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Gary Townsend - Founding member and Chairman, GBT Capital Management, LLC, a macro long/short fund based in Chevy Chase, Maryland. Also, 2007-2013, a founding partner, CEO and Portfolio Manager of Hill-Townsend Capital LLC, a long/short equity financial sector fund. Mr. Townsend has 35 years... More
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  • U.S. Futures Rise After Strong GDP Report; Asia Closes Mixed; Europe Trades Flat 0 comments
    Jul 30, 2014 8:44 AM

    This morning. Today, following a strong preliminary 2Q2014 GDP report, U.S. equity futures are rallying and trade near the top of their pre-market range. In Asia, equities closed mixed. Chinese relative strength indexes indicate an acutely overbought condition. In Europe, equities are mixed, but essentially flat. The dollar is stronger. The U.S. Treasury 10-year yields weakened following the GDP report. Commodities are mixed. Thursday's Nikkei 225 September 2014 (NKU4) equity futures are modestly higher. Since July 8th, the market outlook is "uptrend under pressure", after 6 distributions in the past 17 sessions.

    Tuesday, on better and average volume, most major U.S. equity indexes distributed. The S&P 500 Index (SPX), DJ Industrials, and NYSE composite fell -0.45%, -0.42%, and -0.46%, respectively, while the Nasdaq fell -0.05%. Last week, major indexes closed mixed. The prior week, major indexes closed at least +0.38% higher. In July, indexes are at least +0.07% higher. In 2014, the SPX, DJI, and Nasdaq and NYSE composite are up +7.06%, +2.45%, +6.42%, and +5.64% higher, respectively.

    NYSE volume rose +6.58% to 1.00x its 20-day moving average.

    Other notable indexes closed mixed. The DJ Transports (TRAN) fell -1.38%. The Russell 2000 (RTY) rose +0.19%. The Nasdaq Internet (QNET) index fell -0.58%, and the Nasdaq Biotech (NBI) index rose +1.08%. The TRAN, RTY, QNET, and NBI are down -2.96%, -5.54%, -7.44% and -6.63%, respectively, from their recent record highs.

    Focus switches from earnings to economic reporting and the latest from the FOMC. Despite the session's weakness, trading desks reported another relatively quiet day, with Russian sanctions the purported cause of the lower close. Volatility is expected to rise this week ahead of the U.S. July jobs report. Conviction remains weak and unenthusiastic, with higher anxiety levels as the calendar moves to month-end and important economic reports and events come due. Markets continue to consolidate.

    The 2Q2014 earnings season began June 18th, and now 285 of 500 SPX companies have reported with respective +5.53% and +0.92% adjusted EPS and revenues surprises. Financials (59 of 84 reporting) lead with respective +10.8% and +2.91% EPS and revenue surprises. In 1Q2014, 499 of 499 SPX companies reported with respective +5.91% EPS and +0.20% revenue surprises.

    Forward estimates have moved up. Respective estimates for 2014, 2015 and 2016 are now $119.40, $132.87, and $147.24, respectively compared to $118.05, $131.36 and $145.70 at June-end, respective increases of +1.14%, +1.15% and +1.06%. Price earnings multiples remain elevated. With SPX equities trading at a 17.2x (compared to 17.3x the prior day) average 2014-15 earnings ($126.14), attention focuses on prospective 2014-15 earnings and valuations (17.2x times survey 2014-15 SPX average operating earnings suggests a 2168.45 SPX level in the next year, a +10.1% rise from yesterday's close).

    Technicals worsened as the SPX surrendered its 20-day moving average. Most SPX market segments closed lower. SPX market breadth was negative, and up volume lagged down volume. Volatility rose, but remains well below average historical levels. Treasury bond markets weakened. On the day, the U.S. Treasury 10-year bond yield fell -1.42% to end at 2.4601%, compared to 2.4853% at the prior close.

    This morning, 10-year U.S. Treasury yields are up +4.51 bps at 2.5052%, compared to the prior close. World sovereign bond markets are mixed. Spanish and Italian 10-year debt yields are again at multi-year lows at 2.459% and +2.635%, respectively, compared to 2.471% and +2.640% the prior day. Notably, the Spanish sovereign 10-year yield is below the U.S. 10-year bond yield.

