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U.S. Futures Higher After Fair Value Adjustment; Asia Mixed; Europe Eases

This morning. Today, U.S. equity futures suggest modest gains, though participation and activity are likely to remain muted. Notably, the NYSE composite index (NYA) closed Friday at a 2nd consecutive record. The S&P 500 (SPX), DJ Industrials (DJI), and DJ Transports (TRAN) open slightly below Thursday's record highs. In Asia, Japanese equity markets posted moderate gains, as the yen strengthened modestly. Chinese equity indexes closed modestly mixed. In Europe, are moderately lower. The DAX set another record high close Friday. Monday's Nikkei 225 March 2014 (NKH4) equity futures are unchanged. Commentary focuses on interest rate, currency, and commodity price developments.

The U.S. equity market trend is "confirmed uptrend". The uptrend commenced on September 8th.

Friday, U.S. equity markets rallied in early trading, then eased lower to mid-morning lows before improving and closing mixed. The NYSE composite DJI posted the day's best +0.75% gain, followed by the DJI, SPX, and Nasdaq, which fell -0.01%, -0.03%, and -0.25%, respectively. Volume rose modestly from Thursday's post -holiday session.

Trading desks reported a slow post-holiday trading. With SPX equities trading at a full 16.7x 2013 earnings multiple, attention focuses on 2014 earnings and valuations (16.7x times survey $121.59 2014 SPX earnings suggests a 2032.91 SPX level next year, a +10.4% rise).

Technicals were little changed. SPX market segments closed mixed. Market breadth was narrowly positive, and up volume led down volume. Volatility rose. Treasury bond markets weakened. The U.S. Treasury 10-year bond yield rose +0.95 bps to 3.0000%, compared to 2.9905% at the prior close.

This morning, 10-year U.S. Treasury yields are down -1.84 bps to 2.9814% compared to the prior close. Spanish and Italian 10-year debt yields are 4.18% and 4.14%, respectively, compared to 4.23% and 4.21% the prior day. The U.S. dollar is mixed. U.S. options markets are unchanged at neutral to bullish, compared to neutral to bullish the prior day. The CBOE SKEW rose +0.05% to 136.72, compared to 136.65 the prior day, well above a neutral range (115-120) and at levels that generally correlate well with market tops.

In pre-market futures trading, March SPX equity futures (SPH4) price near the middle a 1834-1839 trading range. After a fair value adjustment of -1.60 points, SPX equity futures price at 1836.50, up +1.60 points. The SPX opens +2.07% and +3.18% above its respective 20- and 50-day moving averages, and +6.33% and +9.84% above its respective 100- and 200-day moving averages. Initial resistance is 1844.26. Initial support is 1839.18, then 1836.85.

In Asia, equity markets closed mixed, with continued strength in Japan. In Japan, the Nikkei 225 index (NYSEARCA:NKY) closed up +0.69%, the Hang Sang index (HSI) rose +0.01%, but the Shanghai composite (SHCOMP) fell -0.18%. The Japanese yen continues to weaken to its worst post-2008 levels. In China, short-term interbank lending rates continued to ease. 7-day Shibo rates fell to 4.82%, from 5.06% the prior day, and compares to 9.00% the prior Monday and 4.45% on December 17th. All are closed higher last week, but are mixed in December. All closed higher in November. The NKY and HSI are bull markets. Today's volumes are unavailable.

Commentary focused on the 2014 U.S. economic prospects, the prospective impact of Chinese economic reforms, and currency and intra-bank lending rate developments.

Regional relative strength indexes (RSI) suggest that Japanese equities are short-term overbought, while Chinese equity markets improve from recent oversold conditions. Monday, the NKY RSI improved to 70.08, compared to 68.20 the prior day. The index's RSI is down from an overbought 70.20 on December 3rd. The HSI RSI ended Friday at 48.66, compared to 48.61 the prior day. The SHCOMP's RSI worsened to 37.53, compared to 38.18 the prior session. The index's RSI fell to a low of 15.27 on last June 27th, which was also this year's low index close.

