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U.S. Futures Advance After Mixed March Employment; Asia Ends Week Higher; Europe Extends Gains

This morning. Today, after release of a mixed March employment report, U.S. equity futures are moderately higher after fair value adjustment. In Asia, equity markets closed mixed, with somewhat better strength in Shanghai. In Europe, indexes are moderately higher, with the Euro Stoxx 50 (SX5E) trading above yesterday's post-2008 high close. The dollar is mixed. Commodities are mixed. Monday's Nikkei 225 June 2014 (NKM4) equity futures are up +0.322%.

U.S. economic reporting focuses on the March U.S. employment report. European equity indexes are moderately higher and near session highs. Commentary focuses on interest rate, currency, and commodity price developments.

On April 1st, the U.S. equity market outlook resumed its "confirmed uptrend", ending a brief "in correction" that began on March 26th. On April 1st, the SPX opened at 1873.96. Its subsequent gain is +0.79%. The subsequent distribution count is 1 on the Nasdaq.

Yesterday, the major equity indexes closed mixed. The DJ Industrials (Private:DJI) closed unchanged, -0.02% below its December 31st record close. The S&P 500 (SPX), Nasdaq, and NYSE composite closed off -0.11%, -0.91%, and -0.17%, respectively, on slightly higher volume, as the Nasdaq recorded its first distribution in the current uptrend. The DJ Transports (TRAN) fell -0.16%.

U.S. equity markets opened modestly higher, but by mid-morning reversed lower to late afternoon intraday lows. Indexes generally improved late in the session, narrowing losses. The DJI closed unchanged. NYSE volume rose +1.19% to 0.89x its 20-day moving average. The SPX, Nasdaq, and NYSE composite are higher on the year.

Other narrower indexes suffered greater losses. The Russell 2000 (RTY), Nasdaq Internet (QNET), and Nasdaq Biotech (NBI) fell -0.98%, -2.48%, and -2.71%, respectively. The QNET and NBI in correction, down -11.3% and -13.9%, respectively, from recent highs.

The 4Q2013 quarter's earnings reports are complete, with U.S. materials reports particularly strong, followed by financials. The 1Q2014 earnings reports began on March 15th, though only 19 of 500 SPX companies have now reported.

Trading desks reported quiet world equity markets overnight, with mixed Asian markets and moderately higher European bourses ahead of this morning's U.S. employment report. Regarding yesterday's session, traders noted more rotation, with the slumping Nasdaq and RTY and QNET and NBI both correcting. Traders reported steady selling.

Price earnings multiples are elevated. With SPX equities trading at a 17.1x 2013 earnings multiple, attention focuses on 2014 earnings and valuations (17.1x times survey $117.33 2014 SPX operating earnings suggests a 2,011.85 SPX level next year, a +6.52% rise).

Technicals were little changed. All major indexes closed above their respective 5-, 10-, 20-, 50-, 100-, and 200-day moving averages. Most SPX market segments closed lower. Market breadth was negative, and up volume lagged down volume. Volatility rose. Treasury bond markets weakened. The U.S. Treasury 10-year bond yield fell -0.73 bps to 2.7972%, compared to 2.8045% at the prior close.

This morning, 10-year U.S. Treasury yields are down -0.27 bps at 2.7945%, compared to the prior close. Spanish and Italian 10-year debt yields are near their lowest levels since 2005, at 3.22% and 3.24%, respectively, compared to 3.23% and 3.26% the prior day. The U.S. dollar is modestly stronger compared to the euro and Japanese yen.

U.S. options markets are unchanged at neutral to bullish, compared to neutral to bullish the prior day. The CBOE SKEW rose +0.65% to 128.13, compared to 127.30 the prior day, above a neutral range (115-120), but below 130, a level that correlates well with short-term market tops.