    U.S. options markets improved to neutral to bullish, compared to neutral the prior day. The CBOE SKEW fell -1.98% to 132.35, compared to 135.02 the prior day, above 130, a level that correlates well with short-term market tops. The SKEW closed at a record 143.60 on June 20th.

    In pre-market futures trading, September SPX equity futures (SPM4) price near the top of their 1964-1973 trading range. After a fair value adjustment of +0.75 points, the SPU4 future prices at 1974.75, up +2.09 points. The SPX opens -0.27% and +1.02% above its respective 20- and 50-day moving averages, and +3.20% and +6.22% above its 200-day moving averages. Initial resistance is 1979.88. Initial support is 1964.98, then 1960.02.

    "Uptrend Under Pressure" Market Outlook and Distribution Day Count. Since July 9th, the market outlook is "uptrend under pressure". Tuesday, after early gains, indexes reversed lower and closed at their intraday lows. Volume rose on all the major exchanges, and market breadth was negative. 2Q2014 earnings continue to surprise positive, with financials' earnings leading other sectors.

    The SPX, DJI, and NYSE composite distributed, while the Nasdaq's loss was inconsequential. Since May 27th, distribution days number 7 for the SPX and NYSE composite, and 6 for the Nasadq and DJI.

    On May 27th, the market outlook improved to "confirmed uptrend", ending a period of market "in correction" that began on April 4th. The SPX closed July 24th at a record 1987.01, +8.99% above the 1815.69 close on April 11th, the recent low. On February 3rd, the Nasdaq closed at its 3,996.96 year-to-date low, but then recovered +11.6% to the July 3rd 4,458.65 multi-year record close.

    In Asia, equity markets closed mixed. The Nikkei 225 (NYSEARCA:NKY) closed up +0.18%. The Hang Seng (HSI) Index rose +0.37%, and the Shanghai SE composite (SHCOMP) fell -0.09%. The NKY and HSI 50-day moving averages are above their respective 200-day moving averages. Today's volumes are unavailable.

    Commentary focuses on stronger economic reports, 2Q2014 earnings, and the direction of monetary policy, currency, and commodity price developments.

    This week, the NKY, HSI, and SHCOMP are up +1.22%, +2.13%, and +2.57%, respectively. Last week, the NKY, HSI, and SHCOMP closed up +1.59%, +3.25%, and +3.28%, respectively. In July, the NKY is up +3.19%, the HSI is up +6.65%, and the SHCOMP is up +6.49%. In June, the NKY gained +3.62%, the HSI gained +0.47%, and the SHCOMP gained +0.58%.

    In 2014, the NKY is down -3.96%, the HSI is up +6.12%, and the SHCOMP is up +3.08%. 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 remain volatile, as the SHIBO 7-day rate fell -3 bps to 3.92%, compared to 3.95% 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 that Tokyo is in the upper end of a neutral range, while Hong Kong, and Shanghai are well into overbought ranges. The NKY RSI rose to 66.01, compared to 65.12 the prior session, up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI rose to 80.72, compared to 79.68 the prior day. The SHCOMP's RSI fell to 79.40, compared to the prior day's 80.31 record high. 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 15,646.23, compared to 15,618.07 the prior day, -3.96% below its year-end 16,291.31 high and -59.8% below its late-1989 38,915.87 high close. The index rallied to mid-morning resistance at 15,665, then fell back to a mid-morning 15,594.89 intraday low. The index immediately reversed higher and again tested resistance in late morning. The index traded around 15,650 though the afternoon session. Market segments closed mixed. Leaders were health care, consumer staples, and consumer discretionary, which rose at least +0.38%. Laggards were financials, energy, and utilities, which fell at least -0.35%.

    In China, in Shanghai, the SHCOMP closed at 2,181.24, compared to 2,183.19 at the prior close, +11.9% above the 1,950.01 June 27, 2013 close, last year's low. The index traded to a mid-morning 2,194.37 intraday high, then reversed lower to a late morning 2,177.36 intraday low. By mid-afternoon, the index improved to nearly 2,190, but eased lower in the final hour. Most market segments closed higher. Leaders were energy, health care, and technology, which rose at least +0.88%. Laggards were financials, utilities, and consumer discretionary, which fell at least -0.81%.

