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U.S. Futures Follow Asia, Europe Lower

This morning. The U.S. equity market uptrend, which resumed on April 29th, remains under pressure. Monday, major U.S. equity indexes extended fractionally mixed. Volume fell. Major indexes closed above their respective 5- and 10-day moving averages. The SPX, DJI, and NYSE composite closed below their respective 20-day moving averages. Short-term SPX relative strength indicators (RSI) are in a neutral range.

Today, in Asia, equity markets closed lower, on disappointment that in its policy statement, the BOJ kept monetary policy unchanged. In Europe, equity markets are selling off , with greater weakness in Italy and Spain. Sovereign long-term interest rates are moving higher. Commodities are lower. Commentary focuses on currency and interest rate volatility.

U.S. Treasury 10-year yields are 2.2460%, compared to 2.2097% at the prior close. U.S. repo rates are 9 bps, up from 3 bps the prior day. Spanish and Italian 10-year debt yields are 4.74% and 4.44%, respectively, compared to 4.60 and 4.29%, the prior day. The U.S. dollar is mixed. U.S. options markets are unchanged at bearish to neutral. CBOE skew was unchanged, in a neutral range.

The SPX closed at 1642.81, down -0.03% from 1643.38 the prior day. The index is up +3.83% since April 26th, and +52.9% above the 1074.77 October 4, 2011, intraday low. Last week, the SPX rose +0.78%, compared to a loss of -1.14% the prior week. In June, the SPX is up +0.74%. In May, the index closed up +2.08%. In 2013, the SPX is up +15.2%. In 2012, the SPX closed up +16.0%. Next resistance is at 1647.91. First support is at 1638.48.

Monday, the BKX rose +0.57%, outperforming the SPX. Last week, the BKX fell -0.03%, compared to a gain of +1.18% the prior week. In June, the BKX is up +0.54%, compared to a gain of 8.30% the prior month. This year, the BKX is up +20.8%, outperforming the SPX. Last year, financial stocks outperformed the broader market, as the BKX closed up +30.2%, compared to the +13.4% SPX gain.

In pre-market futures trading, June SPX equity futures are lower, but near the middle of a 1624-1630 range. After a fair value adjustment of -0.09 points, SPX equity futures are at 1627.50, down -14.41 points. The SPX opens -0.24% below and +2.14% above its respective 20- and 50-day moving averages, and +4.90%, and +9.78% above its respective 100- and 200-day moving averages.

Monday. On lower and below average volume, U.S. equity markets closed modestly mixed. Notably, U.S. 10-year yields rose sharply to 14 month highs. At day's end, the Nasdaq and NYSE composite rose +0.13% and +0.03%, respectively, while the SPX and DJI lost -0.03% and -0.06%, respectively. Market breadth was negative, with gainers 0.79:1 losing stocks. Most SPX market segments closed lower. Leaders were telecommunications, health care, and financials, which rose at least +0.12%. Laggards were utilities, industrials, and oil and gas, which fell at least -0.17%.

NYSE volume fell -18.4% to 595.34 million shares, from 729.44 million shares the prior day, 0.79x the 20-day moving average volume.

From its 1643.38 prior day close, the SPX opened higher and set an early 1648.69 intraday high, then reversed lower to a mid-morning 1639.26 intraday low. The index reversed higher by mid-morning, reversed lower in early afternoon, and traded narrowly lower through the close. The index closed fractionally lower at 1642.81. Market volatility rose. From its prior 16.63 close, the VIX opened at 15.15, and traded to resistance at 15.60 through the session and closed at 15.44, up +1.98%. The all-time closing low was 11.26, set June 30, 1993.

On -25.3% lower volume, the DJ Transports fell -0.21%, compared to the DJI's -0.06% loss. The index traded briefly higher and set an early 6,370.24 intraday high, but immediately reversed lower to a mid-morning 6,309.70 intraday low. The index improved through mid-session to 6,355, but traded narrowly lower to the close. The TRAN closed at 6,330.48, -3.34% off its 6,549.16 May 17th record close. The index closed -0.72% below and +1.67% above its respective 20- and 50-day moving averages, and +3.69%, and +12.7% above its respective 100- and 200-day moving averages.

Technical factors were little changed. SPX relative strength (RSI) eased to 54.23, from 54.44 the prior day. The CBOE put/call skew was unchanged at 116.20. U.S. Treasury bond prices fell, as the 10-year yield rose +3.79 bps to end at 2.2097%, from 2.1718% the prior day.

