U.S. Futures Advance; Europe Rallies, Asia Doesn't

This morning. Earning season accelerates this week and follows the U.S. equity market's first monthly decline of the year. The focus is Friday's June U.S. employment report, released at 8:30. Today's equity futures are moderately higher. The market trend remains "in correction".

In Friday's trade, major U.S. equity indexes opened higher, tested breakeven after the mixed June employment report, then rallied into the afternoon session to end near intraday highs. The Nasdaq and SPX ended with the day's best gains. Financials were the best performing market segment. DJ Transports outperformed DJ Industrials. All major indexes closed above their respective 5- and 10-day moving averages. The SPX recaptured its 50-day moving average, after closing below that level for 10 consecutive sessions. The NYSE composite closed below its 50-day moving average for a 12th consecutive day. Short-term SPX relative strength indicators (RSI) strengthened, but remain within a neutral range.

Today, in Asia, equity markets closed lower, with greater weakness in Shanghai. Tuesday's Nikkei 225 (NKU3) equity futures are up +1.277%. Chinese equity futures are mixed. In Europe, equities are rallying with strength, with greater strength in Frankfurt. There are no scheduled U.S. economic reports. Sovereign long-term interest rates are lower. Commodities are mostly higher.

Commentary focuses on the 2Q2013 earnings prospects, the June U.S. employment report, Egypt, and murky Chinese economic prospects.

U.S. Treasury 10-year yields are 2.7193%, compared to 2.7391% at the prior close. U.S. repo rates are 10 bps, up from 7 bps the prior day. Spanish and Italian 10-year debt yields are 4.64% and 4.39%, respectively, compared to 4.66% and 4.42%, the prior day. The U.S. dollar is mixed. U.S. options markets are neutral, improved from bearish to neutral the prior day. CBOE skew rose closed back within a neutral range.

In pre-market futures trading, September SPX equity futures are higher, but near the bottom of a 1635-1638 range. After a fair value adjustment of -1.71 points, SPX equity futures are at 1636.00, up +10.46 points. The SPX opens +0.89% and +0.38% below its respective 20- and 50-day moving averages, but +2.86% and +7.80% above its respective 100- and 200-day moving averages.

Friday. On higher, but below average volume, U.S. equity markets ended with moderate gains. The Nasdaq rose +1.04%, followed by the SPX, DJI, and NYSE composite, which gained +1.02%, +0.98%, and +0.87%, respectively. Market breadth was positive, with gainers 1.32:1 losing stocks. Most SPX market segments closed higher.

NYSE volume rose +29.7% to 625.38 million shares, from 482.04 million shares the prior day, 0.74x the 842.02 million shares 20-day moving average volume. U.S. 10-year yields closed +23.59 bps higher at 2.7391%, from 2.5032% at the prior close.

Futures indicated a moderately higher open. From its prior 1615.41 close, the SPX index opened higher, but fell back to a mid-morning 1614.71 intraday low. The index rallied to 1625 by mid-session and rallied to a late 1632.07 intraday high. The SPX closed at 1631.89, up +1.02% from the prior day and -2.13% below its May 17th record close. The index closed +3.14% above its April 26th close, when the prior corrective trend concluded, but +51.8% above the 1074.77 October 4, 2011, intraday low.

Friday, the BKX rose +2.62%, outperforming the SPX. Last week, the BKX closed up +4.12%, compared to a gain of +2.09% the prior week. In June, the BKX closed down -0.31%, compared to a gain of +8.30% the prior month. This year, the BKX is up +24.7%, outperforming the SPX. Last year, financial stocks outperformed the broader market, as the BKX closed up +30.2%, compared to the +13.2% SPX gain.

On +27.1% higher, but below average volume, the DJ Transports (TRAN) rose +1.54%, compared to the DJI's +0.98% gain. From its prior 6,194.74 close, the index gapped higher to open above 6,240 and after mid-morning, trended higher to end at the intraday high. The TRAN ended at 6,289.96, -3.96% below its 6,549.16 May 17th record close. The index recaptured its 20- and 50-day moving averages, closing +0.99% and +0.11% above its respective 20- and 50-day moving averages. The index ended +1.84% and +9.96% above its respective 100- and 200-day moving averages.

