.82%, respectively. In May, the Euro Stoxx50, FTSE 100, CAC 40 and DAX closed up +2.13%, +2.38%, +2.38%, and +5.50%, respectively. In 2013, the Euro Stoxx50 is down -1.39%, while the FTSE 100, CAC 40, and DAX are up +4.47%, +2.14%, and +4.38%. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.13190%, down from 0.13210% the prior day. USD 3-month LIBOR is 0.27560%, down from 0.27610% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US Libor-OIS (LOIS) spread is 15.110 bps, compared to 14.975 bps the prior day, and compares to the January 6th high of 50.050 bps. Euribor-OIS is 11.350 bps, down from 11.700 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 -9.500 bps, compared to -11.750 bps the prior day, and up from a trough of -147.00 bps on December 14, 2011, and moving below the lower end of a normal -10 bps and -40 bps range.

    · Spanish 10-year debt yields are 4.93%, down from 5.07% the prior day and up from the 4.039% May 3rd low. Italian 10-year debt yields are at 4.75%, compared to 4.86% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.77%, compared to 1.80% the prior day. Japanese 10-year debt yields are 0.87%, compared to 0.85% the prior day.

    · The U.S. government overnight repo rate is 3 bps, down 4 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 slightly lower, with 2- and 10-year maturities yielding 0.407% and 2.575%, respectively, compared to 0.405% and 2.608% Tuesday. The yield curve narrowed -3.54 bps, with the 2- to 10-year spread at +2.168%, compared to 2.204% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.3875% on July 24, 2012, to a high of +2.202% on June 25, 2013.

    · The U.S. dollar is mixed, stronger compared to the euro and British pound, but weaker compared to the Japanese yen. The dollar trades at US$82.841, compared to a US$82.879 intraday high and US$82.571 the prior day, and better compared to its $82.571 50-day, US$82.305 100-day, and US$81.132 200-day averages. The euro trades at US$1.3021, compared to a US$1.3014 intraday low and US$1.3077 the prior day. The euro trades better compared to its US$1.3079 50-day and US$1.3076 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥97.77, compared to ¥97.81 the prior day. The yen trades better than its 50-day moving average ¥99.19, and better than its May 17th 103.21 closing low.

    · Citigroup Economic Surprise Index improved to +1.30, from -8.10 the prior day, its first positive reading since May 3rd. The index is better compared to its respective -9.16 and -16.223 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 May 6th. After a lag, the CESIUSD correlates with EPS revisions.

    · Commodities prices are mixed, with mixed energy, lower precious metals, higher aluminum and copper, and mostly lower agriculture prices.

    Volatility, Skew:

    · The VIX closed at 18.47, down -8.16% from 20.11 at the prior close. The VIX is +8.60% above its 17.01 20-day moving average. Its 30-day high is 21.91. Its 30-day low is 12.26. 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 22.51, down -6.75% from 24.14 at the prior day's close. The V2X index trades +4.66% above its 21.50 20-day moving average, -16.0% below the 26.80 30-day high, and +42.8% above the 15.76 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 23.87, down -14.1% from 27.80 the prior day. The VHSI index trades +19.9% above its 19.91 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE skew closed at 115.23, down -0.73% from 116.08 at the prior day's close, and within 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. Economic Reporting and News:

    · MBA mortgage applications for the week ending June 21st fell -3.0%, compared to -3.3% prior.

    · At 8:30, revised 1Q2013 GDP rose only +1.8%, compared to +2.4% survey and +2.4% revised prior.

    · Personal consumption rose 2.6%, compared to +3.4% survey and revised prior.

    · Core QoQ PCE rose +1.3%, compared to 1.3% survey and revised prior.

    Overseas Economic Reporting and News:

    · France - 1Q2013 final GDP fell -0.2%, compared to -0.2% survey and prior. YoY GDP fell -0.4%, compared to -0.4% survey and prior.

    · Germany - GfK consumer confidence rose to 6.8, from 6.5 survey and 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 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 perfected in April 2013. In May, the index closed at 1630.74, from 1597.57 the prior month and 1498.11 four months prior. The sell countdown stemming with the May 2011 perfection completed, setting a risk level of 1793.08, based on May's 105.90 range and 1687.18 high. The index closed -9.00% below the risk level.

    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 June 14th, the index closed down -1.01% at 1626.73, from 1643.38 the prior week and 1667.47 close four weeks prior. The June 14th buy setup progressed to 2. The 9 sell countdown associated with the March 8th perfection is unchanged since May 24th. The index closed +4.40% above the 1525.36 risk level.

