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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 Ease Lower As Syrian Strike Looms 0 comments
    Aug 28, 2013 9:40 AM

    This morning. Since August 15th, the U.S. equity market trend is "in correction". Earnings season is largely concluded, with 348 of 487 S&P 500 companies having reported with better EPS and 266 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 lower, but better than the intraday lows.

    Tuesday, U.S. equity markets sold off at the open and traded lower to late intraday lows. Market concerns center on the spillover effects of a U.S. military strike against Syria. Technicals worsened. All SPX market segments closed lower. Market breadth was negative, and volatility rose sharply. On flight to quality, U.S. Treasury bond yields fell -7.67 basis points.

    Trading desks noted relatively slow August trading and a dearth of buying demand more than a substantial increase in supply. Flows remain thin, and liquidity poor.

    Today, economic reporting is relatively light worldwide.

    In Asia, Japanese equities closed lower, but halved mid-session losses by the close. Thursday's Nikkei 225 (NKU3) equity futures are down -0.150%. In Europe, equities are moderately lower. Commentary focuses on possible U.S. military action against Syria. Emerging markets' weakness is another theme, along with associated currency and interest rate moves.

    This morning, long-term U.S. Treasury yields are 2.7589%, compared to 2.7087% at the prior close. Spanish and Italian 10-year debt yields are 4.54% and 4.44%, respectively, compared to 4.50% and 4.45% the prior day. The U.S. dollar is stronger. U.S. options markets worsened to neutral, from neutral to bullish the prior day. The CBOE skew remains in a neutral range.

    In pre-market futures trading, September SPX equity futures are modestly lower, and near the top of a 1626-1631 range. After a fair value adjustment of -0.12 points, SPX equity futures are at 1627.75, down -0.38 points. The SPX opens -2.72%, -1.77%, and -0.43% below its respective 20-, 50-, and 100-day moving averages, and +4.63 above its 200-day moving average.

    In Asia, equity market closed lower, with large losses in Tokyo and Hong Kong, but with only modest losses in Shanghai. The Nikkei 225 (NYSEARCA:NKY) closed down -1.51%, but was off -3.29% shortly after mid-session. The Hang Seng (HSI) fell -1.60%. The Shanghai composite (SHCOMP) fell -0.11%. Volumes are unavailable.

    Commentary focused on likely U.S. military actions to punish Syria for its use of chemical weapons.

    The NKY's relative strength index (RSI) closed at 41.26, down from 44.73 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 42.18, from 49.32 the prior day. The SHCOMP's RSI fell to 58.73, from 59.39 the prior day, but up from June 27th's grossly oversold 15.27.

    This week, the NKY is down -2.36%, the HSI is down -1.55%, and the SHCOMP is up +2.13%. Last week, the NKY closed with a +0.08% gain, while the HSI and SHCOMP posted losses of -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 -2.41%, the HSI is down -1.64%, and the SHCOMP is up +5.39%. 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 +28.3%. The HSI is down -5.00%. The SHCOMP is down -7.40%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 13.338.46, down from 13,542.37 the prior day. The index gapped lower to open below 13,300 and fell to an early afternoon 13,188.14 intraday low, then rallied strongly to a late 13,392.57 intraday low. The index closed -3.16% and -4.05% below its respective 20- and 50-day moving averages, and -3.71% below and +8.70% above its respective 100- and 200-day moving averages. All market segments closed at least -1.21% lower. Leaders were health care, technology, and oil and gas. Financials fell -1.425. Laggards were consumer goods, telecommunications, and utilities, which fell at least -1.72%.

    In China, the HSI closed at 21,524.65, down from 21,874.77 at the prior close. The index closed -9.64% below its January 30th 23,882.06 high, but +18.4% above its 18,185.59 June 4, 2012 low. The index gapped lower to open below 21,600, but traded lower to a mid-session 21,465.72 intraday low. In early afternoon, the index improved to 21,550 which proved resistance through the close. The index closed -2.40% below and +0.48% above its respective 20- and 50-day moving averages. All market segments closed at least -0.36%. Leaders were telecommunications, utilities, and technology. Financials fell -1.65%. Laggards were consumer services, oil and gas, and basic materials, which fell at least -1.84%.

    In Shanghai, the SHCOMP closed at 2,101.30, down from 2,103.57 at the prior close, and +7.76% above the 1,950.01 June 27th closing low. The index opened at 2,092, but fell to a mid-morning 2,080.93 intraday low. By mid-session, the index improved to breakeven, then weakened in early afternoon before rallying to a mid-afternoon 2,113.65 intraday high. The index weakened through the final hour to end with a modest loss. The SHCOMP closed +1.71% and +3.26% above its respective 20- and 50-day moving averages. Most market segments closed lower. Leaders were basic materials, consumer services, and industrials, which rose at least +0.673%. Financials fell -0.57%. Laggards were telecommunications, technology, and health care, which fell at least -1.30%.