In pre-market futures trading, June SPX equity futures (SPM4) price near the top of a 1883-1892 trading range. After a fair value adjustment of +1.58 points, the SPM4 future prices at 1891.50, up +10.08 points. The SPX opens +1.20%, +2.80%, +3.54%, and +7.69% above its respective 20-, 50-, 100-, and 200-day moving averages. Initial resistance is 1894.16. Initial support is 1883.01, then 1877.26.

In Asia, equity markets closed mixed, with better strength again in Japan. Economic reporting focused on U.S. economic reports and continued volatility in China's money markets. On the day, the Nikkei 225 (NYSEARCA:NKY) fell -0.05%, the Hang Sang index (HSI) fell -0.24%, and the Shanghai SE composite (SHCOMP) index rose +0.74%. Today's volumes are unavailable.

This week, the NKY, HSI, and SHCOMP closed up +2.50%, +2.01%, and +0.84%, respectively. Last week, the NKY and HSI closed up +3.32% and +2.93%, respectively, while the SHCOMP closed off -0.29%. In April, the NKY, HSI, and SHCOMP are up +1.59%, +1.62%, and +1.26%, respectively, compared to March, when the NKY, HSI, and SHCOMP lost -0.09%, -3.00%, and -1.12%, respectively.

In 2014, the NKY, HSI, and SHCOMP are down -7.553%, -3.42%, and -2.70%, respectively. In 2013, the NKY rose +56.7%. The HSI closed up +2.87%. The SHCOMP closed down -6.75%.

In China, short-term interbank lending rates plummeted. The 7-day Shibo rate fell to 2.99%, compared to 4.11% the prior day, up from a 2.26% low on March 11th, but down from the February 7th 5.41% recent high.

Regional relative strength indexes (RSI) show Tokyo, Hong Kong, and Shanghai, in neutral ranges. The NKY RSI eased to 58.28, compared to 58.53 the prior day, up from an oversold 27.92 on February 4th. The HSI RSI fell to 59.03, compared to 60.53 the prior day. The SHCOMP's RSI rose to 52.96, compared to 49.21 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.

In Japan, the NKY closed at 15,063.77, compared to 15,071.88 the prior day, -7.53% below its recent year-end 16,291.31 high and -61.3% below its late-1989 38,915.87 high close. The index gapped lower to open below 15,020, set its early 15,000.69 intraday low, then recovered and reversed higher by late morning to the 15,098.38 intraday high. In early afternoon, the NKY reversed lower and traded narrowly through the close. The index closed +2.32%, +1.97%, and +3.44% above its respective 20-, 50-, and 200-day moving averages, but -0.24% below its 100-day moving averages. Most market segments closed higher. Leaders were financials, consumer services, and oil and gas, which rose +0.37%. Laggards were health care, technology, and telecommunications, which fell at least -0.01%.

In China, the HSI closed at 22,510.08, compared to 22,565.08 at the prior close. The index gapped lower to open below 22,480, set an early 22,452.64 intraday low, then rallied and reversed higher to a mid-morning 22,595.71 intraday high. The index quickly moved lower again, and tested support at 22,460 late in the session. Most market segments closed higher. Leaders were oil and gas, basic materials, and financials, which rose at least +0.14%. Laggards were consumer services, telecommunications, and technology, which fell -0.55%. The index closed -5.86% below its recent December 3rd 23,910.47 high, but +24.1% above its 18,185.59 June 4, 2012 low.

In Shanghai, the SHCOMP closed at 2,058.83, compared to 2,043.70 at the prior close, +5.58% above the 1,950.01 June 27th close, last year's low. The index opened lower, set its 2,035.37 intraday low, then strengthened and reversed higher by mid-morning and rallied to a late 2,059.91 intraday high. Most market segments closed higher. Leaders were consumer services, technology, and health care, which rose at least +1.01%. Laggards were financials and telecommunications, which rose at least +0.02%, and oil and gas, which ended unchanged.

In Europe, major equity indexes are moderately higher. The Euro Stoxx50 opened at a post-2008 high. The CAC 40 also opened at record high. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.46%, +0.47%, +0.49%, and +0.48%, respectively. The Spanish IBEX 35 is up +0.50%, and the Italian FTSE MIB is up +0.51%. Commentary focuses on the U.S. employment report, and currency and commodity price developments.

