Seeking Alpha

Gary Townsend's  Instablog

Gary Townsend
Send Message
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
My company:
GBT Capital Management LLC
My blog:
Listening to Markets
  • U.S. Futures Ease; Tokyo Advances, Europe Slips 0 comments
    Jul 2, 2013 9:28 AM

    This morning. It's July's first and a holiday-shortened week and follows the U.S. equity market's first monthly decline of the year. Today's futures are modestly lower. Since June 12th, the U.S. equity market trend is "in correction", have ended an "uptrend" that began on April 29th. The June employment report is released on Friday, July 5th. Also, there is an upper house election in Japan this week, which is viewed as a referendum on Prime Minister Abe's government. Egypt's government may fall this week.

    Monday, major U.S. equity indexes closed moderately higher, off the day's mid-session highs. The Nasdaq enjoyed the best result, and the DJ Transports outperformed the Industrials. The SPX and DJI recaptured their respective 10-day moving averages. The SPX closed below its 50-day moving average for a 8th consecutive session. The NYSE composite closed below its 50-day moving average for a 9th consecutive day. Short-term SPX relative strength indicators (RSI) remain slightly below the middle of a neutral range.

    Today, in Asia, equity markets closed mixed, with better strength in Tokyo. Notably, Chinese equity markets, which became grossly oversold, appear to have turned higher after the past weeks' declines. Tuesday's Nikkei 225 (NKU3) equity futures are down -0.07%. Chinese equity futures are also modestly lower. In Europe, equities are moderately lower, with greater weakness in Frankfurt. U.S. economic reporting focuses on June vehicle sales. Sovereign long-term interest rates lower. Commodities are mostly higher.

    Commentary focuses on more the Egypt, where popular unrest threatens the country's nascent "democratic" government.

    U.S. Treasury 10-year yields are 2.454%, compared to 2.477% at the prior close. U.S. repo rates are 14 bps, down from 8 bps the prior day. Spanish and Italian 10-year debt yields are 4.59% and 4.40%, respectively, compared to 4.60% and 4.42%, the prior day. The U.S. dollar is mixed. U.S. options markets are neutral, unchanged from neutral the prior day. CBOE skew slipped below a neutral range.

    In pre-market futures trading, September SPX equity futures are lower and near the bottom of a 1605-1613 range. After a fair value adjustment of +1.71 points, SPX equity futures are at 1607.25, down -1.21 points. The SPX opens -0.16% and -0.49% below its respective 20- and 50-day moving averages, but +1.99% and +6.86% above its respective 100- and 200-day moving averages.

    Monday. On lower and below average volume, U.S. equity markets closed off mid-session highs to end with moderate gains. The Nasdaq rose +0.92%, while the NYSE composite, SPX, and DJI rose +0.61%, +0.54%, and +0.44%, respectively. Market breadth was positive, with gainers 2.52:1 losing stocks. Most SPX market segments closed higher. Leaders were basic materials, industrials, and consumer goods, which rose at least +0.75%. Financials rose +0.54%. Laggards were health care, which rose +0.41%, and telecommunications and utilities, which fell at least -0.12%.

    NYSE volume fell -59.3% to 713.85 million shares, from month and quarter-end spurred volume of 1,754.92 million shares the prior day, 0.82x the 867.19 million shares 20-day moving average volume. U.S. 10-year yields closed -0.92 bps lower at 2.4765%, from 2.4857% at the prior close.

    Futures indicated a higher open. From its prior 1614.96 close, the SPX index opened above 1615 and surged to 1625 in early trading, a level which proved tough resistance through the morning session. The index hit an early afternoon 1626.61 intraday high, then fell through the afternoon session through 1615 to support at 1613 late in the session. The SPX closed at 1614.96, up +0.54% from 1606.28 the prior day and -3.15% below its May 17th record close. The index closed +2.07% above its April 26th close, when the prior corrective trend concluded, but +50.3% above the 1074.77 October 4, 2011, intraday low.

