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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 Advance; Asia Sells Off; Europe Mixed 0 comments
    Jan 9, 2014 9:19 AM

    This morning. Today, the 6th trading day of 2014, U.S. equity futures suggest a moderately higher open. In Asia, equity markets closed lower, apparently on deflationary concerns. In Europe, bourses are modestly mixed, with better strength in Milan and Madrid, where strong bond markets continue their recent run. The Euro Stoxx50 trades intraday at a post-2008 high. This morning's economic news focuses ECB and BOE reaffirmations that interest rates will remain low for an extended period. Otherwise, early 4Q2013 earnings report releases have generally surprised positively. Friday's Nikkei 225 March 2014 (NKH4) equity futures are up +0.126%.

    Commentary focuses on the U.S. economic and interest rate outlook, earnings, currency, and commodity price developments.

    The U.S. equity market trend is "confirmed uptrend". The uptrend commenced on September 8th.

    Wednesday, U.S. equity markets closed mixed. The Nasdaq rose +0.30%, but the S&P 500 (SPX), NYSE composite (NYA), and DJ Industrials (DJI) fell -0.02%, -0.06%, and -0.41%, respectively. NYSE volume rose to 1.11x the 15-day moving average.

    Trading desks reported a quiet day as investors anticipated the release of FOMC minutes, which suggested not shift in expectation regarding monetary policy, i.e., continued tapering of asset purchases but a strengthening of the zero interest rate pledge. The general attitude remains a cautious one. With SPX equities trading at a full 16.7x 2013 earnings multiple, attention focuses on 2014 earnings and valuations (16.7x times survey $118.33 2014 SPX operating earnings suggests a 1973.88 SPX level next year, a +7.40% rise).

    Technicals were little changed. Most SPX market segments closed lower. Market breadth was negative, and up volume lagged down volume. Volatility fell slightly. Treasury bond markets weakened. The U.S. Treasury 10-year bond yield rose +5.05 bps to 2.9894%, compared to 2.9391% at the prior close.

    This morning, 10-year U.S. Treasury yields are down -2.05 bps to 2.9689%, compared to the prior close. Spanish and Italian 10-year debt yields are 3.76% and 3.86%, respectively, compared to 3.79% and 3.88% the prior day. The U.S. dollar is mixed and the Japanese yen continues to weaken.

    U.S. options markets improved to neutral to bullish, from neutral the prior day. The CBOE SKEW rose +0.28% to 129.46, compared to 129.10 the prior day, above a neutral range (115-120), but again below 130, which generally correlates well with market tops.

    In pre-market futures trading, March SPX equity futures (SPH4) price near the top of a 1828-1839 trading range. After a fair value adjustment of -1.06 points, SPX equity futures price at 1835.75, up +4.31 points. The SPX opens +1.12% and +2.25% above its respective 20- and 50-day moving averages, and +5.47% and +8.97% above its respective 100- and 200-day moving averages. Initial resistance is 1842.42. Initial support is 1841.21, then 1832.59.

    In Asia, equity markets closed lower on what appeared to be deflationary concerns. Currency movements remain relatively helpful. The Nikkei 225 index (NYSEARCA:NKY) closed down -1.50%. The Hang Sang index (HSI) fell -0.91%, and the Shanghai composite (SHCOMP) fell -0.82%. All closed near their intraday lows. All are at least -0.13% lower on the week, and all are at least -2.23% lower in 2014. The indexes closed mixed in December. All closed higher in November. The NKY and HSI are bull markets. Today's volumes are unavailable.

    News flows were light generally light. Chinese inflation numbers came in below expectation. Commentary focused on expectations that PBOC will continue to taper its credit accommodation. The Japanese yen continues to weaken. In China, short-term interbank lending rates continued to ease. 7-day Shibo rates fell to 4.02%, compared to 4.13% the prior day, 9.00% on December 23rd and 4.45% on December 17th.

    Regional relative strength indexes (RSI) suggest that Japanese equities are in a neutral range, while Chinese equity markets are in the lower end of a neutral range or oversold. The NKY RSI fell to 54.82, compared to 61.15 at the December 30th close. The HSI RSI ended at 40.78, compared to 45.38 the prior day. The SHCOMP's RSI fell to 28.62, compared to 31.01 the prior session. The index's RSI fell to a low of 15.27 on last June 27th, which was also this year's low index close.

