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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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  • Market Uptrend Under Pressure; U.S. Futures Rise After Distributions; Asia Lower, Europe Mixed 0 comments
    Jan 27, 2014 9:23 AM

    This morning. Today, U.S. equity futures suggest a higher open after distributions on Thursday and Friday, which brought the S&P 500 (SPX) down -3.14% from its December 31st record close. In Asia, equity indexes closed lower. In Europe, bourses are modestly mixed, better than their intraday lows, but with greater weakness in London. Tuesday's Nikkei 225 March 2014 (NKH4) equity futures are up +0.937%.

    The quarter's earnings reports remain generally positive, and U.S. financials' earnings have been particularly strong. This morning, economic reporting is light. In China, the expected failure of China Credit Trust didn't fail, but announced a restructuring agreement that will permit buyers to sell their interest at a price equal to invested principal. Otherwise, news focuses on the rapid strengthening of U.S. bond markets, rising equity market volatility, currency market developments (today, the yen is weaker than last week's close), and weakness in Turkish and Argentine currencies, which are both at record lows compared to the U.S. dollar.

    Friday, U.S. equity markets distributed. On greater and above average volume, the DJ Industrials (DJI), NYSE composite, S&P 500 (SPX), and Nasdaq fell -2.09%, -1.97%, -2.15%, and -2.29%, respectively. Notably, the DJ Transports (TRAN) rose +4.11% and closed at a second consecutive record high. NYSE volume rose +17.9% to 1.39x the 20-day moving average. After the past two trading days' distributions, the U.S. equity market outlook worsened to "uptrend under pressure", from "confirmed uptrend". The uptrend commenced on September 8th.

    Trading desks described stronger early flows that diminished through the afternoon, but also an absence of buyers through the session. The focus remains on macro factors, (despite the rapid flow of earnings reports), including this week's FOMC meeting, when a further taper in asset purchases is expected. With SPX equities trading at a full 16.3x 2013 earnings multiple, attention focuses on 2014 earnings and valuations (16.3x times survey $117.92 2014 SPX operating earnings suggests a 1916.63 SPX level next year, a +7.03% rise).

    Technicals worsened. All SPX market segments closed at least -0.99% lower. Market breadth was negative, and up volume lagged down volume. Volatility spiked to a monthly high. Treasury bond markets strengthened markedly. The U.S. Treasury 10-year bond yield fell -6.22 bps to 2.7150%, compared to 2.7772% at the prior close.

    This morning, 10-year U.S. Treasury yields are up +2.56 bps at 2.7406%, compared to 2.7150% the prior close. Spanish and Italian 10-year debt yields rose to 3.78% and 3.80%, respectively, compared to 3.91% and 3.91% the prior day. The U.S. dollar is weaker against the euro and especially the Japanese yen.

    U.S. options markets are unchanged at neutral to bullish, compared to neutral to bullish the prior day. The CBOE SKEW fell -3.02% to 205, compared to 135.71 the prior day, above a neutral range (115-120), and above 130, which generally correlates well with short-term market tops.

    In pre-market futures trading, March SPX equity futures (SPH4) price near the top of a 1777-1892 trading range. After a fair value adjustment of +2.29 points, SPX equity futures price at 1787.00, up +3.41 points. The SPX opens -2.48% and -1.23% below its respective 20- and, 50-day moving averages, but +1.56% and +5.24% above its 100- and 200-day moving averages. Initial resistance is 1814.74. Initial support is 1778.07, then 1765.84.

    In Asia, equity markets closed mixed. The Nikkei 225 index (NYSEARCA:NKY) closed down -2.51%, though ended better than its worst intraday levels. The Hang Sang index (HSI) fell -2.11%, and the Shanghai composite (SHCOMP) fell -1.03%. Last week, indexes ended mixed. Indexes are at least -3.91% 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.