Market volatility fell. From its prior 16.20 close, the VIX opened at 15.60, rose to a mid-morning 16.28 intraday high, then trended lower to close at the day's 14.89 low, down -8.09%. The all-time closing low was 11.26, set June 30, 1993.

The broader market's technical factors improved. SPX relative strength (RSI) ended at 54.48, from 49.52 the prior day, moving above the middle of a neutral range. The CBOE put/call skew rose +3.53% to 117.12, from 113.13 the prior day, moving back into a neutral range.

Last week, the SPX, DJI, Nasdaq, and NYSE composite are up +1.59%, +1.52%, +2.24% and +1.11%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed up +0.87%, +0.74%, +1.37% and +1.04%, respectively. In June, the SPX, DJI, Nasdaq, and NYSE composite closed down -1.50%, -1.36%, -1.52%, and -2.04%, 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 +14.4%, +15.5%, +15.2%, +9.13%, respectively. All closed at least +5.91% higher in 2012. Immediate SPX resistance is 1638. Immediate support is 1625, (50-day moving average), then 1617 (the 20-day moving average).

Distribution day count. The current corrective downtrend began on June 12th, following an uptrend that began on April 29th.

In Asia, equity markets closed lower, with greater weakness in Shanghai. The Japanese Nikkei (NKY) fell -1.40%. The Hang Seng (HSI) ended with a -1.31% loss. The Shanghai composite (SHCOMP) fell -2.44%. Volumes are unavailable.

The NKY's relative strength index (RSI) fell to 58.06, from 61.89 the prior day, within a neutral range. The index is up from a low of 34.42 on June 13th, but down from an overbought 82.61 on May 22nd. The HSI's RSI fell to 42.96, from 46.44 the prior day. The SHCOMP's RSI fell to 26.68, from 32.14 the prior day, up from June 27th's grossly oversold 15.27, but back within an oversold range.

Commentary focused on Friday's U.S. employment report, which could cause the Bank of China to tighten its own monetary policy.

Last week, the NKY rose +4.63%, the HSI rose +0.25%, and the SHCOMP gained +1.41%. The prior week, the NKY closed up +3.38%, the HSI gained +2.66%, while the SHCOMP lost --4.53%. In June, the NKY closed down -0.71%, the HSI -7.10%, and the SHCOMP -14.0%. 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 +35.7%. The HSI is down -9.16%. The SHCOMP is down -13.7%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

In Japan, the NKY closed at 14,109.34, down from 14,309.97 the prior day. The index opened near 14,4,500 and set an early 14,497.65 intraday high, but lost momentum and reversed lower in early afternoon and closed at the intraday low. The index ended -9.71% below its recent May 22nd 15,627.26 closing high, but up +70.1% above its 8,295.63 July 18, 2012 low. The index closed +5.74% and +1.78% above its respective 20- and 50-day moving averages, and +7.86% and +24.4% above its respective 100- and 200-day moving averages. All market segments closed at least -0.80% lower. Leaders were health care, consumer services, and oil and gas. Laggards were basic materials, financials, and telecommunications, which fell at least -1.65%.

In China, the HSI closed at 20,582.19, compared to 20,854.67 at the prior close. The index closed -13.6% below its January 30th 23,882.06 high, but +13.2% above its 18,185.59 June 4, 2012 low. The index opened above 20,600 and fell to an early 20,244.07 intraday low, the rallied through the session's remainder to a late 20,694.51 intraday high. The index ended -0.98% and -6.29% below its respective 20- and 50-day moving averages. All market segments closed at least -0.26% lower. Leaders were oil and gas, industrials, and telecommunications. Financials fell -1.47%. Laggards were utilities, technology, and basic materials, which fell at least -1.54%.