    Monday, the BKX rose +0.90%, outperforming the SPX. Last week, the BKX closed up +2.09%, compared to a loss of -0.02% the prior week. In June, the BKX closed down -0.31%, compared to a gain of +8.30% the prior month. This year, the BKX is up +20.8%, 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.

    On -60.8% lower and below average volume, the DJ Transports (TRAN) rose +1.10%, compared to the DJI's +0.44% gain. From its prior 6,173.86 close, the index gapped higher and rallied to a mid-session 6,286.20 intraday high, then eased through the afternoon to support and 6,240. The TRAN ended at 6,241.53, -4.70% below its 6,549.16 May 17th record close. The index closed +0.30% above and -0.51% below its respective 20- and 50-day moving averages. The index recaptured its 20-day moving average. The index ended +1.21% and +9.41% above its respective 100- and 200-day moving averages.

    Market volatility declined. From its prior 16.86 close, the VIX fell to support at 16.00 by mid-morning, then eased higher to end at 16.37, down -2.91% on the day. The all-time closing low was 11.26, set June 30, 1993.

    The broader market's technical factors improved modestly. SPX relative strength (RSI) strengthened to 49.35, from 46.88 the prior day, the middle of a neutral range. The CBOE put/call skew fell -1.44% to 114.85, from 116.53 the prior day.

    Last week, the SPX, DJI, Nasdaq, and NYSE composite closed up +0.87%, +0.74%, +1.37% and +1.04%, respectively. The prior 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 closed down -1.50%, -1.36%, -1.52%, and -2.04%, 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 +13.2%, +14.3%, +13.7%, +8.58%, respectively. All closed at least +5.91% higher in 2012. Immediate SPX resistance is 1623 (the 50-day moving average). Immediate support is 1606, (10-day moving average), then 1583 (the 100-day moving average).

    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, with strength in Japan, and moderate weakness in Hong Kong. The Japanese Nikkei (NYSEARCA:NKY) rose +1.78%. The Hang Seng (HSI) reopened with a -0.70% loss. The Shanghai composite (SHCOMP) rose +0.57%, its 3rd consecutive gain. Volumes are unavailable.

    The NKY's relative strength index (RSI) rose to 59.60, in a neutral range, from 56.67 the prior day, and up from a low of 34.42 on June 13th, but down from an overbought 82.61 on May 22nd. The HSI's RSI fell to 39.97, from 41.91 the prior day. The SHCOMP's RSI continues to suggest that the index is oversold. Today, it rose to 30.10, from 27.29 the prior day, and up from last Thursday's grossly oversold 15.27.

    Commentary focused on U.S. and European economic news, regional equity and market volatility, the efficacy of Japanese monetary and fiscal policies, and the Bank of China's open market practices.

    This week, the NKY is up +3.08%, the HSI is down -0.70%, and the SHCOMP is up +1.38%. Last week, the NKY closed up +3.38%, the HSI is up +2.66%, while the SHCOMP is down -4.53%. The prior week, the NKY closed up +4.28%, the HSI lost -3.37%, and the SHCOMP lost -4.11%. In June, the NKY closed down -0.71%, the HSI -7.10%, and the SHCOMP -14.0%. 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 +35.6%. The HSI is down -8.82%. The SHCOMP is down -11.6%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 14,098.74, up from 13,852.50 the prior day. The index opened at 13,950 and traded around that level through mid-afternoon, then rallied into the close to end at the intraday high. The index ended -9.78% below its recent May 22nd 15,627.26 closing high, but up +68.5% above its 8,295.63 July 18, 2012 low. The index closed +7.33% and +2.12% above its respective 20- and 50-day moving averages, and +8.73% and +25.5% above its respective 100- and 200-day moving averages. All market segments closed at least +0.22% higher. Leaders were consumer services, financials, and consumer goods, which rose at least +1.87%. Laggards were technology, utilities, and telecommunications.