European bourses have recently outperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 67.25, compared to 65.50 at the prior close, in a neutral (30-70) range, but better than its recent February 5th 33.57 low, which coincided with its 2014 low. The indexes lowest recent RSI level was 25.77 on June 24th, which marked the 2013 2,494.54 closing low.

Today, the Euro Stoxx50 trades at 3,222.10, +0.46% above its 3,206.76 April 3rd post-2008 high close, and -38.6% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day close, the index traded narrowly higher through early afternoon, but rallied after the U.S. employment report to its 3,225.23 intraday high. Most market segments are higher. Leaders are oil and gas, consumer services, and financials, which are up at least +0.69%. Laggards are technology, health care, and utilities, which are down at least -0.15%.

This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +1.54%, +1.04%, +1.36%, and +0.95%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +2.45%, +0.89%, +1.75%, and +2.61%, respectively. In April, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +1.89%, +1.31%, +1.82%, and +1.28%, respectively. In March, Euro Stoxx50 closed up +0.39%, while the FTSE 100, CAC 40, and DAX closed down -3.10%, -0.38%, and -1.40%, respectively.

In 2014, the indexes are mixed. The Euro Stoxx50, CAC 40, and DAX are up +3.62%, +4.09%, and +1.32%, respectively. The FTSE 100 is down -0.96%. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

1Q2014 SPX Earnings. Of 19 (of 500) reporting companies, 10 or 57.9% surprised positively on earnings, with an average +0.88% surprise average. Of reporting companies, 10 or 52.6% reported sales or revenues above estimates. The average sales/revenue surprise is -0.15%. Consumer discretionary leads with respective +15.9% and +1.98% earnings and revenue surprises. Industrials lag with respective -13.4% and -1.08% revenues surprises.

Valuation. The SPX trades at 17.1x estimated 2013 earnings ($110.15), 16.1x estimated 2014 earnings ($117.33), 14.5x estimated 2015 earnings ($130.69), and 13.0x estimated 2016 earnings ($145.14). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, 2015, and 2016 earnings to grow +6.52%, +6.47%, +11.4%, and 11.1%, respectively.

The BKX trades at 14.1x 2013 adjusted EPS ($5.16), 13.2x estimated 2014 earnings ($5.52), 11.9x estimated 2015 earnings ($6.11), and 10.6x 2016 earnings ($6.86). Analysts expect 2013, 2014, 2015, 2016 EPS will grow +19.4%, +6.89%, +10.8%, and +12.3%, respectively.

Composite, index, and equity options. Options markets are unchanged at neutral to bullish, compared to neutral to bullish the prior session. Composite options are bullish, index options are neutral, and equity options are neutral. The composite put/call ratio is 0.88, compared to 0.65 the prior day, and better than 5- and 10-period moving averages of 0.89 and 0.89, respectively. The index put/call ratio is 1.01 compared to 0.62 the prior day, and better than its 5- and 10-period moving averages of 1.04 and 1.10, respectively. The equity put/call ratio closed the day at 0.82, compared to 0.68 the prior day, and better than its 5- and 10-period moving averages of 0.83 and 0.82, respectively.

NYSE Volume, Breadth Indicators. Volume rose +1.19% to 660.84 million shares, compared to 653.10 million shares the prior day, 0.89x the 745.24 million share 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -538 (compared to +447 the prior day), or 0.70:1. Up volume was 0.74:1 down volume.

Market Outlook and Distribution Day Count. On April 1st, the U.S. equity market outlook resumed its "confirmed uptrend", ending a brief "in correction" that began on March 26th. On April 1st, the SPX opened at 1873.96. Its subsequent gain is +0.79%. Yesterday's Nasdaq -0.91% loss came on slightly higher volume. The distribution count is 1 on the Nasdaq.