In Shanghai, the SHCOMP closed at 1,958.27, from 2,007.20 at the prior close, -0.08% below the most recent 1,959.77 closing low last December 3rd. The index opened below 1,985 and fell to an early 1,953.33. The index rallied back above 1,980 by late morning, but then traded lower through the afternoon session nearly to the early lows. The index closed -19.6% below its 2,434.48 February 5th high. The SHCOMP closed -5.54% and -10.3% below its respective 20- and 50-day moving averages. All market segments closed at least -0.46% lower. Leaders were oil and gas, financials, and telecommunications. Laggards were industrials, technology, and basic materials, which fell at least -3.97%.

In Europe, the major equity indexes are higher and trading near their intraday highs. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +2.02%, +0.79%, +1.71%, and +2.26%, respectively. The Spanish IBEX 35 is up +1.55%. The Italian FTSE MIB is up +1.29%.

From its 2,596.01 prior day's close, the Euro Stoxx50 (SX5E) gapped higher to open above 2,615 and rallied to a mid-session 2,653.12 intraday high. The index currently trades at 2,648.66. All market segments are at least +1.07% higher. Leaders are basic materials, technology, and financials, which are up at least +2.21%. Laggards are oil and gas, utilities, and telecommunications.

Last week, the Euro Stoxx50 and DAX closed down -0.25% and -1.93%, respectively, while the FTSE 100 and CAC 40 gained +2.58% and +0.40%, respectively. The prior week, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed up +2.08%, +1.62%, +2.21%, and +2.18%, respectively. In June, the Euro Stoxx50, FTSE 100, CAC 40, and DAX closed down -6.03%, -5.58%, -5.31%, and -4.67%, 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 +0.48%, +9.03%, +4.89%, and +4.91%. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.

Libor, LOIS, Currencies, Treasuries, Commodities:

· USD LIBOR is 0.12430%, down from 0.12530% the prior day. USD 3-month LIBOR is 0.26860%, down from 0.27990% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

· The US Libor-OIS (LOIS) spread is 15.86 bps, up from 16.69 bps the prior day, and compares to the January 6th high of 50.050 bps. Euribor-OIS is 12.00 bps, down from 12.30 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 -10.630, compared to -11.000 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 are 4.64%, up from 4.66% the prior day and up from the 4.039% May 3rd low. Italian 10-year debt yields are at 4.39%, compared to 4.42% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.72%, compared to 1.72% the prior day. Japanese 10-year debt yields are 0.88%, compared to 0.86% the prior day.

· The U.S. government overnight repo rate is 10 bps, up from 7 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 slightly lower, with 2- and 10-year maturities yielding 0.379% and 2.696%, respectively, compared to 0.395% and 2.739% Friday. The yield curve narrowed -2.69 bps, with the 2- to 10-year spread at +2.317%, compared to 2.344% 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 +2.202% on June 25, 2013.

· The U.S. dollar is mixed, weaker compared to the euro and British pound, but stronger compared to the Japanese yen. The dollar trades at US$84.384, compared to a US$84.588 intraday high and US$84.449 the prior day, and better compared to its $82.703 50-day, US$82.561 100-day, and US$81.287 200-day averages. The euro trades at US$1.2843, compared to a US$1.2829 intraday low and US$1.2829 the prior day. The euro trades worse compared to its US$1.3066 50-day and US$1.3041 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥101.23, compared to ¥101.20 the prior day. The yen trades worse than its 50-day moving average ¥99.38, and better than its May 17th 103.21 closing low.

· Citigroup Economic Surprise Index worsened to -14.00, from -12.80 the prior day. The index is worse compared to its respective -9.08 and -7.63 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 May 6th and fell to a low of -32.90 on June 10th. After a lag, the CESIUSD correlates with EPS revisions.

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

Volatility, Skew:

· The VIX closed at 14.898, down -8.09% from 16.20 at the prior close. The VIX is -13.1% below its 17.13 20-day moving average. Its 30-day high is 21.91. Its 30-day low is 13.56. 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 21.71, down -3.92% from 22.59 at the prior day's close. The V2X index trades -19.0% below its 26.80 20-day moving average, -19.0% below the 26.80 30-day high, and +26.2% above the 17.21 30-day low.