    This week, the NKY is down -2.52%, while the HSI is down -0.13%, and the SHCOMP is down -2.66%, respectively. Last week, the NKY closed up +0.69%, while the HSI and SHCOMP closed off -1.83% and -0.86%, respectively. In January, the NKY is down -2.52%, and the HSI and SHCOMP are down -2.23% and -4.18%, respectively. In December, the NKY rose +4.02%. The HSI and SHCOMP closed down -2.41% and -4.71%, respectively.

    In 2014, the NKY is down -2.52%. The HSI and SHCOMP are down -2.23% and -4.18%, respectively. In 2013, the NKY rose +56.7%. The HSI closed up +2.87%. The SHCOMP closed down -6.75%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

    In Japan, the NKY closed at 15,880.33, compared to 16,121.45 the prior day and -59.2% below its late-1989 38,915.87 high close. The index opened at the 16,004.56 intraday low and fell below 15,860 by mid-morning. The index improved to 15,925 by mid-session, then fell to an early afternoon 15,838.44 intraday low before improving modestly at the close. The index closed +1.10% and +4.46% above its respective 20- and 50-day moving averages, and +8.37% and +12.1% above its respective 100- and 200-day moving averages. Most market segments closed lower. Leaders were utilities, which rose +0.31%, and technology and health care, which close down at least -0.31%. Financials lost -1.07%. Laggards were basic materials, oil and gas, and consumer services, which fell at least -1.70%.

    In China, the HSI closed at 22,787.33, compared to 22,996.59 at the prior day close. The index closed -4.70% below its recent December 3rd 23,910.47 high, but +25.3% above its 18,185.59 June 4, 2012 low. The index opened lower, but reversed higher to a mid-morning 23,044.97 intraday high before weakening into mid-session. The index fell through most of the afternoon, falling to a late 22,709.03 intraday low before improving in the final half hour. All market segments closed at least -0.07% lower. Leaders were utilities, basic materials, and financials. Laggards were telecommunications, technology, and consumer goods, which fell at least -1.45%.

    In Shanghai, the SHCOMP closed at 2,027.62, compared to 2,044.34 at the prior close and +3.98% above the 1,950.01 June 27th close, last year's low. The index improved to a late morning 2,057.17 intraday high, then reversed lower in early afternoon and fell to a late afternoon 2,026.65 intraday low. again after mid-afternoon. All market segments closed at least -0.10% lower. Leaders were oil and gas, technology, and financials. Laggards were basic materials, utilities, and consumer goods, which fell at least -1.07%.

    In Europe, the major equity indexes are mixed, with better strength in Italy and Spain. The Euro Stoxx50, FTSE 100, and DAX are up +0.15%, +0.06%, and +0.05%, respectively, while the CAC 40 is down -0.19%. The Euro Stoxx50 is trading intraday at a new post-2008 high. The DAX remains below its December 27th at a record high. Indexes are mostly higher on the week, but mixed in January. All closed at least -0.30% lower last week, but closed higher in December. All closed mixed in November, but higher in October and September.

    Today, the Euro Stoxx50 trades at 3,114.89, up +0.12% and +0.10% above its 3,111.37 December 27th post-2008 high close, but -40.7% below its 5,249.55 March 31, 2000, all-time closing high. Most market segments are higher. Leaders are telecommunications, technology, and consumer services, which are up at least +0.27%. Financials are up +0.28%. Laggards are utilities, which is up +0.06%, and consumer goods and basic materials, which are down at least -0.17%. European bourses have recently outperformed U.S. equity indexes. Euro Stoxx50 relative strength (RSI) is at 61.83, compared to 60.45 at the prior close, and much better than December 13th's oversold 32.71. Its lowest recent RSI level was 25.77 on June 24th, which marked the year's 2,494.54 closing low.

    This week, the Euro Stoxx 50, CAC 40, and DAX are up +1.30%, +0.09%, and +0.70%, respectively, while the FTSE 100 is down -0.08%. Last week, the Euro Stoxx 50, FTSE 100, CAC 40, and DAX closed down -1.19%, -0.30%, -0.70%, and -1.61%, respectively. In January, the Euro Stoxx50 is up +0.18%, while the FTSE 100, CAC 40, and DAX are down -0.36%, -1.03%, and -0.53%, respectively. In December, the Euro Soxx50, FTSE 100, CAC 40, and DAX closed up +0.72%, +1.48%, +0.02%, and +1.56%, respectively. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively, compared to +13.8%, +5.84%, +15.2%, and +29.1% the prior year.