    On a daily basis, the SPX perfected a sell setup on August 15th at 1405.53, and completed its sell countdown on September 13th, with its 1459.99 close. The 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 another 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 April 29th, the sell countdown associated with the March 13th perfection completed and set a 1608.53 risk level, which superseded the prior risk level. On May 14th, the May 2nd sell setup perfected and initiated a sell countdown. On Tuesday, the SPX rose +0.95% to close at 1588.03, from 1573.09 the prior day and 1628.93 4 days prior. The June 19th buy setup progressed to 5. The 9 sell countdown associated with the May 14th perfection is unchanged since June 18th. The index closed -1.27% below the 1608.53 risk level, which is based on the SPX's April 11th 11.18 point trading range and 1597.35 intraday 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, the index initiated a sell setup, which perfected in May 2013, when the index closed at 61.60, +8.30% from 56.88 at April-end and 53.83 four months prior. The perfection initiated a sell countdown.

    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 and set a 56.93 risk level. On June 21st, the BKX closed at 60.15, down -0.02% from 60.16 the prior week and 60.88 four weeks prior. The June 14th buy setup progressed to 2. The 10 sell countdown associated with the February 1st perfection is unchanged since May 31st. The index closed +5.66% above 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, 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 19th, a bearish price flip initiated a buy setup with a 56.84 close. On April 1st, the buy setup perfected. On May 3rd, a bullish price flip initiated a sell setup. On May 15th, the sell setup perfected. Tuesday, the index closed at 60.48, up +2.18% from 59.19 the prior day and 60.56 four days prior. The June 19th buy setup progressed to 5. The May 15th sell countdown progressed to 11, its first move since June 10th.

    VIX - On a monthly basis, the VIX perfected a sell setup in October 2007. The associated sell countdown progressed to a deferred 13 in June 2012, but is subsequently unchanged. In January, the VIX fell -23.9%, initiating a buy countdown. The VIX ended May at 16.3013.52, compared to 12.70 at the end of March and 18.02 at the end of December. The bullish index flip canceled a 4 buy setup and initiated a sell setup.

    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. On April 12th, the VIX completed the buy countdown associated with the August 10th, setup, which also established a 9.17 risk level. The week ending June 21st, the VIX rose +10.2% to 18.90, from 17.15 the prior week, and 13.99 weeks prior. The May 24th sell setup progressed to 5. The index closed +106.1% above the risk level.

    On a daily basis, on January 18th, a bearish 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. On May 31st, the May 20th sell setup perfected and initiated a sell countdown. Tuesday, the VIX fell -8.16% to 18.47, from 20.11 at the prior close and 16.64 at the 4 days' prior close. The June 20th sell setup progressed to 4. The May 31st 6 sell countdown was unchanged. The VIX closed +77.4% 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% 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 initiated a buy setup. The cross ended May at 1.2999, down -1.28% from 1.3168 the prior month and 1.3057 4 months prior. The buy setup progressed to 3. The 9 buy countdown progressed is unchanged since March.

    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. The cross completed a buy countdown on July 27th, and set a 1.1964 risk level. 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 June 21st, the index fell -1.69% to end at 1.3122, from 1.3347 the prior week and 1.2932 4 weeks prior. The buy setup progressed to 3. The sell countdown associated with the September 28th perfection is a deferred 13, unchanged since June 7th. The cross closed +9.51% above the 1.1964 risk level.

    On a daily basis, 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. On June 7th, the sell countdown associated with the April 12th perfection completed. The completion set a 1.3537 risk level, based on the June 6th 0.0231 trading range and 1.3306 intraday high. On June 11th, the May 29th sell setup perfected and initiated a sell countdown. With Tuesday's -0.33% lower close, the EURUSD cross ended at 1.3077, from 1.3120 the prior day and 1.3295 four days prior. The June 20th buy countdown progressed to 5. The cross closed -3.40% 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 May at 2.1282%, compared to 1.6717% the prior month and 1.7382% 4 months prior. The bullish rate flip canceled a 1 buy setup and initiated a sell setup.

    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 2.5310%, from 2.1295% the prior Friday and 2.0081% four weeks prior. The May 3rd sell setup progressed to 8. The sell countdown associated with the February 1st perfection progressed to 7.