Last week, the SPX, DJI, Nasdaq, and NYSE composite closed up +0.78%, +0.88%, +0.39%, and +0.57%, respectively, compared to losses of -1.14%, -1.23%, -0.09%, and -1.48%, respectively, the prior week. In June, the SPX, DJI, Nasdaq, and NYSE composite are up +0.78%, +0.88%, +0.39%, and +0.57%, respectively. In May, the SPX, DJI, Nasdaq, and NYSE composite closed up +2.08%, +1.86%, +3.82%, and +0.29%, respectively.

In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +15.2%, +16.3%, +15.0%, +10.8%, respectively. All closed at least +5.91% higher in 2012. Immediate SPX support is 1638 (10-day moving average). Resistance is 1646 (20-day moving average).

Distribution day count. The current uptrend began on April 29th. The SPX, DJI, Nasdaq, and NYSE composite have distribution counts of two.

In Asia, equity markets closed lower. The Nikkei (NYSEARCA:NKY) closed down -1.45%. The Hang Seng (NYSE:HIS) fell -1.20%. The Shanghai composite (SHCOMP) remained closed for the Dragon boat festival. Volumes are unavailable.

The NKY's relative strength index fell to 43.31, from 45.61 the prior day, but down from an overbought 82.61 on May 22nd.

Commentary focused on The BOJ policy statement.

This week, the NKY is up +3.42%, compared to a -3.32% loss the prior week. The HSI is down -1.02%, compared to a loss of -4.63% the prior week. In June, the NKY is down -3.32%. The HSI is down -3.32%. The SHCOMP is down -3.90%. The NKY and HSI closed -6.51% and -3.65% lower in May, respectively, their first monthly declines since October. The SHCOMP rose +5.63%. In 2013, the NKY is up +28.1%. The HSI is down -5.75%. The SHCOMP is down -2.57%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

In Japan, the Nikkei 224 (NKY) closed at 13,317.62, from 13,514.20 the prior day. The index traded narrowly through mid-session, with a 13,584.31 mid-morning high, but fell back at the start of the afternoon session, falling to a 13,296.31 intraday low. The index ended -14.8% below its recent high. The index closed -6.46% and -3.04% below its respective 20- and 50-day moving averages, but +5.47% and +21.8% above its respective 100- and 200-day moving averages. All market segments closed at least -0.62%. Leaders were utilities, health care, and consumer goods. Laggards were consumer services, financials, and oil and gas, which lost at least -2.48%.

In China, the Hang Seng (HSI) closed at 21,354.66, compared to 21,615.09 at the prior close. The index closed -10.4% below its January 30th yearly high, but +17.4% above its 18,185.59 June 4, 2012 low. The index opened narrowly lower, but fell on sovereign bond weakness to 21,400 by mid-morning, where it traded narrowly until the final hour, when the index traded to a 21,307.99 intraday low. The index ended -5.54% and -4.79% below its respective 20- and 50-day moving averages. All market segments lost were no better than unchanged. Leaders were telecommunications, technology, and industrials. Financials lost -1.34%. Laggards were consumer services, consumer goods, and basic materials, which lost at least -1.85%.

In Shanghai, the SHCOMP closed Friday at 2,210.90, compared to 2,242.11 at the prior close. The index traded narrowly higher through mid-morning, but reversed lower by late morning and trended lower to a late 2,205.07 intraday low. The index closed -9.18% below its 2,434.48 February 5th high, but up +12.8% from its December 3rd 1,959.77 low. The SHCOMP closed -2.98% and -1.69% below its respective 20- and 50-day moving averages. All market segments closed at least -1.04% lower. Leaders were financials, oil and gas, and utilities. Laggards were basic materials, consumer goods, and technology, which fell at least -1.70%.

In Europe, the major equity indexes are selling off, which greater weakness in Italy and Spain. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.16%, -1.67%, -1.99%, and -1.74%, respectively. The Spanish IBEX 35 is down -2.60%. The Italian FTSE MIB is down -2.56%. From its 2,719.40 prior day's close, the Euro Stoxx50 opened above 2,700 and trended lower to a mid-session 2,656.00 intraday low. The index currently trades at 2,661.67. All market segments are at least -1.31% lower. Leaders are technology, health care, and industrials. Laggards are consumer services, consumer goods, and financials, which are at least -1.91% lower.

