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Daily Quant | 2015 | April
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2015 April

Thursday, April 30, 2015

Posted by | The Daily | No Comments

2015-04-29.2

Fed disappoints, leaves future actions wide-open…

Yesterday’s action traded under pressure for most of the session in front of the FOMC meeting. There seem to be little to stimulate any sort of rally after the weak GDP number released yesterday as continued weakness unfolds.

While the Fed said in their statement that they were concerned about weakness in the first quarter, they believe that it will rebound for the balance of the year. The hidden message was that they were not going to raise rates yet but were still going to do it.

The big story yesterday was in the treasury market as it spiked up to 2.08 before settling at 2.035. This is the first time in the last eight weeks that we have been above 2%. There appears to be some momentum to the upside with the major resistance now at the 2.17 level. As I discussed in Monday’s Market Thunder show, I continue to expect to see interest rates stay between the 1.95 and 2.17 levels.

With today being the final day of the month, a close over 2104.50 will be an all-time new monthly high close. However, the last three months the market has been locked in a sideways range between the 2040 and 2115 levels.

Substantial momentum has been lost on the long-term charts and both the short-term and intermediate term charts remain in a very neutral phase. This does not necessarily set a great tone for the beginning of the month of May.

The critical level for the market today is 2116.25. A penetration of this level will set a move toward the 2125.65 highs.  A penetration of the support at 2097.45 will suggest the movement to the downside for the next 2 to 3 sessions.

Should the 2097.45 level be penetrated, it will confirm a move down to 2088/2085 with the, extreme levels of 2076/2072 over the next 5 to 8 sessions. Currently there is only a 40% probability for this to occur.

The market should open flat to lower, with a 60 percent probability to close lower, should the market remain below the 2116.25 level today.  

Today’s Key Levels

  RX 2125.65
  R3 2121.20
  R2 2116.25
Resistance R1 2111.30
Prior Close   2106.85 -7.91
Support S1 2102.40
  S2 2097.45
  S3 2092.50
  SX 2088.10

Wednesday, April 29, 2015

Posted by | The Daily | No Comments

2015-04-28.2

Fed time…

The day is finally here. The FOMC announcement will be released at 2 o’clock Eastern Standard Time. Expectations are very low for the FOMC release. The markets are always on guard to mince words. Maybe we will have a new word to dissect and figure out what the Fed will do with the lift off or the raising of the short term rates.

Yesterday’s action saw quite a bit of volatility as the markets sold off sharply on rumors that a US ship had been taken over in Yemen by the Iranians. However, this proved to be not a US ship but a Danish ship and the markets reversed turning positive within minutes. Also, in the back of market participants mind was the FOMC meeting so the market rallied back sharply to close higher on the session.

The configuration suggests that the market is once again staged to challenge the historic highs at 2125.92. It will take a penetration today of 2118.55 to signal a rally toward the 2132.15/2145.25 levels.

The critical level on the downside is the 2106.70 level. A close below this level today would suggest a further decline toward the lows of yesterday at 2094 with an extreme of 2086.50. There currently is only a 30% probability for a decline of this sort to be signaled.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2106.40 level today.  

Today’s Key Levels

  RX 2130.85
  R3 2127.05
  R2 2122.80
Resistance R1 2118.55
Prior Close   2114.76 +5.84
Support S1 2110.95
  S2 2106.70
  S3 2102.50
  SX 2098.70

Tuesday, April 28, 2015

Posted by | The Daily | No Comments

2015-04-27.2

Markets reverses after new historical highs…

Yesterday’s action was able to trade into a new historical highs at 2125.92. However, the markets quickly reversed from these levels and sold off for the balance of the session, declining to the 2107.04 level and finishing just at the lows at 2108.92.

The configuration suggests that it is critical that the market closes back above 2116.30 or risk a further decline toward the 2086.50/2076.90 levels. A close below 2097.65 will be necessary to signal the decline. There currently is a 30% probability that this will occur. However, a penetration of 2101.55 will set the tone for a test of the critical 2097.65 level.

The market will most likely remain above the support at 2101.55 until after the release of the FOMC announcement on Wednesday.

Expect the market to remain in a choppy pattern into this announcement.

The market should open flat to lower, with a 60 percent probability to close lower, should the market remain below the 2116.30 level today.  

Today’s Key Levels

  RX 2123.70
  R3 2120.20
  R2 2116.30
Resistance R1 2112.40
Prior Close   2108.92 -8.77
Support S1 2105.45
  S2 2101.55
  S3 2097.65
  SX 2094.15

Monday, April 27, 2015

Posted by | The Weekly Brief | No Comments

Market Overview
2014-08-25 YTD

YTD Performance

New highs for the NASDAQ and the S&P. All eyes now focused on the Fed…

As we begin this new week there is plenty of activity. It will be hard to get bored.  We have the FOMC meeting, a plethora of economic reports, and plenty of earnings to be released.

