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  • U.S. Month-End Futures Fall; Europe Lower On Sanctions Impact; China Rises Again  0 comments
    Jul 31, 2014 9:06 AM

    This morning. It's July's final trading day, and U.S. futures are sharply lower ahead of tomorrow's U.S. employment report and following last evening's collapse of negotiations to avoid an Argentine bond default. U.S. equity futures are near the bottom of their pre-market ranges. In Asia, equities closed mixed, though in China (where record high relative strength indexes indicate an acutely overbought condition), equities extended their rally. In Europe, equities are moderately lower, on economic fears stemming from enhanced Russian sanctions, and economic reports signal continuing deflationary pressures. The dollar is stronger. The U.S. Treasury 10-year yields are slightly lower, following yesterday's nearly +10 bps rise. Commodities are mixed. Friday's Nikkei 225 September 2014 (NKU4) equity futures are modestly lower. Since July 8th, the market outlook is "uptrend under pressure", after 7 distributions in the past 18 sessions.

    Wednesday, on increased and above average volume, U.S. equity indexes closed mixed. The S&P 500 Index (SPX) and Nasdaq rose +0.01% and +0.45%, respectively, while the DJ Industrials (Private:DJI) and NYSE composite fell -0.19% and -0.06%. This week, the Nasdaq is higher, but other indexes are lower. Last week, major indexes closed mixed. 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 +8.40% to 1.09x its 20-day moving average.

    Other notable indexes closed rallied moderately. The DJ Transports (TRAN) rose +0.72%. The Russell 2000 (RTY) rose +0.43%. The Nasdaq Internet (QNET) index rose +0.96%, and the Nasdaq Biotech (NBI) index rose +1.03%. The TRAN, RTY, QNET, and NBI are down -2.27%, -5.14%, -6.56% and -5.66%, respectively, from their recent record highs.

    Trading desks note that the sharp decline in U.S. futures came at around 3:30 am EDT on extremely light volume, but with selling motivating additional selling. There appears no especial focus for the sell-off, as Argentina is not so alarming to the broader market and Chinese markets moved forward, even if European markets sold-off. Economic impact from the Russian sanctions are blamed for poorer integrated petroleum earnings. Futures are now at the lower end of the recent 1950-1985 trading range. Conviction remains weak and unenthusiastic, with higher anxiety levels at month-end and ahead of tomorrow's employment report. Markets continue to consolidate.

    The 2Q2014 earnings season began June 18th, and now 327 of 498 SPX companies have reported with respective +4.75% and +1.00% adjusted EPS and revenues surprises. Financials (67 of 84 reporting) lead with respective +9.81% and +2.49% 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 $119.42, $132.82, and $147.23, respectively compared to $118.05, $131.36 and $145.70 at June-end, respective increases of +1.16%, +1.12% and +1.05%. Price earnings multiples remain elevated. With SPX equities trading at a 17.2x (compared to 17.3x the prior day) average 2014-15 earnings ($126.12), attention focuses on prospective 2014-15 earnings and valuations (17.2x times survey 2014-15 SPX average operating earnings suggests a 2168.19 SPX level in the next year, a +10.1% rise from yesterday's close).

    Technicals were little changed with the SPX, DJI, and NYSE composite indexes below their 20-day moving averages. SPX market segments closed mixed. SPX market breadth was negative, and up volume lagged down volume. Volatility rose slightly, but remains well below average historical levels. Treasury bond markets weakened. On the day, the U.S. Treasury 10-year bond yield rose +9.68 bps to end at 2.5569%, compared to 2.4601% at the prior close.

    This morning, 10-year U.S. Treasury yields are up +3.37 bps at 2.5906%, compared to the prior close. World sovereign bond markets are stronger. Spanish and Italian 10-year debt yields are again at multi-year lows at 2.481% and +2.671%, respectively, compared to 2.523% and +2.699% the prior day. Notably, the Spanish sovereign 10-year yield is below the U.S. 10-year bond yield.

    U.S. options markets worsened to bearish to bullish, compared to neutral the prior day. The CBOE SKEW fell -1.37% to 130.34, compared to 132.35 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 bottom of their 1948-1967 trading range. After a fair value adjustment of -0.78 points, the SPU4 future prices at 1951.00, down -13.22 points. The SPX opens -0.26% and +0.94% above its respective 20- and 50-day moving averages, and +3.15% and +6.15% above its 200-day moving averages. Initial resistance is 1978.51. Initial support is 1962.03, then 1953.98.

