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Gary Townsend - Since 2007, a founding partner, CEO and Portfolio Manager of Hill-Townsend Capital LLC, a long/short equity financial sector fund based in Chevy Chase, Maryland. Mr. Townsend has 30 years banking, regulatory, and investment experience. He started his business career in 1978, as... More
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  • U.S. Futures Reverse Higher, Europe Rebounds, Asia Closes Mixed 0 comments
    Aug 8, 2014 9:14 AM

    This morning. U.S. futures have reversed significant early losses and are now moderately higher and near the top of their pre-session range. In Asia, equities closed mixed, with Japan selling off hard, though China surprisingly held up. In Europe, equities have narrowed significant early losses and are modestly mixed, with better strength in Madrid and Milan. Intraday, the DAX was in correction, but has improved, up small on the day and down -9.89% from its June 20th record high. The dollar is weaker compared to the euro. The U.S. Treasury 10-year yields are lower and at levels last seen in June 2013. Commodities are mostly higher. Monday's Nikkei 225 September 2014 (NKU4) equity futures are moderately higher.

    Since August 6th, the market outlook is "in correction".

    Thursday, on lower, but above average volume, U.S. equity indexes reversed early gains and closed lower. The S&P 500 Index (SPX), DJ Industrials (Private:DJI), Nasdaq, and NYSE composite fell -0.56%, +0.08%, and +0.05% higher, respectively, while the NYSE composite fell -0.04%. Last week, major indexes closed at least -2.18% lower. In August, indexes are at least -0.34% lower. In July, indexes closed off at least -0.87%. In 2014, the SPX, Nasdaq, and NYSE composite are up +3.89%, +4.27%, and +2.43% higher, respectively, while the DJI is down -0.80%.

    NYSE volume fell -3.02% to 1.01x its 20-day moving average.

    Other notable indexes closed mixed. The DJ Transports (TRAN) fell -0.22%. The Russell 2000 (RTY) fell -0.51%. The Nasdaq Internet (QNET) index rose +0.23%, and the Nasdaq Biotech (NBI) index fell -1.40%. The TRAN, RTY, QNET, and NBI are down -4.49%, -7.35%, -8.76% and -8.98%, respectively, from their recent record highs.

    Trading desks report an ugly morning, but one that improved following news reports of a somewhat improved Russia/Ukraine outlook. Japan's weakness was severe but came without clear reason, though attributed to the president's Iraq announcement last night. Europe has rebounded from deeply oversold positions. Regarding yesterday's negative reversal, selling pressure was never intense and was orderly through the day, but buyers remain absent, with exceptionally thin liquidity. The SPX slipped through its 1913 100-day moving average. Bond markets continue to strengthen, with the U.S. 10-year Treasury near late May levels and the German 10-year at an all-time low.

    The 2Q2014 earnings season began June 18th, and now 452 of 500 SPX companies have reported with respective +5.31% and +1.42% adjusted EPS and revenues surprises. Financials (83 of 84 reporting) lead with respective +9.52% and +2.38% 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 $119.57, $132.83, and $146.98, respectively compared to $118.05, $131.36 and $145.70 at June-end, respective increases of +1.29%, +1.12% and +0.88%. Price earnings multiples remain elevated. With SPX equities trading at a 16.7x (compared to 16.7x the prior day) average 2014-15 earnings ($126.20), attention focuses on prospective 2014-15 earnings and valuations (16.7x times survey 2014-15 SPX average operating earnings suggests a 2101.63 SPX level in the next year, a +10.1% rise from yesterday's close).

    Technicals worsened as the SPX surrendered its 100-day moving average, though relative strength indexes signaled oversold condition. Most SPX market segments closed lower. SPX market breadth was negative, and up volume lagged down volume. Volatility rose, and the VIX now suggests a 68% probability that the 30-day change in the SPX will be less than ±5.77%. Treasury bond markets strengthened. On the day, the U.S. Treasury 10-year bond yield fell -5.94 bps to end at 2.4114%, compared to 2.4708% at the prior close.

    This morning, 10-year U.S. Treasury yields are another -1.45 bps lower at 2.3969%, compared to the prior close, its lowest level since June 2013. World sovereign bond markets are also stronger, with the German 10-year yield at 1.088%, a record low. Spanish and Italian 10-year debt yields are lower at 2.543% and 2.768%, respectively, compared to 2.586% and +2.809% the prior day.