Last week, the NKY is up +1.94%, the HSI is up +1.89%, and the SHCOMP is down +0.79%. Last week, the NKY closed up +3.03%, while the HSI and SHCOMP closed off -1.87% and -5.07%, respectively. The prior week, the NKY rose +0.67%, while the HSI and SHCOMP closed off -2.09% and -1.83%, respectively. In December, the NKY is up +4.02%. The HSI and SHCOMP are down -2.66% and -5.54%, respectively. In November, the NKY closed down -2.31%. The HSI closed down -0.58%. The SHCOMP closed up +0.75%.

In 2013, the NKY is up +56.7%. The HSI is up +2.60%. The SHCOMP is down -7.56%. In 2012, the NKY rose +1.37%. The HSI rose +22.9%. The SHCOMP rose +3.17%.

In Japan, the NKY closed at 16,291.31, compared to 16,178.94 the prior day and at another multi-year high, though -58.1% below its late-1989 38,915.87 high close. Today, the index gapped higher to open above 16,260, but then fell to an early 16,182.71 intraday low, then improved to a late session 16,320.22 intraday high. The index closed +4.27% and +7.95% above its respective 20- and 50-day moving averages, and +11.8% and +15.6% above its respective 100- and 200-day moving averages. All market segments closed at least +0.04%. Leaders were oil and gas, technology, and financials, which rose at least +0.98%. Laggards were consumer goods, consumer services, and telecommunications.

In China, the HSI closed at 23,244.87, compared to 23,243.24 at the prior close. The index closed -2.78% below its recent December 3rd 23,910.47 high, but +27.8% above its 18,185.59 June 4, 2012 low. The index gapped higher and set an early 23,369.37 intraday high, but reversed lower in early afternoon and fell to a late 23,178.28 intraday low. Most market segments closed lower. Leaders were technology, consumer services, and industrials, which rose at least +0.07%. Laggards were telecommunications, consumer goods, and basic materials, which fell at least -0.56%.

In Shanghai, the SHCOMP closed at 2,097.53, compared to 2,101.25 at the prior close and +7.56% above the 1,950.01 June 27th closing low. The index set an early 2,111.90 intraday high, but quickly faded and reversed lower by late morning, falling to a mid-afternoon 2,095.22 intraday low. A late rally brought the index back to breakeven, but the index faded in the final half hour. Most market segments closed lower. Leaders were technology, consumer services, and health care, which rose at least +0.26%. Laggards were utilities, oil and gas, and financials, which fell at least -0.42%.

In Europe, the major equity indexes are modestly lower. The DAX closed Friday at another record high. The Euro Stoxx50 closed at a post-2008 high. All are up at least +1.66% on the week, but are mixed in December. All closed mixed in November, but higher in October and September.

Today, the SX5E trades -0.21% below its 3,111.37 December 27th post-2008 high close, but -40.9% below its 5,249.55 March 31, 2000, all-time closing high. European bourses have recently outperformed U.S. equity indexes. SX5E relative strength (RSI) eased to 63.08, compared to 63.33 Friday, and much better than December 13th's oversold 32.71. Its lowest recent level was 25.77 on June 24th, which marked the year's 2,494.54 closing low.

Last week, the Euro Stoxx 50, FTSE 100, CAC 40 and DAX are up ++2.03%, +2.18%, +2.00%, and +2.01%, respectively. The prior week the Euro Stoxx50, FTSE 100, and CAC 40 closed up +4.36%, +2.59%, +3.30%, and +4.37%, respectively, their best weekly gain since April. In December, the Euro Soxx50, FTSE 100 and DAX are up +0.59%, +1.19%, and +1.82%, respectively, while the CAC 40 is down -0.48%. In November, the Euro Stoxx 50 and DAX closed up +1.13% and +4.41%, respectively. The FTSE 100 and CAC 40 closed down -1.20% and -0.11%, respectively. In 2013, the indexes are up +17.8%, +14.1%, +17.4%, and +25.8%, respectively, compared to +13.8%, +5.84%, +15.2%, and +29.1% the prior year.

4Q2013 SPX Earnings. Of 18 (of 499) reporting companies, 13 or 72.2% surprised positively on earnings, with an average +1.67% surprise average. Of reporting companies, 11 or 61.1% reported sales or revenues above estimates. The average sales/revenue surprise is +0.12%. Consumer discretionary leads with +6.56% EPS and +0.93% revenue surprise.