· The Hang Seng volatility index (VHSI) closed at 24.55, up +7.21% from 22.90 the prior day. The VHSI index trades +7.21% above its 24.55 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

· CBOE skew closed at 117.12 +3.53% from 113.13 at the prior day's close, and back within a neutral (115-120) range and making a new low. The recent low was 113.23 on November 14th. 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 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:

· None.

Overseas Economic Reporting and News:

· Eurozone - July Sentix investor confidence fell to -12.6, from -11.4 survey and -11.6 prior.

· France - June Bank of France business sentiment rose to 96, from 94 prior.

· Germany - May MoM industrial production fell -1.0%, compared to -0.5% survey and +0.9% revised prior.

· Portugal - May MoM industrial sales rose +7.4%, compared to -2.4% revised 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 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. In June, the index closed at 1606.28, down -1.50% from 1630.74 the prior month and 1514.68 four months prior. The May 2013 sell countdown progressed to 2. The index closed -10.4% 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 July 5th, the index closed up +1.59% at 1631.89, from 1606.28 the prior week and 1643.38 close four weeks prior. The June 14th buy setup progressed to 4. The 9 sell countdown associated with the March 8th perfection is unchanged since May 24th. The index closed +6.98% 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 Friday, the SPX rose +1.02% to close at 1631.89, from 1614.08 the prior day and 1606.28 4 days prior. The June 27th sell setup progressed to 7. The May 14th sell countdown progressed to 12, its first change since June 27th. The index closed +1.45% 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. In June, the index closed at 61.41, down -0.31% from 61.60 at May-end and 53.98 four months prior. The May 2013 sell countdown progressed to 2.

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 July 5th, the BKX closed at 63.94, up +4.12% from 61.41 the prior week and 61.58 four weeks prior. The bullish price flip canceled the June 14th 3 buy setup and initiated a sell setup. The February 1st sell countdown progressed to 11, its first changed since May 31st. The index closed +12.3% 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, 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. On July 2nd, the index completed its May 15th sell countdown, which set a 64.06 risk level, based on the May 30th 1.14 point high/low range and 62.92 close. Friday, the index closed at 63.94, up +2.62% from 62.31 the prior day and 61.41 four days prior. The June 27th sell setup progressed to 7. The index closed -0.19% below its 64.06 risk level.

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 May a bullish flip initiated a sell countdown. The VIX ended June at 16.86, up +3.44% from 16.30 at the end of May and 115.51 at the end of February. The May 2013 sell setup progressed to 2.

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 July 5th, the VIX fell -11.7% to 14.89, from 16.86 the prior week, and 15.14 weeks prior. The bearish price flip canceled the 6 May 24th sell setup. The index closed +62.4% above the risk level.

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. Friday, the VIX fell -8.09% to 14.89, from 16.20 the prior close and 16.86 at the 4 days' prior close. The June 27th buy setup progressed to 7. The May 31st 6 sell countdown is unchanged since June 21st. The VIX closed +43.0% 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 June at 1.3010, up +0.08% from 1.2999 the prior month and 1.28.15 4 months prior. The bullish price flip canceled the March 2013 3 buy setup. 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 July 5th, the index fell -1.39% to end at 1.2829, from 1.3010 the prior week and 1.3218 4 weeks prior. The bullish price flip canceled the 3 sell setup and initiated a buy setup. The sell countdown associated with the September 28th perfection is a deferred 13, unchanged since June 7th. The cross closed +7.36% above the 1.1964 risk level.

On a daily basis, 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 completed. The completion set a 1.3537 risk level, based on the June 6th 0.0231 trading range and 1.3306 intraday high. On June 11th, the May 29th sell setup perfected and initiated a sell countdown. On July 2nd, the June 20th buy setup perfected and initiated a buy countdown. With Friday's -0.66% lower close, the EURUSD cross ended at 1.2829, from 1.2914 the prior day and 1.3064 four days prior. The July 2nd buy countdown progressed to 3. The cross closed -5.23% 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 June at 2.4857%, compared to 2.1282% the prior month and 1.8756% 4 months prior. The May 2013 sell setup progressed to 2.

