This morning. U.S. equity markets confirmed a new downtrend on October 19th, but Friday's gains suggest a new confirmed uptrend. Friday, the major indexes closed significantly higher, though on lower, early close curtailed volume.
Friday, the NYSE composite rose +1.40%, followed by the Nasdaq, DJI, and SPX, which rose +1.38%, 1.35%, and +1.30%, respectively. The DJ Transports rose +1.09%, underperforming the DJI. In November, the Nasdaq, DJI, and SPX are down -0.35%, -0.66%, -0.21%, and -1.64%, respectively, while the NYSE composite is up +0.05%. In October, the SPX, DJI, Nasdaq, and NYSE composite closed off -1.98%, -2.54%, -4.46%, and -0.36%, respectively. In September, the SPX and DJI indexes closed +2.42% and +2.65% higher, respectively, while the Nasdaq and NYSE composite rose +1.61% and +2.95%, respectively. All the major equity indexes also closed higher in August, July, and June. All are at least +6.50% higher in 2012.
The SPX, DJI, and NSYE composite are above their 20-, 100-, and 200-day moving averages. The Nasdaq recaptured its 20-day moving average, but closed below its 50-, 100-, and 200-day moving averages. Today, Asian equities mixed. In Europe, the major equity indexes are moderately lower.
This morning, U.S. equity futures are lower. U.S. Treasury yields are modestly lower, with the 10-year at 1.660%, down from 1.690% Friday. U.S. repo rates are at 23 bps, up from 21 bps. Spanish and Italian 10-year debt yields are at 5.65% and 4.78%, respectively, compared to 5.62% and 4.75% the prior day. The dollar is mixed. U.S. options markets suggest a neutral to bullish short-term outlook. The CBOE skew rose +1.03% to 117.82 from 116.62 the prior day. Commodities prices are mixed.
In pre-market futures trading, December SPX equity futures are moderately lower, but off the bottom of their 1398-1402 range. SPX equity futures are at 1400.00, down -5.30 points. The SPX opens at 1409.15, off -3.86% from September 14th's 1465.77 multi-year closing high, and +1.07%, +0.16%, and +1.87% above its 20-, 100-, and 200-day moving averages, but -1.20% below its 50-day moving average. The SPX is up +12.1% in 2012. On November 13th, the 20-day moving average crossed below its 50-day moving average. The 50-day moving average crossed above its 100-day moving average on August 17th. The SPX is +31.1% above the 1074.77 October 4, 2011 intraday low. Next resistance is at 1415.20. First support is at 1397.07.
Financial stocks have recently underperformed the broader market, with the BKX down -4.78% from its September 14th high. Friday, the BKX rose +1.55%. The BKX is off -0.87% in November, following losses of -5.85% in October and -1.08% in September.
Friday. On a curtailed trading day, equities gapped higher and trended higher through the session to end at their intraday highs. Market breadth was strongly positive. NYSE volume fell -37.0% from Wednesday's trade, 0.47x the 15-day moving average. At the close, the NYSE composite rose +1.40%, followed by the Nasdaq, DJI, and SPX, which rose +1.38%, +1.35%, and +1.30%, respectively. Most market segments closed higher. Leaders were technology, consumer goods, and basic materials, which rose at least +1.47%. Laggards were financials, health care, which rose at least +1.04%, and utilities, which fell -0.21%.
Futures suggested a higher open, and from its 1391.03 prior close, the SPX gapped higher to open above 1396 and trended higher to end at the 1409.15 intraday high. Market volatility declined. From 15.31 at the prior close, the VIX opened at 15.00, rose to its 15.26 intraday high early in the trade, and then moved narrowly through the close to end at 15.14, down -1.11%.
On -37.9% decreased volume, the DJ transports modestly underperformed, rising +1.09%, compared to the DJI's +1.35% higher close. The index closed at 5,051.76, up from 4,997.18 the prior day and above 5,000 for the 1st time since November 13th. The TRAN traded to 5020 in early trading, fell back to 4,990 before 10:00, then rose through the close to end at the intraday high. The index closed +0.22% and +0.27% above its respective 20- and 50-day moving averages, but -0.31% and -1.28% below its respective 100- and 200- day moving averages. The TRAN closed -5.91% below its 5,368.93 February 3rd closing high. The TRAN has not confirmed multiple DJI new highs (the most recent September 14th) subsequent to February 3rd.
