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Gary Townsend - Founding member and Chairman, GBT Capital Management, LLC, a macro long/short fund based in Chevy Chase, Maryland. Also, 2007-2013, a founding partner, CEO and Portfolio Manager of Hill-Townsend Capital LLC, a long/short equity financial sector fund. Mr. Townsend has 35 years... More
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  • U.S. Futures Rise As Disappointing Durables Point To Delayed Fed Taper 0 comments
    Aug 26, 2013 9:24 AM

    This morning. The U.S. equity market trend is "in correction". Earnings season is largely concluded, with 346 of 484 S&P 500 companies having reported with better EPS and 265 better revenues than consensus, though critics argue that the better EPS is largely due to cost cutting and that revenue growth remains unimpressive. Notwithstanding, 2013-2015 annual EPS estimates are somewhat improved overall from estimates prior to the start of the current season. This morning, futures are mixed, but improving as the morning has progressed.

    Friday, U.S. equity markets opened higher, but moved lower following the disappointing July new home sales report at 10:00. Indexes quickly found support, however, and most reversed higher by late morning and rallied to late intraday highs. Overall, technicals were little changed. All SPX market segments closed at least +0.06% higher. Market breadth was positive. Volatility fell. U.S. Treasury bond yields fell several basis points.

    Trading desks noted slow August trading and modest participation. Flows remain thin, and liquidity poor.

    Today, economic reporting focuses on July durable goods and capital goods shipments, which disappointed. Overseas reporting is light.

    In Asia, Japanese equities closed slightly lower, but Chinese equities rallied strongly. Tuesday's Nikkei 225 (NKU3) equity futures are down -0.513%. In Europe, equities are mixed. London is higher, but continental bourses are moderately lower and near session lows. Commentary focuses on threats to the Italian government coalition. Emerging markets' weakness is another theme, along with associated currency and interest rate moves.

    This morning, long-term U.S. Treasury yields are 2.7908%, compared to 2.8146% at the prior close. Spanish and Italian 10-year debt yields are 4.49% and 4.40%, respectively, compared to 4.46% and 4.33% the prior day. The U.S. dollar is mixed. U.S. options markets are unchanged at neutral to bullish, compared to neutral to bullish the prior day. The CBOE skew rose and now slightly exceeds a neutral range.

    In pre-market futures trading, September SPX equity futures are modestly lower, but near the bottom of a 1658-1662 range. After a fair value adjustment of -0.30 points, SPX equity futures are at 1659.25, down -1.95 points. The SPX opens -1.00% below and +0.25% above its respective 20- and 50-day moving averages, and +1.69% and +6.93% above its respective 100- and 200-day moving averages.

    In Asia, equity market closed mixed, with better strength in China. The Nikkei 225 (NYSEARCA:NKY) closed down -0.18%. The Hang Seng (HSI) rose +.65%. The Shanghai composite (SHCOMP) rose +1.86%. Volumes are unavailable.

    Commentary focused on lower than expected U.S. home sales, which assuaged Fed temper concerns, U.S. Treasury yields, and currency developments.

    The NKY's relative strength index (RSI) closed at 46.41, down from 46.83 the prior day, and in a neutral 30-70 range. The index's RSI is down from an overbought 82.61 on May 22nd, up from a low of 34.42 on June 13th, and down from 64.16 on July 23rd. The HSI's RSI fell to 52.40, from 49.20 the prior day. The SHCOMP's RSI fell to 58.03, from 49.39 the prior day, but up from June 27th's grossly oversold 15.27.

    Last week, the NKY closed up +0.08%, while the HSI and SHCOMP closed off -2.91% and -0.53%, respectively. The prior week, the NKY closed down -5.88%, the HSI lost -1.73%, and the SHCOMP gained +1.12%. In August, the NKY is down -0.23%, the HSI is up +0.56%, and SHCOMP is up +5.15%. In July, the NKY closed down -0.07%, the HSI closed up +5.19%, and the SHCOMP rose +0.74%. In June, the NKY closed down -0.71%, the HSI -7.10%, and the SHCOMP -14.0%.