    "Uptrend Under Pressure" Market Outlook and Distribution Day Count. Since July 9th, the market outlook is "uptrend under pressure". Wednesday, after early gains, indexes came under pressure by mid-morning, then traded narrowly following the 2:00 release of the FOMC action report. Volume rose. Market breadth was negative. 2Q2014 earnings continue to surprise positively, with financials' earnings leading other sectors.

    Indexes closed mixed, with somewhat better Nasdaq strength. Since May 27th, distribution days number 7 for the SPX and NYSE composite, and 6 for the Nasdaq 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. After a late session negative reversal, the Nikkei 225 (NYSEARCA:NKY) closed down -0.16%. The Hang Seng (HSI) Index rose +0.10%, and the Shanghai SE composite (SHCOMP) rose +0.93% and closed near its intraday high. 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 +1.05%, +2.23%, and +3.52%, respectively. Last week, the NKY, HSI, and SHCOMP closed up +1.59%, +3.25%, and +3.28%, respectively. In July, the NKY is up +3.03%, the HSI is up +6.75%, and the SHCOMP is up +7.48%. In June, the NKY gained +3.62%, the HSI gained +0.47%, and the SHCOMP gained +0.58%.

    In 2014, the NKY is down -4.12%, the HSI is up +6.22%, and the SHCOMP is up +4.04%. 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 rose +8 bps to 4.00%, compared to 3.92% 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 eased to 64.42, compared to 66.01 the prior session, up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI rose to 81.00, compared to 80.72 the prior day. The SHCOMP's RSI rose to a record 81.72, compared to 79.40 the prior day. 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 15,620.77, compared to 15,646.23 the prior day, -4.12% below its year-end 16,291.31 high and -59.9% below its late-1989 38,915.87 high close. The index rallied to mid-morning 15,759.66 intraday high, then eased to resistance at 15,700 by mid-session, where it traded narrowly before weakening and reversing lower in the final hour to a late 15,618.85 intraday low. Market segments closed mixed. Leaders were consumer discretionary, financials, and health care, which rose at least +0.36%. Laggards were telecommunications, consumer staples, and utilities, which fell at least -0.58%.

    In China, in Shanghai, the SHCOMP closed at 2,201.56, compared to 2,181.24 at the prior close, +12.9% above the 1,950.01 June 27, 2013 close, last year's low. The index traded narrowly around breakeven through early afternoon, then rallied strongly to a late 2,202.06 intraday high. All market segments closed at least +0.05% higher. Leaders were consumer staples, materials, and financials, which rose at least +1.25%. Laggards were utilities, energy, and telecommunications.

    In Europe, equity indexes are moderately lower and near their intraday lows. The Euro Stoxx 50, FTSE 100, CAC 40, and DAX are down -0.96%, -0.20%, -0.88%, and -1.11%, respectively. The Spanish IBEX 35 is down -1.88%. The Italian FTSE MIB is down -1.29%.

    Economic reporting focuses on economic reports suggestive of deflationary pressures. The euro continues to weaken compared to the dollar.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 41.04, compared to 45.16 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 -5.31% below its recent June 18th multi-year high and -40.2% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,169.23 close, the index rose in early trading to its 3,178.76 intraday low, then fell by mid-morning to support at 3,140, which held until mid-afternoon, when the index weakened again to its 3,125.02 intraday low. The index has improved to 3,139.27. Most market segments are lower. Leaders are health care, which is up +0.91%, and technology and industrials, which are down at least -0.15%. Laggards are telecommunications, financials and materials, which are down at least -1.46%.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.18%, -0.43%, -1.32%, and -2.38%, respectively. Last week, the Euro Stoxx50, FTSE 100, and DAX rose +0.34%, +0.62%, and +0.0%, respectively, while the CAC 40 closed down -0.11%. In July, the FTSE 100 is up +0.27%, while the Euro Stoxx50, CAC 40, and DAX are down -2.81%, -3.38%, and -3.50%, 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 mixed. The Euro Stoxx50 and FTSE 100 are up +0.92% and +0.19%, respectively, while the CAC 40 and DAX are down -0.53% and -0.67%. 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 327 of 498 SPX reporting firms have reported, with respective +4.75% EPS and +1.00% revenue surprises. Financials (67 of 84 reporting) lead with a 9.81% EPS surprise and +2.49% 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 +8.40% to 680.44 million shares, compared to 627.74 million shares the prior day, 1.09x the 624.41 million share 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -714 (compared to -654 the prior day) or 0.62:1. Up volume was 0.81:1 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 13.910 bps, compared to 14.060 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 14.300 bps, compared to 14.500 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 -9.756 bps, compared to -9.250 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 1.159%, compared to 1.170% the prior day.