This week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -2.32%, -1.96%, -2.23%, and -1.11%, respectively. Last week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -1.64%, -2.60%, -1.92%, and -1.13%, respectively, compared to the prior week, when the Euro Stoxx50, CAC 40, and DAX closed up +0.41%, +0.78%, and +0.48%, respectively. The FTSE 100 closed down -0.10%. In June, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are down -3.93%, -4.51%, -4.11%, and -2.23%, respectively. In May, the Euro Stoxx50, FTSE 100, CAC 40 and DAX closed up +2.13%, +2.38%, +2.38%, and +5.50%, respectively. In 2013, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.94%, +6.58%, +3.99%, and +7.23%, respectively. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

Libor, LOIS, Currencies, Treasuries, Commodities:

· USD LIBOR is 0.13140%, up from 0.13290% the prior day. USD 3-month LIBOR is 0.27225%, down from 0.27415% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

· The US Libor-OIS (LOIS) spread is 16.675 bps, compared to 16.915 bps the prior day, and compares to the January 6th high of 50.05 bps. Euribor-OIS is 11.45 bps, unchanged from 11.10 bps the prior day, and down from the December 27, 2011, high of 98.80 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.

· The 3-month Euro basis swap is -12.871 bps, compared to -12.470 bps the prior day, and up from a trough of -147.00 bps on December 14, 2011 and within a normal -10 bps and -40 bps range.

· Spanish 10-year debt yields surged to 4.70%, from 4.60% the prior day and up from the 4.039% May 3rd low. Italian 10-year debt yields are at 4.44%, compared to 4.29% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.65%, compared to 1.60% the prior day. Japanese 10-year debt yields are 0.89%, compared to 0.84% the prior day.

· The U.S. government overnight repo rate is 9 bps, up from 3 bps the prior day. The January 2, 2013, 45 bps rate was the highest since late 2008. The 0.00 bps low was on January 31, 2009.

· U.S. Treasury yields are higher, with 2- and 10-year maturities yielding 0.334% and 2.286%, respectively, compared to 0.310% and 2.210% Monday. The yield curve widened with the 2- to 10-year spread at +1.952%, compared to 1.900% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.3875% on July 24, 2012, to a high of +1.95.2% on June 11, 2013.

· The U.S. dollar is mixed, but weaker compared to the euro and Japanese yen, but stronger compared to the British pound. The dollar trades at US$81.418, compared to a US$81.349 intraday low and US$81.646 the prior day, and worse compared to its $82.769 50-day, US$82.089 100-day, and US$81.037 200-day averages. The euro trades at US$1.3289, compared to a US$1.3248 intraday high and US$1.3257 the prior day. The euro trades mixed compared to its US$1.3033 50-day and US$1.3104 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥96.95, compared to 98.76 the prior day. The yen trades better than its 50-day moving average ¥99.51, and better than its May 17th 103.21 closing low.

· Citigroup Economic Surprise Index worsened to -32.90, from -32.30 the prior day. The index is worse compared to its respective -29.00 and -23.09 5-day and 10-day moving averages. From its July 19th -65.30 low, the index improved rapidly and turned positive last September 5th, but the index signaled exhaustion on December 20th, and from 55.76 moved lower to -30.80 on January 30th. The index turned positive on February 25th and moved to a March 25th high of 30.20, but turned negative again on April 17th. After a lag, the CESIUSD correlates with EPS revisions.

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

Volatility, Skew:

· The VIX closed at 15.44, up +1.98% from 15.14 at the prior close. The VIX is +6.73% above its 14.47 20-day moving average. Its 30-day high is 18.51. Its 30-day low is 12.26. The index's all-time closing low is 11.26 on June 30, 1993. The long-term average is 20.28.

· At mid-session, the Euro Stoxx 50 volatility index (V2X) is 21.78, up +11.2% from 19.42 at the prior day's close. The V2X index trades +16.6% above its 18.58 20-day moving average, -2.73% below the 22.39 30-day high, and +38.2% above the 15.76 30-day low.

· The Hang Seng volatility index (VHSI) closed at 19.04, up +1.55% from 18.75 the prior day. The VHSI index trades +12.1% above its 16.98 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

· CBOE skew closed at 116.20, unchanged from 116.20 at the prior day's close, and within a neutral (115-120) range. Spikes in excess of 130 (as on February 15th and 18th and previously on September 21, and March 12, 15, and 16) correlate well with short-term market tops. The recent high closes were 130.46 on February 15th and 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 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:

· NFIB small business optimism improved to 94.4 from 92.1 survey and prior.