    4Q2013 SPX Earnings. Of 22 (of 499) reporting companies, 15 or 68.2% surprised positively on earnings, with an average +0.44% surprise average. Of reporting companies, 14 or 63.6% reported sales or revenues above estimates. The average sales/revenue surprise is +0.47%. Materials leads with +5.02% EPS and +2.23% revenue surprises.

    Valuation. The SPX trades at 16.7x estimated 2013 earnings ($110.15), 15.5x estimated 2014 earnings ($118.33), 14.0x estimated 2015 earnings ($131.35), and 12.7x estimated 2016 earnings ($144.75). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, 2015, and 2016 earnings to grow +6.52%, +14.4%, +11.0%, and 10.2%, respectively.

    The BKX trades at 16.2x 2012 adjusted EPS ($4.32), 12.6x estimated 2013 earnings ($5.61), 11.5x estimated 2014 earnings ($6.15), and 10.0x 2015 earnings ($7.02). Analysts expect 2013, 2014, and 2015 EPS will grow +30.0%, +9.54%, and +14.1%, 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 bullish, and equity options are neutral. The composite put/call ratio is 0.70, compared to 0.71 the prior day, and better than 5- and 10-period moving averages of 0.77 and 0.72, respectively. The index put/call ratio is 0.96, compared to 0.889 the prior day, and worse than its 5- and 10-period moving averages of 1.06 and 0.89, respectively. The equity put/call ratio closed the day at 0.61, compared to 0.63 the prior day, and better than its 5- and 10-period moving averages of 0.66 and 0.65, respectively.

    NYSE Volume, Breadth Indicators. Volume rose +8.51% to 758.81 million shares, compared to 699.29 million shares the prior day, 1.11x the 686.01 million shares 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -402 (compared to +1,027 the prior day), or 0.77:1. Up volume was 0.92:1 down volume.

    Distribution day count and market trend. The market trend is "confirmed uptrend". The uptrend commenced on September 9th, when the SPX opened at 1655.17, with a subsequent gain of +11.9%. The distribution count is 8 for the DJI, and 6 on the SPX, NYSE composite, and Nasdaq.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09190%, compared to 0.09250% the prior day. USD 3-month LIBOR is 0.24165%, up from 0.24040% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US Libor-OIS (LOIS) spread is 14.865 bps, compared to 14.690 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 11.900 bps, down from 12.100 bps the prior day, and down from the December 27, 2011, high of 98.800 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.

    · The 3-month Euro basis swap is -1.852 bps, compared to -1.406 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, but far better than a normal -10 bps and -40 bps range.

    · Spanish 10-year debt yields are 3.72%, down from 3.79% the prior day. Italian 10-year debt yields are at 3.86%, up from 3.88% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.91%, compared to 1.90% the prior day. Japanese 10-year debt yields are 0.70%, compared to 0.71% the prior day.

    · The U.S. government overnight repo rate is +4 bps, compared to +5 bps the prior day. The January 2, 2013, 45 bps rate was the highest since late 2008. The record -2 bps low was on October 22, 2013.

    · U.S. Treasury yields are slightly lower, with 2- and 10-year maturities yielding 0.421% and 2.984%, respectively, compared to 0.425% and 2.989% Wednesday. The yield curve narrowed -0.180 bps, with the 2- to 10-year spread at +2.563%, compared to 2.564% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.429% on May 1, 2013, to a high of +2.648% on December 31, 2013.

    · The U.S. dollar is modestly mixed, stronger compared to the Japanese yen, but weaker compared to the euro and British pound, . The dollar trades at US$80.977 compared to a US$80.902 intraday low and US$81.022 the prior day, and mixed compared to its $80.593 50-day, US$80.613 100-day, and US$81.528 200-day averages. The euro trades at US$1.3605, compared to a US$1.3622 intraday high and US$1.3576 the prior day. The euro trades mixed compared to its US$1.3607 50-day and US$1.3546 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥104.94, compared to ¥104.86 the prior day. The yen trades worse than its 50-day moving average ¥102.30, but better than its December 27th 105.17 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index rose to 63.40, compared to 61.00 the prior day, its best level in the past 52-weeks. The index is better compared to its respective +56.04 5-day and +52.98 10-day moving averages. 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 recent high of 53.30 on October 1st, but subsequently fell on dollar weakness to -2.10 on October 31st. It has subsequently strengthened. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX Volatility Index (VIX) closed at 12.87, down -0.39% from 12.92 at the prior close. The VIX is -7.92% below the 13.98 20-day moving average. Its 30-day high is 16.75. Its 30-day low is 11.69. The index's all-time closing low is 9.31 on December 22, 1993. The long-term average is 20.14.