    · French 10-year debt yields 1.453%, compared to 1.468% the prior day.

    · Japanese 10-year debt yields are 0.538%, compared to 0.530% the prior day.

    · Spanish and Italian 10-year debt yields are lower and near multi-year lows. Spanish 10-year debt yields are 2.481%, compared to 2.523% the prior day, notably below the U.S. 10-year yield. Italian 10-year debt yields are at 2.671%, compared to 2.699% 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 0.555% and 2.551%, respectively, compared to 0.555% and 2.557% Wednesday. The yield curve narrowed -0.630 bps, with the 2- to 10-year spread at +1.996%, compared to 2.002% 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$81.498, compared to US$81.498 intraday high and US$81.432 the prior day, and better compared to its $80.484 50-day, US$80.164 100-day, and US$80.323 200-day averages. The euro trades at US$1.3382, compared to a US$1.3381 intraday low and US$1.3397 the prior day. The euro trades worse compared to its US$1.3574 50-day and US$1.3688 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥102.88, compared to ¥102.79 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 -5.20, compared to -18.00 the prior day. The index is mixed compared to its respective -18.88 5-day and -19.19 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 lower energy, mixed precious metals, higher aluminum and copper, and mixed agriculture prices.

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +0.38% to 13.33, compared to 13.28 at the prior close. The VIX is +9.97% above the 12.12 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 18.22, up +4.23% compared to 17.48 at the prior day's close. The V2X index trades +15.3% above its 15.80 20-day moving average, -2.74% below the 18.74 30-day high, and +47.9% above the 12.32 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 16.36, down -4.22% compared to 13.44 at the prior close. The VHSI index trades +21.8% above its 13.44 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) fell -1.37% to 130.54, compared to 132.35 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 7:30, July YoY Challenger job cuts rose +24.4%, compared to -20.2% prior.

    · August RBC consumer outlook rose to 51.5, compared to 50.5 prior.

    · At 8:30, 2Q2014 employment cost index rose 0.7%, compared to +0.5% survey and +0.3% prior.

    · The latest weeks' initial and continuing jobless claims were 302K and 2539K, compared to 300K and 2492K survey and 279K and 2508K revised prior.

    · At 9:00, July ISM Milwaukee, with 61.00 survey and 60.57 prior.

    · July Chicago purchasing manager, with 63.0 survey and 62.6 prior.

    Overseas Economic Reporting and News:

    · Japan - June YoY housing starts fell -9.5%, compared to -11.5% survey and -15.0% prior. YoY construction orders rose +9.3%, compared to +13.7% prior.

    · Eurozone - June unemployment was +11.5%, compared to +11.6% survey and prior. July YoY core CPI is +0.8%, compared to +0.8% survey and prior.

    · France - June MoM consumer spending rose +0.9%, compared to -0.4% survey and +0.7% revised prior. June YoY PPI confidence rose +0.5%, compared to -0.1% survey and +0.1% revised prior.

    · Germany - June MoM retail sales rose +1.3%, compared to +1.0% survey and -0.6% prior. July unemployment rate is 6.7%, compared to 6.7% survey and prior.

    · Italy - June YoY fell -1.9%, compared to -1.7% prior.

    Notable Company Ratings/News:

    · None.

    Wednesday's Trade. On greater and above average NYSE volume, major U.S. equity indexes closed mixed. The SPX and Nasdaq rose +0.01% and +0.45%, respectively, while the DJI and NYSE composite fell -0.19% and -0.06%, respectively. This week, indexes are mixed. Last week, indexes closed mixed. In July, indexes are also mixed. In 2014, the SPX, DJI, Nasdaq, and NYSE composite are at least +1.83% higher. Market breadth was negative, with gainers 0.62x losing stocks. SPX market segments closed mixed. Leaders were consumer discretionary, financials, and health care, which rose at least +0.36%. Laggards were telecommunications, consumer staples, and utilities, which fell at least -0.58%.

    Other notable indexes closed higher. The Russell 2000 (RTY) rose +0.43% and closed -5.14% below its March 4th record high. The Nasdaq Internet Index (QNET) rose +0.96% and is down -6.56% below its March 6th closing high. The Nasdaq Biotech Index (NBI) rose +1.03% and ended -5.66% below its February 25th record high.