Libor, LOIS, Currencies, Treasuries, Commodities:

· USD LIBOR is 0.08810%, compared to 0.08840% the prior day. USD 3-month LIBOR is 0.22960%, down from 0.23035% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

· The US Libor-OIS (LOIS) spread is 14.210 bps, compared to 14.335 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 12.900 bps, down from 14.600 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 -0.818 bps, compared to -1.305 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.

· German 10-year debt yields are 1.62%, compared to 1.60% the prior day. Japanese 10-year debt yields are 0.65%, compared to 0.65% the prior day.

· Spanish and Italian 10-year debt yields are near their best levels since 2005. Spanish 10-year debt yields are 3.22%, compared to 3.23% the prior day. Italian 10-year debt yields are at 3.24%, compared to 3.26% the prior day.

· U.S. Treasury yields are slightly lower, with 2- and 10-year maturities yielding 0.454% and 2.794%, respectively, compared to 0.454% and 2.797% Thursday. The yield curve narrowed -0.390 bps, with the 2- to 10-year spread at +2.339%, compared to 2.343% 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 compared to the euro, Japanese yen, and British pound. The dollar trades at US$80.506, compared to a US$80.539 intraday high and US$80.475 the prior day, and mixed compared to its $80.226 50-day, US$80.407 100-day, and US$80.850 200-day averages. The euro trades at US$1.3707, compared to a US$1.3696 intraday low and US$1.3720 the prior day. The euro trades worse compared to its US$1.3735 50-day and US$1.3689 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥103.93, compared to ¥103.93 the prior day. The yen trades worse than its 50-day moving average ¥102.39, but better than its January 1st 105.31 closing low, its weakest prior multi-year closing low.

· Citigroup Economic Surprise Index improved to -41.80, compared to -32.80 the prior day, continuing its string of consecutive negative readings since February 18th. The index is worse compared to its respective -34.16 5-day and -33.12 10-day moving averages. Last June 10th, the index fell to a then 52-week low of -33.26. 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 subsequently strengthened to a +72.70 high on January 15th, but then subsequently trended lower and turned negative on February 19th and fell to a -41.80 52-week low on April 1st. After a lag, the CESIUSD correlates with EPS revisions.

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

Volatility, Skew:

· The CBOE SPX Volatility Index (VIX) rose +2.14% to 13.37, compared to 13.09 at the prior close. The VIX is -8.72% below the 14.65 20-day moving average. Its 30-day high is 18.22. Its 30-day low is 12.92. 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 15.95, down -2.60% compared to 16.37 at the prior day's close. The V2X index trades -16.1% below its 19.00 20-day moving average, -34.5% below the 24.35 30-day high, and +0.95% above the 15.80 30-day low.

· The Hang Seng volatility index (VHSI) closed at 14.46, down -1.97% compared to 14.75 at the prior close. The VHSI index trades -16.0% below its 17.21 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

· CBOE SKEW (SKEW) rose +0.65% to 128.13, compared to 127.30 the prior session, above a neutral reading (115-120), but below 130, a level that correlates well with short-term market tops. The recent record high was 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 index rarely falls below 110, last on July 31, 2009. The index correlates with market tail risks, the cost of buying out-of-the-money, long-dated options, i.e., options not affected by expirations. A rise suggests that investors are buying more puts than calls, a bearish signal.

U.S. Economic Reporting and News:
 

  • At 8:30, March change in nonfarm payrolls was K, with 200K survey and 175K revised prior.
  • March private payrolls was 192K, compared to 200K survey and 162K revised prior.
  • March manufacturing payrolls was -1K, compared to 7K survey and 19K revised prior.
  • March unemployment rate was 6.7%, compared to 6.6% survey and 6.7% prior.
  • March MoM average hourly earnings rose 0.0%, compared to +0.2% survey and +0.4% prior.
  • March average weekly hours were 34.5, with 34.4 survey and 34.3 revised prior.
  • March underemployment rate was 12.7%, compared to 12.6% prior.
  • March labor force participation was 63.2%, compared to 63.0% revised prior.