    · The Euro Stoxx 50 volatility index (V2X) is 16.97, down -2.27% from 17.37 at the prior day's close. The V2X index trades -1.87% below its 17.37 20-day moving average, -11.0% below the 19.07 30-day high, and +23.1% above the 13.79 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 15.34, up +1.86% from 15.06 the prior day. The VHSI index trades +0.38% above its 15.28 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) rose +0.28% to 129.46, compared to 129.10 the prior day, above a neutral (115-120) range, but below 130, a level which correlates well with market tops. The recent high was a record 143.20 on December 20th. Its recent low was 112.47 on May 25, 2013. Spikes in excess of 130 correlate well with short-term market tops, though not in October or November. The prior record high was 139.25, on March 12, 2012. 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 weeks' initial and continuing jobless claims were 335K and 2865K, compared to 335K and 2850K survey and 345K and 2815K revised survey.

    Overseas Economic Reporting and News:

    · Australia - November MoM retail sales rose +0.7%, compared to +0.4% survey and +0.5% prior.

    · China - December YoY CPI rose +2.5%, compared to +2.7% survey and +3.0% prior. December YoY PPPI fell -1.4%, compared to -1.3% survey and -1.4% prior.

    · Eurozone - December services confidence was +0.2, compared to -0.5 survey and -0.9 revised prior. The business climate indicator is 0.27, compare dto +0.22 survey and +0.31 revised prior. Economic confidence is 100.0, compared to 99.1 survey and 98.4 revised prior.

    · Germany - November MoM industrial production rose +1.9%, compared to +1.5% survey and -1.2% prior.

    Company Ratings/News:
     

    • JPM - Releases 4Q2013 earnings on January 14th.


    Wednesday's Trade. U.S. equity markets closed mixed, with a moderate Nasdaq gain, a fractional loss on the SPX, and moderate DJI loss and distribution. The Nasdaq gained +0.30%, while the SPX, NYSE composite, and DJI lost -0.02%, -0.06%, and -0.41%, respectively.

    The U.S. equity market trend is "confirmed uptrend". The uptrend commenced on September 8th.

    Market breadth was negative, with gainers 0.77:1 losing stocks. Most SPX market segments closed lower. Leaders were health care, basic materials, and financials, which rose at least +0.32%. Laggards were utilities, oil and gas, and telecommunications, which fell at least -0.60%.

    NYSE volume rose +8.51% to 758.81 million shares, compared to 699.29 million shares the prior day, 1.11x the 686.01 million shares 20-day moving average volume. On the day, bond markets weakened after mid-day. The U.S. 10-year yield opened at 2.9391%, but spiked to 2.9900% with the release of December FOMC meeting minutes, and rose to a late 3.0084% intraday high. The rate closed at 2.9894%, up +5.03 bps compared to the prior close.

    From its prior day 1837.88 close, SPX futures suggested modest opening losses. The index fell in early trading to the day's 1831.40 intraday low, but reversed higher by mid-morning, when it set its 1840.02 intraday high. The index traded narrowly lower through late afternoon, dipped back to support at 1832 in the final hour, then rallied in the final 30 minutes to end fractionally lower. The index ended at 1837.49, -0.59% below the year-end record closing high. The index closed +71.0% above the 1074.77 October 4, 2011, intraday low.

    The DJ Transportation index (TRAN) rose +0.31%, compared to the DJI's -0.41% loss, and both remain below their December 31st record closes. The TRAN traded higher in early trading, but reversed lower to an early 7,256.84 intraday low, then reversed higher to trade around 7,300 through the session's remainder. Late weakness took the index down to breakeven, but a late rally carried the TRAN to a late 7,314.13 intraday high. The TRAN closed at 7,310.13, -1.22% below its record December 31st 7,400.57 close. Volume rose +25.8% to 1.22:1 average 15-day volume. The TRAN closed +0.89% below and +1.88% above its respective 20- and 50-day moving averages, and +6.33% and +11.0% above its respective 100- and 200-day moving averages.

