This morning. U.S. equity markets confirmed an uptrend on November 23rd. Futures are moderately lower, and off their best morning levels.
Wednesday, markets traded modestly higher until the release of FOMC minutes at 12:30, when it announced further QE long-Treasury purchases. After momentary hesitation, equities rallied strongly to their best levels since early November, but sold off in the final two hours to end modestly mixed. The NYSE composite and SPX ended up +0.17% and +0.04%, respectively, while the Nasdaq and DJI closed off -0.28% and -0.02%, respectively. The DJ Transports underperformed, down -0.29% on the day and -3.62% below its February 3rd high. In December, the NYSE composite is up +1.46%, while the DJI, SPX, and Nasdaq are up +1.69%, +0.87%, and +0.12%, respectively. In November, the Nasdaq, NYSE composite, and SPX closed up +1.11%, +0.28%, and +0.47%, while the DJI closed down -2.10%. 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 +8.43% higher in 2012.
Fundamentals are generally improving, as SPX 20-day moving average has regained a positive slope. All major averages are above their respective 20-, 50-, 100-, and 200-day moving averages. Today, Asian equities closed mixed, with strength in Tokyo, but renewed weakness in Shanghai. In Europe, the major equity indexes are modestly lower, with better strength in Spain.
This morning, U.S. equity futures are modestly lower. U.S. Treasury yields are slightly lower, with the 10-year at 1.695%, down from 1.698% Wednesday. U.S. repo rates are at 23 bps, up from 22 bps the prior day. Spanish and Italian 10-year debt yields are at 5.38% and 4.63%, respectively, compared to 5.37% and 4.64% the prior day. The dollar is slightly stronger. U.S. options markets suggest a neutral to bullish short-term outlook. The CBOE skew rose +0.49% to 116.49, from 115.92 the prior day. Commodities prices are mixed.
In pre-market futures trading, December SPX equity futures are modestly lower and at the lower end of a 1425-1431 range. At 8:30, futures spiked on stronger than expected initial claims, but subsequently fell back. SPX equity futures are at 1426.90, down -0.30 points. The SPX opens at 1428.48, off -2.54% from September 14th's 1465.77 multi-year closing high, and +1.95, +0.86%, +1.01%, and +2.99% above its 20-, 50-, 100-, and 200-day moving averages. The SPX is up +13.6% in 2012. On November 5th, the 20-day moving average crossed below its 50-day moving average, then fell below the 100-day moving average on November 16th. The 50-day moving average crossed above its 100-day moving average on August 17th. The SPX is +32.9% above the 1074.77 October 4, 2011 intraday low. Next resistance is at 1435.79. First support is at 1423.96.
Financial stocks have recently underperformed the broader market, with the BKX down -3.74% from its September 14th high. Wednesday, the BKX rose +0.40%, expanding its monthly gain to +2.37%. The BKX closed down -2.10% in November, following losses of -5.85% in October and -1.08% in September.
Wednesday. Futures suggested a modestly higher open, and markets traded narrowly higher through early afternoon. The 12:30 release of FOMC minutes contained little in the way of unexpected news, but nonetheless propelled equities higher to strong mid-afternoon gains. However, markets began to weaken by mid-afternoon, and most major indexes ended modestly lower. Market breadth was modestly negative. NYSE volume rose 0.27% to 694.72 million shares, 1.02x the 15-day moving average. At the close, the NYSE composite and SPX managed to hold +0.17% and +0.04% gains, while the Nasdaq and DJI fell -0.28% and -0.025, respectively. SPX market segments closed mixed. Leaders were telecommunications, financials, and oil and gas, which rose at least +0.40%. Laggards were health care, consumer services, and technology, which fell at least -0.17%.
From its 1427.84 prior close, the SPX opened at 1432, but traded around 1430 through the FOMC minutes release. After some momentary volatility, the index soared to the 1438.59 intraday high, where it held until mid-afternoon, when fiscal cliff concerns and profit taking reversed the course and sent the SPX back to a late 1426.76 intraday low. A modest late rally salvaged a gain, and the SPX closed at 1428.48. Market volatility rose. From 15.57 at the prior close, the VIX moved to 16.09 by mid-morning, fell back to 15.41 on the markets' mid-afternoon strength, and then moved back to 15.95 at the close, up +2.44%.