· At 10:00, April wholesale inventories, with +0.2% survey and +0.4% prior.

· April MoM wholesale sales, with -0.1% survey and -1.3% revised prior.

Overseas Economic Reporting and News:

· Australia - May NAB business conditions, with -4 actual and -6 prior.

· Japan - Bank of Japan left monetary policy unchanged.

· United Kingdom - April MoM industrial production rose +0.1%, with 0.0% survey and +0.7% prior. MoM manufacturing production fell -0.5%, compared to -0.2% surey and +1.1% prior.

Company Ratings/News:

· None

Price and Selling Exhaustion/Trend Reversal (based on TD sequential):

SPX - On a monthly basis, the SPX initiated a buy setup in June 2008, with the month's 1404.05 high setting the resistance level. The setup perfected at 735.09 in February 2009. A sell setup ensued in May 2009. In September 2010, a follow-on setup began. The May 2009 setup perfected in January 2010. Its countdown completed in January 2012, closing at 1312.41 and setting a 1429.36 risk level. The follow-on setup perfected in May 2011. In March 2012, the index closed at 1408.47, above resistance, suggesting further upside. In September 2012, the index closed at 1440.67, above the 1429.36 risk level and suggesting the likelihood of further upside. In October and November, the index closed below the risk level, but above support. Also, the follow-on countdown rose to 8 in September 2012, but hasn't subsequently progressed. In August 2012, the index initiated a new sell setup, which perfected in April 2013. In May, the index closed at 1630.74, from 1597.57 the prior month and 1498.11 four months prior. The sell countdown stemming with the May 2011 perfection completed, setting a risk level of 1793.08, based on May's 105.90 range and 1687.18 high. The index closed -9.00% below the risk level.

On a weekly basis, the SPX signaled selling exhaustion the week ended June 8th, during which the SPX traded to an intraweek 1266.74 low on June 4th, and then perfected a weekly buy setup with its 1325.66 close. The next week's bullish price flip initiated a sell setup that perfected on August 10th at 1405.87. On January 4th, a bullish price flip initiated a sell setup, which perfected the week ending March 1. On January 31st, the sell countdown associated with August 10th perfection completed and generated a 1525.36 risk level. In the week ending June 7th, the index closed up +0.78% at 1643.38, from 1630.74 the prior week and 1633.70 close four weeks prior. The April 26th sell setup progressed to 7. The 9 sell countdown associated with the March 8th perfection is unchanged since May 24th. The index closed +7.74% above the 1525.36 risk level.

On a daily basis, the SPX perfected a sell setup on August 15th at 1405.53, and completed its sell countdown on September 13th, with its 1459.99 close. The index showed weak subsequent trend until November 19th, when a bullish price flip initiated a sell setup with support at 1359.88, the open and intraday low. The index perfected the setup on November 30th with its 1416.18 close, initiating a sell countdown, which completed on January 7th. On January 9th, a bullish price flip initiated another sell setup, which perfected on January 22nd. On March 6th, the sell countdown associated with the January 7th setup perfected and set a 1561.74 risk level, based on the March 6th 18.27 range and 1543.47 intraday high. On March 13th, the sell setup perfected. On April 29th, the sell countdown associated with the March 13th perfection completed and set a 1608.53 risk level, which superseded the prior risk level. On May 14th, the May 2nd sell setup perfected and initiated a sell countdown. On Monday, the SPX fell -0.04% to close at 1642.81, from 1643.38 the prior day and 1631.38 4 days prior. The June 7th sell setup progressed to 2. The sell countdown associated with the May 14th progressed to 8. The index closed +2.13% above the 1608.53 risk level, which is based on the SPX's April 11th 11.18 point trading range and 1597.35 intraday high.

BKX - On a monthly basis, the BKX perfected a buy setup in December 2007, but has yet to complete its associated buy countdown, which is has been a deferred 13 since April 2011. That same month, the BKX initiated a buy setup, but the setup has remained unperfected since December 2011, when the index closed at 39.38. The buy countdown would complete with a close below 28.72, the February 2009 close with an 8 buy countdown. In September 2012, the index initiated a sell setup, which perfected in May 2013, when the index closed at 61.60, +8.30% from 56.88 at April-end and 53.83 four months prior. The perfection initiated a sell countdown.