    Market volatility fell, as the VIX ended down -0.39% at 12.87, compared to 12.92 at the prior close. The VIX moved higher in early session to the 13.24 intraday high, then moved narrowly around 13.00 through most of the session before slipping lower at the close. The VIX closed -7.92% below the 13.98 20-day moving average. The VIX's all-time closing low was 9.31, on December 22, 1993.

    The broader market's technical factors were little changed. The SPX index closed above its 5-, 10-, 20-, 50-, 100-, and 200-day moving averages. SPX relative strength (RSI) fell to 61.98, compared to 62.23 the prior day, in a neutral range. The RSI is down from an overbought 72.13 on September 18th, when the SPX closed at an earlier record high, but up from an oversold 39.19 on October 9th. The CBOE put/call skew rose +0.28%, compared to 129.46, compared to 129.10 the prior day, well above a neutral 115-120 range, but below 130, which correlates well with short-term market tops.

    This week, the SPX, Nasdaq, and NYSE composite are up +0.33%, +0.82%, and +0.23%, respectively, while the DJI is down -0.04%. Last week, the SPX, DJI, Nasdaq, and NYSE composite closed down -0.54%, -0.05%, -0.59%, and -0.55%, respectively. In January, the SPX, DJI, Nasdaq, and NYSE composite are down -0.59%, -0.69%, -0.26%, and -0.76%, respectively. In December, the SPX, DJI, Nasdaq, and NYSE composite closed up +2.36%, +3.05%, +2.87%, and +2.13%, respectively.

    In 2013, the SPX, DJI, Nasdaq, and NYSE composite closed up +29.6%, +26.5%, +38.2%, +23.2%, respectively. All closed at least +5.91% higher in 2012.

    KBW Bank Index (BKX). On lower, but above average holiday week volume, the BKX closed at 70.50, up +0.77% from 69.96 at the prior day's close, its best post-2008 close and its first above 70.0 since October 2, 2008. The index opened briefly lower, but rallied through mid-afternoon to 70.50 before easing to 70.25 in the final hour. A late rally carried the index to a late 70.54 intraday high. Volume fell -6.22% to 53.621 million shares, compared to 57.178 million shares the prior day, 1.09:1 the 49.148 million share 15-day moving average.

    Large cap banks outperformed the regional banks, as the KBW regional banking index (KRX) rose +0.03%.

    This week, the BKX is up +1.48%. Last week, the BKX rose closed up +0.56%, compared to a gain of +1.07% the prior week. In January, the BKX is up +1.79%. In December, the BKX rose +2.18%. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise. In 2012, the index rose +18.1%, compared to a +13.4% rise in the SPX.

    The BKX is now +19.1% better than the June 24th 59.19 close, its worst since May 13th. The index crossed above 50 on December 17, 2012, and 60 on May 15, 2013. The BKX closed +116.5% 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 +71.0% in the same period.

    The BKX index closed -41.8% below its February 20, 2007, record 121.06 high. The BKX is up +278.6% from its 18.62 March 6, 2009, closing low.

    Technical indicators were little changed. The index closed +3.04% and +5.14% above its respective 20- and 50-day moving averages. The index closed +7.97% and +11.9% above its respective 100- and 200-day moving averages. The 20-day moving average rose +14 bps to 68.42. The 67.05 50-day moving average rose +11 bps. Its 100-day moving average rose +6 bps to 65.30, and the 200-day moving average rose +7 bps to 63.02. The 20-day closed (by +1.37 points) below the 50-day, and the gap rose +3 bps. The 50-day moving average closed (by +4.03 points) above the 200-day moving average, and the gap widened +5 bps. The 100-day moving average closed (by +2.27 points) above the 200-day moving average, and the gap narrowed -1 bp.

    The directional movement indicator widened to +20.120, compared to +18.518 the prior day, its 14th consecutive positive reading. Relative strength rose to 72.87, compared to 69.66 the prior day, moving into an overbought range and above an overbought 72.62 on November 26th, which was followed by an -8.32% pullback in the following two trading weeks. The lowest most recent RSI level was 31.08 on November 14, 2012, which is also the date of the BKX's 2012 closing low. Next resistance is 70.73; next support is at 70.09.