    In Europe, equity indexes have improved from moderately lower opens and are currently mixed. The Euro Stoxx 50 and DAX are up +0.17% and +0.12%, respectively, while the FTSE 100 and CAC 40 are up +0.10% and -0.10%. The Spanish IBEX 35 is up +0.68%. The Italian FTSE MIB is down -0.02%.

    Economic reporting is light. The euro is slightly weaker compared to the dollar.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 49.32, compared to 48.18 at the prior close, in a neutral (30-70) range, better than its recent February 5th 33.57 closing low, which coincided with its 2014 low. The index's lowest recent RSI level was 25.77 on June 24, 2013, which marked the year's 2,494.54 closing low.

    The Euro Stoxx50 trades -3.58% below its recent June 18th multi-year high and -39.1% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,190.54 close, the index eased to a mid-morning 3,177.35 intraday low, but reversed higher by late morning to a mid-afternoon 3,199.61 intraday high. The index currently trades at 3,195.56. Most market segments are lower. Leaders are technology, health care and telecommunications, which are up at least +0.57%. Financials are up +0.47%. Laggards are materials, consumer staples, and energy, which are down at least -0.21%.

    This week, the Euro Stoxx50, FTSE 100, and CAC 40 are up +0.66%, +0.14%, and +0.71%, respectively, while the DAX is down -0.56%. Last week, the Euro Stoxx50 and DAX closed down -0.09% and -0.18%, respectively, while the FTSE 100 and CAC 40 closed up +0.04% and +0.17%. In July, the FTSE 100 is up +0.84%, while the Euro Stoxx50, CAC 40, and DAX are down -1.00%, -1.39%, and -1.71%, respectively. In June, the Euro Stoxx50 closed up +0.03%, while the FTSE 100, CAC 40, and DAX closed down -0.88%, -1.53%, and -0.84%, respectively.

    In 2014, the indexes are higher. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +2.80%, +0.77%, +1.52%, and +1.19%, respectively. In 2013, the indexes closed up +18.0%, +14.4%, +18.0%, and +25.5%, respectively.

    2Q2014 SPX Earnings. The 2nd quarter earnings season began June 18th, and now 285 of 500 SPX reporting firms have reported, with respective +5.53% EPS and +0.92% revenue surprises. Financials (59 of 84 reporting) lead with a 10.8% EPS surprise and +2.91% revenue surprise.

    In 1Q2014, of 499 (of 499) reporting companies, 370 or 74.5% surprised positively on earnings, with an average +5.91% surprise average. Of reporting companies, 263 or 53.0% reported sales or revenues above estimates. The average sales/revenue surprise was +0.20%. Energy led with respective +10.0% and -1.01% earnings and revenue surprises. Financials had respective +5.67% and +0.26% earnings and revenue surprises. Consumer staples lagged with respective +0.34% and -0.66% earnings and revenue surprises.

    Valuation. The SPX trades at 17.9x estimated 2013 earnings ($110.15), 16.5x estimated 2014 earnings ($119.40), 14.8x estimated 2015 earnings ($132.87), and 13.4x estimated 2016 earnings ($147.24). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2014, 2015, and 2016 earnings to grow +8.40%, +11.3%, and 10.8%, respectively.

    The KBW Bank Index (BKX) trades at 13.7x 2013 adjusted EPS ($5.16), 12.9x estimated 2014 earnings ($5.48), 11.9x estimated 2015 earnings ($5.95), and 10.7x 2016 earnings ($6.63). Analysts expect 2014, 2015, 2016 EPS will grow +6.23%, +8.53%, and +11.5%, respectively.