Technical factors improved as all the major averages recaptured their 20-day moving averages. The CBOE put/call skew rose +1.03% to 117.82, compared to 116.62 the prior day. U.S. Treasury bond prices rose.
Trading desks debated whether Friday's gains were an adequate follow-through to Monday's strong gains. Follow-throughs should normally be accompanied by increased volume, but Friday's shortened trading day did not provide a good comparison to Wednesday.
Immediate SPX support is 1407 (the 100-day moving average and August close), then 1397, 1394 (the 20-day moving average), and 1383 (the 200-day moving average). Resistance is 1415, then 1420 (the August high close), 1426 (the 50-day moving average), and 1466 (the September 14th closing high).
Distribution day count. With the start of the current confirmed uptrend on November 23rd, the distribution count reset.
In Asia, equity markets opened higher in Tokyo and Hong Kong, but trended lower to end mixed. In Shanghai, equity markets opened lower, a rally attempt failed at mid-day, and the SHCOMP trended lower into the close. The NKY rose +0.24% on +2.78% increased volume. The HSI closed down -0.24% on -19.7% volume decrease. In Shanghai, the SHCOMP fell -0.49% on a -13.1% volume decrease. The NKY and HSI closed above their respective 20-, 50-, 100-, and 200-day moving averages. The SHCOMP closed below its 20-, 50-, 100-, and 200-day moving averages.
Commentary focused on Japan's parliamentary elections.
Compared to last week's close, the NKY is up +0.24%, the HSI is down -0.24%, and the SHCOMP is down -0.49%. Last week, the NKY rose +3.80%, the HSI rose +3.32%, and the SHCOMP rose +0.63%. In November, the NKY is up +5.16%, the HSI is up +1.02%, and the SHCOMP is -2.49%, respectively. In October, the NKY closed up +1.50%, while the HSI and SHCOMP ended +3.85% higher and -0.83% lower, respectively.
In Japan, the NKY closed at 9,388.94, up from 9,366.80 at Thursday's close, and above 9,000 for a 6th consecutive session. The index closed down -8.45% from its March 27th high, but +11.0% higher in 2012. The index gapped higher to open above 9,460, and trended higher to an early session 9,487.94 intraday high. By mid-session, the index weakened to 9,430, where it traded until the final hour, when the index sold off to end at the intraday low. The NKY closed +4.95%, +5.25%, +5.69%, and +3.41% above their respective 20-, 50-, 100-, and 200-day moving averages. Most market segments closed higher. Leaders were utilities, consumer services, and consumer goods, which rose at least +0.58%. Laggards were financials, telecommunications, and oil and gas, which fell at least -0.83%.
In China, the Hang Seng closed at 21,861.81, up from 21,913.98 at the prior close. The index has closed above 20,000 since September 12th. The index closed +18.6% higher in 2012. The index gapped higher to open at the 21,986.36 intraday high, but immediately fell back to breakeven and then trended lower through mid-afternoon to the 21,827.27 intraday low. The index rallied modestly in the final 90 minutes to narrow the day's loss. The HSI closed +1.33% and +3.07% above its respective 20- and 50-day moving averages. Market segments closed mixed. Leaders were consumer goods, industrials, and utilities, which rose at least +0.18%. Financials fell -0.25%. Laggards were telecommunications, oil and gas, and technology, which fell at least -0.46%.
In Shanghai, the SHCOMP closed at 2,017.46, down from 2,027.36 at the prior close. The index closed -18.5% below its 2,474.07 March 14th high, and down -8.27% in 2012. The index opened lower and tested support at 2,016 by mid-morning, then rallied back to breakeven by mid-session. The index trended lower again through the afternoon to a late session 2,014.16 intraday low. All market segments closed at least -0.13% lower. Leaders were oil and gas, financials, and utilities. Laggards were telecommunications, consumer goods, and technology, which fell at least -1.24%.
In Europe, the majorequity indexes are lower. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -0.62%, -0.59%, -0.83%, and -0.31%, respectively. The Euro Stoxx50, CAC 40, and DAX are above its 20-, 50-, 100- and 200 day moving averages. The FTSE 100 is above its 20-, 100-, and 200-day moving averages. On the day, the Spanish IBEX 35 and Italian FTSE MIB are down -0.66% and -0.60%, respectively. Economic reporting is light.