    U.S. options markets improved to neutral, compared to bearish to neutral the prior day. The CBOE SKEW rose +0.22% to 124.68, compared to 124.41 the prior day, below 130 for the 3rd consecutive session, 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 1890-1911 trading range. After a fair value adjustment of -0.38 points, the SPU4 future prices at 1913.00, up +8.12 points. The SPX opens -2.60% and -2.33% below its respective 20- and 50-day moving averages, and -1.70% below and +2.56% above its 200-day moving averages. Initial resistance is 1924.05. Initial support is 1899.94, then 1890.30.

    "In correction" Market Outlook and Distribution Day Count. Since August 6th, the market outlook is "in correction", following a period of "uptrend under pressure" that began on July 8th. 2Q2014 earnings continue to surprise positively, with financials' earnings leading other sectors.

    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 surprised and closed mixed, as in Japan, the Nikkei 225 (NYSEARCA:NKY) closed down -2.98% and is now nearly in recession, down -9.29% this year. In China, the Hang Seng (HSI) Index fell -0.23%, and the Shanghai SE composite (SHCOMP) closed up +0.31%. The NKY and HSI 50-day moving averages are above their respective 200-day moving averages. Today's volumes are unavailable.

    Commentary focused on President Obama's announcement overnight that he approved U.S. air strikes in Iraq in support of U.S. humanitarian relief in Kurdistan.

    This week, the NKY is down -5.39%, while the HSI is down -0.82%, and the SHCOMP is up +0.42%. Last week, the NKY, HSI, and SHCOMP rose +0.42%, +1.31%, and +2.76%, respectively. In August, the NKY, HIS, and SHCOMP are down -5.39%, -1.72%, and -0.32%, respectively. In July, the NKY closed up +3.03%, the HSI rose +6.75%, and the SHCOMP rallied +7.48%.

    In 2014, the NKY is down -9.29%, the HSI is up +4.40%, and the SHCOMP is up +3.71%. 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, and the SHIBO 7-day fell -2 bps to 3.50%, compared to 3.52% 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 at the bottom of a neutral range, its most oversold since April, when the NKY closed at 13,885.11, its worst of the year. The NKY RSI fell to 32.16, compared to 45.34 the prior session, up from an oversold 27.92 on February 4th, the most recent prior yearly low. The HSI RSI fell to 59.69, compared to 61.82 the prior day and an overbought 81.00 on July 31st. The SHCOMP's RSI eased higher to 66.63, compared to 65.42 the prior day. On July 28th, the index's RSI was a record 81.72. 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 14,778.37, compared to 15,232.37 the prior day, -9.29% below its year-end 16,291.31 high and -62.0% below its late-1989 38,915.87 high close. The index opened modestly lower, but weakened through the morning session to a late morning 14,753.84 intraday low. The index traded narrowly around 14,800 through the afternoon, but weakened a fell below that support in the final hour. All market segments closed at least -1.94% lower. Leaders were energy, utilities, and consumer staples. Financials lost -2.97%. Laggards were materials, technology, and telecommunications, which fell at least -3.14%.

    In China, in Shanghai, the SHCOMP closed at 2,194.43, compared to 2,187.67 at the prior close, +12.5% above the 1,950.01 June 27, 2013 close, last year's low. The index traded narrowly through the session, with a late morning 2,180.76 intraday low, then reversed higher by late morning to an early afternoon 2,199.58 intraday high. Most market segments closed higher. Leaders were technology, consumer discretionary, and consumer staples, which rose at least +0.56%. Laggards included financials and materials, which rose at least +0.11%, and utilities, which fell -0.14%.

    In Europe, major equity indexes are mostly higher, though only modestly, but far better than their large early losses. The Euro Stoxx 50, CAC 40, and DAX are up +0.26%, +0.23%, and +0.14%, respectively, though the FTSE 100 is down -0.26%. The Spanish IBEX 35 is up +0.82%. The Italian FTSE MIB is up +1.24%. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -8.72%, -4.55%, -9.48%, and -9.89%, respectively, from their recent highs.

    Economic reporting is light. Commentary focuses on Ukrainian and Iraqi developments. The euro is slightly stronger compared to the dollar.