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

    S&P 500 Index (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 December, the index closed up +2.36% at 1848.36, compared to 1805.81 the prior month and 1632.97 four months prior. The May 2013 sell countdown progressed to 6. The index closed +3.08% above the risk level.

    On a weekly basis, on January 4th, a bullish price flip initiated a sell setup, which perfected the week ending March 1. 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. On September 13th, a bullish price flip initiated a sell countdown which completed on November 8th and initiated a sell countdown. In the week ending January 3rd, the index fell -0.54% to 1831.37, compared to 1841.40 the prior week and its 1775.32 close four weeks prior. The December 20th sell setup progressed to 3. The November 8th sell countdown progressed to 7. The index closed +5.40% above the 1737.48 risk level.

    On a daily basis, on October 22nd, the SPX completed the September 16th sell countdown and set a 1774.00 risk level, based on the day's 12.85 high/low range and 1759.33 intraday high. Also, the October 10th sell setup perfected, initiating a sell countdown, which completed on November 29th. The completion set a 1,823.12 risk level, based on the day's 9.57 point range and 1803.98 intraday high. On December 11, 2013, a bearish price flip initiated a buy setup. December 31st, the December 18th sell setup perfected and initiated a sell countdown. On January 2nd, a bearish price flip initiated a buy setup. On Wednesday, the SPX fell -0.02% to 1837.49, compared to 1837.88 the prior day and 1831.98 4 days prior. The bullish price flip canceled the January 2nd 4 buy setup and initiated a sell setup. The December 31st sell countdown progressed to 2. The index closed +0.79% above the 1823.12 risk level.

    KBW Bank Index (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 December, the index closed up +2.18% at 69.26, compared to 67.78 November-end and 62.21 four months prior. The May 2013 sell countdown progressed to 6.

    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 October 18th, a bullish price flip initiated a sell setup, which perfected on December 20th. For the week ending January 2nd, the BKX closed up +0.56% at 69.47, compared to 69.08 the prior week and 66.62 four weeks prior. The December 20th sell countdown progressed to 2. The index closed +1.73% above the 68.29 risk level.

    On a daily basis, on August 8th, a bearish price flip initiated a buy setup, which completed on August 19th and initiated a buy countdown. On September 16th, the September 4th sell setup perfected and initiated a sell countdown. The October 22nd, the October 10th sell setup perfected and initiated a sell countdown. On November 8th, a bullish price flip initiated a sell setup, which perfected on November 21st, initiating a sell countdown with completed on December 16th. The completion set a 69.11 risk level. On December 31st, the December 17th sell setup perfected and initiated a sell countdown. On January 2nd, the October 22nd sell countdown completed and set a 69.69 risk level. On January 3rd, a bullish price flip initiated a sell setup. Wednesday, the index rose +0.77% to 70.50, compared to 69.96 the prior day and 66.64 four days prior. The January 3rd sell setup progressed to 4. The December 31st sell countdown progressed to 4. The index closed +1.29% below the risk level.

    CBOE SPX Volatility Index (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 December down -0.15% at 13.72, compared to 13.70 at the end of November and 17.01 at the end of August. The bearish index flip canceled a 1 sell setup and initiated a buy setup.

    On a weekly basis, the VIX perfected a buy setup on January 27, 2012, and a sell setup on June 8th, followed by another perfected buy setup on August 10th. On April 12th, the VIX completed the buy countdown associated with the August 10th, setup, which also established a 9.17 risk level. The week ending January 3rd, the VIX rose +10.4% to 13.76, compared to 12.46 the prior week, and 13.79 4 weeks prior. The December 27th buy setup progressed to 2. The index closed +50.1% above the 9.17 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. On September 13th, the September 4th buy setup perfected. On September 18th, a bearish flip initiated a buy setup. On September 20th, the July 9th buy countdown completed. On October 10th, a bearish index flip initiated a buy setup, which perfected on October 22nd. The associated sell countdown commenced on October 23rd, which completed on December 26th and set a 10.88 risk level. On January 6th, bearish index flip initiated a buy setup. Wednesday, the VIX fell -6.47% to 12.87, compared to 12.92 the prior day and 14.23 at the 4 days' prior close. The January 6th buy setup progressed to 2. The VIX closed +18.3% above the 10.88 risk level.