Valuation. The SPX trades at 17.8x 2012 adjusted EPS ($103.41), 16.7x estimated 2013 earnings ($110.13), 15.1x estimated 2014 earnings ($121.59), and 13.7x estimated 2015 earnings ($134.58). The 10-year average median price/earnings multiple is 15.9x. Analysts expect 2013, 2014, and 2015 earnings to grow +6.50% and +10.4%, and +10.7%, respectively.

The BKX trades at 16.0x 2012 adjusted EPS ($4.32), 13.4x estimated 2013 earnings ($5.16), 12.3x estimated 2014 earnings ($5.64), and 11.2x 2015 earnings ($6.16). Analysts expect 2013, 2014, and 2015 EPS will grow +19.5%, +9.23%, and +9.25%, respectively.

Composite, index, and equity options. Options markets are unchanged at neutral to bullish, compared to neutral to bullish the prior session. Composite options are bullish, index options are bullish, and equity options are neutral. The composite put/call ratio is 0.72, compared to 0.64 the prior day, and worse than 5- and 10-period moving averages of 0.54 and 0.68, respectively. The index put/call ratio is 0.76, compared to 0.73 the prior day, and better than its 5- and 10-period moving averages of 0.82 and 0.90, respectively. The equity put/call ratio closed the day at 0.71, compared to 0.60 the prior day, and worse than its 5- and 10-period moving averages of 0.60 and 0.67, respectively.

NYSE Volume, Breadth Indicators. Volume rose +0.76% to 423.71 million shares compared to 420.51 million shares the prior day, 0.60x the 706.46 million share 20-day moving average. Market breadth was modestly positive, and up volume led down volume. Advancing stocks led by +42 (compared to +211 the prior day), or 1.03:1. Up volume was 1.58:1 down volume.

Distribution day count and market trend. The market trend is "confirmed uptrend". The uptrend commenced on September 9th, when the SPX opened at 1655.17, with a subsequent gain of +11.9%. The distribution count is 10 for the DJI, and 9 on the SPX, NYSE composite, and Nasdaq.

Libor, LOIS, Currencies, Treasuries, Commodities:

· USD LIBOR is 0.09600%, compared to 0.09600% the prior day. USD 3-month LIBOR is 0.24660%, up from 0.24660% the prior day, and compares to the January 4, 2013, recent peak of 0.58250%.

· The US Libor-OIS (LOIS) spread is 15.260 bps, compared to 15.060 bps the prior day, and compares to the recent June 12, 2012 46.785 bps high. Euribor-OIS is 13.550 bps, down from 14.020 bps the prior day, and down from the December 27, 2011, high of 98.800 bps. Moves in the LOIS indicate changes in intra-bank lending risk premiums.

· The 3-month Euro basis swap is -3.413 bps, compared to -1.349 bps the prior day, up from a trough of -147.00 bps on December 14, 2011, but far better than a normal -10 bps and -40 bps range.

· Spanish 10-year debt yields are 4.18%, up from 4.23% the prior day. Italian 10-year debt yields are at 4.14%, down from 4.21% the prior day, and up from the 3.822% May 3rd low. German 10-year debt yields are 1.95%, compared to 1.96% the prior day. Japanese 10-year debt yields are 0.74%, compared to 0.71% the prior day.

· The U.S. government overnight repo rate is +0 bps, compared to +3 bps the prior day. The January 2, 2013, 45 bps rate was the highest since late 2008. The record -2 bps low was on October 22, 2013.

· U.S. Treasury yields are slightly mixed, with 2- and 10-year maturities yielding 0.380% and 3.000%, respectively, compared to 0.387% and 3.000% Friday. The yield curve widened +0.800 bps, with the 2- to 10-year spread at +2.621%, compared to 2.613% the prior day. In the past year, the 2- and 10-year spread varied from a low of +1.429% on May 1, 2013, to a high of +2.613% on December 27, 2013.

· The U.S. dollar is modestly mixed, weaker compared to the euro, but stronger compared to the Japanese yen and British pound. The dollar trades at US$80.243 compared to a US$80.433 intraday high and US$80.392 the prior day, and mixed compared to its $80.410 50-day, US$80.673 100-day, and US$81.619 200-day averages. The euro trades at US$1.3770, compared to a US$1.3776 intraday high and US$1.3749 the prior day. The euro trades better compared to its US$1.3623 50-day and US$1.3520 100-day averages, and compares to a multi-year low of US$1.1877 on June 7, 2010. In Japan, the dollar trades at ¥105.15, compared to ¥105.17 the prior day. The yen trades worse than its 50-day moving average ¥101.18, and worse than its December 19th 104.37 closing low, its weakest prior multi-year closing low.