    Composite, index, and equity options. Options markets improved to neutral to bullish, compared to neutral the prior session. Composite options are bullish, index options are neutral, and equity options are neutral. The composite put/call ratio is 0.83, compared to 0.93 the prior day, and worse than 5- and 10-period moving averages of 0.87 and 0.89, respectively. The index put/call ratio is 1.07, compared to 1.12 the prior day, and better than its 5- and 10-period moving averages of 1.25 and 1.14, respectively. The equity put/call ratio closed the day at 0.77, compared to 0.87 the prior day, and worse than its 5- and 10-period moving averages of 0.77 and 0.82, respectively.

    NYSE Volume, Breadth Indicators. Volume rose +6.58% to 627.74 million shares, compared to 588.98 million shares the prior day, 1.01x the 624.69 million share 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -654 (compared to -394 the prior day) or 0.64:1. Up volume was 0.49:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.09150%, compared to 0.09130% the prior day. USD 3-month LIBOR is 0.23410%, unchanged from 0.23510% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 13.960 bps, compared to 14.060 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 14.500 bps, compared to 14.000 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 curve is -9.232 bps, compared to -8.282 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and below the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 1.123%, compared to 1.120% the prior day.

    · French 10-year debt yields 1.431%, compared to 1.454% the prior day.

    · Japanese 10-year debt yields are 0.530%, compared to 0.524% the prior day.

    · Spanish and Italian 10-year debt yields are lower and at new multi-year lows. Spanish 10-year debt yields are 2.454%, compared to 2.471% the prior day, notably below the U.S. 10-year yield. Italian 10-year debt yields are at 2.635%, compared to 2.640% the prior day. Spanish and Italian 10-year debt yields peaked at 7.62% and 7.26%, respectively, in July 2012 and November 2011.

    · U.S. Treasury yields are mixed, with 2- and 10-year maturities yielding 0.539% and 2.475%, respectively, compared to 0.539% and 2.430% Tuesday. The yield curve widened +1.530 bps, with the 2- to 10-year spread at +1.936%, compared to 1.921% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.921% on July 29, 2014, to a high of +2.648% on December 31, 2013.

    · The U.S. dollar is stronger compared to the euro, Japanese yen, and British pound. The dollar trades at US$81.295, compared to US$81.312 intraday high and US$80.991 the prior day, and better compared to its $80.457 50-day, US$80.144 100-day, and US$80.311 200-day averages. The euro trades at US$1.3399, compared to a US$1.3395 intraday low and US$1.3409 the prior day. The euro trades worse compared to its US$1.3580 50-day and US$1.3693 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥102.25, compared to ¥102.12 the prior day. The yen trades better than its 50-day moving average ¥101.87, and better than its January 1st 105.31 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index improved to -18.00, compared to -20.70 the prior day. The index is mixed compared to its respective -22.50 5-day and -19.97 10-day moving averages. From a +72.70 high on January 15th, the index subsequently trended lower and turned negative on February 19th and fell to a -45.90 124-week low on April 7th. The index turned briefly positive in the latter half of May, but has been negative since May 29th. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +5.73% to 13.28, compared to 12.56 at the prior close. The VIX is +10.6% above the 12.01 20-day moving average. Its 30-day high is 15.38. Its 30-day low is 10.28. Its all-time closing low is 9.31 on December 22, 1993. The long-term average is 20.00.

    · The Euro Stoxx 50 volatility index (V2X) is 16.63, down -0.78% compared to 16.76 at the prior day's close. The V2X index trades +6.43% above its 15.01 20-day moving average, -11.1% below the 18.70 30-day high, and +35.2% above the 12.30 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 17.08, up +7.15% compared to 15.94 at the prior close. The VHSI index trades +28.9% above its 13.25 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) fell -1.98% to 132.35, compared to 135.02 the prior session, above a neutral reading (115-120) and since June 19th, and well above 130, a level that correlates well with short-term market tops. The recent record high was 143.26 on June 20, 2014. Its recent low was 112.47 on May 25, 2013. Spikes in excess of 130 correlate well with short-term market tops, as occurred last December, ahead of market declines last January. 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 7:00, the latest week's MBA mortgage applications fell -2.2%, compared to +2.4% revised prior.

    · At 8:15, July ADP employment change rose 218K, compared to 230K survey and 281K prior.