    In China, the HSI closed at 20,658.65, compared to 20,803.29 at last Friday's close. The index closed -13.3% below its January 30th 23,882.06 high, but +13.6% above its 18,185.59 June 4, 2012 low. The index opened at the 21,004.56 intraday high, but reversed lower in early trading. The index rallied to breakeven in early afternoon, but weakened through the session's remainder to a late 20,633.16 intraday low. The index ended -2.23% and -6.37% below its respective 20- and 50-day moving averages. Most market segments closed lower. Leaders were oil and gas, utilities, and industrials, which fell at least +0.10%. Laggards were financials, consumer goods, and basic materials, which fell at least -1.00%.

    In Shanghai, the SHCOMP closed at 2,006.56, from 1,995.24 at the prior close. The index opened lower and fell to a late-morning 1,978.46 intraday low, but reversed higher by mid-afternoon and rose to a late 2,007.60 intraday high. The index closed -17.6% below its 2,434.48 February 5th high, and +2.39% above its recent December 3rd 1,959.77 closing low. The SHCOMP closed -5.88% and -8.69% below its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were health care, consumer goods, and technology, which rose at least +1.73%. Laggards were basic materials, which rose +0.28%, and telecommunications and financials, which fell at least -0.22%.

    In Europe, the major equity indexes are moderately lower, with greater weakness in Frankfurt. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -0.90%, -0.61%, -0.84%, and -1.26%, respectively. The Spanish IBEX 35 is down -0.06%. The Italian FTSE MIB is down -0.80%.

    From its 2,622.62 prior day's close, the Euro Stoxx50 (SX5E) opened slightly higher, but immediately turned lower to a late morning 2,597.19 intraday low. A modest mid-session rally quickly failed, and is again testing earlier daily lows. The SX5E currently trades at 2,598.48. All market segments are at least -0.49% lower. Leaders are technology, telecommunications, and financials, which are down at least -0.72%. Laggards are health care, oil and gas, and utilities.

    This week, the Euro Stoxx50, FTSE 100, and CAC 40 are up +0.07%, +1.02%, +0.16%, respectively, and the DAX is down -0.71%. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +2.08%, +1.62%, +2.21%, and +2.18%, respectively. The prior 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 closed down -6.03%, -5.58%, -5.31%, and -4.67%, 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 -1.20%, while the FTSE 100, CAC 40, and DAX are up +6.46%, +2.85%, and +3.81%. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.12630%, up from 0.12450% the prior day. USD 3-month LIBOR is 0.27290%, down from 0.27310% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US Libor-OIS (LOIS) spread is 16.29 bps, unchanged from 16.86 bps the prior day, and compares to the January 6th high of 50.050 bps. Euribor-OIS is 11.10 bps, down from 11.20 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 -9.565 bps, compared to -9.880 bps the prior day, and up from a trough of -147.00 bps on December 14, 2011, and within a normal -10 bps and -40 bps range.

    · Spanish 10-year debt yields are 4.59%, down from 4.60% the prior day and up from the 4.039% May 3rd low. Italian 10-year debt yields are at 4.40%, compared to 4.42% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.69%, compared to 1.72% the prior day. Japanese 10-year debt yields are 0.89%, compared to 0.89% the prior day.

    · The U.S. government overnight repo rate is 14 bps, down 8 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 0.344% and 2.454%, respectively, compared to 0.351% and 2.477% Monday. The yield curve narrowed -1.420 bps, with the 2- to 10-year spread at +2.111%, compared to 2.125% 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 stronger compared to the Japanese yen, euro, and British pound. The dollar trades at US$83.197, compared to a US$83.232 intraday high and US$83.054 the prior day, and better compared to its $82.599 50-day, US$82.421 100-day, and US$81.205 200-day averages. The euro trades at US$1.3026, compared to a US$1.3018 intraday low and US$1.3064 the prior day. The euro trades worse compared to its US$1.3078 50-day and US$1.3061 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥99.82, compared to ¥99.66 the prior day. The yen trades worse than its 50-day moving average ¥99.20, and better than its May 17th 103.21 closing low.