From its prior 2,557.03 close, the Euro Stoxx50 opened at 2,550 and after a brief rally, the index trended lower to its present 2,540.15 intraday low. All market segments are at least -0.24% lower. Leaders are health care, consumer goods and utilities. Financials are down -0.67%. Laggards are oil and gas, industrials, and technology, which are down at least -1.11%.
Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +5.34%, +3.81%, +5.60%, and +5.16%, respectively. In November, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +3.69%, +0.14%, +2.17%, and +0.41%, respectively. In 2012, the indexes are up +9.85%, +3.92%, +10.9%, and +23.6%, respectively.
Libor, LOIS, Currencies, Treasuries, Commodities:
- USD LIBOR is 0.15500%, up from 0.15450% the prior day. USD 3-month LIBOR is 0.31150%, unchanged from 0.31150% the prior day, and compares to the January 4th peak of 0.58250%.
- The US Libor-OIS (LOIS) spread is 19.27 bps, compared to 16.60 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 12.50 bps, up from 12.45 bps the prior day, and down from the December 27th high of 98.80 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.
- The 3-month Euro basis swap worsened to -27.924 bps, from -27.194 bps the prior day, but up from a trough of -147.00 bps on December 14th and within a normal -10 bps and -40 bps range.
- Spanish 10-year debt yields are 5.65%, compared to 5.62% the prior day. Italian 10-year debt yields are at 4.78%, compared to 4.75% the prior day. German 10-year debt yields are 1.42, compared to +1.44% the prior day.
- The U.S. government overnight repo rate is 23 bps, compared to 21 bps the prior day.
- U.S. Treasury yields are lower, with 2- and 10-year maturities yielding 0.266% and 1.657%, respectively, compared to 0.270% and 1.690% Friday. The yield curve is narrowed, with the 2 to 10 year spread +1.391%, compared to 1.420% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.174% on July 24, 2012, to a high of +1.998% on March 19, 2012.
- The U.S. dollar is mixed, stronger compared to the euro and Japanese yen, but slightly weaker compared to the British pound. The dollar trades at US$80.194, compared to a US$80.150 intraday low and US$80.192 the prior day, and mixed compared to its US$80.068 50-day, US$81.069 100-day, and US$80.803 200-day averages. The euro trades at US$1.2969, compared to a US$1.2944 intraday low and US$1.2976 the prior day. The euro trades mixed compared to its US$1.2908 50-day and US$1.2674 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥82.14, compared to ¥82.40 the prior day. The yen trades worse than its 50-day moving average ¥79.48.
- Citigroup Economic Surprise Index rose to 47.40, from 46.50 the prior day, but down from a recent peak of 60.70 on November 13th. The index turned positive on September 5th. The index is lower compared to its respective +47.32 5-day and +52.53 10-day moving averages. The index has improved significantly from a recent July 19th -65.30 low, but the trend appears to have again turned lower. After a lag, a rising CESIUSD correlates with stabilizing EPS revisions.
- Commodities prices are mixed, with lower energy, lower precious metals, higher aluminum and copper, and higher agriculture prices.
- The VIX fell -1.11% to end at 15.14, down from 15.31 at the prior close. The VIX is -12.4% below its 17.29 20-day moving average. The VIX set a recent closing low of 13.45 on August 17. Its 30-day high is 19.65.
- The Euro Stoxx 50 volatility index (V2X) is up +4.33% to 18.52, from 17.75 at the prior day's close. The V2X index trades -12.6% below its 21.19 20-day moving average, -25.2% below the 24.77 30-day high, and +6.28% above the 17.42 30-day low.
- The Hang Seng volatility index (VHSI) closed at 15.48, up +0.26% from 15.44 the prior day. The VHSI index trades -6.07% below its 16.48 20-day moving average.
- CBOE skew rose +1.03% to 117.82, from 116.62 at the prior day's close, within a neutral (115-120) range. Spikes in excess of 130 (as last on September 21, but also on March 12, 15, and 16) correlate well with short-term market tops. The recent high close was 130.60 on September 21st. The index rarely falls below 110, last on July 31, 2009. The index tracks 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. news and economic reporting:
- At 8:30, the October Chicago Fed national activity index.