On -6.17% lower volume, the DJ transports underperformed, down -0.29% compared to the DJI's -0.02% loss. The index closed at 5,174.74, down from 5,189.95 the prior day, but above 5,000 since November 23rd. The TRAN also opened modestly higher and traded narrowly through the FOMC release. It rallied with the broader markets to 5,224.86, but quickly retreated back to 5,210, where it traded for about an hour. Going into the session's final hour, the index reversed lower and fell to a 5,168.66 intraday low late in the session. The index closed +2.13%, +2.23%, +2.23%, and +1.25% above its respective 20-, 50-, 100-, and 200-day moving averages. The TRAN closed -3.62% 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 were largely unchanged. The CBOE put/call skew rose +0.49% to 116.49, from 115.92 the prior day. U.S. Treasury bond prices fell sharply after the FOMC announcement.
Trading desks reported a quiet day, punctuated by greater activity after 12:30. Fiscal cliff talks remain deadlocked.
Immediate SPX support is 1424, then 1416 (the 50-day moving average), 1414 (the 100-day moving average), 1401 (the 20-day moving average), and 1387 (the 200-day moving average). Resistance is 1435 and 1466 (the September 14th closing high).
Distribution day count. Since the uptrend confirmation on November 23rd, the SPX, DJI, and NYSE composite have a distribution counts of two.
In Asia, equity markets ended mixed, with strength in Tokyo and weakness in Shanghai. The NKY rose +1.68% on a +63.8% volume increase. The HSI closed down -0.26%, on a -20.5% volume decrease. In Shanghai, the SHCOMP fell -1.02% on a -8.01% volume decrease. The SHCOMP closed above 2,000 for a 7th consecutive session and compares to the December 3rd 1949.46 intraday and post-2009 low. The NKY and HSI closed above their respective 20-, 50-, 100-, and 200-day moving averages. The SHCOMP closed above its 20-day moving average, but surrendered its 50-day moving average, and also closed below its 100- and 200-day moving averages.
Commentary focused on the recent weakness of the yen, U.S. fiscal cliff, and global growth prospects.
Compared to last week's close, the NKY is up +2.26%, the HSI is up +1.15%, and the SHCOMP is down -0.02%. Last week, the NKY rose +0.86%, the HSI rose +0.73%, and the SHCOMP rose +4.12%. In December, the NKY is up +3.14%, the HSI up +1.88%, and the SHCOMP up +4.11%. In November, the NKY closed up +5.80%, while the HSI and SHCOMP closed +0.73% higher and -4.12% lower, respectively.
In Japan, the NKY closed at 9,742.73, up from 9,581.46 at Wednesday's close, and above 9,000 since November 16th. The index closed down -5.00% from its March 27th high, but +15.2% higher in 2012. The index gapped higher to open at 9,680.00, and rallied through the morning session to 9,740. The index rallied in early afternoon to the 9,767.05 intraday high, then eased through the afternoon. The NKY closed +4.51%, +7.84%, +8.72%, and +7.16% above their respective 20-, 50-, 100-, and 200-day moving averages. Most market segments closed higher. Leaders were technology, industrials, and financials, which rose at least +2.01%. Laggards were telecommunications and health care, which rose at least +0.30%, and utilities, which fell -1.13%.
In China, the Hang Seng closed at 22,445.58, down from 22,503.35 at the prior close, and up +21.8% for the year. The index has closed above 20,000 since September 12th. The index opened flat, and an attempted early rally to 22,563.14 was sold, reversing the index lower by mid-session. The index eased through late afternoon, then sold off to the 22,380.78 intraday low before rallying modestly into the close to narrow the day's losses. The HSI closed +2.80% and +3.96% above its respective 20- and 50-day moving averages. Most market segments closed lower. Leaders were consumer services, which rose +1.37%, and industrials and technology, which closed off at least -0.01%. Financials lost -0.16%. Laggards were telecommunications, basic materials, and utilities, which closed at least -0.46% lower.