    European bourses have recently underperformed U.S. equity indexes. Intraday Euro Stoxx50 relative strength (RSI) is 31.04, compared to an oversold 28.70 at the prior close, in the lower end of a neutral (30-70) range. Yesterday, its RSI closed below its prior February 5th 33.57 low, which coincided with its prior 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 -8.79% below its recent June 18th multi-year high and -42.4% below its 5,249.55 March 31, 2000, all-time closing high. From its prior day 3,012.88 close, the index fell to an early 2,977.52 intraday low, the year's worst, but then improved to a mid-afternoon 3,025.66 intraday high. The index currently trades at 3,015.86. Most market segments are mixed. Leaders are energy, financials, and consumer discretionary, which are up at least +0.21%. Laggards are telecommunications, consumer staples, and technology, which are down at least -0.65%.

    This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -1.60%, -2.21%, -1.96%, and -3.73%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -3.23%, -0.90%, -1.95%, and -3.22%, respectively. In August, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.95%, -2.21%, -1.96%, and -3.73%, respectively. In July, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -3.49%, -0.21%, -4.00%, and -4.33%, respectively.

    In 2014, the indexes are lower. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.75%, -2.49%, -3.10%, -5.19%, 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 452 of 500 SPX reporting firms have reported, with respective +5.31% EPS and +1.42% revenue surprises. Financials (83 of 84 reporting) lead with a 9.52% EPS surprise and +2.38% 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 17.3x estimated 2013 earnings ($110.15), 16.0x estimated 2014 earnings ($119.57), 14.4x estimated 2015 earnings ($132.83), and 13.0x estimated 2016 earnings ($146.98). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2014, 2015, and 2016 earnings to grow +8.55%, +11.1%, and 10.7%, respectively.

    The KBW Bank Index (BKX) trades at 13.2x 2013 adjusted EPS ($5.16), 12.4x estimated 2014 earnings ($5.51), 11.5x estimated 2015 earnings ($5.94), and 10.3x 2016 earnings ($6.62). Analysts expect 2014, 2015, 2016 EPS will grow +6.81%, +7.76%, and +11.6%, respectively.

    Composite, index, and equity options. Options markets improved to neutral, compared to bearish to neutral the prior session. Composite options are neutral, index options are neutral, and equity options are neutral. The composite put/call ratio is 1.01, compared to 1.12 the prior day, and better than 5- and 10-period moving averages of 1.14 and 1.04, respectively. The index put/call ratio is 1.18, compared to 1.20 the prior day, and worse than its 5- and 10-period moving averages of 1.23 and 1.14, respectively. The equity put/call ratio closed the day at 0.90, compared to 1.10 the prior day, and better than its 5- and 10-period moving averages of 1.11 and 1.01, respectively.

    NYSE Volume, Breadth Indicators. Volume fell -3.02% to 670.07 million shares, compared to 690.91 million shares the prior day, 1.01x the 665.20 million share 20-day moving average. Market breadth was negative, and up volume lagged down volume. Advancing stocks lagged by -251 (compared to +570 the prior day) or 0.85:1. Up volume was 0.43:1 down volume.

    Libor, LOIS, Currencies, Treasuries, Commodities:

    · USD LIBOR is 0.08990%, compared to 0.08990% the prior day. USD 3-month LIBOR is 0.23420%, down from 0.23710% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

    · The US LIBOR-OIS (LOIS) spread is 13.970 bps, compared to 13.920 bps the prior day, and compares to the recent June 12, 2012, 46.785 bps high. Euribor-OIS is 14.500 bps, compared to 14.600 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 curve is -11.985 bps, compared to -11.750 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, and within the lower end of a normal -10 bps and -40 bps range.

    · German 10-year debt yields 1.043%, a record low, compared to 1.062% the prior day.

    · French 10-year debt yields 1.335%, compared to 1.357% the prior day.

    · Japanese 10-year debt yields are 0.505%, compared to 0.527% the prior day.

    · Spanish and Italian 10-year debt yields are lower and remain near multi-year lows. Spanish 10-year debt yields are 2.557%, compared to 2.626% the prior day, notably below the U.S. 10-year yield. Italian 10-year debt yields are at 2.837%, compared to 2.872% 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 0.420% and 2.370%, respectively, compared to 0.429% and 2.411% Thursday. The yield curve narrowed -3.320 bps, with the 2- to 10-year spread at +1.950%, compared to 1.983% 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 weaker compared to the euro and Japanese yen, but stronger compared to the British pound. The dollar trades at US$81.376, compared to US$81.291 intraday high and US$81.524 the prior day, and better compared to its $80.598 50-day, US$80.262 100-day, and US$80.371 200-day averages. The euro trades at US$1.3392, compared to a US$1.3408 intraday high and US$1.3394 the prior day. The euro trades worse compared to its US$1.3547 50-day and US$1.3660 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥101.91, compared to ¥102.10 the prior day. The yen trades better than its 50-day moving average ¥101.95, and better than its January 1st 105.31 closing low, its weakest prior multi-year closing low.