· Citigroup Economic Surprise Index is unchanged at 49.40, compared to 48.40 the prior day. The index is higher compared to its respective +47.82 5-day and +43.50 10-day moving averages. 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. The index improved and turned positive on July 30th and rose to a recent high of 53.30 on October 1st, but subsequently fell on dollar weakness to -2.10 on October 31st. It has subsequently strengthened. After a lag, the CESIUSD correlates with EPS revisions.

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

Volatility, Skew:

· The CBOE SPX Volatility Index (VIX) closed at 12.46, up +1.05% from 12.33 at the prior close. The VIX is -12.4% below the 14.22 20-day moving average. Its 30-day high is 16.75. Its 30-day low is 11.69. The index's all-time closing low is 9.31 on December 22, 1993. The long-term average is 20.14.

· The Euro Stoxx 50 volatility index (V2X) is 17.54, up +6.53% from 16.46 at the prior day's close. The V2X index trades +5.56% above its 16.60 20-day moving average, -7.86% below the 19.04 30-day high, and +27.2% above the 13.79 30-day low.

· The Hang Seng volatility index (VHSI) closed at 14.81, down -0.20% from 14.84 the prior day. The VHSI index trades -5.34% below its 15.65 20-day moving average. Its lowest historical close was 11.72, on June 30, 2005.

· CBOE SKEW (SKEW) rose +0.05% to 136.72, compared to 136.65 the prior day, well above a neutral (115-120) range and above 130, which correlates well with market tops. The recent high was a record 143.20 on December 20th. Its recent low was 112.47 on May 25, 2013. Spikes in excess of 130 correlate well with short-term market tops, though not in October or November. The prior record high was 139.25, on March 12, 2012. 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:

· November MoM pending home sales rose %, compared to +1.0% survey and -0.6% revised prior.

· At 10:00, December Dallas Fed manufacturing activity, with 2.0 survey and 1.9 prior.

Overseas Economic Reporting and News:

· Italy - December economic sentiment was 83.6, compared to 83.4 revised prior. Business confidence rose to 98.2, compared to 99.0 survey and 98.2 revised prior .

· United Kingdom - December Hometrack housing survey rose +0.5%, compared to +0.5% prior.

Company Ratings/News:
 

  • None.


Friday's Trade. U.S. equity markets closed modestly mixed, with the NYSE composite setting a new record close. The NYSE composite rose +0.21%, while the Nasdaq, SPX, and DJI fell -0.25%, -0.03%, and -0.01%, respectively.

The U.S. equity market trend is "confirmed uptrend". The uptrend commenced on September 8th.

Market breadth was modestly positive, with gainers 1.03:1 losing stocks. SPX market segments closed mixed. Leaders were oil and gas, basic materials, and utilities, which rose +0.19%. Financials fell -0.08%. Laggards were health care, technology, and consumer services, which fell at least -0.12%.

NYSE volume rose +0.76% to 423.71 million shares, compared to 420.51 million shares the prior day, 0.60x the 706.46 million shares 20-day moving average volume. On the day, bond markets strengthened modestly. The U.S. 10-year yield opened at 2.9877%, fell to an early 2.9702% mid-morning low, then moved higher to end at 3.000%, up +0.95 bps compared to the prior close.

From its prior day 1842.02 record close, SPX futures suggested modest opening gains, and the index opened above 1843.00 and set an early 1844.89 intraday high. Momentum failed, and the index reversed lower to a mid-morning 1839.81 intraday low and then traded narrowly around 1841 through the close. The index closed at 1841.40, -0.03% off the prior day's 1841.40 record close. The index closed +71.3% above the 1074.77 October 4, 2011, intraday low.