    In Europe, the major equity indexes are moderately lower and trade near intraday lows. The Euro Stoxx50 (SX5E), FTSE 100, CAC 40, and DAX are down -0.64%, -0.52%, -0.41%, and -1.21%, respectively. The Spanish IBEX 35 is down -1.19%. The Italian FTSE MIB is down -0.17%.

    Economic reporting includes German IFO business climate reports, which were better than expected. Commentary focuses on German consumer confidence (slight miss) and likely U.S. military action against Syria.

    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 41.06, down from 43.66 at the prior close, and down from an overbought 72.74 on August 14th.

    From its 2,749.27 prior day's close, the SX5E opened at 2,740, rallied to 2,754.27 by mid-morning, then reversed lower to support at 2,735. The index currently trades at 2,730.09, its intraday low. Most market segments are lower. Leaders are oil and gas and utilities, which are up at least +0.89%, and health care, which fell -0.54%. Financials are down -0.79%. Laggards are consumer services, consumer goods, and basic materials, which are down at least -1.37%.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -0.67%, -0.54%, -0.46%, and -1.27%, respectively. 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%. In August, Euro Stoxx50, CAC 40, and DAX are down -0.81%, -3.22%, -0.51%, and -1.30%, respectively. 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 +3.63%, +8.61%, +8.52%, and +6.89%. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

    2Q2013 SPX Earnings. Of 486 (of 499) reporting companies, 348 or 71.6% surprised positively on earnings, with a +2.72% surprise average. Of reporting companies, 266 or 54.9% reported sales or revenues in excess of estimates. The average sales/revenue surprise is +0.49%.

    Valuation. The SPX trades at 15.8x 2012 earnings ($103.41), 14.8x estimated 2013 earnings ($110.19), 13.3x estimated 2014 earnings ($122.23), and 12.0x estimated 2015 earnings ($135.40). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, and 2015 earnings to grow +6.56% and +10.9%, and +10.8%respectively.

    Composite, index, and equity options. Options markets worsened to neutral, compared to neutral to bullish the prior session. Composite options are neutral, index options are neutral, and equity options are neutral. The composite put/call ratio is 1.02, compared to 0.89 the prior day, and worse than 5- and 10-period moving averages of 0.89 and 0.90, respectively. The index put/call ratio is 1.25, compared to 1.09 the prior day, and worse than its 5- and 10-period moving averages of 1.23 and 1.03, respectively. The equity put/call ratio closed the day at 0.91, compared to 0.83 the prior day, and worse than its 5- and 10-period moving averages of 0.83 and 0.84, respectively.

    NYSE Volume, Breadth Indicators. Volume rose +25.1% to 683.17 million shares, from 546.18 million shares the prior day, 1.03x the 660.96 million share 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged decliners by -1,858 (compared to -536 the prior day), or 0.24:1. Up volume was 0.09:1 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 0.11800%, up from 0.11730% the prior day. USD 3-month LIBOR is 0.26050%, down from 0.25940% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US Libor-OIS (LOIS) spread is 15.92 bps, up from 15.54 bps the prior day, and compares to the January 6th high of 50.050 bps. Euribor-OIS is 12.30 bps, down from 12.50 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 -9.793 bps, compared to -10.061 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 4.54%, up from 4.50% the prior day and up from the 4.039% May 3rd low. Italian 10-year debt yields are at 4.44%, up from 4.45% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.84%, compared to 1.85% the prior day. Japanese 10-year debt yields are 0.73%, compared to 0.75% the prior day.

    · The U.S. government overnight repo rate is 3 bps, compared to 3 bps the prior day. The January 2, 2013, 45 bps rate was the highest since late 2008. The 0.00 bps low was on January 31, 2009.

    · U.S. Treasury yields are mixed, with 2- and 10-year maturities yielding 0.383% and 2.738%, respectively, compared to 0.356% and 2.709% Tuesday. The yield curve widened +0.2300 bps, with the 2- to 10-year spread at +2.355%, compared to 2.353% 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 stronger compared euro, British pound, and Japanese yen. The dollar trades at US$81.449, compared to a US$81.469 intraday high and US$81.166 the prior day, and worse compared to its $82.232 50-day, US$82.395 100-day, and US$81.610 200-day averages. The euro trades at US$1.3346, compared to a US$1.3337 intraday low and US$1.3393 the prior day. The euro trades better compared to its US$1.3187 50-day and US$1.3132 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥97.43, compared to ¥98.65 the prior day. The yen trades better than its 50-day moving average ¥98.65, and better than its May 17th 103.21 closing low.

