U.S. Futures Ease As Earnings Hold Up
Long/Short Equity, Short-Term Horizon, Medium-Term Horizon
Seeking Alpha Analyst Since 2008
This morning. Earning season focuses today on the Citigroup (C) earnings report, which beat both on EPS and revenues. The DJ Industrials (DJI) and S&P 500 Index (SPX) open at new record highs, but without the DJ Transportation Index's (TRAN) confirmation of the DJI closing high. Today's higher equity futures are modestly lower. Since July 11th, the market trend is "confirmed uptrend".
In Friday's session, major U.S. equity indexes traded narrowly lower through most of the session, but a late-session rally ended the day with modest gains. The Nasdaq closed with the day's best gains. Financials was the best performing market segment. DJ Transports underperformed DJ Industrials. All major indexes closed above their respective 5-, 10-, 20-, and 50-day moving averages. Short-term SPX relative strength indicators (RSI) strengthened, but remain within a neutral range.
Today, in Asia, Japanese equity markets were closed, but Chinese equity markets closed modestly higher. Tuesday's Nikkei 225 (NKU3) equity futures are up +0.14%. Chinese equity futures are mixed. In Europe, equities are moderately higher, but off their best levels of the day. Scheduled U.S. economic reports focus on the July Empire manufacturing and advance retail sales. Commodities are mostly lower.
Commentary focuses on the 2Q2013 earnings, currency developments, Chinese economic prospects.
Today, long-term U.S. Treasury yields are 2.6315%, compared to 2.5821% at the prior close. U.S. repo rates are 4 bps, unchanged at 4 bps the prior day. Spanish and Italian 10-year debt yields are 4.78% and 4.49%, respectively, compared to 4.78% and 4.48%, the prior day. The U.S. dollar is stronger. U.S. options markets improved to bearish to bullish, from bearish to neutral the prior day. CBOE skew rose is below a neutral range.
In pre-market futures trading, September SPX equity futures are modestly lower and near the middle of a 1671-1675 range. After a fair value adjustment of +4.34 points, SPX equity futures are at 1673.75, down -0.86 points. The SPX opens +3.43% and +2.89% above its respective 20- and 50-day moving averages, and +5.44% and +10.6% above its respective 100- and 200-day moving averages.
Friday. On lower and below average volume, U.S. equity markets ended higher, with the SPX and DJI at new record closes. The DJ Transports (TRAN) did not confirm the DJI's new high. The Nasdaq rose +0.61%, followed by the SPX, NYSE composite and DJI, which rose +0.31%, +0.06%, and +0.02%, respectively. Market breadth was modestly positive, with gainers 1.01:1 losing stocks. Most SPX market segments closed higher. Leaders were financials, health care, and consumer services, which rose at least +0.56%. Laggards were basic materials, industrials, and telecommunications, which fell at least -0.44%.
NYSE volume fell -8.22% to 681.04 million shares, from 742.03 million shares the prior day, 0.80x the 853.56 million shares 20-day moving average volume. U.S. 10-year yields closed -1.00 bps higher at 2.5821%, from 2.5721% at the prior close.
Futures indicated a mixed open. From its prior 1675.02 close, the SPX index traded narrowly through the day, rallying in the final half-hour to end with modest gains. The SPX closed at 1680.19, 1652.62, -0.89% below its May 17th record close. The index closed +6.19% above its April 26th 1582.24 close, when the prior corrective trend concluded, but +56.3% above the 1074.77 October 4, 2011, intraday low.
Friday, the BKX rose +1.29%, outperforming the SPX. Last week, the BKX closed up +0.86%, compared to a +4.12% gain the prior week. In July, the BKX is up +5.02%. In June, the BKX closed down -0.31%. This year, the BKX is up +25.8%, 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 +22.9% higher and above average volume, the DJ Transports (TRAN) fell -0.55%, compared to the DJI's +0.02% gain. From its prior 6,472.32 close, the index opened below 6,430, set an early 6,412.12 intraday low, then rallied to a mid-morning 6,498.97 intraday high. The index trended lower into the afternoon session and fell to support at 6,420 in late afternoon before rallying with the broader market into the close. The TRAN closed at 6,436.93, -1.71% below its 6,549.16 May 17th record close. The index closed +2.91% and +1.98% above its respective 20- and 50-day moving averages. The index ended +3.83% and +11.9% above its respective 100- and 200-day moving averages.
Market volatility fell. From its prior 14.01 close, the VIX moved as high as 14.04 by mid-morning, but fell back to a late 13.74 intraday low. The index closed at 14.01, down -1.21%. The all-time closing low was 11.26, set June 30, 1993.