    In 2013, the NKY is up +31.2%. The HSI is down -2.88%. The SHCOMP is down -7.61%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 13,636.28, down from 13,660.55 the prior day. The index closed +63.0% above its 8,365.90 July 25, 2012 closing low. Today, the index gapped higher and set an early 13,741.49 intraday high, but reversed lower to 13,586.84 by mid-morning, then rallied to breakeven by mid-session. The index traded narrowly higher through mid-afternoon, but eased lower in the final hour. The index closed -1.12% and -1.70% below its respective 20- and 50-day moving averages, and -1.36% below and +11.6% above its respective 100- and 200-day moving averages. Market segments closed mixed. Leaders were oil and gas, financials, and industrials, which rose at least +0.19%. Laggards were utilities, technology, and telecommunications, which fell at least -0.74%.

    In China, the HSI closed at 22,005.32, up from 21,863.51 at the prior close. The index closed -7.63% below its January 30th 23,882.06 high, but +21.0% above its 18,185.59 June 4, 2012 low. The index gapped higher to open above 21,940 and rose to a mid-morning 22,116.00 intraday high. The index fell back to support at 22,000 through the close. The index closed -0.21% below and +2.91% above its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were basic materials, consumer goods, and industrials, which rose at least +1.13%. Financials gained +0.61%. Laggards were technology and utilities, which rose at least +0.16%, and telecommunications, which fell -0.32%.

    In Shanghai, the SHCOMP closed at 2,096.47, up from 2,057.46 at the prior close, and +7.51% above the 1,950.01 June 27th closing low. The index opened above 2,060, and rallied to 2,085 by mid-session and to its late 2,097.31 intraday high. The SHCOMP closed +2.05% and +2.91% above its respective 20- and 50-day moving averages. All market segments closed at least +1.19% higher. Leaders were consumer services, industrials, and technology, which rose at least +2.36%. Financials rose +1.83%. Laggards were health care, utilities, and oil and gas.

    In Europe, the major equity indexes are mixed, higher in London, but lower on the continent, with greater weakness in Italy. The Euro Stoxx50 (SX5E), CAC 40, and DAX are down -0.60%, -0.58%, and -0.22%, respectively, while the FTSE 100 is up +0.70%. The Spanish IBEX 35 is down -0.70%. The Italian FTSE MIB is down -2.24%.

    There are no scheduled economic reports. Commentary focuses on the Italian government's shaky government coalition.

    On August 14th, the SX5E set a new 2,852.08 52-week high, though -46.9% below its March 31, 2000, all-time closing high. European bourses have recently outperformed U.S. equity indexes. SX5E relative strength (RSI) is a neutral 54.68, down from 56.28 the prior day and down from an overbought 72.74 on August 14th.

    From its 2,805.32 prior day's close, the SX5E initially traded narrowly, but weakened by mid-morning to 2,803.84 but has found support at 2,805 moving into the afternoon session. The index currently trades at 2,808.85. Most market segments are lower. Leaders are health care, technology, and telecommunications, which are up at least +0.03%. Laggards are industrials, utilities, and financials, which are down at least -0.69%.

    Last week, the Euro Stoxx50, FTSE 100, and CAC 40 closed down -0.99%, -0.12%, -1.32%, but the DAX closed up +0.30%. The prior week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -0.76%, -0.30%, -0.69%, and -0.18%, respectively. In August, Euro Stoxx50, CAC 40, and DAX are up +1.86%, +1.77%, and +1.79%, respectively, while the FTSE 100 is down -1.91%. In July, the Euro Stoxx50, FTSE100, CAC 40, and DAX closed up +5.82%, +6.48%, +6.22%, and +3.58%, respectively. In 2013, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +6.43%, +10.1%, +11.0%, and +10.3%. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

    2Q2013 SPX Earnings. Of 484 (of 499) reporting companies, 346 or 71.5% surprised positively on earnings, with a +2.70% surprise average. Of reporting companies, 265 or 54.9% reported sales or revenues in excess of estimates. The average sales/revenue surprise is +0.49%.

    Valuation. The SPX trades at 16.0x 2012 earnings ($103.41), 15.1x estimated 2013 earnings ($110.22), 13.6x estimated 2014 earnings ($122.23), and 12.3x estimated 2015 earnings ($135.41). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, and 2015 earnings to grow +6.58% and +10.9%, and +10.8%respectively.