On a weekly basis, the BKX recorded a completed buy countdown December 2, 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 were weak until December 7, when the index initiated a new sell setup, which perfected on February 1st. On February 22nd, the sell countdown associated with the September 21st perfection completed and set a 56.93 risk level. On June 7th, the BKX closed at 61.58, down -0.03% from 61.60 the prior week and 58.53 four weeks prior. The April 26th sell setup progressed to 7. The 10 sell countdown associated with the February 1st perfection was unchanged. The index closed +8.17% above the 56.93 risk level, which is based on the February 22nd week's 1.08 point range and 55.85 high.

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. A sell countdown began on September 28th. On December 17th, the 50.62 close above the November 1st 50.45 close and above the prior two days' close completed a sell countdown and initiated a sell setup, which perfected on February 13th. On March 14th, the sell setup closed above 57.22 and perfected. On March 19th, a bearish price flip initiated a buy setup with a 56.84 close. On April 1st, the buy setup perfected. On May 3rd, a bullish price flip initiated a sell setup. On May 15th, the sell setup perfected. Monday, the index closed at 61.93, up +0.57% from 61.58 the prior day and 61.00 four days prior. The bullish price flip canceled the 5 June 3rd buy setup and initiated a sell setup. The May 15th sell countdown progressed to 10.

VIX - On a monthly basis, the VIX perfected a sell setup in October 2007. The associated sell countdown progressed to a deferred 13 in June 2012, but is subsequently unchanged. In January, the VIX fell -23.9%, initiating a buy countdown. The VIX ended May at 16.3013.52, compared to 12.70 at the end of March and 18.02 at the end of December. The bullish index flip canceled a 4 buy setup and initiated a sell setup.

On a weekly basis, the VIX perfected a buy setup on January 27, 2012, and a sell setup on June 8th, followed by another perfected buy setup on August 10th. On April 12th, the VIX completed the buy countdown associated with the August 10th, setup, which also established a 9.17 risk level. The week ending June 7th, the VIX fell -7.12% to 15.14, from 16.30 the prior week, and 12.59 weeks prior. The May 24th sell setup progressed to 3.

On a daily basis, on January 18th, a bearish flip initiated a new buy setup and a buy countdown stemming from the January 16th setup perfection. On March 1st, a bearish flip initiated a buy setup. On March 11th, the buy countdown associated with the January 16th perfection completed, and set a 10.41 risk level. On March 15th, the buy setup associated with March 1st flip perfected. On May 31st, the May 20th sell setup perfected and initiated a sell countdown. Monday, the VIX rose +1.98% to 15.44, from 15.14 at the prior close and 16.27 at the 4 days' prior close. The June 7th sell setup progressed to 2. The May 31st 2 sell countdown was unchanged. The VIX closed +48.3% above the risk level.

EUR, USD Cross - On a monthly basis, Euro Dollar cross perfected a buy setup on May 30, 2008, at 1.554. Subsequent monthly trends were weak until December 31, 2009, when a monthly decline of -4.56% 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 buy 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 retest the July 2010 lows. In March, a bearish price initiated a buy setup. The cross ended May at 1.2999, down -1.28% from 1.3168 the prior month and 1.3057 4 months prior. The buy setup progressed to 3. The 9 buy countdown progressed is unchanged since March.

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. The cross completed a buy countdown on July 27th, and set a 1.1964 risk level. 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. On January 18th, the index completed a sell setup at 1.336. The week of May 31st, the index rose +0.52% to end at 1.2999, from 1.2932 the prior week and 1.3114 4 weeks prior. The buy setup progressed to 4. The 11 sell countdown associated with the September 28th perfection was unchanged. The cross closed +9.24% above the 1.1964 risk level.

On a daily basis, the EURUSD cross perfected a sell setup on September 12th. The subsequent trend was lower until a buy setup initiated on November 2nd and perfected on November 14th with a 1.2736 close. The index initiated a buy setup the following day and perfected the setup on November 27th at 1.2943. On January 11th, the sell countdown stemming from the November 27th completed, setting a 1.3393 risk level. On January 24th, a bullish price flip initiated a sell setup which rose to an unperfected 9 on February 5th. On February 14th, a bearish price flip initiated a sell setup, which subsequently perfected on February 26th. On April 4th, a bullish price flip initiated a sell setup, which perfected on April 12th. On June 7th, the sell countdown associated with the April 12th perfection perfected. With Monday's +0.30% higher close, the EURUSD cross ended at 1.3257, from 1.3218 the prior day and 1.3081 four days prior. The 9 May 29th sell setup is unperfected. The cross closed -1.02% below the risk level.