    U.S. 10-year Bond Index (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 December 2013 up +28.37 bps at 3.0282%, compared to 2.7445% the prior month and 2.7839% 4 months prior. The May 2013 sell setup perfected and initiated a sell setup.

    On a weekly basis, 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%. On October 18th, the February 1st sell countdown completed, setting a 3.2260% risk level, based on the September 6th weekly 22.110 bps range and 3.0050% intraweek high. On November 8th, a bullish rate flip initiated a sell setup. For the week ended December 27th, the rate rose +11.14 bps to 3.0000%, compared to 2.8886% the prior Friday and 2.7445% four weeks prior. The November 8th sell setup progressed to 7. The June 28th sell countdown progressed to 10. The rate closed -22.60 bps below the 3.2260% risk level.

    On a daily basis, 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 September 24th, the September 11th buy setup perfected. On December 31st, the December 18th sell setup perfected and initiated a sell countdown. On January 2nd, a bearish rate flip initiated a buy setup. On Wednesday, the rate rose +5.05 bps to 2.9894%, compared to 2.9391% the prior day and 2.9948% four days prior. The January 2nd buy setup progressed to 5. The December 31st sell countdown was unchanged. The rate closed +17.44 bps above the 2.8150% risk level.

    EURUSD Spot Exchange Rate (EURUSD 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 December up +1.12% at 1.3743, compared to 1.3591 the prior month and 1.3222 4 months prior. The July 2013 sell setup progressed to 6. The 9 buy countdown progressed is unchanged since March 2013.

    On a weekly basis, on September 27th, the April 12th sell countdown completed, setting a 1.4008 risk level. On November 29th a bullish rate flip initiated a sell setup. The week of January 3rd, the index fell -1.16% to end at 1.3589, compared to 1.3749 the prior week and 1.3706 4 weeks prior. The bearish price flip canceled the November 29th 5 sell setup and initiated a buy setup. The cross closed -2.90% below the 1.4008 risk level.

    On a daily basis, on July 10th, a bullish price flip initiated a sell setup, which perfected on July 22nd. On September 16th, the July 2nd sell countdown completed. On September 19th, the September 9th sell setup perfected and initiated a sell countdown. On October 28th, the October 16th sell setup perfected. On November 8th, the October 29th buy setup perfected and initiated a buy countdown. On January 2nd, a bearish price flip initiated a buy setup. With Wednesday's -0.27% lower close, the EURUSD cross ended at 1.3576, compared to 1.3616 the prior day and 1.3672 four days prior. The January 2nd buy setup progressed to 5. The November 8th 10 buy countdown is unchanged since January 6th. The cross closed +0.27% above the 1.3580 risk level.

    Euro Stoxx 50 (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 December, the index closed up +0.60% at 3,105.22, compared to 3,086.64 the prior month and 2,721.37 four months prior. The July 31st sell setup progressed to 6. The May 2013 sell countdown progressed to 5.

    On a weekly basis, a November 23, 2012, bullish price flip initiated a sell setup that perfected January 18, 2013. On August 16th, the January 19th sell countdown 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. The week of September 13th, a bullish price flip initiated a sell setup which perfected on November 11th, which initiated a sell countdown. The week of December 6th, a bearish price flip initiated a buy setup. In the week ended January 3rd, the index fell -1.39% to 3,074.43, compared to 3,111.37 the prior week and 2,979.94 at the 4 weeks' prior close. The December 27th sell setup progressed to 2. The November 11th sell countdown progressed to 2. The index closed +5.67% above the 2,909.37 risk level.

    On a daily basis, on September 17th, the September 5th sell setup perfected and initiated a sell countdown, which completed on October 21st. On October 21st, the October 9th sell setup perfected and initiated a sell countdown, which established a 3,056.96 risk level. On December 3rd, a bearish price flip initiated a buy setup, which perfected on December 13th. On January 7th, a bullish price flip initiated a sell setup. Wednesday, the index fell -0.01% to 3,110.66, compared to 3,110.96 the prior day and 3,074.43 at the prior 4 days' close. The January 7th sell setup progressed to 2. The index closed +1.76% above the 3,056.96 risk level.