The DJ Transportation index (TRAN) fell -0.16%, compared to the DJI's -0.01% loss. The TRAN rose opened higher and rallied to an early 7,352.08 intraday high, but quickly reversed lower to a mid-morning 7,320.19 intraday low. The index improved to 7,340 and improved to close at 7,352.08, compared to the prior session's 7,363.64 record close. The TRAN closed at 7,363.64, up +0.33%, compared to the DJI's +0.75% gain. Volume rose +1.09% to 055:1 average 15-day volume. The TRAN closed +2.02% and +3.28% above its respective 20- and 50-day moving averages, and +7.89% and +12.3% above its respective 100- and 200-day moving averages.

Market volatility rose, as the VIX ended up +1.05% at 12.46, compared to 12.33 at the prior close. The VIX set an early 12.20 intraday low, then reversed higher and rose to a late 12.59 intraday high. The index eased in the final half hour. The VIX closed -12.4% below the 14.22 20-day moving average. The VIX's all-time closing low was 9.31, on December 22, 1993.

The broader market's technical factors were little changed. The SPX index closed above its 5-, 10-, 20-, 50-, 100-, and 200-day moving averages. SPX relative strength (RSI) eased to 69.30, compared to 69.69 the prior day, in the top of a neutral range. The RSI is down from an overbought 72.13 on September 18th, when the SPX closed at an earlier record high, but up from an oversold 39.19 on October 9th. The CBOE put/call skew rose +0.05% to 136.72, compared to 136.65 the prior day, well above a neutral 115-120 range, and well above 130, which correlates well with short-term market tops.

Last week, the SPX, DJI, Nasdaq, and NYSE composite closed up +1.27%, +1.59%, +1.26%, and +1.54%, respectively. The prior week, the SPX, DJI, Nasdaq, and NYSE composite closed up +2.42%, 2.965, +2.59%, and +2.42%, respectively. In December, the SPX, DJI, Nasdaq, and NYSE composite are up +1.97%, +2.44%, +2.38%, and +1.67%, respectively. In November, the SPX, DJI, Nasdaq, and NYSE composite closed up +2.80%, +3.48%, +3.58%, and +1.73%, respectively.

In 2013, the SPX, DJI, Nasdaq, and NYSE composite are up +29.1%, +25.8%, +37.7%, +22.6%, respectively. All closed at least +5.91% higher in 2012.

KBW Bank Index (BKX). On greater, but below average holiday week volume, the BKX closed at 69.08, down -0.07% from 69.13 at the prior day's close. The index traded lower to an early 68.97 intraday low, but then reversed higher to a mid-morning 69.29 intraday high before trading narrowly at breakeven through early afternoon then easing late in the session. Volume fell -13.0% to 27.038 million shares, compared to 31.088 million shares the prior day, 0.55:1 the 49.039 million share 15-day moving average.

Large cap banks underperformed the regional banks, as the KBW regional banking index (KRX) fell -0.04%.

Last week, the BKX is up +1.07%, compared to a gain of +2.60% the prior week. In December, the BKX is up +1.92%. In November, the BKX closed up +5.54%, compared to October, when the BKX closed up +3.16%. For the year, the BKX is up +34.7%, better than the SPX's +29.1% rise. In 2012, the index rose +18.1%, compared to a +13.4% rise in the SPX.

The BKX is now +16.7% better than the June 24th 59.19 close, its worst since May 13th. The index crossed above 50 on December 17, 2012, and 60 on May 15, 2013. The BKX closed +112.2% 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 +71.3% in the same period.

The BKX index closed -42.9% below its February 20, 2007, record 121.06 high. The BKX is up +271.0% from its 18.62 March 6, 2009, closing low.

Technical indicators were little changed. The index closed +2.15% and +4.00% above its respective 20- and 50-day moving averages. The index closed +6.28% and +10.4% above its respective 100- and 200-day moving averages. The 20-day moving average rose +5 bps to 67.63. The 66.43 50-day moving average rose +11 bps. Its 100-day moving average rose +4 bps to 65.00, and the 200-day moving average rose +6 bps to 62.58. The 20-day closed (by +1.20 points) below the 50-day, and the gap narrowed -4 bps. The 50-day moving average closed (by +3.85 points) above the 200-day moving average, and the gap widened +3 bps. The 100-day moving average closed (by +2.42 points) above the 200-day moving average, and the gap widened +2 bps.