    · Citigroup Economic Surprise Index improved to -3.60, from -9.00 the prior day when it recorded its first positive reading since May 3rd. The index is better compared to its respective -5.28 and -8.83 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 and fell to a low of -32.90 on June 10th. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The VIX closed at 16.37, down -2.91% from 16.86 at the prior close. The VIX is -5.24% below its 17.28 20-day moving average. Its 30-day high is 21.91. Its 30-day low is 12.84. 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 22.02, up +0.87% from 21.83 at the prior day's close. The V2X index trades +0.43% above its 21.92 20-day moving average, -17.9% below the 26.80 30-day high, and +36.1% above the 16.17 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 21.37, up +5.95% from 21.83 the prior day. The VHSI index trades +0.43% above its 20.76 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE skew closed at 114.85, down -1.44% from 116.53 at the prior day's close, and below 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:

    · Federal Reserve Board of Governors will vote on Basle III regulatory requirements.

    · At 8:45, June ISM New York, with 54.4 prior.

    · At 10:00, May factory orders, with +2.0% survey and +1.0% prior.

    Overseas Economic Reporting and News:

    · Hong Kong - May YoY retail sales rose +12.8%, compared to +19.4 survey and +2.07% prior.

    · Japan - June YoY vehicle sales fell -15.8%, compared to -7.3% prior.

    · Eurozone - May MoM PPI fell -0.3%, compared to -0.2% survey and -0.6% prior.

    · United Kingdom - June construction PMI is 51.0, with 51.2 survey and 50.8 prior.

    Company Ratings/News:

    · None.

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

    SPX - On a monthly basis, the SPX initiated a buy setup in June 2008, with the month's 1404.05 high setting the resistance level. The setup perfected at 735.09 in February 2009. A sell setup ensued in May 2009. In September 2010, a follow-on setup began. The May 2009 setup perfected in January 2010. Its countdown completed in January 2012, closing at 1312.41 and setting a 1429.36 risk level. The follow-on setup perfected in May 2011. In March 2012, the index closed at 1408.47, above resistance, suggesting further upside. In September 2012, the index closed at 1440.67, above the 1429.36 risk level and suggesting the likelihood of further upside. In October and November, the index closed below the risk level, but above 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 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. In June, the index closed at 1606.28, down -1.50% from 1630.74 the prior month and 1514.68 four months prior. The May 2013 sell countdown progressed to 2. The index closed -10.4% 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 28th, the index closed up +0.87% at 1606.28, from 1626.73 the prior week and 1630.74 close four weeks prior. The June 14th buy setup progressed to 3. The 9 sell countdown associated with the March 8th perfection is unchanged since May 24th. The index closed +5.30% 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 Monday, the SPX rose +0.54% to close at 1614.96, from 1606.28 the prior day and 1588.03 4 days prior. The June 27th sell setup progressed to 4. The May 14th 11 sell countdown progressed is unchanged since June 27th. The index closed +0.40% above 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. In June, the index closed at 61.41, down -0.31% from 61.60 at May-end and 53.98 four months prior. The May 2013 sell countdown progressed to 2.

    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 28th, the BKX closed at 61.41, down -0.63% from 61.60 the prior week and 61.60 four weeks prior. The June 14th buy setup progressed to 3. The 10 sell countdown associated with the February 1st perfection is unchanged since May 31st. The index closed +7.87% 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. Monday, the index closed at 61.96, up +0.90% from 61.41 the prior day and 60.48 four days prior. The June 27th sell setup progressed to 4. The May 15th sell countdown is a deferred 13 since June 27th.

    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 May a bullish flip initiated a sell countdown. The VIX ended June at 16.86, up +3.44% from 16.30 at the end of May and 115.51 at the end of February. The May 2013 sell setup progressed to 2.