USGG10YR - On a monthly basis, the USGG10YR began a downward trend from 5.0506% in May 2006, perfecting a sell setup in April 2008 (at 3.7295%) and completing the associated buy countdown in June 2011 (at 3.1600%), when it produced a 1.1121% risk factor. A subsequent 9 buy setup perfected in May 2012, with the rate at 1.5578%. In September 2012, a bullish price flip initiated a sell setup. The rate ended May at 2.1282%, compared to 1.6717% the prior month and 1.7382% 4 months prior. The bullish rate flip canceled a 1 buy setup and initiated a sell setup.

On a weekly basis, the index perfected a buy setup on June 8th, but subsequent trends were weak until a December 7th bullish rate flip initiated a sell setup, which perfected on February 1st, when the rate ended at 2.0149%. The rate has subsequently shown little trend, and the associated sell setup is unchanged at 1. The rate ended the most recent week at 2.1718%, from 2.1282% the prior Friday and 1.8973% four weeks prior. The May 3rd sell setup progressed to 6. The sell countdown associated with the February 1st perfection progressed to 6.

On a daily basis, 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 December 19th, the rate perfected its sell setup and initiated a sell countdown. On February 20th, a bearish rate flip initiated a buy setup, which perfected on March 4th. On April 8th, the buy setup perfected. On April 15th, the buy countdown associated with the March 4th perfection completed and set a 1.6098% risk level, based on the April 5th 10.61 bps range between the intraday high and low rate and 1.7159% close. On May 15th, the May 3rd buy setup perfected. On Monday, the rate ended at 2.2097%, from 2.1718% the prior day and 2.1462% four days prior. The June 7th sell setup progressed to 2. The May 20th sell countdown progressed to 7.

NKY - On a monthly basis, the NKY perfected a buy setup on April 30, 2009 (at 8,828.26), but subsequently traded narrowly until November, 2012, when the index rose +5.80%, following an increase of +1.50% in October, and initiated a sell setup. The index closed May at 13,774.54, down -0.62% from 13,860.86 the prior month and 11,138.66 four months prior, ending 7 consecutive monthly gains. The sell setup rose to 7.

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. The index initiated a sell setup on October 26th, and on December 21st, the sell setup perfected. Notably, on December 28th, the index closed at 10,395.18, +2.01% above 10,190.35 resistance (its April 4th weekly high), suggesting further upside. The sell countdown associated with the December 21st perfection completed April 5th and set a 14.645.46 risk level, based on the 1,419.84 point range on that day and 13,225.62 intraday high. For the week ending June 7th, the index closed down -6.51% at 12,877.53, from 13,774.54 the prior week and 14,607.54 four weeks' prior. The index closed -12.1% below the risk level.

On a daily basis, the November 15th bullish price flip initiated a sell setup, which perfected on November 30th. The associated sell countdown completed on December 28th. On January 4th, the index opened after the New Year's holiday, and closed above resistance, suggesting further upside. Though the index subsequently moved higher, it was without strong trend until a March 4th bullish price flip initiated a sell setup. On March 15th, the sell setup perfected with its close above the March 12th 12,461.97 intraday high. The associated sell countdown completed on April 26th. On March 27th, a bearish price flip initiated a buy setup, which perfected on April 15th. On May 7th, a bullish price flip initiated a sell setup. On May 17th, the sell setup perfected; also, the sell countdown associated with the April 26th perfection completed. The completion set a 15,412.34 risk level, which is based on the May 16th 15,155.72 intraday high and 276.21 point range. On June 4th, the May 23rd buy setup perfected and initiated a buy countdown. On Tuesday, the index fell -1.45% to 13,317.62, from 13,514.20 the prior day and 13,014.87 four days prior. The bullish price flip initiated a sell setup. The 4 June 4th buy countdown was unchanged. The index closed -13.6% below the risk level.

HSI - On a monthly basis, the HSI perfected a buy countdown on March 31, 2009, and two subsequent perfected upward setups on December 31, 2009 and May 31, 2011. In February, the index closed at 23,020.27, completing the sell countdown stemming from the May 2011 perfection. The completed countdown set a 27,194.16 risk level. A bullish price flip in September 2012 initiated a sell setup. The index ended May at 22,392.16, down -1.52% from 22,737.01 the prior month and 22,729.53 four months prior. The bearish price flip canceled an 8 sell setup and initiated a buy setup. The index closed -17.7% below the risk level.