    Composite, index, and equity options. Options markets are unchanged at neutral to bullish, compared to neutral to bullish the prior session. Composite options are bullish, index options are neutral, and equity options are neutral. The composite put/call ratio is 0.79, compared to 0.80 the prior day, and better compared to its 5- and 10-period moving averages of 0.87 and 0.86, respectively. The index put/call ratio is 1.23, compared to 1.03 the prior day, and worse compared to its 5- and 10-period moving averages of 1.07 and 1.00, respectively. The equity put/call ratio closed the day at 0.70, compared to 0.72 the prior day, and better compared to its 5- and 10-period moving averages of 0.82 and 0.82, respectively.

    NYSE Volume, Breadth Indicators. Volume fell -0.27% to 571.79 million shares, from 573.35 million shares the prior day, 0.86x the 662.33 million share 20-day moving average. Market breadth was modestly positive, and up volume lagged down volume. Advancing stocks led decliners by +1,578 (compared to +2,093 the prior day), or 4.29:1. Up volume was 2.32:1 down volume.

    Distribution day count. The current corrective trend began on August 15th, following a uptrend that commenced on July 11th.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.11680%, up from 0.11570% the prior day. USD 3-month LIBOR is 0.26210%, unchanged from 0.26210% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US Libor-OIS (LOIS) spread is 15.71 bps, down from 15.81 bps the prior day, and compares to the January 6th high of 50.050 bps. Euribor-OIS is 12.30 bps, unchanged from 12.30 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 -9.752 bps, compared to -9.544 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and below a normal -10 bps and -40 bps range.

    · Spanish 10-year debt yields are 4.49%, up from 4.46% the prior day and up from the 4.039% May 3rd low. Italian 10-year debt yields are at 4.40%, up from 4.33% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.93%, compared to 1.94% the prior day. Japanese 10-year debt yields are 0.77%, compared to 0.77% the prior day.

    · The U.S. government overnight repo rate is 2 bps, compared to 2 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 0.376% and 2.817%, respectively, compared to 0.376% and 2.815% Friday. The yield curve widened +0.170 bps, with the 2- to 10-year spread at +2.440%, compared to 2.439% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.548% on August 31, 2012, to a high of +2.538% on August 22, 2013.

    · The U.S. dollar is mixed, stronger compared euro and Japanese yen, but weaker compared to the British pound. The dollar trades at US$81.421, compared to a US$81.450 intraday high and US$81.361 the prior day, and worse compared to its $82.221 50-day, US$82.417 100-day, and US$81.606 200-day averages. The euro trades at US$1.3375, compared to a US$1.3365 intraday low and US$1.3383 the prior day. The euro trades better compared to its US$1.3186 50-day and US$1.3126 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥98.62, compared to ¥98.72 the prior day. The yen trades worse than its 50-day moving average ¥98.60, and better than its May 17th 103.21 closing low.

    · Citigroup Economic Surprise Index worsened to 28.50, from 34.30 the prior day. The index turned positive on July 30th. The index is worse compared to its respective +33.36 and +36.12 5-day and 10-day moving averages. 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 mixed, with lower energy, lower precious metals, higher aluminum and copper, and higher agriculture prices.

    Volatility, Skew:

    · The CBOE SPX Volatility Index (VIX) closed at 13.98, down -5.28% from 14.76 at the prior close. The VIX is +3.26% above its 13.484 20-day moving average. Its 30-day high is 16.56. Its 30-day low is 11.83. The index's all-time closing low is 11.26 on June 30, 1993. The long-term average is 20.18.

    · At mid-session, the Euro Stoxx 50 volatility index (V2X) is 18.56, up 4.14% from 17.82 at the prior day's close. The V2X index trades +3.86% above its 17.87 20-day moving average, -9.71% below the 20.56 30-day high, and +15.7% above the 16.04 30-day low.

    · The Hang Seng volatility index (VHSI) closed Monday at 18.52, up +0.22% from 18.48 the prior day. The VHSI index trades +7.51% above its 17.23 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) closed at 120.13, up +0.77% from 119.21 at the prior day's close, and above a neutral (115-120) range. The recent low was 112.47 on May 25, 2013. Spikes in excess of 130 (as on February 15 and 18, 2013 and previously on September 21, and March 12, 15, and 16, 2012) correlate well with short-term market tops. The recent high closes were 130.46 on February 15th and 130.60 on September 21st. 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:

    · At 8:30, July durable goods fell %, compared to -4.0% survey and +3.9% revised prior.