The directional movement indicator narrowed to +12.804, compared to +14.600 the prior day, its 7th consecutive positive reading. Relative strength slipped to 66.22, compared to 66.83 the prior day, near the top of a neutral range, down from an overbought 72.62 on November 26th, but up from an oversold 35.75 on October 8th. The lowest most recent RSI level was 31.08 on November 14, 2012, which is also the date of the BKX's 2012 closing low. Next resistance is 69.26; next support is at 68.94.

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

S&P 500 Index (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 November, the index closed up +2.80% at 1805.81, compared to 1756.54 the prior month and 1685.96 four months prior. The May 2013 sell countdown progressed to 6. The index closed -0.61% below the risk level.

On a weekly basis, on January 4th, a bullish price flip initiated a sell setup, which perfected the week ending March 1. On August 2nd, the March 1st sell countdown completed and set a 1737.48 risk level, based on the week's 27.81 point range and 1709.67 high. The week ending August 16th, a bearish price flip initiated a buy setup. On September 13th, a bullish price flip initiated a sell countdown which completed on November 8th and initiated a sell countdown. In the week ending December 27th, the index rose +1.27% to 1841.40, compared to 1818.32 the prior week and its 1805.81 close four weeks prior. The December 20th sell setup progressed to 2. The November 8th sell countdown progressed to 7. The index closed +5.98% above the 1737.48 risk level.

On a daily basis, on October 22nd, the SPX completed the September 16th sell countdown and set a 1774.00 risk level, based on the day's 12.85 high/low range and 1759.33 intraday high. Also, the October 10th sell setup perfected, initiating a sell countdown, which completed on November 29th. The completion set a 1,823.12 risk level, based on the day's 9.57 point range and 1803.98 intraday high. On December 11, 2013, a bearish price flip initiated a buy setup. On Friday, the SPX fell -0.03% to 1841.40, compared to 1842.02 the prior day and 1818.32 4 days prior. The December 18th sell setup progressed to 7. The index closed +1.00% above the 1823.12 risk level.

KBW Bank Index (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 November, the index closed up +5.54% at 67.78, compared to 64.22 at October-end and 65.77 four months prior. The May 2013 sell countdown progressed o 6.

On a weekly basis, a bullish price flip occurred on July 27, 2012, and the sell setup perfected the following September 21st. Subsequent trends were weak until December 7, when the index initiated a new sell setup, which perfected on February 1, 2013. On February 22nd, the September 21st sell countdown completed and set a 56.93 risk level. On July 19th, the February 1st sell countdown completed and set a 68.29 risk level, based on the day's 2.24 point range and 66.05 intraday high. On October 18th, a bullish price flip initiated a sell setup, which perfected on December 20th. For the week ending December 27th, the BKX closed up +1.07% at 69.08, compared to 68.35 the prior week and 67.78 four weeks prior. The sell countdown associated with the December 20th perfection initiated. The index closed +1.16% above the 68.29 risk level.

On a daily basis, on August 8th, a bearish price flip initiated a buy setup, which completed on August 19th and initiated a buy countdown. On September 16th, the September 4th sell setup perfected and initiated a sell countdown. The October 22nd, the October 10th sell setup perfected and initiated a sell countdown. On November 8th, a bullish price flip initiated a sell setup, which perfected on November 21st, initiating a sell countdown with completed on December 16th. The completion set a 69.11 risk level. Friday, the index fell -0.07% to 69.08, compared to 69.13 the prior day and 68.35 four days prior. The December 17th sell setup progressed to 8. The October 22nd 12 sell countdown was unchanged. The index closed -0.04% below the risk level.

CBOE SPX Volatility Index (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 November down -0.36% at 13.70, compared to 13.75 at the end of October and 13.45 at the end of July. The bullish index flip canceled a 1 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 December 27th, the VIX fell -9.64% to 12.46, compared to 13.79 the prior week, and 13.70 4 weeks prior. The bearish index flip canceled the November 29th 4 sell setup and initiated a buy setup. The index closed +35.9% above the 9.17 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 perfected on July 9th, when a sell countdown was initiated. On September 13th, the September 4th buy setup perfected. On September 18th, a bearish flip initiated a buy setup. On September 20th, the July 9th buy countdown completed. On October 7th, the September 24th sell setup perfected, and a sell countdown initiated the following day. On December 11th, a bearish price flip initiated a buy setup. On December 26th, the October 25th buy countdown completed. Friday, the VIX rose +1.05% to 12.46, compared to 12.33 the prior day and 13.79 at the 4 days' prior close. The December 18th buy setup progressed to 7. The VIX closed +10.9% above the 11.24 risk level.