    · Citigroup Economic Surprise Index improved to +2.60, compared to 0.00 the prior day, its first positive reading since May 28th. The index is better compared to its respective -8.36 5-day and -13.62 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, turned negative on May 29th. After a lag, the CESIUSD correlates with EPS revisions.

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

    Volatility, Skew:

    · The CBOE SPX volatility index (VIX) rose +1.77% to 16.66, compared to 16.37 at the prior close. The VIX is +22.7% above the 13.64 20-day moving average. Its 30-day high is 17.57. 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 20.75, down -0.21% compared to 20.80 at the prior day's close. The V2X index trades +20.5% above its 17.02 20-day moving average, -6.31% below the 22.15 30-day high, and +62.7% above the 12.76 30-day low.

    · The Hang Seng volatility index (VHSI) closed at 16.77, up +6.88% compared to 15.69 at the prior close. The VHSI index trades +16.0% above its 14.46 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

    · CBOE SKEW (SKEW) rose +0.22% to 124.68, compared to 124.41 the prior session, above a neutral reading (115-120) and its 3rd consecutive reading under 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 8:30, 2Q2014 preliminary nonfarm productivity rose +2.5%, compared to +1.6% survey and -4.5% revised prior.

    · 2Q2104 unit labor costs rose +0.6%, compared to +1.1% survey and +11.8% revised prior.

    · At 10:00, MoM June wholesale inventories, with +0.7% survey and +0.5% prior.

    Overseas Economic Reporting and News:

    · France - June MoM industrial production rose +1.3%, compared to +1.0% survey and -1.6% revised prior. June MoM manufacturing rose +1.6%, compared to +1.5% survey and -2.3% prior.

    · Germany - June MoM exports rose +0.9%, compared to +0.8% survey and -1.1% prior. MoM imports rose +4.5%, compared to +1.0% survey and -3.4% prior.

    · United Kingdom - June MoM construction output rose +1.2%, compared to +1.0% survey and -1.2% revised prior.

    Notable Company Ratings/News:

    · Bank of America - Reported to be near a $17 billion settlement with the Justice Department.

    Thursday's Trade. On lower, but above average NYSE volume, major U.S. equity indexes reversed early gains, fell through support levels by mid-afternoon, and closed with moderate losses. The SPX, DJI, Nasdaq, and NYSE composite fell -0.56%, -0.46%, -.46%, and -0.65%, respectively. This week, the indexes are at least -0.41% lower. The prior week, indexes closed mixed. In August, indexes are at least -0.80% lower. In July, indexes closed down at least -1.51%. In 2014, the DJI is now -1.26% lower, while the others are at least +1.76% higher. Market breadth was negative, with gainers 0.85x losing stocks. Most SPX market segments closed lower. Leaders were utilities and industrials, which rose at least +0.08%, and technology, which fell -0.45%. Financials fell -0.53%. Laggards were materials, telecommunications, and health care, which fell at least -0.89%.

    Other notable indexes closed mixed. The Russell 2000 (RTY) fell -0.51% and closed -7.35% below its March 4th record high. The Nasdaq Internet Index (QNET) rose +0.23% and is down -8.76% below its March 6th closing high. The Nasdaq Biotech Index (NBI) fell -1.40% and ended -8.98% below its February 25th record high.

    NYSE volume fell -3.02% to 670.07 million shares, compared to 690.91 million shares the prior day, 1.01x the 665.20 million share 20-day moving average volume. Bond markets strengthened. In early trading, the U.S. 10-year yield traded narrowly through mid-morning, then trended lower to a late 2.4060% intraday low. The index ended at 2.4114%, down -5.94 bps from the 2.4708% prior close.

    From its prior day 1938.99 SPX close, September 2014 SPX futures (SPM4) suggested a moderately higher open. In early trading, the index found its 1928.89 intraday high, then weakened and reversed lower by late morning and trended lower through support at 1915 to a late 1904.78 intraday low. The index closed at 1909.57, +77.7% above the 1074.77 October 4, 2011, intraday low, the bottom of the most recent correction.