In Shanghai, the SHCOMP closed at 2,061.48, down from 2,082.73 the prior day. The index closed -16.7% below its 2,474.07 March 14th high, and down -6.27% in 2012. The index opened at 2,077, and after a brief morning rally to 2,081.29, trended lower through the session to end just better than the 2,060.01 intraday low. All market segments closed at least -0.61% lower. Leaders were health care, oil and gas, and telecommunications. Financials lost -0.96%. Laggards were consumer goods, basic materials, and technology, which fell at least -1.37%.
In Europe, the majorequity indexes are modestly lower, with greater weakness in Frankfurt. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -0.29%, -0.27%, -0.27%, and -0.51%, respectively. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are above their respective 20-, 50-, 100- and 200 day moving averages. On the day, the Spanish IBEX 35 is down -0.06%, while the Italian FTSE MIB is down -0.24%.
From its prior 2,630.34 close, the Euro Stoxx50 opened at the 2,638.64 intraday high, but quickly reversed lower to the 2,621.18 intraday low. The index rallied back to flat, where it traded through mid-session, but then weakened into the afternoon to 2,623.92. Most market segments are lower. Leaders are telecommunications and oil and gas, which are at least +0.04% higher, and consumer goods, off -0.03%. Financials are down -0.38%. Laggards are industrials, utilities, and technology, which are down at least -0.36%.
For the week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +1.05%, +0.28%, +1.08%, and +0.94%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +1.01%, +0.81%, +1.36%, and +1.52%, respectively. For the month, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +2.05%, +1.09%, +2.46%, and +2.47%, respectively. In November, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +2.86%, +1.45%, +3.73%, and +2.00%, respectively. In 2012, the indexes are up +13.4%, +6.44%, +15.3%, and +28.7%, respectively.
Libor, LOIS, Currencies, Treasuries, Commodities:
- USD LIBOR is 0.16150%, unchanged from 0.16150% the prior day. USD 3-month LIBOR is 0.30800%, down from 0.30950% the prior day, and compares to the January 4th peak of 0.58250%.
- The US Libor-OIS (LOIS) spread is 16.15 bps, compared to 16.50 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 12.80 bps, unchanged from 12.80 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 is -21.720 bps, compared to -22.073 bps the prior day, and 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 5.38%, compared to 5.37% the prior day. Italian 10-year debt yields are at 4.63%, compared to 4.64% the prior day. German 10-year debt yields are 1.33%, compared to +1.34% the prior day.
- The U.S. government overnight repo rate is 23 bps, compared to 22 bps the prior day.
- U.S. Treasury yields are higher, with 2- and 10-year maturities yielding 0.238% and 1.695%, respectively, compared to 0.242% and 1.698% Wednesday. The yield curve widened, with the 2 to 10 year spread +1.457%, compared to 1.456% 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 somewhat stronger compared to the euro, British pound, and Japanese yen. The dollar trades at US$79.919, compared to a US$80.040 intraday high and US$79.815 the prior day, and worse compared to its US$80.205 50-day, US$80.645 100-day, and US$80.873 200-day averages. The euro trades at US$1.3064, compared to a US$1.3041 intraday low and US$1.3074 the prior day. The euro trades better compared to its US$1.2925 50-day and US$1.2776 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥83.52, compared to ¥83.26 the prior day. The yen trades worse than its 50-day moving average ¥80.61.
- Citigroup Economic Surprise Index rose to 48.50, from 48.00 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 better compared to its respective 46.40 5-day and 42.18 10-day moving averages. The index has improved significantly from a recent July 19th -65.30 low, but the trend was lower until December 7th's bullish reversal from the prior day's 35.50 close. After a lag, a rising CESIUSD correlates with stabilizing EPS revisions.
- Commodities prices are mostly lower, with lower energy, lower precious metals, higher aluminum and copper, and lower agriculture prices.
- The VIX rose +2.44% to end at 15.95, up from 15.57 at the prior close. The VIX is -0.69% below its 16.10 20-day moving average. The VIX set a recent closing low of 13.45 on August 17. Its 30-day high is 19.40.