The broader market's technical factors were little changed. SPX relative strength (RSI) ended at 66.62, from 65.48 the prior day, moving farther above the middle of a neutral range. The CBOE put/call skew fell -1.96% to 113.27, from 115.53 the prior day, back below a neutral 115-120 range.
Last week, the SPX, DJI, Nasdaq, and NYSE composite rose +2.96%, +2.175, +3.47%, and +3.09%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed up +1.59%, +1.52%, +2.24% and +1.11%, respectively. In July, the SPX, DJI, Nasdaq, and NYSE composite are up +4.60%, +3.72%, +5.78%, and +4.23%, respectively. In June, the SPX, DJI, Nasdaq, and NYSE composite closed down -1.50%, -1.36%, -1.52%, and -2.04%, respectively.
In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +17.8%, +18.0%, +19.2%, +12.5%, respectively. All closed at least +5.91% higher in 2012. Immediate SPX resistance is 1683. Immediate support is 1675, then 1670.
Distribution day count. There have been no distributions since the current market uptrend commenced on July 11th.
In Asia, equity markets closed higher, with better strength in Shanghai. The Japanese Nikkei (NKY) was closed for the Marine Day holiday. The Hang Seng (HSI) ended with a +0.12% gain. The Shanghai composite (SHCOMP) rose +0.98%. Volumes are unavailable.
The NKY's relative strength index (RSI) closed Friday at 62.63, from 62.19 the prior day, within a neutral 30-70 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 rose to 53.46, from 53.10 the prior day. The SHCOMP's RSI rose to a neutral 48.76, from 45.63 the prior day, and up from June 27th's grossly oversold 15.27.
Commentary focused on Chinese 2Q2013 GDP report and June industrial production, which both were in-line with estimates.
Last week, the NKY closed up +1.37%, while the HSI and SHCOMP closed up +2.03% and +1.61%, respectively. The prior week, the NKY rose +4.63%, the HSI rose +0.25%, and the SHCOMP gained +1.41%. In July, the NKY is up +6.06%, while the HSI and SHCOMP are up +2.40% and +4.05%, respectively. In June, the NKY closed down -0.71%, the HSI -7.10%, and the SHCOMP -14.0%. In May, the NKY and HSI closed -6.51% and -3.65% lower, respectively, their first monthly declines since October. The SHCOMP rose +5.63%. In 2013, the NKY is up +39.6%. The HSI is down -5.97%. The SHCOMP is down -9.24%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.
In Japan, the NKY closed at 14,506.25, up from 14,472.58 the prior day. The index traded briefly lower to an early 14,417.30 intraday low, then rallied and reversed higher to a mid-morning 14,574.17 intraday high. The index weakened and briefly reversed lower late in the morning trade, then reversed back to 14,520, where it traded through the close. The index ended -7.39% below its recent May 22nd 15,627.26 closing high, but up +71.2% above its 8,295.63 July 18, 2012 low. The index closed +7.30% and +4.19% above its respective 20- and 50-day moving averages, and +9.87% and +26.7% above its respective 100- and 200-day moving averages. Most market segments closed higher. Leaders were basic materials, utilities, and industrials, which rose at least +1.49%. Laggards were oil and gas, which rose +0.43%, and financials and consumer services, which fell at least -0.10%.
In China, the HSI closed at 21,303.31, compared to 21,227.28 at the prior close. The index closed -10.6% below its January 30th 23,882.06 high, but +17.1% above its 18,185.59 June 4, 2012 low. The index traded narrowly through the day, with a late morning 21,391.76 intraday high, and mid-afternoon 21,205.60 intraday low. A late rally brought the session to a modest gain. The index ended +3.08% above and -2.42% below its respective 20- and 50-day moving averages. Most market segments closed higher. Leaders were technology, industrials, and basic materials, which rose at least +0.73%. Financials rose +0.07%. Laggards were consumer services, oil and gas, and consumer goods, which fell at least -0.63%.
In Shanghai, the SHCOMP closed at 2,059.39, from 2,039.49 at the prior close, +5.61% above the recent 1,950.01 June 27th closing low. The index opened with modest gains, but dropped back to 2,037.32 by mid-morning, then rallied to a mid-session 2,076.63 intraday high. The index eased through the afternoon to support a 2,050 before strengthening into the close. The index closed -15.4% below its 2,434.48 February 5th high. The SHCOMP close +1.77% above its 20-day moving average, but -4.73% below its 50-day moving average. Most market segments closed higher. Leaders were technology, health care, and consumer goods, which rose at least +1.78%. Laggards were basic materials and utilities, which rose at least +0.48%, and oil and gas, which fell at least -0.20%.