    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 28th, the VIX fell -10.8% to 16.86, from 18.90 the prior week, and 16.30 weeks prior. The May 24th sell setup progressed to 6. The index closed +83.9% 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. Monday, the VIX fell -2.91% to 16.37, from 16.86 at the prior close and 18.47 at the 4 days' prior close. The June 27th buy setup progressed to 4. The May 31st 6 sell countdown is unchanged since June 21st. The VIX closed +57.3% 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 June at 1.3010, up +0.08% from 1.2999 the prior month and 1.28.15 4 months prior. The bullish price flip canceled the March 2013 3 buy setup. 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 28th, the index fell -0.85% to end at 1.3010, from 1.3122 the prior week and 1.2999 4 weeks prior. The bullish price flip canceled the 3 sell setup and initiated a buy setup. The sell countdown associated with the September 28th perfection is a deferred 13, unchanged since June 7th. The cross closed +9.08% 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 Monday's +0.42% higher close, the EURUSD cross ended at 1.3064, from 1.3010 the prior day and 1.3070 four days prior. The June 20th buy setup is an unperfected 9. The cross closed -3.49% 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 June at 2.4857%, compared to 2.1282% the prior month and 1.8756% 4 months prior. The May 2013 sell setup progressed to 2.

    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 2.4857%, from 2.5310% the prior Friday and 2.1282% four weeks prior. The May 3rd sell setup perfected and initiated a concomitant sell countdown. The sell countdown associated with the February 1st perfection progressed to 8.

    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 Monday, the rate ended at 2.4765%, compared to 2.4857% the prior day and 2.6082% four days prior. The June 27th sell setup progressed to 3. The rate closed -33.9 bps below the 2.8150% risk level.

    SX5E - On a monthly basis, the Euro Stoxx50 perfected a 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 2012 initiated a sell setup, which perfected in May 2013 and initiated a sell countdown. In June, the index closed at 2,602.59, compared to 2,769.64 the prior month and 2,633.55 four months prior. The bearish price flip initiated a buy 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 28st, the index rose +2.08% to 2,602.59, from 2,549.48 the prior week and 2,769.64 at the 4 weeks' prior close. The June 7th buy setup progressed to 4. The 7 sell countdown stemming from the January 18th perfection is unchanged since May 17th. The index closed -6.40% 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. Monday, the index fell -0.77% to 2,622.62, from 2,602.59 the prior day and 2,543.37 at the prior 4 days' close. The bullish price flip canceled thee June 27th 3 buy setup and initiated a sell setup. The June 12th 5 buy countdown is unchanged since June 25th. The index closed -6.35% below the 2,786.57 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 ended June at 13,677.32, down -0.71% from 13,774.32 the prior month and 11,559.36 four months prior. The sell setup progressed to 8.

    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 28th, the index closed up +3.38% at 13,677.32, from 13,230.13 the prior week and 13,774.54 four weeks' prior. The June 7th buy setup progressed to 4. The index closed -6.61% 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 Tuesday, the index rose +1.78% to 14,098.74, from 13852.50 the prior day and 12,834.01 four days prior. The June 28th sell setup progressed to 3. The June 4th 7 buy countdown is unchanged since June 26th. The index closed -8.52% 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. A bearish price flip in May 2013 initiated a buy setup. The index ended June at 20,803.29, down -7.01% from 22,392.16 the prior month and 23,020.27 four months prior. The May 2013 buy setup progressed to 2. The index closed -23.5% 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 28th, the index closed at 20,803.29, up +2.66% from 20,263.31 the prior week and 22,392.16 four weeks prior. The May 31st buy setup progressed to 5. The April 5th 6 buy countdown is unchanged from last week. The index closed -6.95% 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 Tuesday, the index fell -0.70% to 20,658.65, from 20,803.29 the prior day and 19,855.72 four days prior. The June 27th sell setup progressed to 3. The index closed +9.53% above the 18,860.42 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 June, the index closed at 1,979.21, down 14.0% from 2,300.60 the prior month and 2,365.59 four months prior. The April 30th buy setup progressed to 3. The January 2012 buy countdown progressed to 8.

    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 28th, the index closed the week down -4.53% at 1,979.21, from 2,073.10 the prior week and 2,300.60 four weeks prior. The June 7th buy setup progressed to 4. 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. Tuesday, the index rose +0.57% to 2,006.56, from 1,979.21 at the prior close and 1,959.51 4 days prior. The June 28th sell setup progressed to 3. The index closed -6.35% below the risk level.