- At mid-session, the Euro Stoxx 50 volatility index (V2X) is up +0.06% to 17.06, from 17.05 at the prior day's close. The V2X index trades -5.17% below its 17.99 20-day moving average, -31.1% below the 24.77 30-day high, and +4.90% above the 16.26 30-day low. On November 29th, the index fell to a 5-year closing low of 16.48.
- The Hang Seng volatility index (VHSI) closed at 15.03, down -0.73% from 15.14 the prior day. The VHSI index trades -4.75% below its 15.78 20-day moving average.
- CBOE skew rose +0.49% to 116.49, from 115.92 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 recent low was 113.23 on November 14th. 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:
- Initial jobless claims for the week ended December 8th were 343K, compared to 369K survey and 372K revised prior.
- Continuing claims for the week ended December 1st were 3198K, compared to 3210K survey and 3221K revised prior.
- November advance retail sales were %, compared to +0.5% survey and -0.3% revised prior.
- Australia - New vehicle sales were +0.0%, compared to -2.5% revised prior.
- Hong Kong - 3Q2012 industrial production fell -0.1%, compared to -2.9% prior.
- Eurozone - Agree to a unified bank supervision regime, based in Germany.
Price and Selling Exhaustion/Trend Reversal:
SPX - On a monthly basis,the SPX signaled selling exhaustion in February 2009 when it perfected sell setup at 735.09. The index recorded a bullish price flip in May 2009, when the index closed at 919.14, above the prior month 872.81 close and above the January 825.88 close 4 months prior. The index perfected the sell setup in January 2010. A bullish price flip in May 2009 initiated a sell setup, which perfected in January 2010. A sell countdown began in March 2010. In September 2010, the index initiated a follow-on sell setup, which perfected in May 2011. The sell countdown completed in January 2012. The index initiated a new countdown in August 2012, which progressed to 4 in November, when the index closed at 1416.18, compared to 1412.16 the prior month and 1379.32 four months prior. Resistance is 1429.36. On a weekly basis, the SPX signaled selling exhaustion the week ended June 8th, during which the SPX traded to an intraday low 1266.74 on June 4th, when it perfected a weekly buy setup on the June 8th. The next week's bullish price flip initiated a sell setup that perfected on August 10th at 1405.87. In the week ending December 7th, the index closed up +0.13% at 1418.07, compared to 1416.18 the prior week and 1379.85 four weeks prior. The sell setup extended to 2. The sell countdown is 8. The SPX closed -1.28% below its 1436.40 price exhaustion target. On a daily basis, the SPX perfected an upward setup on August 15th at 1405.53, but didn't show much subsequent trend until November 19th, when a bullish price flip initiated a sell setup with a close at 1386.89. The index perfected the setup on November 30th with its 1416.18 close and initiating a sell countdown. Wednesday, the SPX closed at 1428.48, compared to 1427.84 the prior day and 1413.94 four days prior. The sell setup rose to 4. The countdown rose to 6.
BKX - On a monthly basis, the BKX perfected a buy setup in December 2007 and completed its buy countdown in February 2009. recorded a completed downward countdown in February 2009. The BKX reached an unperfected buy setup in December 2011. In September 2012, it initiated a sell setup, which rose to 3 in November. In November, the BKX fell -2.10% to end at 48.56, compared to 49.60 at the end of October, but above 45.52 four months prior. On a weekly basis, the BKX recorded a completed buy countdown November 25, 2011. A bullish price flip in the week ending December 16th initiated a sell setup which perfected the week of February 10th, when the index closed at 44.53. A bearish price flip ensued the week of April 13th, and a buy setup perfected the week of June 8th, when the index closed at 40.86. A bullish price flip occurred on July 27th, and the sell setup perfected on September 21st. Subsequent trends have been weak, though the index closed on December 7 at 49.33, above 48.56 the prior week and 48.13 four weeks prior, a bullish price flip that initiated a new sell setup. On a daily basis, the BKX signaled selling exhaustion on June 4th, then rallied to 44.65 on June 19th, when it perfected a sell setup. The index completed a sell countdown on August 8th, and on August 15th, perfected a daily follow-on sell 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 a sell countdown, followed on September 19th, with an unperfected sell setup. Since then, the BKX traded without much trend December 6th's bullish price flip. The index closed Wednesday at 49.71, compared to 49.51 at the prior close and 48.79 four days prior. The sell setup rose to 5. The countdown is a deferred 13. Completion requires a close above the November 1st 50.45 close and above the prior two days' close.