    · Citigroup Economic Surprise Index improved to 26.00, from 23.30 the prior day. The index is worse compared to its respective +31.00 and +34.65 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. The index improved and turned positive on July 30th and rose to a high of 40.60 on August 15th. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX Volatility Index (VIX) closed at 16.77, up +11.9% from 14.99 at the prior close. The VIX is +21.6% above its 13.79 20-day moving average. Its 30-day high is 17.13. 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 23.63, up +6.59% from 22.17 at the prior day's close. The V2X index trades +31.3% above its 18.00 20-day moving average, -0.09% below the 23.65 30-day high, and +47.3% above the 16.04 30-day low.

    · The Hang Seng volatility index (VHSI) closed Wednesday at 20.73, up +6.80% from 19.41 the prior day. The VHSI index trades +19.4% above its 17.36 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) closed at 118.07, down -0.52% from 118.69 at the prior day's close, and within 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:

    · The latest week's MBA mortgage applications fell -2.5%, compared to -4.6% prior.

    · At 10:00, July MoM pending home sales, with +0.0% survey and -0.4% prior.

    Overseas Economic Reporting and News:

    · Germany - September GfK consumer confidence is 6.9, compared to 7.1 survey and 7.0 prior.

    · Italy - June MoM retail sales fell -0.2%, compared to +0.0% survey and +0.1% revised prior.

    · United Kingdom - August CBI reported sales index rose to 27, compared to 20 survey and 17 prior.

    Company Ratings/News:
     

    • None.


    Tuesday's Trade. On increased and above average volume, U.S. equity markets fell heavily, as U.S. saber rattling vis-a-vis Syria continued to dominate world markets. Since August 15th, the market trend is "in correction".

    Futures indicated a much lower open modestly higher open, and indexes fell moderately at the open and gave ground through the session to late intraday lows. The Nasdaq fell -2.16%, followed by the SPX, NYSE composite, and DJI, which fell -1.59%, -1.53%, and -1.14% lower. Market breadth was negative, with gainers a mere 0.24:1 losing stocks. All SPX market segments closed at least -0.04% lower. Leaders were utilities, telecommunications, and oil and gas. Laggards were basic materials, technology, and financials, which fell at least -2.00%.

    NYSE volume rose +25.1% to 683.17 million shares, from 546.18 million shares the prior day, +1.03x the 660.96 million share 20-day moving average volume. U.S. 10-year yields fell -7.67 bps to 2.7087%, from 2.7853% at the prior close.

    SPX futures pointed to a -15 point lower open, and from its prior 1656.78 close, the SPX opened below 1645, and traded lower through 1640 by early afternoon and 1635 by mid-afternoon. The index set a late 1629.05 intraday low. The index closed at 1630.48, -4.63% below the August 2nd record close. The index closed +51.7% above the 1074.77 October 4, 2011, intraday low.

    The TRAN ended at 6,311.83, down -2.59% compared to the DJI's -1.14% loss. From its 6,479.36 prior close, the TRAN gapped lower to open just above 6,400. By mid-session, the index had fallen below 6,340, and eased to a late 6,306.76 intraday low. The index closed at 6,311.83, -5.37% below its August 1st 6,670.06 record close. Volume rose +6.55% to 1.18:1 average volume. The TRAN closed -2.32%, -1.23%, -0.13% below its respective 20-, 50-, and 100-day moving averages. The index ended +5.49% above its 200-day moving average.

    Market volatility surged higher. From its prior 14.99 prior close, the VIX opened above 16.50, but fell back to 15.80 in early session, then trended steadily higher to a late 17.13 intraday high. The index closed at 16.77, up +11.9% on the day and +21.6% above its 13.79 20-day moving average. The VIX's all-time closing low was 11.26, set June 30, 1993.

    The broader market's technical factors worsened, as the SPX surrendered its 100-day moving average. The SPX closed below its 5-, 10-, 20-, 50-, and 100-day moving averages. The SPX closed above its 200-day moving average. SPX relative strength (RSI) fell to 35.14, from 43.94 the prior day, near the bottom of a neutral range and at its worst level since last November 14th, the SPX 52-week closing low. The CBOE put/call skew fell -0.52% to 118.07, from 118.69 the prior day, and within a neutral 115-120 range.

    This week, the SPX, DJI, Nasdaq, and NYSE composite are down -1.53%, -2.02%, -0.67%, and -1.88%, respectively. 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. In August, the SPX, DJI, Nasdaq, and NYSE composite are down -3.28%, -4.67%, -1.32%, and -2.83%, 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 +14.3%, +12.8%, +18.5%, +10.0%, respectively. All closed at least +5.91% higher in 2012. Immediate SPX resistance is 1665. Immediate support is 1652, then 1647.