- At 10:30, the November Dallas Fed manufacturing activity index, with 2.0 survey and 1.8 prior.
· China - The 3Q2012 entrepreneur confidence index fell to 116.5 from 121.2 prior.
· South Korea - November SK consumer confidence rose to 99 from 98 prior.
· Spain - Catalan pro-independence parties win a majority, according to exit polls.
Price and Selling Exhaustion/Trend Reversal:
- SPX - On a monthly basis,the SPX signaled selling exhaustion in February 2009 and rallied through a perfected upward setup in January 2010 and a completed upward countdown in January 2011. In May 2011, the SPX perfected another setup in April 2011. After September and August 2012's respective +1.98% and +2.42% higher closes, followed by October's -1.98% decline, the upward monthly setup is 4 and the countdowns is 11. On a weekly basis, the SPX signaled buying exhaustion the week of March 30th, when it completed an upward countdown on its higher 1408.47 daily and weekly close. The SPX signaled selling exhaustion the week ended June 8th, during which the SPX traded to an intraday low 1266.74 on June 4th, with a completed downward weekly setup on the June 8th. Subsequently, the SPX rebounded and perfected an upward setup on August 10th, when it closed at 1402.11. In the week ending November 23rd, the index closed up +3.62% at 1409.15, compared to 1359.88 the prior week and 1411.94 four weeks prior. The downward setup rose to 7. The downward countdown was unchanged at 4. The SPX closed -1.91% below its 1446.74 price exhaustion target. On a daily basis, the SPX perfected an upward setup on August 16th and completed an upward countdown on September 13th, when the SPX rose +0.40% to close at 1465.77. The SPX set a new multi-year closing high of 1465.77 the following day. Friday, the SPX rose +1.30%, and closed at 1409.15, compared to 1391.03 the prior day and the 1359.88 close 4 days prior. The upward setup and countdown rose to 4.
- BKX - On a monthly basis, the BKX recorded a completed downward countdown in February 2009. The BKX reached an unperfected downward setup of 9 in December 2011. In October, the BKX rose +0.04%, after having increased +5.06%, and +3.67% in the prior 2 months. Its upward setup is 2, with an upward countdown of 1. On a weekly basis, the BKX recorded a completed countdown last November 25th. The index subsequently rallied, perfecting a setup on February 10th, and rising the week of March 30th to 50.9, above to the 49.30 price exhaustion target. The index subsequently reversed, and on June 8, the BKX closed at 41.00 with downward perfected setup. On September 21st, the index closed at 50.22, down -2.36% on the week, but above the 47.17 close 4 weeks prior, perfecting an upward setup. On October 26th, the index closed at 49.25, below the 49.58 close 4 weeks prior, initiating a new downward setup and countdown. Friday, the BKX closed at 47.15, down -2.04% from 48.13 at the prior week's close. The close was below the 50.44 close 4 weeks prior, extending the downward set up to 8, while the downward countdown rose to 6. On a daily basis, the BKX signaled selling exhaustion on June 4th, then rallied to 44.65 on June 19th, when it perfected an upward daily setup. The index completed an upward daily countdown on August 8th. On August 15th, the index perfected a daily upward setup. On September 6th, the BKX initiated a new setup with its +2.93% gain, which broke through resistance at 47.75. On September 14th, the index completed an upward countdown, followed on September 19th, when the index perfected its upward setup. Since then, the BKX traded without much direction until Wednesday's -4.36% decline, which closed below both the prior day's and 4 day prior closes, initiating both a new downward setup and countdown. Friday, the BKX closed at 49.17, up from 48.42 the prior day, and the 47.15 close 4 days prior. The upward setup rose to 4 with a countdown of 3.