    Economic reporting was light. Commentary focused on commodities, earnings, but especially currency developments. The Japanese yen has strengthened about +2% since mid-January. In China, short-term interbank lending rates rose modestly, as 7-day Shibo rates declined to 4.65%, from 4.72% the prior day.

    Regional relative strength indexes (RSI) are in the lower end of a neutral (30-70) range or oversold. The NKY RSI fell to 36.69, compared to 43.29 the prior day, its worst showing since May 2012. The HSI RSI ended at an oversold 29.22, compared to 36.24 the prior day. The SHCOMP's RSI worsened to 42.86, compared to 47.45 the prior session. On June 27, 2013, the index's RSI fell to a low of 15.27, which was also last year's low index close.

    Last week, the SHCOMP closed up +1.41%, while the NKY and HSI closed off -4.63% and -5.00%, respectively. The prior week, NKY closed down -1.12%, the HSI closed up +1.26%, and the SHCOMP closed down -0.41%. In January, the NKY is down -7.89%, the HSI is down -5.71%, and the SHCOMP is down -3.91%. 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 -7.89%. The HSI and SHCOMP are down -5.71% and -3.91%, 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 15,005.73, compared to 15,391.56 the prior day and -61.4% below its late-1989 38,915.87 high close. The index opened lower and set an early 14,933.55 intraday low, then improved to resistance at 15,075 in mid-afternoon. The index eased through the final two hours. The index closed -5.36% and -3.24% below its 20- and 50-day moving averages, but +0.84% and +4.55% above its respective 50-, 100-, and 200-day moving averages. All market segments closed at least -0.99% lower. Leaders were telecommunications, utilities, and consumer goods. Laggards were financials, basic materials, and industrials, which fell at least -2.39%.

    In China, the HSI closed at 21,976.10, compared to 22,450.06 at the prior day close. The index closed -7.89% below its recent December 3rd 23,910.47 high, but +20.8% above its 18,185.59 June 4, 2012 low. The index gapped lower to an early 21,880.73 intraday low, but generally strengthened through the session, with an early afternoon 22,044.23 intraday high. Most market segments closed lower. Leaders were consumer services, which rose +0.17%, and utilities, and telecommunications, which fell at least -1.23%. Financials fell -2.17%. Laggards were industrials, basic materials, and consumer goods, which fell at least -2.68%.

    In Shanghai, the SHCOMP closed at 2,033.30, compared to 2,054.39 at the prior close, +4.27% above the 1,950.01 June 27th close, last year's low. The index gapped lower to open at 2,044 and fell to a mid-morning 2,029.81 intraday low. Through mid-afternoon, the index rallied back to 2,044, then weakened again to the close. Most market segments closed lower. Leaders were technology and consumer services, which rose at least +0.10%, and consumer goods, which fell -0.31%. Laggards were financials, utilities, and oil and gas, which fell at least -1.39%.

    In Europe, the major equity indexes are mixed and recovering from late morning intraday lows. Milan and Madrid are modestly lower. The Euro Stoxx50 and CAC 40 are up +0.18% and +0.15%, respectively, compared to the FTSE 100 and DAX, which are down -1.24% and -0.13%. Last week, the indexes closed at least -2.42% lower, compared to gains of at least +1.33% the prior week. They are at least -2.09% lower in January. All closed higher in December.

    European bourses have recently outperformed U.S. equity indexes. Euro Stoxx50 relative strength (RSI) is 39.80, compared to 39.00 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.

    Today, the Euro Stoxx50 trades at 3,030.33, -4.74% below its 3,168.76 January 15th post-2008 high close, and -42.5% below its 5,249.55 March 31, 2000, all-time closing high. The index traded lower in early trading, set a 3,011.46 intraday low, but reversed higher in early afternoon to the 3,041.19 intraday high. Most market segments are higher. Leaders are technology, industrials, and financials, which are at least +0.32%. Laggards are consumer goods, utilities, and telecommunications, which are down at least -0.13%.