U.S. 10-year Bond Index (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 November 2013 up +19.03 bps at 2.7445%, compared to 2.5542% the prior month and 2.5762% 4 months prior. The May 2013 sell setup progressed to 7.

On a weekly basis, Trends were weak until a May 3rd bullish rate flip (at 1.7382%) initiated a sell setup, which perfected on June 28th, when the rate ended at 2.4857%. On October 18th, the February 1st sell countdown completed, setting a 3.2260% risk level, based on the September 6th weekly 22.110 bps range and 3.0050% intraweek high. On November 8th, a bullish rate flip initiated a sell setup. For the week ended December 27th, the rate rose +11.14 bps to 3.0000%, compared to 2.8886% the prior Friday and 2.7445% four weeks prior. The November 8th sell setup progressed to 7. The June 28th sell countdown progressed to 10. The rate closed -22.60 bps below the 3.2260% risk level.

On a daily basis, 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 September 24th, the September 11th buy setup perfected and initiated a buy countdown. On Friday, the rate rose +0.95 bps to 3.0000%, compared to 2.9905% the prior day and 2.8886% four days prior. The December 18th sell setup completed. The September 24th buy countdown is a deferred 13 since November 27th. The rate closed +18.50 bps above the 2.8150% risk level.

EURUSD Spot Exchange Rate (EURUSD 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 November up +0.05% at 1.3591, compared to 1.3584 the prior month and 1.3302 4 months prior. The July 2013 sell setup progressed to 5. The 9 buy countdown progressed is unchanged since March 2013.

On a weekly basis, on September 27th, the April 12th sell countdown completed, setting a 1.4008 risk level. On November 29th a bullish rate flip initiated a sell setup. The week of December 27th, the index rose +0.56% to end at 1.3749, compared to 1.3673 the prior week and 1.3591 4 weeks prior. The November 29th sell setup progressed to 5. The cross closed -1.72% below the 1.4008 risk level.

On a daily basis, on July 10th, a bullish price flip initiated a sell setup, which perfected on July 22nd. On September 16th, the July 2nd sell countdown completed. On September 19th, the September 9th sell setup perfected and initiated a sell countdown. On October 28th, the October 16th sell setup perfected. On November 8th, the October 29th buy setup perfected and initiated a buy countdown. On December 25th, a bullish price flip initiated a sell setup. With Friday's +0.07% higher close, the EURUSD cross ended at 1.3691, compared to 1.3681 the prior day and 1.3673 four days prior. The December 25th sell setup progressed to 2. The November 8th 7 buy countdown is unchanged since December 20th. The cross closed +0.82% above the 1.3580 risk level.

Euro Stoxx 50 (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 November, the index closed up +1.13% at 3,086.64, compared to 3,052.14 the prior month and 2,753.97 four months prior. The July 31st sell setup progressed to 5. The May 2013 sell countdown progressed to 4.

On a weekly basis, a November 23, 2012, bullish price flip initiated a sell setup that perfected January 18, 2013. On August 16th, the January 19th sell countdown completed and set a 2,909.37 risk level, based on the August 16th week's 53.48 range and 2,855.89 intraweek high. The week of September 13th, a bullish price flip initiated a sell setup which perfected on November 11th, which initiated a sell countdown. The week of December 6th, a bearish price flip initiated a buy setup. In the week ended December 27th, the index rose +2.03% to 3,111.37, compared to 3,049.35 the prior week and 3,086.64 at the 4 weeks' prior close. The bullish price flip canceled the December 6th 3 buy setup and initiated a sell setup. The November 11th sell countdown progressed to 2. The index closed +6.94% above the 2,909.37 risk level.

On a daily basis, on September 17th, the September 5th sell setup perfected and initiated a sell countdown, which completed on October 21st. On October 21st, the October 9th sell setup perfected and initiated a sell countdown, which established a 3,056.96 risk level. On December 3rd, a bearish price flip initiated a buy setup, which perfected on December 13th. Friday, the index rose +1.25% to 3,111.37, compared to 3,072.88 the prior day and 3,031.05 at the prior 4 days' close. The December 19th sell setup progressed to 6. The December 13th 1 buy countdown in unchanged since December 13. The index closed +1.57% above the 3,056.96 risk level.