    · Ex-transportation, July durable goods rose %, compared to +0.5% survey and -0.1% revised prior.

    · Capital goods no-defense shipments, ex-aircraft rose %, compared to +0.3% survey and -0.9% prior.

    · At 10:30, August Dallas Fed manufacturing activity, with 3.9 survey and 4.4 prior.

    Overseas Economic Reporting and News:

    · Spain - MoM PPI rose +0.5%, compared to +0.0% prior. YoY PPI rose +0.8% and 1.3% prior.

    Company Ratings/News:
     

    • None.


    Friday's Trade. On lower and below average volume, U.S. equity markets rose modestly, with the DJI positing its 2nd consecutive higher close. Since August 15th, the market trend is "in correction".

    Futures indicated a modestly higher open, and indexes rose initially, then reversed modestly lower after the 10:00 release of disappointing July new home sales, which fell -13.4% MoM, compared to -2.0% survey. Nonetheless, indexes moved higher by mid-morning and improved through the session to late intraday highs. The Nasdaq and NYSE composite rose +0.52%, followed by the SPX and DJI, which rose +0.39% and +0.31%, respectively. Market breadth was positive, with gainers 2.11:1 losing stocks. All SPX market segments closed at least +0.06% higher. Leaders were telecommunications, basic materials, and oil and gas, which rose +0.75%. Laggards were financials, consumer services, and industrials.

    NYSE volume fell -0.27% to 571.79 million shares, from 573.35 million shares the prior day, +0.86x the 662.33 million share 20-day moving average volume. U.S. 10-year yields fell -6.98 bps to 2.8146%, from 2.8844% at the prior close.

    SPX futures pointed to a modestly higher open, and the SPX traded briefly above 1660, but traded off to its 1654.81 intraday low just after 10:00. The index rallied, however, and moved higher by mid-morning and improved through the afternoon to a late 1664.85 intraday high. The index closed at 1663.50, -2.70% below the August 2nd record close. The index closed +54.8% above the 1074.77 October 4, 2011, intraday low.

    The TRAN ended at 6,479.85, up +0.11%, compared to the DJI's +0.31% gain. From its 6,472.54, the TRAN opened modestly higher, but immediately reversed lower and fell to its 6,433.00 intraday low just after 10:00. The index improved into the afternoon session, but never traded higher until the final hour, when it reversed higher to a late 6,484.29 intraday high. The index closed at 6,479.85, -2.85% below its August 1st 6,670.06 record close. Volume fell -11.3% to 0.73:1 average volume. The TRAN again failed to confirm the DJI's August 2nd record. The TRAN closed +0.26% and +1.46% below its respective 20- and 50-day moving averages. The index ended +2.65% and +8.54% above its respective 100- and 200-day moving averages.

    Market volatility fell. From its prior 14.76 prior close, the VIX opened at 14.27 but rose quickly to 14.82 in early trading, then slipped through the session's remainder to end at the 13.98 intraday low, down -5.28%, but +3.26% above its 13.54 20-day moving average. The VIX's all-time closing low was 11.26, set June 30, 1993.

    The broader market's technical factors were little changed, as the SPX, DJI, and NYSE composite closed above their 5-day moving averages, but below their 10- and 20-day moving averages. The SPX closed above its 100- and 200-day moving averages. SPX relative strength (RSI) rose to 46.72, from 43.49 the prior day, in the lower end of a neutral range. The CBOE put/call skew rose +0.77% to 120.1, from 119.21 the prior day, above a neutral 115-120 range.

    Last week, the SPX, Nasdaq, and NYSE composite rose +0.46%, +1.53%, and +0.10%, while the DJI ended with a -0.47% loss. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed down -2.10%, -2.23%, -1.57%, and -1.63%, respectively. In August, the Nasdaq is up +0.87%, while the SPX, DJI, and NYSE composite are down -1.32%, -3.16%, and -0.88%, respectively. In July, the SPX, DJI, Nasdaq, and NYSE composite closed up +4.95%, +3.96%, +6.56%, and 4.90%, respectively.