- VIX - On a monthly basis, the VIX perfected an upward setup on January 31, 2008, and reached an upward setup of 7 on October 31, 2008. In September, the VIX rose +18.3%, after falling -16.9% in August, and rising +8.36% in July. Presently, the VIX exhibits no particular monthly trend. On a weekly basis, the VIX perfected a downward setup on January 27th, and an upward setup on June 8th, followed by another perfected downward setup on August 10th. Last week, the VIX fell -7.74% to end at 15.14, compared to 16.41 the prior week, and the 17.81 close 4 weeks prior. The current downward setup and countdown rose to 2. On a daily basis, the VIX reached an upward countdown of 11 on June 4th, and subsequently exhibited a more distinct downward trend with a perfected setup on August 17th, followed by a perfected upward setup on August 31st. Subsequently, the VIX exhibited little in the way of a distinct trend. Friday, the VIX fell -1.11% to 15.14, compared to 15.31 at the prior close, and 17.99 at the 4 days' prior close. On November 23rd, the index perfected a downward setup and countdown rose to 2. The VIX closed +7.99% above the 14.02 support level and -13.8% below the 17.57 exhaustion level.
- DXY - On a monthly basis, DXY perfected a downward setup on May 31, 2011. Subsequent monthly trends have proven de minimus. The DXY closed October at 79.919, down -0.28% from 79.935 at the end of the prior month, but below 82.635 at the end of June, four months' prior. The monthly downward setup is 2, with a downward countdown of 1. On a weekly basis, the currency perfected an upward setup on January 6th. From a weekly high of 83.48 on July 20th, the DXY has trended lower, setting an unperfected downward setup of 9 on September 28th, with a downward countdown of 6. In subsequent weeks, the trend has been higher, but without much momentum. On November 23rd, the DXY closed at 80.192, compared to 81.257 the prior week, and 80.593 four weeks prior. Last week's decline erased and upward setup and initiated a downward setup. The index ended -3.97% below the 83.508 price resistance target. On a daily basis, the DXY perfected an upward setup on June 6th, but showed little distinct trend until the end of August, when it initiated a downward setup, which was perfected on September 11th. After 6 weeks without much trend, the DXY initiated a new upward setup on November 2nd, which it perfected on November 14. After Friday's -0.63% decrease, the DXY closed at 80.192, compared to 80.699 the prior day and 81.257 four days prior. The downward setup rose to 5 while the countdown rose to 4.
- USGG10YR - On a monthly basis, the USGG10YR perfected a downward countdown on February 29th, and a downward setup on May 31st. The subsequent trend has been week, with an upward setup of 3 and countdown of 1. On a weekly basis, the index perfected a downward setup on June 8th, but subsequent trends has been weak. The rate ended the most recent week at 1.6899%, up from 1.5800% the prior Friday and 1.7147% four weeks prior. The downward setup rose to 4, while the downward countdown was unchanged at 2. On a daily basis, the USGG10YR completed a downward setup on May 8th, followed by two downward countdowns on May 17th and June 4th. Subsequent trends were weak until August 3rd, when the rate rose nearly 9 bps to end at 1.5905%, initiating a new upward setup. This setup perfected on August 15th, when the rate ended at 1.8155%. A new downward setup commenced on August 21st, when the rate rose to 1.8610% before ending at 1.7984%, below the prior 4 day's close of 1.8155%. The downward setup perfected on August 31st, when the rate ended at 1.5484%. The trend reversed upward on September 3rd, and the upward setup reached an unperfected 9 on September 18th. After a late October intraday spike to 1.861%, the trend was lower until November 16th, when the rate closed at 1.5800%. On Friday, the rate rose to 1.6899%, compared to 1.6796% the prior day and 1.5800% four days prior. The upward setup and countdown rose to 4.
- NKY - On a monthly basis, the NKY perfected a downward setup on April 30, 2009, and subsequently has traded narrowly. In October, the index rose +0.51%, following increases of +0.34% and +1.67% in September and August, respectively. However, the October close was below the 9,006.78 June close, four months prior. There is currently no setup or countdown. On a weekly basis, the NKY perfected an upward on March 9th, and a subsequent downward setup on June 1st with a countdown of 8. For the week ended November 23rd, the NKY rose +3.80% to 9,366.80, compared to 9,024.16 the prior week and 8,933.06 4 weeks prior. The upward setup rose to 5 with a countdown of 2. On a daily basis, the NKY perfected an upward setup on March 27th, and two consecutive downward setups on April 12th, and May 14th, with completed downward countdowns on May 16th and June 4th. The index rallied through August 21st, but then strung together multiple lower closes, perfecting a downward setup on September 5th. The index subsequently rallied, initiating a setup on September 7th, which it perfected on September 20th. A downward setup commenced on September 21st, and the setup perfected on October 3rd. The countdown reached 10 on October 15th. Subsequent trend and momentum were weak until November 14th. The index initiated an upward setup and countdown on November 15th. Today, the index closed up +0.24% at 9,388.94, from 9,366.80 the prior day and 9,024.16 four days prior. The upward setup rose to 7, and the countdown rose to 6.