On a weekly basis, the HSI perfected a sell setup on March 2, 2012, and the associated sell countdown completed on September 21, 2012, and set a 22,357.00 risk level, based on the September 14, 2012, when it set a 22,357.00 risk level. The index perfected two sell setups on November 9th and February 1st. A buy setup initiated the following week and perfected on April 5th, initiating a sell countdown. On June 7th, the index closed at 21,575.26, down -3.65% from 22,392.16 the prior week and 23,321.22 four weeks prior. The May 31st buy setup progressed to 2. The April 5th buy countdown progressed to 4. The index closed -3.50% below the risk level.

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. A sell setup commenced on September 9th, followed by a completed countdown on October 24th, with a trend of 22,071.74, and another perfected setup on October 25th. It completed another sell countdown on December 6th. The index perfected another sell setup on December 14th, and completed the associated countdown on January 23rd, when it set a 23,881.32 risk level. On April 19th, a bullish price flip initiated a sell setup, which perfected on May 2nd and initiated a sell countdown. On June 4th, the May 23rd buy setup perfected and initiated a buy countdown. On Tuesday, the HSI fell -1.20% to 21,354.66, from 21,615.09 the prior day and 22,069.24 four days prior. The 5 June 4th buy countdown was unchanged. The index closed -10.6% below the risk level.

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. In May 2011, the SHCOMP assumed a downward trend and perfected a buy setup on January 31, 2012. In December, a bullish price flip initiated a sell setup. In May, the index closed at 2,300.60, up +5.63% from 2,177.91 the prior month and 2,385.42 four months prior. The April 30th buy setup progressed to 2. The 7 buy countdown associated with the January 2012 perfection was unchanged.

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. In subsequent weeks, it traded below the sales exhaustion target of 2148.45 to a 1980.12 close on November 30th, when the buy countdown reached 11. On December 14th, a bullish price flip initiated a sell setup at 2,059.47. That setup perfected on February 8th, with a 2,432.40 close, up +18.1%. On June 7th, the index closed the week down -3.90% at 2,210.90, from 2,300.60 the prior week and 2,246.83 four weeks prior. The bearish price flip initiated a buy setup. The 5 sell countdown associated with the February 8th perfection was unchanged.

On a daily basis, On December 4th, a bullish price flip initiated a sell setup. On January 14th, the sell setup that began on December 25th perfected; also, the bullish price flip initiated a follow-on sell setup. On March 26th, a bearish price flip initiated a buy setup, which perfected on April 9th and canceled a deferred sell countdown. Monday, the index fell -1.33% to 2,210.90, from 2,242.11 at the prior close and 2,299.25 4 days prior. The June 3rd buy setup progressed to 5. The April 9th buy countdown completed.

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. On May 31st, the index closed at 2,769.64, compared to 2,712.00 the prior month and 2,763.68 four months prior. The 9 sell setup perfected and initiated a sell countdown.

On a weekly basis, the index trends are more pronounced, having perfected an sell setup on March 16th (at 2,511.42), followed by a buy setup initiation on March 30th, which perfected on May 25th, when the index closed at 2,161.87, down -13.9%. On June 15th, a bullish price flip initiated a sell setup with a 2,181.23 close. The index subsequently rallied to perfect a sell setup on August 10th, when it closed at 2,362.69, up +9.29%. A bullish price flip the week of November 23rd (2,557.03 close) initiated a sell setup that perfected on January 18th at 2,709.59, up +5.97%. The sell countdown associated with the August 10th perfection also completed on January 18th, when the index closed at 2,709.59, up +24.2% over the June 15th bullish price flip. The completion set a 2,785.45 risk level. Since January 18th, the subsequent trend is lower. In the week ended June 7th, the index fell -1.64% to 2,724.08, from 2,769.64 the prior week and 2,785.24 at the 4 weeks' prior close. The bearish price flip canceled the 6 April 26th sell setup and initiated a buy setup. The 7 sell countdown stemming from the January 18th perfection was unchanged. The index closed -2.03% below the risk level.