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%. On June 27th, the May 3rd sell setup perfected. The rate ended the most recent week at 2.7391%, from 2.4857% the prior Friday and 2.1718% four weeks prior. The sell countdown associated with the February 1st perfection progressed to 9.

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 June 24th, the May 20th sell countdown completed, setting a 2.8150% risk level, based on the June 24th 15.03 bps trading range and 2.6647% intraday high. On July 3rd, a bullish rate flip initiated a sell setup. On Friday, the rate ended at 2.7391%, from 2.5032% the prior day and 2.4721% four days prior. The July 3rd sell setup progressed to 2. The rate closed -7.6 bps below the 2.8150% risk level.

SX5E - On a monthly basis, the Euro Stoxx50 perfected a 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 2012 initiated a sell setup, which perfected in May 2013 and initiated a sell countdown. In June, the index closed at 2,602.59, compared to 2,769.64 the prior month and 2,633.55 four months prior. The bearish price flip initiated a buy 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 July 5th, the index fell -0.25% to 2,596.01, from 2,602.59 the prior week and 2,724.08 at the 4 weeks' prior close. The June 7th buy setup progressed to 5. The 7 sell countdown stemming from the January 18th perfection is unchanged since May 17th. The index closed -6.63% 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. On June 12th, the May 31st buy setup perfected and initiated a buy countdown. On June 17th, a bullish price flip initiated a sell setup. Friday, the index fell -0.19% to 2,596.01, from 2,603.20 the prior day and 2,622.62 at the prior 4 days' close. The bearish price flip canceled a July 1st sell setup and initiated a buy setup. The June 12th 6 buy countdown is unchanged since July 3rd. The index closed -6.84% below the 2,786.57 risk level.

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 ended June at 13,677.32, down -0.71% from 13,774.32 the prior month and 11,559.36 four months prior. The sell setup progressed to 8.

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 July 5th, the index closed up +4.63% at 14,309.97, from 13,677.32 the prior week and 12,877.53 four weeks' prior. The bullish price flip canceled the June 7th 4 buy setup and initiated a sell setup. The index closed -2.29% 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 Friday, the index rose +2.08% to 14,309.97, from 14,055.56 the prior day and 13,852.50 four days prior. The June 28th sell setup progressed to 6. The June 4th 7 buy countdown is unchanged since June 26th. The index closed -8.45% 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. A bearish price flip in May 2013 initiated a buy setup. The index ended June at 20,803.29, down -7.01% from 22,392.16 the prior month and 23,020.27 four months prior. The May 2013 buy setup progressed to 2. The index closed -23.5% 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 July 5th, the index closed at 20,854.67, up +0.25% from 20,803.29 the prior week and 21,575.26 four weeks prior. The May 31st buy setup progressed to 6. The April 5th 6 buy countdown is unchanged since June 21st. The index closed -7.94% 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 June 20th, a bearish price flip initiated a buy setup. On June 25th, the June 4th buy countdown completed and set a 18,860.42 risk level, which is based on the day's 565.94 trading range and 19,426.36 intraday low. On Friday, the index rose +1.89% to 20,854.67, from 20,468.67 the prior day and 20,440.08 four days prior. The July 4th sell setup progressed to 2. The index closed +9.13% above the 18,860.42 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 June, the index closed at 1,979.21, down 14.0% from 2,300.60 the prior month and 2,365.59 four months prior. The April 30th buy setup progressed to 3. The January 2012 buy countdown progressed to 8.

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 July 5th, the index closed the week up +1.41% at 2,007.20, from 1,979.21 the prior week and 2,210.90 four weeks prior. The June 7th buy setup progressed to 5. The 6 sell countdown associated with the February 8th perfection is unchanged since May 31st.

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. On June 7th, the April 9th buy countdown completed and set a 2,142.63 buy risk level. On June 19th, the June 3rd buy setup perfected and initiated a buy countdown. Friday, the index rose 0.05% to 2,007.20, from 2,006.10 at the prior close and 1,995.24 4 days prior. The June 28th sell setup progressed to 5. The index closed -8.60% below the risk level.