    On a daily basis, 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 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 8th, 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 May 15th, the May 3rd buy setup perfected. On June 24th, the May 20th sell countdown completed, setting a 2.8150% risk level, based on the June 24th 15.03 bps trading range and 2.6647% intraday high. On Tuesday, the rate ended at 2.6082%, from 2.5368% the prior day and 2.3527% four days prior. The June 19th sell setup progressed to 5. The rate closed -20.7 bps below the 2.8150% 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 May at 13,774.54, down -0.62% from 13,860.86 the prior month and 11,138.66 four months prior, ending 7 consecutive monthly gains. The sell setup rose to 7.

    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 and set a 14.645.46 risk level, based on the 1,419.84 point range on that day and 13,225.62 intraday high. For the week ending June 21st, the index closed up +4.28% at 13,230.13, from 12,686.52 the prior week and 14,612.45 four weeks' prior. The June 7th buy setup progressed to 3. The index closed -9.36% below the risk level.

    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. The associated sell countdown completed on April 26th. On March 27th, a bearish price flip initiated a buy setup, which perfected on April 15th. On May 7th, a bullish price flip initiated a sell setup. On May 17th, the sell setup perfected; also, the sell countdown associated with the April 26th perfection completed. The completion set a 15,412.34 risk level, which is based on the May 16th 15,155.72 intraday high and 276.21 point range. On June 4th, the May 23rd buy setup perfected and initiated a buy countdown. On Wednesday, the index fell -1.04% to 12,834.01, from 12,969.34 the prior day and 13,014.58 four days prior. The June 25th buy setup progressed to 2. The June 4th buy countdown progressed to 7, its first move since June 14th. The index closed -16.7% below the risk level.

    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. A bullish price flip in September 2012 initiated a sell setup. The index ended May at 22,392.16, down -1.52% from 22,737.01 the prior month and 22,729.53 four months prior. The bearish price flip canceled an 8 sell setup and initiated a buy setup. The index closed -17.7% below the risk level.

    On a weekly basis, the HSI perfected a sell setup on March 2, 2012, and the associated sell countdown completed on September 21, 2012, and set a 22,357.00 risk level, based on the September 14, 2012, when it set a 22,357.00 risk level. The index perfected two sell setups on November 9th and February 1st. A buy setup initiated the following week and perfected on April 5th, initiating a sell countdown. On June 21st, the index closed at 20,263.31, down -3.37% from 20,969.14 the prior week and 22,618.67 four weeks prior. The May 31st buy setup progressed to 4. The April 5th buy countdown progressed to 6. The index closed -9.36% below the risk level.

    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 19th, a bullish price flip initiated a sell setup, which perfected on May 2nd and initiated a sell countdown. On June 4th, the May 23rd buy setup perfected and initiated a buy countdown. On June 20th, a bearish price flip initiated a buy setup. On June 25th, the June 4th buy countdown completed and set a 18,860.42 risk level, which is based on the day's 565.94 trading range and 19,426.36 intraday low. On Wednesday, the index fell -1.04% to 12,834.01, from 12,969.34 the prior day and 13,014.58 four days prior. The June 20th buy setup progressed to 5. The index closed +7.84% above 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. In December, a bullish price flip initiated a sell setup. In May, the index closed at 2,300.60, up +5.63% from 2,177.91 the prior month and 2,385.42 four months prior. The April 30th buy setup progressed to 2. The 7 buy countdown associated with the January 2012 perfection was unchanged.

    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 June 21st, the index closed the week down -4.11% at 2,073.10, from 2,162.04 the prior week and 2,288.53 four weeks prior. The June 7th buy setup progressed to 3. The 5 sell countdown associated with the February 8th perfection is unchanged since May 31st.

    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. On June 7th, the April 9th buy countdown completed and set a 2,142.63 buy risk level. On June 19th, the June 3rd buy setup perfected and initiated a buy countdown. Wednesday, the index fell -0.41% to 1,951.50, from 1,959.51 at the prior close and 2,084.02 4 days prior. The June 19th buy countdown progressed to 6. The index closed -8.92% below the risk level.

    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. On May 31st, the index closed at 2,769.64, compared to 2,712.00 the prior month and 2,763.68 four months prior. The 9 sell setup perfected and initiated a sell countdown.

    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. The completion set a 2,785.45 risk level. Since January 18th, the subsequent trend is lower. In the week ended June 21st, the index fell -4.42% to 2,549.48, from 2,667.32 the prior week and 2,764.29 at the 4 weeks' prior close. The June 7th buy setup progressed to 3. The 7 sell countdown stemming from the January 18th perfection is unchanged since May 17th. The index closed -8.31% below the risk level.