In Europe, the major equity indexes are moderately higher, but off their early session highs. The Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +0.25%, +0.39%, +0.50%, and +0.20%, respectively. The Spanish IBEX 35 is down -0.49%. The Italian FTSE MIB is up +0.25%.
From its 2,674.87 prior day's close, the Euro Stoxx50 (SX5E) gapped higher and set an early 2,697.79 intraday high, but currently trades at 2,681.50. Most market segments are higher. Leaders are health care, technology, and industrials, which are at least +0.59% higher. Laggards are financials, telecommunications, and utilities, which are down at least -0.05%.
Last week, the Euro Stoxx50, FTSE100, CAC 40, and DAX closed down are up +3.09%, +2.45%, +2.80%, and +4.27%, respectively. The prior 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. In July, the Euro Stoxx50, FTSE100, CAC 40, and DAX are up +2.97%, +5.65%, +3.56%, and +3.39%, 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 2013, the Euro Stoxx50, FTSE 100, CAC 40, and DAX are up +1.67%, +11.3%, +6.34%, and +8.10%. In 2012, the indexes closed up +13.8%, +5.84%, +15.2%, and +29.1%, respectively.
Libor, LOIS, Currencies, Treasuries, Commodities:
· USD LIBOR is 0.11979%, down from 0.12020% the prior day. USD 3-month LIBOR is 0.26760%, unchanged from 0.26760% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.
· The US Libor-OIS (LOIS) spread is 15.76 bps, down from 16.06 bps the prior day, and compares to the January 6th high of 50.050 bps. Euribor-OIS is 11.70 bps, unchanged from 11.70 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 -11.25, compared to -11.0 bps the prior day, and up from a trough of -147.00 bps on December 14, 2011, and at the low end of a normal -10 bps and -40 bps range.
· Spanish 10-year debt yields are 4.78%, unchanged from 4.78% the prior day and up from the 4.039% May 3rd low. Italian 10-year debt yields are at 4.49%, compared to 4.48% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.57%, compared to 1.56% the prior day. Japanese 10-year debt yields are 0.82%, compared to 0.82% the prior day.
· The U.S. government overnight repo rate is 4 bps, unchanged from 4 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 0.347% and 2.598%, respectively, compared to 0.339% and 2.582% Friday. The yield curve widened -0.840 bps, with the 2- to 10-year spread at +2.252%, compared to 2.243% 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 stronger compared to the euro, British pound, and Japanese yen. The dollar trades at US$83.276, compared to US$83.298 intraday high and US$82.988 the prior day, and better compared to its $82.854 50-day, US$82.672 100-day, and US$81.385 200-day averages. The euro trades at US$1.3027, compared to a US$1.3019 intraday low and US$1.3067 the prior day. The euro trades mixed compared to its US$1.3053 50-day and US$1.3030 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥100.11, compared to ¥99.22 the prior day. The yen trades worse than its 50-day moving average ¥99.53, and better than its May 17th 103.21 closing low.
· Citigroup Economic Surprise Index worsened to -11.70, from -11.90 the prior day. The index is mixed compared to its respective -11.58 and -10.33 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, lower precious metals, higher aluminum and copper, and lower agriculture prices.
Volatility, Skew:
· The VIX closed at 13.84, down -1.21% from 14.01 at the prior close. The VIX is -16.4% below its 16.56 20-day moving average. Its 30-day high is 21.91. Its 30-day low is 13.57. 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 19.27, up +1.03% from 19.07 at the prior day's close. The V2X index trades -11.6% below its 21.81 20-day moving average, -28.1% below the 26.80 30-day high, and +4.55% above the 18.43 30-day low.
· The Hang Seng volatility index (VHSI) closed at 20.60, down -2.83% from 21.20 the prior day. The VHSI index trades -9.26% below its 22.70 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.
· CBOE skew closed at 113.27, down -1.96%, from 115.53 at the prior day's close, and below a neutral (115-120) range. The recent low was 112.47 on May 25, 2013. Spikes in excess of 130 (as on February 15th and 18th and previously on September 21st, and March 12th, 15th, and 16th) 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:
· At 8:30, July empire manufacturing rose to 9.46, compared to 5.00 survey and 7.84 prior.
· June advance retail sales rose +0.4%, compared to , with 0.8% survey and +0.5% revised prior. Retail sales ex auto and gas fell -0.1%, compared to with +0.4% survey and +0.3% prior.
· At 10:00 May business inventories, which +0.0% survey and +0.3% prior.