2Q2013 Earnings. Of 21 reporting companies, 15 or 71.4% surprised positively on earnings, with a +1.28% surprise average. Of reporting companies, 10 or 47.6% reported sales or revenues in excess of estimates. The average sales/revenue surprise is -0.24%.

Valuation. The SPX trades at 15.8x 2012 earnings ($103.41), 14.8x estimated 2013 earnings ($110.19), 13.2x estimated 2014 earnings ($123.25), and 12.1x estimated 2015 earnings ($135.07). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, and 2015 earnings to grow +6.56% and +11.9%, and +9.59%respectively.

Composite, index, and equity options. Options markets improved to neutral, from bearish to neutral the prior day. Composite options are neutral, index options are neutral, and equity options are neutral. The composite put/call ratio is 0.94, compared to 1.14 the prior day, and better compared to its 5- and 10-period moving averages of 0.99 and 1.01, respectively. The index put/call ratio is 1.22, compared to 1.41 the prior day, and better compared to its 5- and 10-period moving averages of 1.23 and 1.23, respectively. The equity put/call ratio closed the day at 0.86, compared to 1.02 the prior day, and better compared to its 5- and 10-period moving averages of 0.91 and 0.92, respectively.

NYSE Volume, Breadth Indicators. Volume rose +29.7% to 625.38 million shares, from 482.04 million shares the prior day, 0.74x the 842.02 million share 20-day moving average. Market breadth was positive, and up volume led down volume. Advancing stocks led decliners by +415 (from -642 the prior day), or 1.32:1. Up volume was 2.01:1 down volume.

KBW Bank Index (BKX). On higher, but below average volume, the BKX rose +2.62% to 63.94, a new post-2008 closing high, from 62.31 at the prior day's close. The index gapped higher to open above 62.70, and rallied to 63.40 before mid-session. The index trended higher through the afternoon to 63.60 in the final hour, then rallied to close at the intraday high. Volume rose +75.8% to 46.60, from 26.514 million shares on the short trading day prior to Independence Day, or 0.77:1x the 60.942 million share 15-day moving average.

Large cap banks underperformed the regional banks' performance, as the KBW regional banking index (KRX) rose +2.76%.

Last week, the BKX rose +2.62%, compared to a +2.09% gain the prior week. In June, the index closed down -0.31%, compared to May's +8.30% gain. For the year, the BKX is up +24.7%, better than the SPX's +14.4% rise. In 2012, the index rose +30.2%, compared to a +13.4% rise in the SPX.

The BKX is now +5.27% better than the June 24th 59.19 close, its worst since May 13th. The index is +2.08% above its recent 62.64 May 30th high close. The index crossed above 50 on December 17th. The BKX closed +10.3% above its 57.95 April 23, 2010 close (the prior post-2008 high point), and +96.4% 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 +51.8% in the same period.

The BKX index closed -47.2% below its February 20, 2007, record 121.06 high.

Technical indicators improved. The index closed above its 5-, 10-, 20-, 50-, 100-, and 200-day moving averages. The index closed +4.58% and +6.30% above its respective 20- and 50-day moving averages. The index closed +10.5% and +17.6% above its respective 100- and 200-day moving averages. The index has closed above its 100-day moving average since last August 7th. The 20-day moving average rose +16 bps. The 50-day moving average rose +15 bps. Its 100-day moving average rose +9 bps, and the 200-day moving average rose +6 bps. The 20-day closed (by +0.99 points) above the 50-day, and the gap was unchanged. The 50-day moving average closed (by +5.77 points) above the 200-day moving average, and the gap widened +9 bps. The 100-day moving average closed (by +3.50 points) above the 200-day moving average since March 19th, and the gap widened +4 bps.

The directional movement indicator narrowed to +18.330, from +8.475 the prior day, its 7th consecutive positive reading. Relative strength rose to 67.24, from 60.00 the prior day, rising toward the top of a neutral 30-70 range. Next resistance is 64.37; next support is at 63.07.