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 November, the VIX fell -14.7%, after rising +0.89% in October, and falling 16.2% in September. The VIX ended November at 15.87, compared to 18.60 at the end of October and 17.47 at the end of The month's decline initiated a downward setup but without a countdown. On a weekly basis, the VIX perfected a buy setup on January 27th, and a sell setup on June 8th, followed by another perfected buy setup on August 10th. Last week, the VIX rose +0.19% to end at 15.90, compared to 15.87 the prior week, and the 16.64 close 4 weeks prior. The sell setup rose to 4, but the countdown was unchanged at 2. On a daily basis, the VIX reached an sell 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 sell setup on August 31st. Subsequently, the VIX exhibited little in the way of a distinct trend. On November 23rd, the index perfected a sell setup. A bearish price flip on December 7th initiated a new sell setup. Wednesday, the VIX rose +2.31% to 15.93, compared to 15.57 at the prior close and 16.58 at the 4 days' prior close. The countdown stemming from the November 23rd perfection rose to 4. The buy setup rose to 4. The VIX closed +13.0% above the 14.02 support level and -14.4% below the 18.64 exhaustion level.
DXY, EUR Cross - On a monthly basis, Euro Dollar cross perfected a downward setup on May 30, 2008, at 1.554. Subsequent monthly trends were weak until December 31, 2009, with a monthly decline of -4.56% that brought the index to 1.4321. The downward move continued until July 2010, when from 1.2238, the index rose +7.10%, with an unperfected downward setup in August 2010. The index failed to establish much strong upward momentum, however, peaking at the end of April 2011 at 1.4807, but then trending lower to test the July 2010 lows, when in August 2012, the index completed a buy countdown. In recent months, the trend has been higher, with an upward setup of 3. The cross ended November at 1.2986, compared to 1.2960 the prior month and 1.2667 4 months prior. The sell setup is 3 with a countdown of 1. On a weekly basis, the cross perfected a buy setup on January 6th, followed by another buy setup and completed countdown on June 1, 2012, when the cross closed at 1.2434. After several weeks without much trend, the index initiated an sell setup the week ended August 3rd, when it closed at 1.2387, and the setup perfected on September 28, with a 1.2860 close. The week of December 7th, the index ended at 1.2927, compared to 1.2986 the prior week and 1.2304 4 weeks prior. The weekly setup and countdown rose to 3. On a daily basis, the EURUSD cross perfected a sell setup on September 12th. The subsequent trend was lower, with a buy setup initiated on November 2nd and perfected on November 14th with a 1.2736 close. The index initiated an buy setup the following day and perfected the setup on November 27th at 1.2943. With Wednesday's +0.52% increase, the EURUSD cross closed at 1.3072, compared to 1.3005 the prior day and 1.2970 four days prior. The bullish price flip initiated a sell setup The sell countdown rose to 5.
USGG10YR - On a monthly basis, the USGG10YR perfected a buy countdown on February 29th, and a buy setup on May 31st. The subsequent trend has been weak. The rate ended November at 1.6156%, compared to 1.6901% the prior month and 1.6449% 4 months prior. The upward setup of 3 with a countdown of 1. On a weekly basis, the index perfected a buy setup on June 8th, but subsequent trends have been weak. The rate ended the most recent week at 1.6215%, up from 1.6156% the prior Friday and 1.5800% four weeks prior. The index initiated a sell setup. 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 1.580%. A bullish price flip on December 7th initiated a sell setup. On Wednesday, the rate ended at 1.7005%, up from 1.6541% the prior day and 1.5857% four days prior. The sell setup rose to 4. The close above 1.6659%, the close on November 20th, completed the sell countdown.