    From its prior day 8,009.82 close, the DJ Transportation index (TRAN) fell -0.22%, compared to the DJI's -0.46% loss, closing -5.63% off its July 24th record close. At the open, the index gapped higher and set and early 8,069.97 intraday high, then weakened and reversed lower in mid-afternoon, then fell to a late 7,969.80 intraday low. The index closed at 7,992.08, its worst close since May 22nd. Volume fell -7.82% to 12.676 million shares, compared to 13.752 million shares the prior session, and 0.99x the 15-day moving average volume. The TRAN closed -3.39% and -2.58% below its respective 20- and 50-day moving averages, and +0.74% and +5.28% above its respective 100- and 200-day moving averages.

    Market volatility rose, as the CBOE SPX volatility index (VIX) rose +1.77% to 16.66, compared to 16.37 at the prior close. The VIX opened lower and set an early 15.44 intraday low, then moved higher to 17.00 in early afternoon. The index slipped back to 16.00 by mid-afternoon, then moved back to a late 17.25 intraday high in the final hour. 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 -0.17% to 124.41, compared to 124.62 the prior session, above a neutral 115-120 range, but below 130 for the first time since June 18th, 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. The SPX relative strength (RSI) fell to an oversold 32.85, compared to 35.72 the prior day, in the lower end of a neutral range, down from an overbought 73.73 on June 9th and up from an oversold 31.24 on February 3rd, its previous yearly low. 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 SPX, DJI, Nasdaq, and NYSE composite are down -0.81%, -0.76%, -0.41%, and -1.01%. Last week, the SPX, DJI, Nasdaq, and NYSE composite fell -2.68%, -2.75%, -2.18%, and -2.67%, respectively. In August, the SPX, DJI, Nasdaq, and NYSE composite are down -1.09%, -1.18%, -0.80%, and -1.33%, respectively. In July, the SPX, DJI, Nasdaq, and NYSE composite closed down up -1.51%, -1.56%, -0.87%, and -2.30%, respectively.

    In 2014, the SPX, Nasdaq, and NYSE composite are up +3.31%, +3.79%, and +1.76%, respectively, while the DJI is now -1.26% lower. 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 15-day average volume, the BKX fell -0.96% to 68.30, compared to 68.90 at the prior day's close, -6.32% below its 72.91 March 20th post-2008 closing high. The index opened higher and set an early 69.31 intraday high, but reversed lower by mid-morning and trended lower to a late 69.31 intraday low. Volume fell -2.78% to 40.942 million shares, compared to 42.114 million shares the prior day, and 0.94x the 43.339 million share 15-day moving average.

    Large cap banks outperformed the regional banks, as the KBW regional banking index (KRX) rose -0.96%.

    This week, the BKX is down -1.24%. Last week, the BKX fell -3.41%, compared to the prior week, when the BKX closed up +1.19%. In August, the BKX is down -2.62%, compared to July, when the BKX closed off -1.64%. In 2014, the BKX is down -1.39%, compared to the SPX's +3.31% gain. In 2013, the BKX rose +35.1%, better than the SPX's +29.6% rise.

    The BKX is now +15.4% 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. On June 5th, the BKX rose back above 70, but then again surrendered that level on August 1st.

    The BKX closed +109.8% 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 +77.7% in the same period. The BKX index closed -43.6% below its February 20, 2007, record 121.06 high. The BKX is up +266.8% from its 18.62 March 6, 2009, closing low, its low at the end of the 2008-09 financial panic.

    Technical indicators worsened. The average closed -3.10%, -3.45%, -2.61%, and -1.03% below its 20-, 50-, 100-, and 200-day moving averages. The 20-day moving average fell -13 bps to 70.48. The 70.74 50-day moving average narrowed -1 bp. Its 70.13 100-day moving average fell -2 bps, and the 200-day moving average rose +1 bp to 69.01. The 20-day closed (by -0.26 points) below the 50-day, and the negative gap widened -12 bps. The 50-day moving average closed (by +1.73 points) above the 200-day moving average, and the gap fell -2 bps. The 100-day moving average closed (by +1.12 points) above the 200-day moving average, and the gap narrowed -4 bps.

    The directional movement indicator improved -17.712, compared to -15.301 the prior day, its 6th consecutive negative reading. Relative strength fell to 34.81, compared to 38.00 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 69.02; next support is 67.86.

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

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