Overseas Economic Reporting and News:
 

  • Eurozone - March Markit retail PMI was 49.2, compared to 48.5 prior.
  • France - March Markit retail PMI was 50.0, compared to 48.4 prior.
  • Germany - February MoM factory orders rose +0.6%, compared to +0.2% survey and +0.1% revised prior. Markit construction PMI was 52.5, compared to 53.6 prior. Retail PMI was 50.2, compared to 52.1 prior.
  • Italy - March Markit PMI was 46.5, compared to 43.1 prior.
  • Spain - March Markit services PMI was 54.0, compared to 53.3 survey and 53.7 prior. Composite PMI was 54.2, compared to 53.7 survey and 53.8 prior.
  • United Kingdom - March YoY new car registrations rose 17.7%, compared to +3.0% prior.


Company Ratings/News:
 

  • None.


Thursday's Trade. On greater, but below average NYSE volume, U.S. equity indexes closed mostly lower. The DJI closed unchanged, while the SPX, Nasdaq, and NYSE composite, which fell -0.11%, -0.91%, and -0.17%, respectively. The SPX, Nasdaq, and NYSE composite are higher this year, while the DJI is -0.02% lower.

Other narrower indexes faired more poorly. The Russell 2000 (RTY) fell -0.98% and is -2.28% below its March 4th record close. The Nasdaq Internet Index (QNET) fell -2.48%, in correction and -11.3% below its March 6th closing high. The Nasdaq Biotech Index fell -2.71%, in correction and down -13.9% from its recent February 25th record high.

After a brief "in correction" that began on March 26th, the U.S. equity market outlook resumed its "confirmed uptrend" on April 1st, when the SPX closed at a record high 1885.52 on higher volume.

Market breadth was negative, with gainers 0..70x losing stocks. SPX market segments closed mixed. Leaders were telecommunications, oil and gas, and utilities, which rose at least +0.30%. Financials fell -0.12%. Laggards were health care, consumer services, and technology, which fell at least -0.27%.

NYSE volume rose +1.19% to 660.84 million shares, compared to 653.10 million shares the prior day, 0.89x the 745.24 million share 20-day moving average volume. On the day, bond markets strengthened modestly. The U.S. 10-year yield opened at 2.8045%, and moved narrowly through late afternoon, when the yield fell to the session's 2.7543% intraday low. The yield closed at 2.7972%, down -0.73 bps compared to the 2.8045% prior close.

From its prior day 1890.90 SPX close, June 2014 SPX futures (SPM4) suggested a modestly lower open. The SPX index rose to an early 1893.80 intraday high, but reversed lower by mid-morning and fell to a late afternoon 1882.65 intraday low. The index rallied through the final hour, moderating the day's loss. The SPX ended at 1888.77, -0.11% below its April 2nd record close. The index closed +75.7% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

The DJ Transportation index (TRAN) fell -0.16%, compared to DJI's +0.00% gain, and closed without DJI confirmation of recent TRAN record closes. From its prior 7,695.51 close, the TRAN improved to a mid-morning 7,715.91 intraday high, but immediately reversed lower and trended lower to a mid-afternoon 7,695.51 intraday low. The index improved through the final hour to narrow losses and closed at 7,683.19, -0.16% below its 7,695.51 April 1st record close. Volume fell -13.7% to 9.890 million shares, compared to 11.464 million shares the prior session, and 0.73x the 15-day moving average volume. The TRAN closed +1.79% and +4.01% above its respective 20- and 50-day moving averages, and +4.98% and +10.9% above its respective 100- and 200-day moving averages.

Market volatility rose +2.14%, as the CBOE SPX volatility index (VIX) closed at 13.37, compared to 13.09 at the prior close. The VIX opened at the 13.02 intraday low, then trended higher to a late 13.70 intraday high. Volatility trended lower through the final hour. The VIX's all-time closing low was 9.31, on December 22, 1993. Its record high was 89.53 in December 2008. Its lifetime average is 20.01.