    · At 8:30, QoQ 2Q2014 rose +4.0%, compared to +3.0% survey and -2.1% revised prior.

    · QoQ 2Q2014 personal consumption rose +2.5%, compared to +1.9% survey and +1.2% revised prior.

    · QoQ 2Q2104 core PCE rose +2.0%, compared to +1.9% survey and +1.2% prior.

    · At 2:00, FOMC QE3 pace, with $25 billion survey and $35 billion prior, with $15 billion Treasury and $10 billion MBS purchases.

    · FOMC rate decision, with +0.25% survey and prior.

    Overseas Economic Reporting and News:

    · China - July Westpac-MNI consumer sentiment was 114.8, compared to 112.6 prior.

    · Japan - July small business confidence rose to 48.7, compared to 47.3 prior. June preliminary MoM industrial production fell -3.3%, compared to -1.2% survey and +0.7% prior.

    · Eurozone - July final consumer confidence was -8.4, compared to -8.4 survey and prior. July service confidence was 3.6, compared to 4.5 survey and 4.4 revised prior. July business climate indicator was +0.17, compared to +0.20 survey and +0.21 revised prior.

    · France - July consumer confidence was 86, compared to 86 survey and prior.

    · Germany - June MoM import prices rose +0.2%, compared to +0.3% survey and +0.0% prior.

    · Spain - QoQ 2Q2014 preliminary GDP rose +0.6%, compared to +0.5% survey and +0.4% prior.

    · United Kingdom - Lloyds business barometer was 52, compared to 51 prior.

    Notable Company Ratings/News:

    · None.

    Tuesday's Trade. On greater and average NYSE volume, major U.S. equity indexes closed lower, with distributions on the SPX, DJI, and NYSE composite. The SPX, DJI, Nasdaq, and NYSE composite fell -0.45%, -0.425, -0.05%, and -0.46%, respectively. This week, indexes are mixed. Last week, indexes closed mixed. In July, indexes are mixed. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are at least +2.02% higher. Market breadth was negative, with gainers 0.64x losing stocks. Most SPX market segments closed lower. Leaders were telecommunications, which rose +2.17%, and health care and consumer discretionary, which fell at least -0.01%. Financials fell -0.61%. Laggards were materials, utilities, and industrials, which fell at least -0.74%.

    Other notable indexes closed mixed. The Russell 2000 (RTY) rose +0.19% and closed -5.54% below its March 4th record high. The Nasdaq Internet Index (QNET) fell -0.58% and is down -7.44% below its March 6th closing high. The Nasdaq Biotech Index (NBI) rose +1.08% and ended -6.63% below its February 25th record high.

    NYSE volume rose +6.58% to 627.74 million shares, compared to 588.98 million shares the prior day, 0.64x the 624.69 million share 20-day moving average volume. Bond markets strengthened. The U.S. 10-year yield set an early 2.4962% intraday high, then fell to a mid-morning 2.4493% intraday low. The index ended at 2.4601%, down -2.52 bps from the 2.4853% prior close.

    From its prior day 1978.91 SPX close, September 2014 SPX futures (SPM4) suggested a modestly higher open. The index opened higher and set an early 1984.85 intraday high, but weakened on news of new Russian sanctions. The index reversed lower and tested resistance at 1974 by late morning, but rallied and moved modestly higher in early afternoon, finding resistance at 1980. Equities weakened again following President Obama's mid-afternoon comments, and fell through the final hour to end at session lows. The index closed at 1969.95, +83.3% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    From its prior day 8,332.97 close, the DJ Transportation index (TRAN) fell -1.38%, compared to the DJI's -0.42% gain, closing -2.96% off its July 24th record close. The index set an opening 8,342.23 intraday high, but immediately reversed lower and to late morning support at 8,260. After improving to 8,280 in early afternoon, the index weakened through the final two hours and ended at the 8,217.62 intraday low. Volume rose +10.8% to 13.056 million shares, compared to 11.785 million shares the prior session, and 1.07x the 15-day moving average volume. The TRAN closed -1.22% and +0.45% above its respective 20- and 50-day moving averages, and +4.09% and +8.94% above its respective 100- and 200-day moving averages.