    In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +16.6%, +14.6%, +21.1%, +12.2%, respectively. All closed at least +5.91% higher in 2012. Immediate SPX resistance is 1667. Immediate support is 1657, then 1651.

    KBW Bank Index (BKX). On lower and below average volume, the BKX closed at 64.91, down -0.18% from 65.03 at the prior day's close. The index opened higher and set an early 65.26 intraday high, but reversed lower before 10:00 and fell to an early afternoon 64.60 intraday low. The index improved through the close. Volume fell -13.9% to 34.954 million shares, from 40.608 million shares the prior day, 0.82:1x the 42.796 million share 15-day moving average.

    Large cap banks outperformed the regional banks' performance, as the KBW regional banking index (KRX) fell -0.36%.

    Last week, the BKX closed up +0.31%, compared to a -0.95% loss the week before. In August, the BKX is down -1.31%. In July, the BKX closed up +7.10%. For the year, the BKX is up +26.6%, better than the SPX's +16.6% rise. In 2012, the index rose +18.9%, compared to a +13.4% rise in the SPX.

    The BKX is now +9.66% better than the June 24th 59.19 close, its worst since May 13th. The index crossed above 50 on December 17th and 60 on August 5th. The BKX closed +99.4% 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 +54.8% in the same period.

    The BKX index closed -46.4% below its February 20, 2007, record 121.06 high. The BKX is up +248.6% from its 18.62 March 6, 2009, closing low.

    Technical indicators were little changed. The index closed above its 5- and 10-day moving averages, but below its 20-day moving average. The index closed above its 50-, 100-, and 200-day moving averages. The index closed -0.68% below and +1.33% above its respective 20- and 50-day moving averages. The index closed +5.95% and +13.9% above its respective 100- and 200-day moving averages. The index has closed above its 100-day moving average since August 7, 2012. The 20-day moving average fell -5 bps. The 50-day moving average rose +8 bps. Its 100-day moving average rose +11 bps, and the 200-day moving average rose +7 bps. The 20-day closed (by +1.30 points) above the 50-day, and the gap narrowed -13 bps. The 50-day moving average closed (by +7.04 points) above the 200-day moving average, and the gap was unchanged. The 100-day moving average closed (by +4.25 points) above the 200-day moving average since March 19th, and the gap rose +3 bps.

    The directional movement indicator improved to -2.462, from -4.303 the prior day, its 7th consecutive negative reading. Relative strength worsened to 50.36, from 51.32 the prior day, within a neutral 30-70 range. Next resistance is 65.25; next support is at 64.59.

    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 July, the index closed at 1685.73, up +4.95% from 1606.28 the prior month and 1569.19 four months prior. The May 2013 sell countdown progressed to 3. The index closed -5.99% 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. On August 2nd, the March 1st sell countdown completed and set a 1737.48 risk level, based on the week's 27.81 point range and 1709.67 high. The week ending August 16th, a bearish price flip initiated a buy setup. In the week ending August 23rd, the index closed up +0.46% to 1663.50, compared to 1655.83 the prior week and 1691.65 close four weeks prior. The August 16th buy setup progressed to 2. The index closed -4.26% below the 1737.48 risk level.

    On a daily basis, the SPX perfected a sell setup on March 13th, with a 1552.52 close. On April 29th, the March 13th sell countdown. On May 2nd, a bullish price flip initiated a follow-on sell setup, and on May 14th, the sell setup perfected and initiated a sell countdown, which completed on July 8th. The completion set a risk level of 1725.50, based on the 38.32 point May 22nd trading range and 1,687.18 intraday high. On June 26th, a bullish price flip initiated another follow-on sell setup, and this setup perfected on July 9th and initiated a sell countdown. On August 1st, a bullish price flip initiated a sell setup. On Friday, the SPX rose +0.40% to 1663.50, compared to 1656.96 the prior day and 1646.06 4 days prior. The August 22nd sell setup progressed to 2. The July 9th sell countdown progressed to 12. The index closed -3.59% below the 1725.50 risk level.

    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 July, the index closed at 65.77, up +7.10% from 61.41 at June-end and 56.28 four months prior. The May 2013 sell countdown progressed to 3.