NKY - On a monthly basis, the NKY perfected a buy setup on April 30, 2009, and subsequently has traded narrowly. In November, the index rose +5.80%, following an increase of +1.50% in October. On November 30th, a bullish price flip initiated a sell setup. The index closed at 9,446.01, compared to 8,928.29 the prior month and 9,006.78 four months prior. On a weekly basis, the NKY perfected a sell setup on March 9th, and a subsequent buy setup on June 1st with a countdown of 8. For the week ended December 7th, the NKY rose +0.93% to 9,527.39, compared to 9,446.01 the prior week and 8,757.60 4 weeks prior. The upward setup rose to 7 and the countdown rose to 4. 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 sell setup on September 7th, which it perfected on September 20th. A buy setup commenced on September 21st, which was perfected on October 3rd. Subsequent trend and momentum were weak until November 15th, when a bullish price flip initiated a sell setup and countdown. The sell setup perfected on November 30th. Thursday, the index closed up +1.68% at 9,742.73, compared to 9,581.46 the prior day and 9,527.39 four days prior. The sell countdown rose to 5.
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 three months and ended November at 22,030.39, compared to 21,641.82 the prior month and 19,441.46 four months prior. The sell setup rose to 3, with a countdown of 11. 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 sell setup and countdown in the week ending September 14th. The index perfected the setup on November 9th. Subsequent trends were less pronounced, but last week, the index rose +0.39% to close at 22,191.17, compared to 22,030.39 the prior week and 21,384.38 4 weeks prior. The index initiated a follow-on sell setup, with a countdown of 2. On a daily basis, the HSI perfected a sell setup and completed an upward countdown on August 8th. After September 5th's lower close, the index perfected a buy setup. An sell setup commenced on September 9th, followed by a completed countdown on October 24th, with a trend of 22071.74, and another perfected setup on October 25th. It completed another sell countdown on December 6th, with a trend of 22,465.97. After today's -0.26% increase, the HSI closed below the December 6th trend at 22,445.58, down from 22,503.35 the prior day, but above the 22,191.17 close four days prior. The index's sell setup rose to 8.
SHCOMP - On a monthly basis, the SHCOMP perfected a buy setup on September 30, 2008, and subsequently rallied to an August 31, 2009, high, but without perfecting a subsequent sell setup. Since then, the SHCOMP resumed a downward trend perfecting another buy setup on January 31, 2012. The index ended November at 1,980.12, below trend exhaustion of 1,987.13, and compared to 2,068.88 the prior month and 2,225.43 four months prior. The current monthly buy countdown is 6. On a weekly basis, the SHCOMP last perfected a buy setup on April 8, 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 buy setup and traded below the sales exhaustion target of 2148.45. On December 7th, the index closed the week up +4.12% at 2,061.79, compared to 1,980.12 the prior week and 2,069.07 four weeks prior. The buy countdown was unchanged at 11. On a daily basis, the SHCOMP perfected a buy setup and a completed a downward countdown on June 28th, but sold through the 2,170.95 exhaustion target on July 23rd to the September 5th 2037.68 closing low. On August 20th, the index perfected a buy setup carryover from August 2nd, and the index perfected another buy setup on August 27th, with completed buy countdowns September 5th and 24th. On September 25th, the index perfected another buy setup. The subsequent trend was weak until November 8th, when the index initiated a buy setup at 2,091.25. The index perfected the setup on November 20th at 2,004.17. On December 4th, a bullish price flip initiated a sell setup. Thursday, the index closed down -1.02% at 2,061.48, down from 2,082.73 at the prior close and below the 2061.79 close 4 days prior. The bearish price flip interrupted the sell setup and initiated a buy setup. The sell countdown rose to 5.