    Last week, the Euro Stoxx 50, FTSE 100, CAC 40, and DAX closed down -3.99%, -2.42%, -3.84%, and -4.01%, respectively. The prior week, the Euro Stoxx 50, FTSE 100, CAC 40, and DAX closed up +1.61%, +1.33%, +1.81%, and +2.85%, respectively. In January, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.91%, -2.68%, -3.42%, and -2.09%, 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 122 (of 499) reporting companies, 89 or 73.6% surprised positively on earnings, with an average +6.03% surprise average. Of reporting companies, 82 or 67.2% reported sales or revenues above estimates. The average sales/revenue surprise is +1.07%. Financials lead with +12.4% EPS and +2.04% revenue surprises.

    Valuation. The SPX trades at 16.3x estimated 2013 earnings ($110.15), 15.2x estimated 2014 earnings ($117.92), 13.7x estimated 2015 earnings ($130.91), and 12.3x estimated 2016 earnings ($145.55). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, 2015, and 2016 earnings to grow +6.52%, +14.0%, +11.0%, and 11.2%, respectively.

    The BKX trades at 15.8x 2012 adjusted EPS ($4.32), 12.2x estimated 2013 earnings ($5.59), 11.1x estimated 2014 earnings ($6.16), and 9.8x 2015 earnings ($7.00). Analysts expect 2013, 2014, and 2015 EPS will grow +29.3%, +10.2%, and +13.6%, 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 neutral, index options are bullish, and equity options are neutral. The composite put/call ratio is 0.90, compared to 0.87 the prior day, and worse than 5- and 10-period moving averages of 0.81 and 0.77, respectively. The index put/call ratio is 0.94, compared to 0.90 the prior day, and worse than its 5- and 10-period moving averages of 0.92 and 0.86, respectively. The equity put/call ratio closed the day at 0.89, compared to 0.86 the prior day, and worse than its 5- and 10-period moving averages of 0.77 and 0.74, respectively.

    NYSE Volume, Breadth Indicators. Volume rose +17.9% to 919.41 million shares, compared to 779.99 million shares the prior day, 1.39x the 663.30 million shares 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -2,251 (compared to -1,047 the prior day), or 0.15:1. Up volume was 0.09:1 down volume.

    Distribution day count and market outlook. The market outlook worsened to "uptrend under pressure, from "confirmed uptrend". The current uptrend commenced on September 9th, when the SPX opened at 1655.17, with a subsequent gain of +8.16%. The distribution count is 7 for the DJI, SPX, NYSE composite, and Nasdaq.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.08660%, compared to 0.08870% the prior day. USD 3-month LIBOR is 0.23610%, down from 0.23535% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US Libor-OIS (LOIS) spread is 15.010 bps, compared to 14.635 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 11.150 bps, up from 11.000 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 -3.521, compared to -4.007 bps, compared to -2.440 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 3.78%, down from 3.80% the prior day. Italian 10-year debt yields are at 3.91%, compared to 3.91% the prior day. German 10-year debt yields are 1.67%, compared to 1.66% the prior day. Japanese 10-year debt yields are 0.64%, compared to 0.63% the prior day.