Nikkei 225 (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. In July 2013, the November 2012 sell setup perfected. In September, a bullish price flip initiated a sell setup. In November, the index rose +9.31% to 15,661.87, compared to 14,327.94 the prior month and 13,688.32 four months prior. The September 30th sell setup progressed to 3.

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 December 27th, the index closed up +1.94% at 16,178.94, compared to 15,870.42 the prior week and 15,870.42 four weeks prior. The November 13th sell setup progressed to 7. The index closed +8.36% above the 14,645.46 risk level.

On a daily basis, on September 2nd a bullish price flip initiated a sell setup, which perfected on September 12th. The associated sell countdown initiated on September 18th. On October 10th, a bullish price flip initiated a sell setup. On October 22nd, the September 18th sell countdown completed and set a risk level of 14,935.79. On November 21st, the November 11th sell setup perfected and initiated a sell countdown. On December 13th, a bearish price flip initiated a buy setup. On December 26th, the November 21st sell countdown completed and set a 16,362.09 risk level. Monday, the index rose +0.69% to 16,291.31, compared to 16,178.94 the prior day and to 16,174.44, and 15,889.33 four days prior. The December 18th sell setup progressed to 8. The index closed -0.43% below the 16,362.09 risk level.

Hang Sang Index (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. In October, the index rose +1.52% to 23,206.37, compared to 22,859.86 the prior month and 20.803.29 four months prior. The September 2013 sell setup progressed to 2. The index closed -14.7% 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 December 20th, a bearish price flip initiated a buy setup. For the week ended December 27th, the index closed up +1.89% to 23,243.24, compared to 22,812.18 the prior week and 23,696.28 four weeks prior. The December 20th buy setup progressed to 2. The April 5th 10 buy countdown was unchanged. The index closed +3.96% above the 22,357.00 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 September 12th, the September 2nd sell setup perfected and on September 16th, a sell countdown initiated. On November 4th, the September 16th sell countdown completed and set a 23,991.23 risk level. On December 11th, a bearish price flip initiated a buy setup, which perfected on December 23rd. On December 26th, a bullish price flip initiated a sell setup. On Monday, the index rose +0.01% to 23,244.87, compared to 23,243.24 the prior day and 22,812.18 four days prior. The December 24th sell setup progressed to 3. The index closed -3.11% below the 23,991.23 risk level.

Shanghai Composite Index (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. The perfection initiated a buy setup. In April 2013, a bearish price flip initiated a buy setup. In October, the index closed down -1.52% to 2,141.61, compared to 2,174.67 the prior month and 1,979.21 four months prior. The bullish price flip canceled the April 30th 6 buy setup and initiated a sell setup. The January 2012 9 buy countdown is unchanged since July 2013.

On a weekly basis, 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 September 20th, the July 26th sell setup perfected and initiated a sell countdown. On December 20th, a bearish price flip initiated a buy setup. On December 27th, the index closed the week up +0.79% to 2,101.25, compared to 2,084.79 the prior week and 2,220.50 four weeks prior. The December 20th buy setup progressed to 2. The September 20th 6 sell countdown is unchanged since December 6th.

On a daily basis, On August 13th, the August 1st sell setup perfected and initiated a sell countdown, which perfected on October 10th. On September 3rd a bullish price flip initiated a sell setup and initiated a sell countdown. On November 28th, the October 10th sell countdown completed, setting a 2,259.57 risk level. On December 10th, a bearish price flip initiated a buy setup, which perfected on December 20th and initiated a buy countdown. Monday, the index fell -0.18% to 2,097.53, compared to 2,101.25 at the prior close and 2,092.91 4 days prior. The December 27th sell setup rose to 2. The December 20th 3 buy countdown is unchanged since December 26th. The index closed -7.17% below the 2,259.57 risk level.

SPX, DJI, RTY, TRAN, CCMP, NYA, VIX, SKEW, NKY, EURUSD, USGG10YR, HSI, SHCOMP, SX5E, CAC, DAX, FTSE, JPY, GBP, EUR