Overseas Economic Reporting and News:
· China - 2Q2013 real YoY GDP rose +7..6%, compared to +7.7% survey and +7.7% prior. June YoY industrial production rose 9.3\5, compared to +9.3% survey and +9.4% prior. 2Q2013 business climate index fell to 120.6, compared to 125.6 prior.
Company Ratings/News:
· C - Reports $1.25 adjusted EPS and $20.810 billion revenues, compared to with consensus $1.18 EPS and $19.765 billion EPS.
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 12th, the index closed up +2.96% at 1670.30, from 1631.89 the prior week and 1626.73 close four weeks prior. The bullish price flip canceled the June 14th 4 buy setup and initiated a sell setup. The March 8th sell countdown progressed to 10. The index closed +10.2% 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, which completed on July 8th. The completion set a risk level of 1725.50, based on the 38.32 point May 22nd trading range and 1,687.18 intraday high. On July 9th, the June 27th sell setup perfected and initiated a sell countdown. On Friday, the SPX rose +0.31% to close at 1680.19, from 1675.02 the prior day and 1635.50 4 days prior. The July 9th sell countdown progressed to 4. The index closed -2.63% below the 1725.50 risk level.
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 12th, the BKX closed at 64.49, up +0.86% from 63.94 the prior week and 60.16 four weeks prior. The July 5th sell setup progressed to 2. The February 1st sell countdown progressed to 12. The index closed +13.3% 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 June 26th, a bullish price flip initiated a sell setup, which perfected on July 9th and initiated a sell countdown. 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 64.49, up +1.29% from 63.67 the prior day and 64.29 four days prior. The bullish price flip initiated a sell setup. The July 9th 1 sell countdown was unchanged. The index closed +0.67% above 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 12th, the VIX fell -7.05% to 13.84, from 14.89 the prior week, and 17.15 4 weeks prior. The July 5th sell setup progressed to 2. The index closed +50.9% above the risk level.
On a daily basis, on May 20th a bullish flip initiated a sell setup, which perfected on May 31st and initiated a sell countdown. On June 26th, a bearish flip initiated a buy countdown, which perfection on July 9th. The perfection canceled the May 31st sell countdown, and initiated a buy countdown. Friday, the VIX fell -1.21% to 13.84, from 14.01, from 14.35 at the prior close and 14.78 at the 4 days' prior close. The July 9th buy countdown progressed to 3. The VIX closed +33.0% 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 12th, the index rose +1.86% to end at 1.3067, from 1.2829 the prior week and 1.3347 4 weeks prior. The July 5th buy setup progressed to 2. The sell countdown associated with the September 28th perfection is a deferred 13, unchanged since June 7th. The cross closed +8.87% 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 -0.23% lower close, the EURUSD cross ended at 1.3067, from 1.3097 the prior day and 1.2870 four days prior. The July 10th sell setup progressed to 3. The July 2nd 5 buy countdown is unchanged since July 9th. The cross closed -3.47% 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 2.5821%, from 2.7391% the prior Friday and 2.1295% four weeks prior. The February 1st 9 sell countdown was unchanged.
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 2.5821%, from 2.5721% the prior day and 2.6356% four days prior. The July 11th buy setup progressed to 2. The rate closed -23.3 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 12th, the index rose +3.04% to 2,674.87, from 2,596.01 the prior week and 2,667.32 at the 4 weeks' prior close. The bullish price flip canceled the June 7th 5 buy setup and initiated a sell setup. The 7 sell countdown stemming from the January 18th perfection is unchanged since May 17th. The index closed -3.80% 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 July 8th, a bullish price flip initiated a sell setup. Friday, the index fell -0.24% to 2,674.87, from 2,681.32 the prior day and 2,650.85 at the prior 4 days' close. The July 10th sell setup progressed to 5. The June 12th 6 buy countdown is unchanged since July 3rd. The index closed -4.01% 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 12th, the index closed up +1.37% at 14,506.25, from 14,309.97 the prior week and 12,686.52 four weeks' prior. The July 5th sell setup progressed to 2. The index closed -0.95% below the risk level.
On a daily basis, 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 July 10th, the June 28th sell setup perfected and cancelled the June 4th 7 buy countdown. On Friday, the index rose +0.23% to 14,506.25, from 14,472.58 the prior day and 14,109.34 four days prior. The index closed -5.88% 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 12th, the index closed at 21,277.28, up +2.03% from 20,854.67 the prior week and 20,969.14 four weeks prior. The bullish price flip canceled the May 31st 6 buy setup and initiated a sell setup. The April 5th 6 buy countdown is unchanged since June 21st. The index closed -4.71% below the risk level.