    · The U.S. government overnight repo rate is +3 bps, compared to +10 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 higher, with 2- and 10-year maturities yielding 0.352% and 2.752%, respectively, compared to 0.336% and 2.715% Friday. The yield curve widened +2.010 bps, with the 2- to 10-year spread at +2.400%, compared to 2.380% 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 stronger compared to the Japanese yen and euro, but slightly weaker compared to the British pound. The dollar trades at US$80.483, compared to a US$80.508 intraday high and US$80.458 the prior day, and mixed compared to its $80.580 50-day, US$80.486 100-day, and US$81.440 200-day averages. The euro trades at US$1.3671, compared to a US$1.3667 intraday low and US$1.3678 the prior day. The euro trades better compared to its US$1.3646 50-day and US$1.3590 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥102.79, compared to ¥102.31 the prior day. The yen trades better than its 50-day moving average ¥103.42, but better than its January 1st 105.31 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index worsened to +62.60, compared to +62.50 the prior day. The index is worse compared to its respective +63.46 5-day and +66.22 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 53.30 on October 1st, but subsequently fell on dollar weakness to -2.10 on October 31st. It has subsequently consistently strengthened. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX Volatility Index (VIX) spiked to 18.14, up +31.7% from 13.77 at the prior close. The VIX is +37.0% above the 13.24 20-day moving average. Its 30-day high is 18.14. 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 20.91, down -0.13% from 20.93 at the prior day's close. The V2X index trades +21.7% above its 16.93 20-day moving average, -4.48% below the 21.89 30-day high, and +41.8% above the 14.74 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 17.55, up +15.8% from 15.16 the prior day. The VHSI index trades +19.0% above its 14.75 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) fell -3.02% to 131.61, compared to 135.71 the prior day, above a neutral (115-120) range and above 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:

    · At 10:00, December MoM new home sales, with -1.9% survey and -2.1% revised prior.

    · At 10:30, January Dallas Fed manufacturing activity, with 3.3 survey and 3.1 prior.

    Overseas Economic Reporting and News:

    · Japan - December YoY exports rose 15.3%, compared to 18.0% survey and 18.4% prior. Imports YoY rose 24.7, compared to 26.2% survey and 21.1% prior. The adjusted traded balance was less than survey.

    · Germany - January IFO business climate rose to 110.6, compared to 110.0 survey and 19.5 prior. IFO expectations rose to 108.9, compared to 108.0 survey and 107.4 prior.

    Company Ratings/News:
     

    • None.


    Friday's Trade. On greater and above average volume, U.S. equity markets distributed. The SPX, DJI, Nasdaq, and NYSE composite fell -2.09%, -1.96%, -2.15%, and -2.29%, respectively.

    The U.S. equity market outlook worsened to "uptrend under pressure", from "confirmed uptrend". The uptrend commenced on September 8th.

    Market breadth was negative, with gainers 0.15:1 losing stocks. All SPX market segments closed at least -0.99%. Leaders were telecommunications, utilities, and consumer goods. Laggards were financials, basic materials, and industrials, which fell at least -2.39%.

    NYSE volume rose +17.8% to 919.41 million shares, compared to 629.13 million shares the prior day, 1.39x the 663.30 million share 20-day moving average volume. On the day, bond markets strengthened markedly. The U.S. 10-year yield opened at 2.7781%, fell to a late session 2.7041% intraday low, and ended at 2.7150%, down -5.30 bps compared to the prior close.

    From its prior day 1828.46 close, SPX futures suggested another lower open. The index gapped lower to open near 1820 and trended lower through the session to end at the 1790.29 intraday low. The index closed +66.6% above the 1074.77 October 4, 2011, intraday low.

    The DJ Transportation index (TRAN) fell -4.11%, compared to the DJI's -1.96% loss, but -3.77% off its January 23, 2013 record close. From its prior 7,503.83 close, the TRAN opened slightly lower and fell quickly to 7,350 then eased through the session to a late 7,252.14 intraday low. Volume rose +8.21% to 1.21:1 average 15-day volume. The TRAN closed -1.79% and -0.10% below its respective 20- and 50-day moving averages, and +3.79% and +9.00% above its respective 100- and 200-day moving averages.

    Market volatility spiked, as the VIX ended at 18.14, up +31.7% from 13.77 at the prior close. The VIX opened at the 14.92 intraday low and trended higher through the session to end at the intraday high. The VIX closed +37.0% above the 13.24 20-day moving average. The VIX's all-time closing low was 9.31, on December 22, 1993.