    NYSE volume rose +8.40% to 680.44 million shares, compared to 627.74 million shares the prior day, 1.09x the 680.44 million share 20-day moving average volume. Bond markets weakened markedly. The U.S. 10-year yield set an early 2.4565% intraday low, then traded narrowly higher until 8:30, then rose to sharply to mid-afternoon 2.5642% intraday high. The index ended at 2.5569%, up +9.68 bps from the 2.4601% prior close.

    From its prior day 1969.95 SPX close, September 2014 SPX futures (SPM4) suggested a moderately higher open. The index gapped higher and set an early 1978.90 intraday high, but reversed lower by mid-morning, falling to an early afternoon 1962.42 intraday low. Markets steadied, then reversed higher after 2:00, but found resistance at 1976. The index fell back to 1968 in the final hour, but improved enough into the close to end with a fractional gain. The index closed at 1970.07, +83.3% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    From its prior day 8,217.62 close, the DJ Transportation index (TRAN) rose +0.72%, compared to the DJI's -0.19% loss, closing -2.27% off its July 24th record close. The index rallied to 8,290 in early trading, but fell back to a mid-morning 8,225.04 intraday low before steadying and rallying anew to a mid-afternoon 8,311.84 intraday high. The index fell back to 8260 in the final hour before improving again into the close. The index closed at 8,276.54. Volume fell -7.91% to 12.023 million shares, compared to 13.056 million shares the prior session, and 0.99x the 15-day moving average volume. The TRAN closed -0.52% below and +1.07% above its respective 20- and 50-day moving averages, and +4.75% and +9.60% above its respective 100- and 200-day moving averages.

    Market volatility rose +0.38%, as the CBOE SPX volatility index (VIX) closed at 13.33, compared to 13.28 at the prior close. The index fell to an early 12.53 intraday low, but rose to an early afternoon 14.07 intraday high before trending lower to the close. 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 -1.37%, to 130.54, compared to 132.35 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 ended little changed, with the SPX, DJI, and NYSE composite below their respective 20-day moving averages. The SPX relative strength (RSI) fell to 51.26, compared to 51.20 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 +0.69%, while the SPX, DJI, and NYSE composite are down -0.41%, -1.29%, 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%, +0.32%, and +1.24%, respectively, while the NYSE composite is down -0.45%. 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%, +1.83%, +6.86%, and +5.09%, respectively. In 2013, the SPX, DJI, Nasdaq, and NYSE composite closed up +29.6%, +26.5%, +38.2%, +23.2%, respectively. All closed at least +5.91% higher in 2012.

    KBW Bank Index (BKX). On lower, but below 15-day average volume, the BKX rose +0.88% to 71.40, compared to 70.78 at the prior day's close, -2.07% below its 72.91 March 20th post-2008 closing high. The index rose to early resistance at 71.50, then dropped back to an early afternoon 70.85 intraday low. The index rallied to a mid-afternoon 71.66 intraday high before easing again in the final hour. Volume fell -4.62% to 41.743 million shares, compared to 43.765 million shares the prior day, and 0.92x the 45.436 million share 15-day moving average.

    Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) rose +1.02%.

    This week, the BKX is up +0.90%, compared to last week, when the BKX closed up +1.19%. In July, the BKX is up +0.13%, compared to June, when the BKX rose +3.48%. In 2014, the BKX is up +3.09%, 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 +23.2% 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 +119.3% 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 +83.3% in the same period.

    The BKX index closed -41.0% below its February 20, 2007, record 121.06 high. The BKX is up +283.5% from its 18.62 March 6, 2009, closing low, its low during the 2008-09 financial panic.

    Technical indicators improved. The index recaptured and closed +0.26% above its 20-day moving average, and closed +1.11%, +1.70%, and +3.66% above its 50-, 100-, and 200-day moving averages. The 20-day moving average fell -2 bps to 71.21. The 70.61 50-day moving average rose +8 bps. Its 70.21 100-day moving average was unchanged, and the 200-day moving average rose +4 bps to 68.88. The 20-day closed (by +0.60 points) above the 50-day, and the gap narrowed -9 bps. The 50-day moving average closed (by +1.73 points) above the 200-day moving average, and the gap widened +3 bps. The 100-day moving average closed (by +1.33 points) above the 200-day moving average, and the gap narrowed -4 bps.

    The directional movement indicator improved to +1.967, compared to -1.038 the prior day, its 1st positive reading in 3 sessions. Relative strength fell to 53.17, compared to 48.16 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 71.76; next support is 70.95.

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

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