    On a weekly basis, a bullish price flip occurred on July 27, 2012, and the sell setup perfected the following September 21st. Subsequent trends were weak until December 7, when the index initiated a new sell setup, which perfected on February 1, 2013. On February 22nd, the September 21st sell countdown completed and set a 56.93 risk level. On July 19th, the February 1st sell countdown completed and set a 68.29 risk level, based on the day's 2.24 point range and 66.05 intraday high. On August 23rd, the BKX closed at 64.91, compared to 64.71 the prior week and 65.98 four weeks prior. The August 16th buy setup progressed to 2. The index closed -4.95% below the 68.29 risk level.

    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. On June 26th, a bullish price flip initiated a sell setup, which perfected on July 9th and initiated a sell countdown. On July 2nd, the index completed its May 15th sell countdown, which set a 64.06 risk level, based on the May 30th 1.14 point high/low range and 62.92 close. On July 24th, the July 12th sell setup perfected, but did not initiate a sell countdown. On August 8th a bearish price flip initiated a buy setup, which completed on August 19th and initiated a buy countdown. Friday, the index fell -0.19% to 64.91, compared to 65.03 the prior day and 63.84 four days prior. The August 22nd sell setup progressed to 2. The August 19th 1 buy countdown is unchanged since August 19th. The index closed +1.33% above its 64.06 risk level.

    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 July at 13.45, down -20.2% from 16.86 at the end of June and 12.70 at the end of March. The May 2013 sell 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. 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 August 23rd, the VIX fell -2.71% to 13.98, compared to 14.37 the prior week, and 12.72 4 weeks prior. The August 16th sell setup progressed to 2. The index closed +52.5% above the risk level.

    On a daily basis, on May 20th a bullish flip initiated a sell setup, which perfected on May 31st and initiated a sell countdown. On June 26th, a bearish flip initiated a buy countdown, which perfected on July 9th, when a sell countdown was initiated. Friday, the VIX closed down -5.28% at 13.98, compared to 14.76 the prior day and 15.10 at the 4 days' prior close. The bearish price flip canceled the August 14th 7 sell setup and initiated a buy setup. The July 9th buy countdown progressed to 12. The VIX closed +34.3% above the 10.41 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 July at 2.5762%, compared to 2.4857% the prior month and 1.8487% 4 months prior. The May 2013 sell setup progressed to 3.

    On a weekly basis, on December 7th, a bullish rate flip (at 1.6215%) initiated a sell setup, which perfected on February 1st. The perfection initiated a sell setup. Subsequent trends were weak until a May 3rd bullish rate flip (at 1.7382%) initiated a sell setup, which perfected on June 28th, when the rate ended at 2.4857%. For the week ended August 23rd, the rate ended at 2.8146%, compared to 2.8251% the prior Friday and 2.5624% four weeks prior. The August 16th sell setup progressed to 2. The February 1st sell countdown progressed to 11.

    On a daily basis, 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 Friday, the rate closed down -6.98 bps at 2.8146%, from 2.8844% the prior day and 2.8804% four days prior. The bearish rate flip canceled the August 14th 8 sell setup and initiated a buy setup. The rate closed -0.004 bps below the 2.8150% 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 July at 1.3302, up +0.45% from 1.3010 the prior month and 1.2815 4 months prior. The June 2013 sell setup progressed to 2. 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 August 23rd, the index rose +0.41% to end at 1.3383, compared to 1.3329 the prior week and 1.3279 4 weeks prior. The July 19th sell setup progressed to 6. The sell countdown associated with the September 28th perfection is a deferred 13, unchanged since June 7th. The cross closed +11.8% 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. On July 2nd, the June 20th buy setup perfected and initiated a buy countdown. On July 10th, a bullish price flip initiated a sell setup, which perfected on July 22nd. The perfection canceled the July 2nd buy countdown. With Friday's +0.20% higher close, the EURUSD cross ended at 1.3383, compared to 1.3356 the prior day and 1.3335 four days prior. The August 15th sell setup progressed to 7. The July 22nd 11 sell countdown is unchanged since August 20th. The cross closed -1.20% below the 1.3537 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 July, the index closed at 2,753.97, up +5.82% from 2,602.59 the prior month and 2,624.02 four months prior. The bullish price flip canceled a 1 buy setup and initiated a sell setup. The May 2013 sell countdown is unchanged since May 2013.