    The broader market's technical factors worsened. All exchanges closed below their respective 5-, 10-, and 20-day moving averages, and only the Nasdaq remains above its 50-day moving average. SPX relative strength (RSI) fell to 36.82, compared to 50.32 the prior day, in the lower end of a neutral range. The RSI is down from an overbought 71.26 on December 31st, when the SPX closed an earlier record high, but up from an oversold 39.19 on October 9th. The CBOE put/call skew fell -3.02%, to 131.61, compared to 138.92 the prior day, well above a neutral 115-120 range, and above 130, which correlates well with short-term market tops.

    Last week, the SPX, Nasdaq, and NYSE composite closed down -2.63% -3.52%, -1.65%, and -2.99%, respectively. The prior week, the DJI and Nasdaq closed up +0.13% and +0.55%, respectively, while the SPX and NYSE composite closed down -0.20% and -0.27%. In January, the SPX, DJI, Nasdaq, and NYSE composite are down -3.14%, -4.21%, -1.16%, and -3.52%, 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 greater and above average volume, the BKX closed at 68.44, down -2.55% from 70.23 at the prior day's close, and its first close below 70.00 since January 13th. The index gapped lower to open at 69.60 and trended lower through the session to a last minute 68.43 intraday low. Volume rose +19.5% to 73.831 million shares, compared to 61.756 million shares the prior day, 1.26x the 58.518 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) fell -1.48%.

    Last week, the BKX closed down -2.66%, compared to the prior week's loss of -0.65%. In January, the BKX is down -1.18%. 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 +15.6% better than the June 24th 59.19 close, its worst since May 13th. The index crossed above 50 on December 17, 2012, 60 on May 15, 2013, and 70 on January 8, 2014. The BKX closed +110.2% 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 +66.6% in the same period.

    The BKX index closed -43.5% below its February 20, 2007, record 121.06 high. The BKX is up +267.6% from its 18.62 March 6, 2009, closing low.

    Technical indicators worsened. The index closed -2.23% below its 20-day moving average, but +0.19%, +4.60%, and +11.2% above its respective 50-, 100-, and 200-day moving averages. The 20-day moving average rose +15 bps to 69.97. The 68.17 50-day moving average rose +15 bps. Its 100-day moving average rose +9 bps to 65.90, and the 200-day moving average rose +8 bps to 63.70. The 20-day closed (by +1.69 points) above the 50-day, and the gap was unchanged. The 50-day moving average closed (by +4.49 points) above the 200-day moving average, and the gap widened +1 bp. The 100-day moving average closed (by +2.21 points) above the 200-day moving average, and the gap widened +1 bp.

    The directional movement indicator worsened to -8.633, compared to 3.616 the prior day, its first negative reading since December 17th. Relative strength fell to 43.33, compared to 55.10 the prior day, and moving into the lower end of a neutral range and down from an overbought 75.56 and 71.88 on January 9th and 10th, respectively. 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 69.43; next support is at 67.94.