On a daily basis, 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 Monday, the index rose +0.12% to 21,303.31, from 21,437.49 the prior day and 20,683.01 four days prior. The July 9th sell setup progressed to 5. The index closed +13.0% 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 12th, the index closed the week up +1.61% at 2,039.49, from 2,007.20 the prior week and 2,162.04 four weeks prior. The June 7th buy setup progressed to 6. 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. On June 3rd, a bearish price flip initiated a buy setup, which perfected on June 19th, and initiated a buy countdown. On June 7th, the April 9th buy countdown completed and set a 2,142.63 buy risk level. On July 10th, a bullish price flip initiated a sell setup. Monday, the index rose +0.98% to 2,059.39, from 2,039.49 at the prior close and 1,965.45 4 days prior. The July 10th sell setup progressed to 4. The June 19th 8 buy countdown is unchanged since July 9th. The index closed -3.88% below the June 7th risk level.
2Q2013 Earnings. Of 28 reporting companies, 21 or 75.0% surprised positively on earnings, with a +3.61% surprise average. Of reporting companies, 15 or 53.6% reported sales or revenues in excess of estimates. The average sales/revenue surprise is +0.69%.
Valuation. The SPX trades at 16.2x 2012 earnings ($103.41), 15.2x estimated 2013 earnings ($110.46), 13.6x estimated 2014 earnings ($123.29), and 12.4x estimated 2015 earnings ($135.21). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, and 2015 earnings to grow +6.82% and +11.6%, and +9.67%respectively.
Composite, index, and equity options. Options markets improved to bearish to bullish, from bearish to neutral the prior day. Composite options are bullish, index options are bullish, and equity options are bearish. The composite put/call ratio is 0.89, compared to 1.00 the prior day, and better compared to its 5- and 10-period moving averages of 0.99 and 0.99, respectively. The index put/call ratio is 0.74, compared to 1.30 the prior day, and better compared to its 5- and 10-period moving averages of 1.00 and 1.50, respectively. The equity put/call ratio closed the day at 1.00, compared to 0.86 the prior day, and worse compared to its 5- and 10-period moving averages of 1.00 and 0.95, respectively.
NYSE Volume, Breadth Indicators. Volume fell -8.22% to 681.04 million shares, from 742.03 million shares the prior day, 0.80x the 853.56 million share 20-day moving average. Market breadth was modestly positive, and up volume led down volume. Advancing stocks led decliners by +19 (compared to +2,232 the prior day), or 1.01:1. Up volume was 1.27:1 down volume.
KBW Bank Index (BKX). The BKX closed at a new post-2008 closing high. On lower and below average volume, the BKX rose +1.29% to 64.49, from 63.67 at the prior day's close. The index opened above 63.80 and trended higher to close at the intraday high. Volume fell -0.001% to 59.093 million shares, from 59.144 million shares the prior day, or 0.95:1x the 61.960 million share 15-day moving average.
Large cap banks outperformed the regional banks' performance, as the KBW regional banking index (KRX) rose +1.19%.
Last week, the BKX closed up +0.86%, compared to the prior week's +4.12% gain. In July, the BKX is up +5.02%. In June, the index closed down -0.31%, compared to May's +8.30% gain. For the year, the BKX is up +25.8%, better than the SPX's +17.8% rise. In 2012, the index rose +30.2%, compared to a +13.4% rise in the SPX.
The BKX is now +9.81% better than the June 24th 59.19 close, its worst since May 13th. The index crossed above 50 on December 17th. The BKX closed +98.1% 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 +56.3% in the same period.
The BKX index closed -46.7% below its February 20, 2007, record 121.06 high.
Technical indicators were little changed. The index closed above its 5-, 10-, 20-, 50-, 100-, and 200-day moving averages. The index closed +4.19% and +5.88% above its respective 20- and 50-day moving averages. The index closed +10.6% and +17.8% 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 +17 bps. The 50-day moving average rose +15 bps. Its 100-day moving average rose +9 bps, and the 200-day moving average rose +7 bps. The 20-day closed (by +0.99 points) above the 50-day, and the gap widened 4 bps. The 50-day moving average closed (by +6.18 points) above the 200-day moving average, and the gap widened +16 bps. The 100-day moving average closed (by +3.60 points) above the 200-day moving average since March 19th, and the gap widened +4 bps.
The directional movement indicator narrowed to +12.928, from 13.754 the prior day, its 12th consecutive positive reading. Relative strength rose to 65.96, from 62.24 the prior day, in a neutral 30-70 range. Next resistance is 64.73; next support is at 64.02.
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