    On a weekly basis, 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 was lower, until a bullish price flip in the week ending July 12th. On August 16th, the sell countdown stemming from the January 18th perfection completed and set a 2,909.37 risk level, based on the August 16th week's 53.48 range and 2,855.89 intraweek high. In the week ended August 23rd, the index fell -0.99% to 2,826.05, compared to 2,854.27 the prior week and 2,741.96 at the 4 weeks' prior close. The July 12th sell setup progressed to 7. The index closed -2.86% below the 2,909.37 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 July 8th, a bullish price flip initiated a sell setup, which perfected on July 18th and initiated a sell countdown. On August 15th, the July 18th sell countdown completed and set a 2,876.19 risk level, based on the day's 32.11 point range and 2835.86 close. Friday, the index rose +0.49% to 2,826.05, compared to 2,812.32 the prior day and 2,823.35 at the prior 4 days' close. The bullish price flip canceled the August 19th 4 buy setup and initiated a sell setup. The index closed -1.74% below the 2,876.19 risk level.

    Nikkei - 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 July at 13668.32, down -0.07% from 13,677.32 the prior month and 12,397.91 four months prior. The November 2012 sell setup progressed to 9 and perfected.

    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 August 23rd, the index closed up +0.08% at 13,365.17, compared to 13,650.11 the prior week and 14,129.98 four weeks' prior. The August 9th buy setup progressed to 3. The index closed -6.80% below the risk level.

    On a daily basis, 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 July 10th, the June 28th sell setup perfected, cancelled the June 4th 7 buy countdown, and initiated a sell countdown. On August 2nd, a bullish price flip initiated a sell setup. Monday, the index fell -0.18% to 13,636.28 compared to 13,660.55 the prior day and 13,396.38 four days prior. The bullish price flip canceled the August 19th 5 buy setup and initiated a sell setup. The July 10th sell countdown progressed to 10. The index closed -11.5% below the 15,412.34 risk level.

    Hang Sang - 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 July at 21,883.66, up +5.19% from 20,803.29 the prior month and 22,299.63 four months prior. The May 2013 buy setup progressed to 3. The index closed -19.5% 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 August 23rd, the index closed down -2.91% to 21,863.51, compared to 22,517.81 the prior week and 21,968.95 four weeks prior. The bearish price flip canceled the July 12th 6 sell setup and initiated a buy setup. The April 5th 6 buy countdown is unchanged since June 21st. The index closed -2.21% below the risk level.

    On a daily basis, 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 Monday, the index rose +0.65% to 22,005.32, from 21,863.51 the prior day and 21,970.29 four days prior. The bullish price flip canceled the August 20th 5 buy setup and initiated a sell setup. The index closed +16.7% above the 18,860.42 risk level.

    Shanghai Composite - 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 perfection initiated a buy setup. In April 2013, a bearish price flip initiated a buy setup. In July, the index closed at 1,993.80, up +0.74% from 1,979.21 the prior month and 2,236.62 four months prior. The April 30th buy setup progressed to 4. The January 2012 buy countdown progressed to 9.

    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 August 23rd, the index closed the week down -0.53% at 2,057.46, compared to 2,068.45 the prior week and 2,010.85 four weeks prior. The July 26th sell setup progressed to 5.

    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. On June 3rd, a bearish price flip initiated a buy setup, which perfected on June 19th, and initiated a buy countdown. On June 7th, the April 9th buy countdown completed and set a 2,142.63 buy risk level. On July 29th, a bullish price flip initiated a sell setup. On July 30th, the June 19th buy countdown completed and set a 1,735.74 risk level, based on the June 25th 113.91 point trading range and 1,849.65 intraday low. On August 13th, the August 1st sell setup perfected and initiated a sell countdown. Monday, the index rose +1.90% to 2,096.47, compared to 2,057.46 at the prior close and 2,072.59 4 days prior. The bullish price flip canceled the August 16th 6 buy setup and initiated a sell setup. The August 13th 1 sell countdown is unchanged since August 13th. The index closed +20.8% above the July 30th risk level.

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