On a daily basis, on January 3rd, the index completed the associated countdown (with a 2,701.22 close) and set a 2,786.57 risk level, based on the prior day's 2,711.25 high and 51.46 intraday range. On March 14th, the March 4th sell setup perfected. On March 18th, a bearish price flip initiated a buy setup, which perfected on March 28th, and initiated a buy countdown. On April 23rd, a bullish price flip initiated a sell countdown, which perfected on May 3rd. The perfection initiated a sell countdown. Monday, the index fell -0.17%, from 2,719.40 the prior day and 2,724.08 the prior day and 2,755.70 at the prior 4 days' close. The May 31st buy setup progressed to 7. The 11 sell countdown associated with the May 3rd perfection is unchanged since May 28th. The index closed -2.41% below the 2,786.57 risk level.

1Q2013 Earnings. Of 493 reporting companies, 347 or 70.4% surprised positively on earnings, with a +4.94% surprise average. Of reporting companies, 233 or 47.4% reported sales or revenues in excess of estimates. The average sales/revenue surprise is -0.67%.

Valuation. The SPX trades at 15.9x 2012 earnings ($103.41), 14.9x estimated 2013 earnings ($110.05), and 13.4x estimated 2014 earnings ($122.89). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013 and 2014 earnings to grow +6.34% and +11.6%, respectively.

Options. Options markets are unchanged at neutral to bearish, from neutral to bearish the prior day. Composite options are neutral, index options are neutral, and equity options markets are bearish. The composite put/call ratio is 1.06, compared to 1.12 the prior day, and worse compared to its 5- and 10-period moving averages of 1.14 and 1.05, respectively. The index put/call ratio is 1.17, compared to 1.22 the prior day, and better compared to its 5- and 10-period moving averages of 1.30 and 1.18, respectively. The equity put/call ratio closed the day at 1.04, compared to 1.08 the prior day, and worse compared to its 5- and 10-period moving averages of 1.07 and 1.00, respectively.

NYSE Indicators. Volume fell -18.4% to 595.34 million shares, from 729.44 million shares the prior day, 0.79x the 752.12 million share 20-day moving average. Market breadth was negative , and up volume lagged down volume. Advancing stocks lagged decliners by -357 (compared to +1,165 the prior day), or 0.79:1. Up volume was 0.89:1 down volume.

BKX. On lower volume, the KBW bank index rose +0.57% to 61.93, from 61.58 at the prior day's close. The index gapped higher and quickly tested resistance at 62.00, but then fell back to an early 61.58 intraday low. The index rallied back to 62.08 by mid-morning, then traded narrowly through the close. Volume fell -23.0% to 42.978 million shares, from 55.828 million shares the prior day, or 0.72:1x the 61.337 million share 15-day moving average.

Large cap banks underperformed the regional banks' performance, as the KRX rose +0.94%.

This week, the BKX is up +0.57%. Last week, the BKX closed down -0.03%, compared to a gain of +1.18% the prior week. In June, the index is up +0.4%. In May, the BKX closed up +8.30%. For the year, the BKX is up +20.1%, better than the SPX's +15.2% rise. In 2012, the index rose +30.2%, compared to a +13.4% rise in the SPX.

Since May 15th, the BKX closed below 60 only on June 5th. It crossed above 50 on December 17th. The BKX closed +6.87% above its 57.95 April 23, 2010 close (the prior post-2008 high point), and +90.2% above the 32.56 intraday low on October 4, 2011. Large-cap bank stocks have outperformed the broader market's rebound, with the SPX up +52.9% in the same period.

The BKX index closed -47.3% below its March 30, 2007, record 121.16 high.

Technical indicators improved. The index closed above its 5-, 10-, and 20-day moving averages. The index closed +1.50% and +6.49% above its respective 20- and 50-day moving averages. The index closed +9.31% and +16.4% above its respective 100- and 200-day moving averages. The index has closed above its 100-day moving average since last August 7th. Yesterday, the 20-day moving average rose +17 bps. The 50-day moving average rose +11 bps. Its 100-day moving average rose +8 bps, and the 200-day moving average rose +7 bps. The 20-day closed (by +2.86 points) above the 50-day, and the gap widened +6 bps. The 50-day moving average closed (by +4.93 points) above the 200-day moving average, and the gap widened +4 bps. The 100-day moving average closed (by +3.42 points) above the 200-day moving average since March 19th, and the gap rose 1 bp.

The directional movement indicator improved to 11.105, from +4.175 the prior day. Relative strength rose to 62.22, from 60.44 the prior day, both in a neutral 30-70 range. Next resistance is 62.17; next support is at 61.59.