- HSI - On a monthly basis, the HSI perfected a downward countdown on March 31, 2009, and two subsequent perfected upward setups on December 31, 2009 and May 31, 2011. The index has yet to reach its 24,923.28 price exhaustion target. The index has risen in each of the past two months and concluded October at 22,111.33, with a upward setup and countdown counts of 2. On a weekly basis, the HSI perfected an upward setup on March 2nd, and subsequently traded to a low close of 18,185.59 on June 4th. After a period of weak trend, the index established a new upward setup and countdown in the week ending September 14th. The index perfecting an upward setup on November 9th. Subsequent trends have been weak. Last week, the index rose +3.57% to close at 21,193.98, compared to 21,159.01 the prior week and 21,545.57 4 weeks prior. On a daily basis, the HSI perfected an upward daily setup and completed an upward countdown on August 8th. After September 5th's lower close, the index perfected a downward setup. An upward setup commenced on September 9th, followed by a completed countdown on October 15th, and another perfected setup on October 25th. After today's -0.24% decrease, the HSI closed at 21,861.81, compared to 21,913.98 the prior day and 21,262.06 four days prior. The upward setup and countdown rose to 4.
- SHCOMP - On a monthly basis, the SHCOMP perfected a downward setup on September 30, 2008, and subsequently rallied to an August 31, 2009, high, but without perfecting a subsequent upward setup. Since then, the SHCOMP resumed a downward trend perfecting another downward setup on January 31, 2012. The current monthly setup and countdowns are 6 and 11, respectively. On a weekly basis, the SHCOMP last perfected an upward setup on April 11, 2011. The index has subsequently trended lower, with a downward perfected setup on September 23, 2011, and January 6, 2012 countdown completion, when it closed at 2,163.40. The index rallied to a high of 2,476.22 during the week ending March 16th, but without perfecting an upward setup. On July 13th, the index perfected a downward weekly setup and traded below the sales exhaustion target of 2148.45. The index completed a downward countdown on August 31st. On November 23rd, the index closed the week up +0.63% at 2,027.38, compared to 2,014.73 the prior week and 2,066.21 four weeks prior. The downward setup increased to 3, and the countdown rose to 2. On a daily basis, the SHCOMP perfected a daily downward setup and a completed a downward countdown on June 8th, but sold through the 2,170.95 exhaustion target on July 23rd to the September 5th yearly 2037.68 closing low. On August 23th, the index perfected a downward setup carryover from August 2nd, and the index perfected another downward setup on August 27th, with completed downward countdowns September 3rd and 5th. On September 25th, the index perfected another downward setup. The subsequent trend was weak until November 8th, when the index initiated a downward setup at 2,091.25. The index perfected the setup on November 20th at 2,004.17. Today, the index ended -0.49% lower, at 2,017.46, compared to 2,027.38 at the prior close and 2,016.98 4 days prior. The upward setup rose to 4, while the upward countdown was unchanged at 2.
- SX5E - On a monthly basis, the Euro Stoxx50 last perfected an upward setup on May 31, 2007, and perfected a downward setup on September 30, 2008. The downward countdown reached 10 in March 2009, with the index closing at 2,071.13. Subsequently, the index has traded without much trend or momentum, though a new upward setup and countdown commenced in August 2012. Its current upward setup is 4, and countdown is 2. On a weekly basis, the index trends are more pronounced, having perfected an upward setup on March 9th, followed by a downward setup on May 25th, followed by a weekly close 2119.19 below the sales exhaustion target. The index subsequently rallied to perfect an upward setup on August 10th. The upward countdown reached 10 on September 14th. Subsequent trends have been weak. In the week ended November 23rd, the index rose +5.34% to close at 2,557.03, compared to 2,427.32 the prior week and 2,469.09 at the 4 weeks' prior close. On a daily basis, the index perfected a downward setup on May 14th and countdown on June 1st, when it closed at 2,068.66, below the 2,087.31 sales exhaustion target. The index subsequently rallied through a perfected upward setup on June 18th and completed its upward countdown on August 3rd, notably rising through the 2,344.95 price exhaustion target. On September 13th, the index perfected an upward setup. Daily trends were weak through November 16th, without sustained upward or downward setups and countdowns. Strong gains on November 19th initiated an upward setup and countdown. On November 23rd, the index rose +0.87% to 2,557.03, compared to 2,535.09 the prior day and 2,427.32 at the prior 4 days' close. The upward setup and countdown rose to 5.