    2Q2013 Earnings. Of 20 reporting companies, 15 or 75.0% surprised positively on earnings, with a +1.32% surprise average. Of reporting companies, 10 or 50.0% reported sales or revenues in excess of estimates. The average sales/revenue surprise is -0.24%.

    Valuation. The SPX trades at 15.5x 2012 earnings ($103.41), 14.6x estimated 2013 earnings ($110.18), 13.1x estimated 2014 earnings ($122.80), and 11.9x estimated 2015 earnings ($135.28). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, and 2015 earnings to grow +6.55% and +11.5%, and +10.2%respectively.

    Composite, index, and equity options. Options markets are neutral, unchanged from neutral the prior day. Composite options are neutral, index options are neutral, and equity options are neutral. The composite put/call ratio is 0.91, compared to 0.94 the prior day, and better compared to its 5- and 10-period moving averages of 0.96 and 1.03, respectively. The index put/call ratio is 1.06, compared to 1.23 the prior day, and better compared to its 5- and 10-period moving averages of 1.17 and 1.19, respectively. The equity put/call ratio closed the day at 0.84, compared to 0.85 the prior day, and better compared to its 5- and 10-period moving averages of 0.88 and 0.97, respectively.

    NYSE Volume, Breadth Indicators. Volume fell -59.3% to 713.85 million shares, from 1.75 billion shares the prior day, 0.82x the 867.19 million share 20-day moving average. Market breadth was positive, and up volume lagged down volume. Advancing stocks led decliners by +1,308 (compared to +50 the prior day), or 2.52:1. Up volume was 2.09:1 down volume.

    KBW Bank Index (BKX). On lower and below average volume, the BKX rose +0.90% to 61.96, from 61.41 at the prior day's close. The index gapped higher to pend above 61.80 and rose to a mid-session 62.61 intraday high. The index eased lower through the final 3 hours. Volume fell -34.9% to 45.322 million shares, from 69.586 million shares the prior day, or 0.72:1x the 62.801 million share 15-day moving average.

    Large cap banks underperformed the regional banks' performance, as the KBW regional banking index (KRX) rose +2.29%.

    Last week, the BKX rose +2.09%, compared to a -0.02% loss the prior week. In June, the index closed down -0.31%, compared to May's +8.30% gain. For the year, the BKX is up +20.8%, better than the SPX's +13.2% rise. In 2012, the index rose +30.2%, compared to a +13.4% rise in the SPX.

    The BKX is now +4.68% better than the June 24th 59.19 close, its worst since May 13th. The index is -1.09% below its recent 62.64 May 30th high close. The index crossed above 50 on December 17th. The BKX closed +6.92% above its 57.95 April 23, 2010 close (the prior post-2008 high point), and +90.3% 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 +50.3% in the same period.

    The BKX index closed -48.8% below its February 20, 2007, record 121.06 high.

    Technical indicators improved at the margin. The index closed above its 5-, 10-, 20-, 50-, 100-, and 200-day moving averages. The index closed +1.92% and +3.75% above its respective 20- and 50-day moving averages. The index closed +7.47% and +14.3% 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 rose +1 bp. The 50-day moving average rose +14 bps. Its 100-day moving average rose +7 bps, and the 200-day moving average rose +7 bps. The 20-day closed (by +1.07 points) above the 50-day, and the gap narrowed -12 bps. The 50-day moving average closed (by +5.52 points) above the 200-day moving average, and the gap widened +8 bps. The 100-day moving average closed (by +3.45 points) above the 200-day moving average since March 19th, and the gap widened +1 bp.

    The directional movement indicator widened to 9.963, from +3.9457 the prior day, its 4th consecutive positive reading. Relative strength rose to 58.28, from 55.5 the prior day, in a neutral 30-70 range. Next resistance is 62.52; next support is at 61.50.

Back To Gary Townsend's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.