The market's technical factors were little changed. All indexes closed above their 5-, 10-, 20-, 50-, 100-, and 200-day moving averages. SPX relative strength (RSI) eased to 62.71, compared to 62.79 the prior day, in a neutral range, and better than an oversold 31.24 on February 3rd. The RSI is also down from an overbought 71.26 on December 31st, when the SPX closed an earlier record high, but above earlier oversold levels of 35.14 on August 27th and 39.19 on October 9th. The CBOE put/call SKEW rose +0.65% to 128.13, compared to 127.30 the prior session, above a neutral 115-120 range, but below 130, a level that correlates well with short-term market tops.

This week, the SPX, DJI, Nasdaq, and NYSE composite are up +1.68%, +1.53%, +1.97%, and +1.57%, respectively. Last week, the DJI rose +0.12%, while the SPX, Nasdaq, and NYSE composite closed down -0.48%, -2.83%, and -1.73%, respectively. In April, the SPX, DJI, Nasdaq, and NYSE composite are up +0.88%, +0.70%, +0.92%, and +0.67%, respectively. In March, the DJI and NYSE composite are up +0.01% and +0.09%, respectively, while the SPX and Nasdaq are down -0.10% and -3.54%, respectively.

In 2014, the SPX, Nasdaq, and NYSE composite are up +2.19%, +1.46%, and +1.91%, respectively, while the DJI is down -0.02%. 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 and below average volume, the BKX rose +0.03% to 72.69, compared to 72.67 at the prior day's close, its 14th consecutive close above 70.00, but -0.30% below its 72.91 March 20th post-2008 closing high. The index traded lower through most of the session, with a late morning 72.21 intraday low. The index reversed higher late in the session with a final minutes 72.75 intraday high. Volume fell -19.5% to 34.591 million shares, compared to 42.952 million shares the prior day, and 0.62x the 55.588 million share 15-day moving average.

Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) rose +0.06%.

This week, the BKX is up +1.75%, compared to a decline of -1.73% the prior week. In April, the BKX is up +0.55%, compared to March, when the BKX closed up +4.74%. In 2014, the BKX is up +4.95%, compared to the SPX's +2.19% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

The BKX is now +22.8% better than the June 24th 59.19 close, its worst since May 13, 2013. The index crossed above 50 on December 17, 2012, 60 on May 15, 2013, and 70 on January 8, 2014, but then dropped back below 70 on January 24th, which persisted until March 6th. The BKX closed +123.3% above the 32.56 intraday low on October 4, 2011, the bottom of that year's correction. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +75.7% in the same period.

The BKX index closed -40.0% below its February 20, 2007, record 121.06 high. The BKX is up +290.4% from its 18.62 March 6, 2009, closing low.

Technical indicators were little changed. The index closed +1.56%, +4.49%, +5.55%, and +9.49% above its respective 20-, 50-, 100-, and 200-day moving averages. The 20-day moving average rose +10 bps to 71.58. The 69.57 50-day moving average rose +3 bps. Its 100-day moving average rose +9 bps to 68.87, and the 200-day moving average rose +6 bps to 66.39. The 20-day closed (by +2.01 points) above the 50-day, and the gap widened +8 bps. The 50-day moving average closed (by +3.18 points) above the 200-day moving average, and the gap narrowed -3 bps. The 100-day moving average closed (by +2.48 points) above the 200-day moving average, and the gap widened +3 bps.

The directional movement indicator narrowed to +11.404, compared to 12.794 the prior day, its 24th consecutive positive reading. Relative strength rose to 62.71, compared to 62.60 the prior day, in a neutral range, up from the recent 32.95 low on February 3rd, but down from an overbought 75.56 and 71.88 on January 9th and 10th, respectively. The recent low RSI level 31.08 on November 14, 2012, which is also the date of the BKX's 2012 closing low. Next resistance is 72.89; next support is 72.35.

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