    On a daily basis, 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. On April 23rd, a bullish price flip initiated a sell countdown, which perfected on May 3rd. On June 12th, the May 31st buy setup perfected and initiated a buy countdown. On June 17th, a bullish price flip initiated a sell setup. Tuesday, the index fell -1.48% to 2,511.83, from 2,549.48 the prior day and 2,683.98 at the prior 4 days' close. The June 20th buy setup progressed to 4. The June 12th buy countdown progressed to 5. The index closed -8.73% below the 2,786.57 risk level.

    2Q2013 Earnings. Of 13 reporting companies, 10 or 76.9% surprised positively on earnings, with a +1.49% surprise average. Of reporting companies, 7 or 53.9% reported sales or revenues in excess of estimates. The average sales/revenue surprise is -0.07%.

    Valuation. The SPX trades at 15.2x 2012 earnings ($103.41), 14.2x estimated 2013 earnings ($110.31), 12.8x estimated 2014 earnings ($122.91), and 11.6x estimated 2015 earnings ($135.21). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, and 2015 earnings to grow +6.78% and +11.4%, and +9.95%respectively.

    Composite, index, and equity options. Options markets worsened to bearish to neutral, from neutral the prior day. Composite options are neutral, index options are bearish, and equity options are neutral. The composite put/call ratio is 1.07, compared to 1.01 the prior day, and better compared to its 5- and 10-period moving averages of 1.14 and 1.09, respectively. The index put/call ratio is 1.55, compared to 1.30 the prior day, and worse compared to its 5- and 10-period moving averages of 1.34 and 1.22, respectively. The equity put/call ratio closed the day at 0.89, compared to 0.89 the prior day, and better compared to its 5- and 10-period moving averages of 1.07 and 1.03, respectively.

    NYSE Volume, Breadth Indicators. Volume fell -16.4% to 809.94 million shares, from 968.43 million shares the prior day, 0.96x the 840.59 million share 20-day moving average. Market breadth was positive, and up volume led down volume slightly. Advancing stocks led decliners by +1,882 (compared to -2,301 the prior day), or 4.20:1. Up volume was 6.92:1 down volume.

    KBW Bank Index (BKX). On lower, but above average volume, the KBW bank index rose +2.18% to 60.48, from 59.19 at the prior day's close. The index gapped higher to open above 59.50 and trended higher to a late session 60.74 intraday high. Volume fell -15.6% to 63.026 million shares, from 74.703 million shares the prior day, or 1.003:1x the 62.836 million share 15-day moving average.

    Large cap banks underperformed the regional banks' performance, as the KBW regional banking index (KRX) rose +2.16%.

    Last week, the BKX closed down -0.02%. The prior week, the BKX closed down -2.31%. In June, the index is down -2.35%. In May, the BKX closed up +8.30%. For the year, the BKX is up +17.9%, better than the SPX's +11.4% rise. In 2012, the index rose +30.2%, compared to a +13.4% rise in the SPX.

    Monday's 59.19 close was its worst since May 13th. The index crossed above 50 on December 17th. The BKX closed +4.37% above its 57.95 April 23, 2010 close (the prior post-2008 high point), and +85.8% above the 32.56 intraday low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +47.8% in the same period.

    The BKX index closed -50.0% below its February 20, 2007, record 121.06 high.

    Technical indicators improved. The BKX recaptured its 5- and 10-day moving averages. The index closed -0.63% below and 2.20% above its respective 20- and 50-day moving averages. The index closed +5.40% and +12.1% above its respective 100- and 200-day moving averages. The index has closed above its 100-day moving average since last August 7th. The 20-day moving average fell -5 bps. The 50-day moving average rose +11 bps. Its 100-day moving average rose +7 bps, and the 200-day moving average rose +7 bps. The 20-day closed (by +1.69 points) above the 50-day, and the gap narrowed -17 bps. The 50-day moving average closed (by +5.22 points) above the 200-day moving average, and the gap widened 4 bps. The 100-day moving average closed (by +3.42 points) above the 200-day moving average since March 19th, and the gap was unchanged.

    The directional movement indicator narrowed to -2.907, from -6.7074 the prior day and its 4th consecutive daily negative reading. Relative strength rose to 51.36, from 43.27 the prior day, in the middle of a neutral 30-70 range. Next resistance is 60.97; next support is at 59.77.

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