    KBW Bank Index (BKX). On higher and above average volume, the BKX closed at 62.37, down -3.12% from 64.38 at the prior day's close. The index opened below 64.00 and trended lower through the session to 63.00 by mid-session and to 62.50 by mid-afternoon to a late afternoon 62.32 intraday low. Volume rose +44.7% to 56.994 million shares, from 39.401 million shares the prior day, 1.30:1x the 43.783 million share 15-day moving average.

    Large cap banks outperformed the regional banks' performance, as the KBW regional banking index (KRX) fell -3.40%.

    This week, the BKX is down -3.62%, compared to a gain of +0.31% last week. In August, the BKX is down -5.17%. In July, the BKX closed up +7.10%. For the year, the BKX is up +21.6%, better than the SPX's +14.3% rise. In 2012, the index rose +18.9%, compared to a +13.4% rise in the SPX.

    The BKX is now +5.37% 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 +91.6% 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 +51.7% in the same period.

    The BKX index closed -48.5% below its February 20, 2007, record 121.06 high. The BKX is up +235.0% from its 18.62 March 6, 2009, closing low.

    Technical indicators worsened. The index surrendered its 50-day moving average. The index closed above its 100- and 200-day moving averages. The index closed -4.27% and -2.82% below its respective 20- and 50-day moving averages. The index closed +1.53% and +9.10% 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 -16 bps. The 50-day moving average rose +4 bps. Its 100-day moving average rose +7 bps, and the 200-day moving average rose +8 bps. The 20-day closed (by +0.98 points) above the 50-day, and the gap narrowed -14 bps. The 50-day moving average closed (by +7.01 points) above the 200-day moving average, and the gap narrowed -5 bps. The 100-day moving average closed (by +4.26 points) above the 200-day moving average, and the gap was unchanged.

    The directional movement indicator worsened to -12.693, from -4.224 the prior day, its 9th consecutive negative reading. Relative strength worsened to 34.6362, from 46.23 the prior day, falling to the bottom of a neutral 30-70 range and at its lowest level since 31.08 on November 14, 2012, which is also the BKX's 52-week closing low. Next resistance is 63.51; next support is at 61.78.

    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 Tuesday, the SPX fell -1.59% to 1630.48, compared to 1656.78 the prior day and 1642.80 4 days prior. The bearish price clip cancelled the August 22nd 3 sell setup and initiated a buy setup. The July 9th sell countdown is a deferred 13. The index closed -5.51% 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. Tuesday, the index fell -3.12% to 62.37, from 64.38 the prior day and 64.07 four days prior. The August 26th buy setup progressed to 2. The August 19th buy countdown progressed to 2. The index closed -2.64% below 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. Tuesday, the VIX closed up +11.9% at 16.77, compared to 14.99 the prior day and 15.94 at the 4 days' prior close. The August 27th sell setup progressed to 2. The July 9th buy countdown progressed to a deferred 13. The VIX closed +61.1% 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 Tuesday, the rate closed down -7.67 bps at 2.7087%, compared to 2.7853% the prior day and 2.8935% four days prior. The August 23rd buy setup progressed to 3. The rate closed -0.106 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 Tuesday's +0.19% higher close, the EURUSD cross ended at 1.3393, compared to 1.3368 the prior day and 1.3355 four days prior. The July 22nd 11 sell countdown is unchanged since August 20th. The cross closed -1.44% 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. Tuesday, the index fell -2.56% to 2,749.27, compared to 2,821.45 the prior day and 2,774.58 at the prior 4 days' close. The bearish price flip canceled the August 23rd 2 sell setup and initiated a buy setup. The index closed -4.41% 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. Wednesday, the index fell -1.51% to 13,338.46, compared to 13,542.37 the prior day and 13,365.17 four days prior. The bearish price flip canceled the August 25th 2 sell setup and initiated a buy setup. The July 10th 10 sell countdown is unchanged since /august 26th. The index closed -13.5% 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 Wednesday, the index fell -1.60% to 21,524.65, compared to 21,874.77 the prior day and 21,895.40 four days prior. The bearish price flip canceled the August 25th 2 sell setup and initiated a buy setup. The index closed +14.1% 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. Wednesday, the index fell -0.11% to 2,101.30, compared to 2,103.57 at the prior close and 2,067.12 4 days prior. The August 25th sell setup progressed to 3. The August 13th sell countdown progressed to 4. The index closed +21.1% above the July 30th risk level.

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