SX5E - On a monthly basis, the Euro Stoxx50 last perfected an sell setup on May 31, 2007. It perfected a buy setup on September 30, 2008. The buy countdown completed in May 2012. A bullish price flip in August initiated a sell setup, which ended November at 4. The index closed at 2,575.25, compared to 2,503.64 the prior month and 2,479.82 four weeks prior. On a weekly basis, the index trends are more pronounced, having perfected an sell setup on March 9th, followed by a buy setup on May 25th, followed by a weekly close 2119.19, below the sales exhaustion target. The index subsequently rallied to perfect a sell setup on August 10th. The upward countdown reached 10 on September 14th. A bullish price flip the week of November 23rd initiated a sell setup that closed the following week at 2,575.25, above the price exhaustion target of 2,563.46. In the week ended December 7th, the index rose +0.03% to close at 2,601.37, compared to 2,575.25 the prior week and 2,479.82 at the 4 weeks' prior close. The sell setup rose to 3. The sell countdown was unchanged at 8. On a daily basis, the index perfected a downward setup on May 14th, when it closed at 2,201.95. The index subsequently rallied through a perfected sell setup on June 18th and completed its sell countdown on July 24th. 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. On November 29th, the index perfected an upward setup. Wednesday, the index rose +0.24% to 2630.34, compared to 2,624.03 the prior day and 2,603.41 at the prior 4 days' close. The sell countdown was unchanged at 5. The index closed -1.35% below the 2,666.32 trend.
3Q2012 Earnings. The 3rd quarter's earnings reports were mixed, beating on EPS, but falling short on sales/revenues. Of 494 reporting companies, 353 or 71.5% surprised positively on earnings, beating by an average +3.65%. Sales and revenues fell short, however, with only 202 or 41.0% surprising positively.
Valuation. The SPX trades at 13.6x estimated 2012 earnings ($103.95), 12.3x estimated 2013 earnings ($114.90), and 11.1x estimated 2014 earnings ($127.84). 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 0.87, compared to 0.84 the prior day, and mixed compared to its 5- and 10-period moving averages of 0.86 and 0.92, respectively. The index put/call ratio soared to 1.24, compared to 0.75 the prior day, and worse compared to its 5- and 10-period moving averages of 1.01 and 1.05, respectively. The equity put/call ratio closed the day at 0.72 compared to 0.89 the prior day, and better compared to its 5- and 10-period moving averages of 0.81 and 0.87, respectively.
NYSE Indicators. Volume rose +0.27% to 694.24 million shares, compared to 692.87 million shares the prior day, +1.02x the 15-day moving average. Market breadth was negative, though up volume led down volume. Advancing stocks lagged decliners by -240 (compared to +1,069 the prior day), or 0.85:1. Up volume led down volume by 1.27:1.
BKX. Volume rose +35.7%, and the KBW bank index closed at 49.71, up +0.40% from 49.51 at the prior close. Volume rose to 69.428 million shares, from 51.183 million shares the prior day, or 1.26:1x the 55.080 million share 15-day moving average. The index opened at 49.70 and rallied through early afternoon to a 50.18 intraday high. The index fell sharply through the afternoon to a late session 49.62 intraday low, then rallied modestly into the close. Large cap banks outperformed the regional banks, as the KRX fell -0.039%.
For the week, the BKX is up +0.77%. In December, the BKX is up +2.37%. In November, the index closed off -2.10%. The index rose +0.04% in October, and +5.06% and +3.67% in September and August, respectively.
The BKX has closed below 50 since November 6th. It closed -3.74% below its recent September 14th peak. It has closed above 40 since January 3rd. The BKX closed -14.2% below its April 23, 2010 close (the post-2008 high point), but +52.7% above the 32.56 low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, which is up +32.9% in the same period. The BKX is up +26.2% in 2012, compared to a +13.6% rise in the SPX.
Technical indicators are improving, as 20-day moving average has regained a positive slope, and the index recaptured its 50-day moving average. The index closed +2.78%, +0.67%, +2.61%, and +5.02% above its respective 20-, 50-, 100-, and 200-day moving averages. 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 rose +11 bps. The 50-day moving average was unchanged. Its 100-day moving average rose +4 bps and the 200-day moving average rose +3 bps. The 20-day closed (by -0.91 points) below the 50-day. The 50-day moving average has closed (by +2.02 points) above the 200-day moving average since February 22nd. The 100-day moving average closed (by +1.13 points) above the 200-day moving average since March 19th, and the gap expanded +2 bps.
The directional movement indicator is positive, and widened to 5.61 from 3.72 the prior day. Relative strength rose to 58.58, from 56.93 the prior day, above the middle of a neutral range. Next resistance is 50.05; next support at 49.49.