    Nikkei 225 (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. In July 2013, the November 2012 sell setup perfected. In September, a bullish price flip initiated a sell setup. In December, the index rose +4.02% to 16,291.31, compared to 15,661.87 the prior month and 13,388.86 four months prior. The September 30th sell setup progressed to 4. The sell countdown associated with the July 2013 perfection progressed to 2.

    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 December 30th, the index closed up +0.69% at 16,291.31, compared to 16,178.94 the prior week and 15,889.33 four weeks prior. The November 13th sell setup progressed to 8. The index closed +10.5% above the 14,645.46 risk level.

    On a daily basis, on September 2nd a bullish price flip initiated a sell setup, which perfected on September 12th. The associated sell countdown initiated on September 18th. On October 10th, a bullish price flip initiated a sell setup. On October 22nd, the September 18th sell countdown completed and set a risk level of 14,935.79. On November 21st, the November 11th sell setup perfected and initiated a sell countdown. On December 26th, the November 21st sell countdown completed and set a 16,362.09 risk level. On January 6th, a bearish price flip initiated a buy setup. Thursday, the index fell -1.50% to 15,880.33, compared to 16,121.45 the prior day and 16,291.31 four days prior. The January 6th buy setup progressed to 4. The index closed -2.94% below the 16,362.09 risk level.

    Hang Sang Index (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. In December, the index fell -2.41% to 23,306.39, compared to 23,881.29 the prior month and 21,743.10 four months prior. The September 2013 sell setup progressed to 4. The index closed -14.3% 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 December 20th, a bearish price flip initiated a buy setup. For the week ended January 3rd, the index closed down -1.83% to 22,817.28, compared to 23,243.24 the prior week and 23,743.10 four weeks prior. The December 20th buy setup progressed to 3. The April 5th 10 buy countdown was unchanged. The index closed +2.06% above the 22,357.00 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 September 12th, the September 2nd sell setup perfected and on September 16th, a sell countdown initiated. On November 4th, the September 16th sell countdown completed and set a 23,991.23 risk level. On December 11th, a bearish price flip initiated a buy setup, which perfected on December 23rd. On January 3rd, a bearish price flip initiated a buy setup. On Thursday, the index fell -0.91% to 22,787.33, compared to 22,996.59 the prior day and 22,817.28 four days prior. The January 3rd buy setup progressed to 5. The December 23rd 3 buy countdown was unchanged. The index closed -5.02% below the 23,991.23 risk level.

    Shanghai Composite Index (SHCOMP) - On a monthly basis, the SHCOMP perfected a buy setup on September 30, 2008, and subsequently rallied to an August 31, 2009, high, but without perfecting a subsequent sell setup. In May 2011, the SHCOMP assumed a downward trend and perfected a buy setup on January 31, 2012. The perfection initiated a buy setup. In April 2013, a bearish price flip initiated a buy setup. In December, the index closed down -4.71% to 2,115.98, compared to 2,220.50 the prior month and 2,098.38 four months prior. The October 2013 sell setup progressed to 3. The January 2012 9 buy countdown is unchanged since July 2013.

    On a weekly basis, 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 September 20th, the July 26th sell setup perfected and initiated a sell countdown. On December 20th, a bearish price flip initiated a buy setup. On January 2nd, the index closed the week down -0.86% to 2,083.14, compared to 2,101.25 the prior week and 2,237.11 four weeks prior. The December 20th buy setup progressed to 3. The September 20th 6 sell countdown is unchanged since December 6th.

    On a daily basis, On August 13th, the August 1st sell setup perfected and initiated a sell countdown, which perfected on October 10th. On September 3rd a bullish price flip initiated a sell setup and initiated a sell countdown. On November 28th, the October 10th sell countdown completed, setting a 2,259.57 risk level. On December 10th, a bearish price flip initiated a buy setup, which perfected on December 20th and initiated a buy countdown. On January 3rd, a bearish price flip initiated a buy setup. Thursday, the index fell -0.82% to 2,027.62, compared to 2,044.34 at the prior close and 2,083.14 4 days prior. The January 3rd buy setup progressed to 5. The December 20th buy countdown progressed to 7. The index closed -10.3% below the 2,259.57 risk level.

    SPX, DJI, RTY, TRAN, CCMP, NYA, VIX, SKEW, NKY, EURUSD, USGG10YR, HSI, SHCOMP, SX5E, CAC, DAX, FTSE, JPY, GBP, EUR

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