    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 17th, the index fell -0.20% to 1838.70, compared to 1842.37 the prior week and its 1818.32 close four weeks prior. The December 20th sell setup progressed to 5. The November 8th 8 sell countdown is unchanged since January 3rd. The index closed +5.83% 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 14th, a bullish price flip initiated a sell setup. On Wednesday, the SPX rose +0.06% to 1844.86, compared to 1843.80 the prior day and 1848.38 4 days prior. The bearish price flip canceled the January 14th 5 sell setup and initiated a buy setup. The December 31st 5 sell countdown is unchanged since January 16th. The index closed +1.19% 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 17th, the BKX closed down -0.65% at 70.31, compared to 70.77 the prior week and 68.35 four weeks prior. The December 20th sell countdown progressed to 4. The index closed +2.96% 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 17th, a bullish price flip initiated a sell setup. Wednesday, the index rose +0.44% to 71.40, compared to 71.09 the prior day and 71.19 four days prior. The January 17th sell setup progressed to 3. The December 31st sell countdown progressed to 10. The index closed +2.59% above the 69.69 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 17th, the VIX rose +2.47% to 12.44, compared to 12.14 the prior week, and 13.79 4 weeks prior. The December 27th buy setup progressed to 4. The index closed +35.7% 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 16th, the bullish index flip initiated a sell setup. Wednesday, the VIX fell -0.23% to 12.84, compared to 12.87 the prior day and 12.28 at the 4 days' prior close. The January 21st sell setup progressed to 2. The VIX closed +18.0% 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, which perfected on January 3rd. The week of January 10th, a bearish rate flip initiated a buy setup. For the week ended January 17th, the rate fell -3.85 bps to 2.8194%, compared to 2.8579% the prior Friday and 2.8886% four weeks prior. The January 10th buy setup progressed to 2. The June 28th 11 sell countdown is unchanged since January 3rd. The rate closed -40.60 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 9th, a bearish rate flip initiated a buy setup. On Wednesday, the rate rose +3.70 bps to 2.8656%, compared to 2.8286% the prior day and 2.8912% four days prior. The January 9th buy setup progressed to an unperfected 9. The December 31st 3 sell countdown is unchanged since January 15th. The rate closed +5.06 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 December 27th, a bearish rate flip initiated a buy setup. The week of January 17th, the index fell -0.94% to end at 1.3541, compared to 1.3670 the prior week and 1.3673 4 weeks prior. The December 27th buy setup progressed to 3. The cross closed -3.42% 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 15th, a bullish price flip initiated a buy setup. With Wednesday's -0.10% lower close, the EURUSD cross ended at 1.3547, compared to 1.3561 the prior day and 1.3541 four days prior. The January 15th buy setup progressed to 6. The November 8th buy countdown remains an uncompleted 13. The cross closed -0.24% 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 17th, the index rose +1.61% to 3,154.10, compared to 3,104.15 the prior week and 3,049.35 at the 4 weeks' prior close. The December 27th sell setup progressed to 4. The November 11th sell countdown progressed to 4. The index closed +8.41% 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, which perfected on January 17th. On January 21st, a bearish price flip initiated a buy setup. Wednesday, the index fell -0.06% to 3,151.27, compared to 3,153.08 the prior day and 3,154.10 at the prior 4 days' close. The index closed +3.09% 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. On January 10th, the November 15th sell setup perfected. For the week ending January 17th, the index closed down -1.12% at 15,734.46, compared to 15,912.06 the prior week and 15,870.42 four weeks prior. The bearish price flip initiated a buy setup. The index closed +8.65% 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 14th, a bearish price flip initiated a buy setup. Thursday, the index fell -0.79% to 15,695.89, compared to 15,820.96 the prior day and 15,734.46 four days prior. The bearish price flip canceled the January 22nd 1 sell setup and initiated a buy setup. The index closed -4.07% 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 17th, the index closed up +1.26% to 23,133.35, compared to 22,846.25 the prior week and 22,812.18 four weeks prior. The bullish price flip canceled the December 20th 4 buy setup and initiated a sell setup. The April 5th 11 buy countdown was unchanged. The index closed +3.47% 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 Thursday, the index fell -1.51% to 22,733.90, compared to 23,082.25 the prior day and 23,133.35 four days prior. The bearish price flip canceled the January 15th 5 sell setup and initiated a buy setup. The December 23rd buy countdown progressed to 5. The index closed -5.24% 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 17th, the index closed the week down -0.41% to 2,004.95, compared to 2,013.30 the prior week and 2,084.79 four weeks prior. The December 20th buy setup progressed to 5. 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 20th, the January 3rd buy setup perfected and initiated a buy countdown. On January 22nd, a bullish price flip initiated a sell setup. Thursday, the index fell -0.47% to 2,042.18, compared to 2,051.75 at the prior close and 2,004.95 4 days prior. The January 22nd sell setup progressed to 2. The December 20th 11 buy countdown is unchanged since January 20th. The index closed -9.62% 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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