    Market volatility rose +5.73%, as the CBOE SPX volatility index (VIX) closed at 13.28, compared to 12.56 at the prior close. The index fell to an early 12.12 intraday low, then trended higher through the session to a late 13.35 intraday high. The VIX's all-time closing low is 9.31, on December 22, 1993. Its record high is 89.53 in December 2008. Its lifetime average is 20.01. The CBOE put/call SKEW fell -1.98%, to 132.35, compared to 135.02 the prior session, above a neutral 115-120 range, and well above 130, a level that correlates well with short-term market tops. Its record 143.26 high came on June 20th.

    The market's technical factors worsened as the SPX surrendered its 20-day moving average. The SPX relative strength (RSI) fell to 51.20, compared to 55.92 the prior day, in a neutral range, down from an overbought 73.73 on June 9th and up from an oversold 31.24 on February 3rd. The RSI compares to an overbought 71.26 on December 31st, when the SPX closed at an earlier record high, and compares to earlier oversold levels of 35.14 on August 27th and 39.19 on October 9th.

    This week, the Nasdaq is up +0.24%, while the SPX, DJI, and NYSE composite are down -0.42%, -1.10%, and -0.45%, respectively. Last week, the SPX, Nasdaq, and NYSE composite closed up +0.01%, +0.39%, and +0.00%, respectively, while the DJI closed down -0.82%. In July, indexes are mixed. The SPX, DJI, and Nasdaq are up +0.50%, +0.51%, and +0.78%, respectively, while the NYSE composite is down -0.39%. In June, the SPX, DJI, Nasdaq, and NYSE composite rose +1.91%, +0.65%, +3.90%, and +2.07%, respectively.

    In 2014, the SPX, DJI, Nasdaq, and NYSE composite are up +6.58%, +2.02%, +6.37%, and +5.16%, 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, but below 15-day average volume, the BKX fell -0.45% to 70.78, compared to 71.10 at the prior day's close, -2.92% below its 72.91 March 20th post-2008 closing high. The index rose to an early 71.36 intraday high, then fell to support at 70.90 by mid-morning. An early afternoon rally carried the index back to 71.20, but the index weakened again through the final two hours, reversing lower to end at the intraday low. Volume rose +7.55% to 44.839 million shares, compared to 44.749 million shares the prior day, and 0.98x the 44.839 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) rose +0.19%.

    This week, the BKX is up +0.03%, compared to last week, when the BKX closed up +1.19%. In July, the BKX is down -0.74%, compared to June, when the BKX rose +3.48%. In 2014, the BKX is up +2.19%, compared to the SPX's +6.58% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +22.1% better than the June 24, 2013, 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. On April 10th, the BKX fell below 70.00 and then eased consistently to the May 15th 66.81 closing low, its lowest close since early February. The BKX closed +117.4% 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 +83.3% in the same period.

    The BKX index closed -41.5% below its February 20, 2007, record 121.06 high. The BKX is up +280.1% from its 18.62 March 6, 2009, closing low, its low during the 2008-09 financial panic.

    Technical indicators were little changed. The index closed -0.63% below its 20-day moving average, and closed +0.35%, +0.81%, and +2.82% above its 50-, 100-, and 200-day moving averages. The 20-day moving average fell -3 bp to 71.23. The 70.53 50-day moving average rose +7 bps. Its 70.21 100-day moving average was unchanged, and the 200-day moving average rose +4 bps to 68.84. The 20-day closed (by +0.69 points) above the 50-day, and the gap narrowed -11 bps. The 50-day moving average closed (by +1.70 points) above the 200-day moving average, and the gap widened +5 bps. The 100-day moving average closed (by +1.37 points) above the 200-day moving average, and the gap narrowed -7 bps.

    The directional movement indicator worsened to -1.038, compared to -0.538 the prior day, its 2nd consecutive negative reading. Relative strength fell to 48.16, compared to 50.76 the prior day, in a neutral range, down from an overbought 73.14 on June 9th, but up from the recent 32.95 low on February 3rd. The lowest 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 71.17; next support is 70.59.

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

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