3Q2012 Earnings. The 3rd quarter's earnings reports were mixed, beating on EPS, but falling short on sales/revenues. Of 487 reporting companies, 437 or 71.3% surprised positively on earnings, beating by an average +3.59%. Sales and revenues fell short, however, with only 200 or 41.5% surprising positively.
Valuation. The SPX trades at 13.9x estimated 2012 earnings ($108.87) and 12.1x estimated 2013 earnings ($114.89), compared to 13.9x and 12.6x respective 2011-12 earnings the prior day. The 10-year average median price/earnings multiple is 15.9x. Since the beginning of 2012, analysts changed 2012 and 2013 earnings estimates by -7.14%, and -3.60%, respectively. Analysts expect 2012 and 2013 earnings to exceed actual 2011 earnings ($96.94) by +4.12% and +18.0%, respectively.
Options. Options markets are neutral to bullish. Composite options are bullish, index options are neutral, and equity options markets are neutral. The composite put/call ratio is 0.89, compared to 0.86 the prior day, and worse compared to its 5- and 10-period moving averages of 0.92 and 0.99, respectively. The index put/call ratio closed at 1.09, compared to 1.00 the prior day, and worse compared to its 5- and 10-period moving averages of 1.12 and 1.16, respectively. The equity put/call ratio closed the day at 0.79, compared to 0.77 the prior day, and better compared to its 5- and 10-period moving averages of 0.83 and 0.93, respectively.
NYSE Indicators. Volume fell -37.0% to 328.94 million shares, from 521.79 million shares million shares the prior day, +0.47x the 15-day moving average. Market breadth was positive, and up volume led down volume. Advancing stocks led decliners by +1,950 (compared to +1,048 the prior day), or 5.11:1. Up volume led down volume by 12.2:1.
BKX. Markets closed 2 hours early, so volume fell -43.2%, and the KBW bank index closed at 49.17, up from 48.42 at the prior close. Volume fell to 22.996 million shares, from 40.462 million shares the prior day, or 0.41:1x the 56.302 million share 15-day moving average. The index gapped higher to open at 48.65 and rose through the session to end at the 49.17 intraday high. Large cap banks underperformed the regional banks, as the KRX rose +2.48%.
Last week, the BKX closed up +4.28%, compared to the prior week's -2.04% decline, and its 2nd consecutive weekly increase. In November, the index is down -0.87%. The index rose +0.04% in October, and +5.06% and +3.67% in September and August, respectively.
The BKX closed below 50 for the 12th consecutive session. It closed -4.78% below its recent September 14th peak. It has closed above 40 since January 3rd. The BKX closed -15.2% below its April 23, 2010 close (the post-2008 high point), but +51.0% above the 32.56 low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, which is up +31.1% in the same period. The BKX is up +24.9% in 2012, compared to a +12.1% rise in the SPX.
Technical indicators improved, though the day's light volume reduces the significance of the day's advance. The BKX recaptured its 20-day moving volume. The index closed +0.90%, +2.30%, and +4.38% above its respective 20-, 100-, and 200-day moving averages. The index remains -1.20% below its 50-day moving average. The 20-day moving average crossed below its 50-day moving average on November 13th. The index has closed above its 100-day moving average since August 7th. The 20-day moving average declined -2 bps. The 50-day moving average was unchanged. Its 100-day moving average rose +3 bps and the 200-day moving average rose +3 bps. The 20-day closed (by -1.03 points) below the 50-day. The 50-day moving average has closed (by +2.66 points) above the 200-day moving average since February 22nd. The 100-day moving average closed (by +0.96 points) above the 200-day moving average since March 19th, and the gap widened.
The directional movement indicator switched to positive Friday. Relative strength improved to 52.44 from 46.76 the prior day, moving into the middle of a neutral range. Next resistance is 49.37; next support at 48.76.