As the weeks, months and years unfold after the crisis, it is becoming clear that there may be a new paradigm that the world operates on. While it was unprecedented action that was taken in the 2009 crisis by the QE programs, bailouts, etc., they now are tools in the chest to continue the manipulation and engineering of the economies of the world.

However, in the end the same greed and fear that dominates the common investor will ultimately reveal an extreme weakness which will be market participants’ inability to continue to believe. As the massive amounts of debt continue to build in the treasuries of the US, other Western nations, and corporations it will ultimately end like an avalanche on Mount Everest.

As I have discussed many times before, I believe that market participants will ultimately lead the Fed rather than the Fed continuing to lead the markets. While this shift in the markets doesn’t appear to be about to happen now, it does appear that it is now just a matter of time.

It is very possible that something as simple as the Grexit could be a trigger for market participants to become uneasy. Rumors of banks freezing accounts and possible capital controls in Greece could cause a substantial amount of uneasiness in the markets.

My expectation for this week is that we will trade in a choppy range with an upward bias prior to the release of the FOMC announcement on Wednesday and then action will pick up substantially from there as Thursday and Friday have a substantial amount of economic releases.

By the Box

YTD Performance

2014-08-25 StyleBoxes1

Performance Divergence

2014-08-25 StyleBoxes2

SP 500 for the week of 04/20/2015

2014-08-25 PriorWeek

2014-08-25 PriorWeekLevels

Looking back on last week

Monday

Markets opened on a stronger note with the S&P finishing up 0.92% on the session. This erased the bulk of the decline from Friday. Most of this action was based upon the People’s Bank of China lowering the reserve requirement ratio on all banks to 18.5% from 19.5%. This cut was the largest since November 2008 which has market participants hoping for the slowdown in China to end. This sentiment flowed throughout Europe and into the US open and kept the market trading at the higher levels for the entire session.

Tuesday

Markets opened on a stronger note but were unable to hold that strength as the markets faded, trading in a sideways range just below unchanged for most of the session, with the S&P finishing down 0.14%. The only featured events of the day was the M&A activity between Teva and Mylan this kept a strong bid in the pharmaceuticals and the biotechnology group with IBB showing a 1.8% gain.

Wednesday

Markets opened flat and traded down early in the session but then saw a midsession rally with the S&P finishing up 0.51%. While the gains were only moderate, all 10 sectors showed a positive return by the close with the technology sector leading the way up 1.1%. Much of the positive sentiment was generated by news that MasterCard and Visa would be able to process transactions in China.

Thursday

The rally continued on Thursday as a modest gain by the S&P of 0.24% was registered. The NASDAQ was able to move to a new record high close of 5056 going back to March 10, 2000. While the markets were able to move higher, most of the economic news continues to be disappointing across the planet. The only bright spot was that the New Housing Sales had exceeded expectations. After the midsession rally, the market sold off in the last hour but finished in positive territory.

Friday

 Markets opened steady on Friday and traded higher throughout the session with the S&P finishing up 0.23% and 1.75% for the week. This was the second week in a row of strong performance even as the backdrop of economic performance remained weak.

Market sentiment was positive triggered by the earnings release of Amazon which showed strong revenues and better than expected operating income with the stock surging up 14.19%. But looking at the sector by sector performance, it was quite mixed with financials down -0.2%, industrials -0.4%, and energy down -0.6%. But in the end, it was a very positive week for the S&P 500 and the markets in general. 



S&P 500 for 04/24/2015

2015-04-24.2

While Friday’s action was positive, it was a very choppy session with not a lot of leadership outside of the technology sector. The configuration suggests that we still need a close over 2119.40 to signal higher prices in the pattern. There is a 60% probability that we will see the close over this level and we should move directly to the 2128.95/2132.50 levels. While the markets continue to move higher, the momentum continues to be lackluster.

There appears to be some hesitancy in the patterns suggesting that if we do not rally above the 2138.10 level this week and close lower, then we could be entering into a 2 to 4 week downward pattern. The close on Friday was unable to inspire new momentum suggesting that we will see a deceleration from this point.

The critical level on the downside today is 2110.30. A penetration would suggest a minor decline toward the 2106/2102 levels. There currently is only a 30% probability for that to occur.

The overall technical pitcher continues to suggest that the underlying trend is to the upside but it is becoming more fragile as the weeks unfold.

The market should open flat to higher with a 60 percent probability to close higher should the market remain above the 2110.30 Level today.

This Week’s Key Levels

ER 2158.50
R3 2148.90
R2 2138.10
Resistance R1 2127.35
Prior Close   2117.69 +36.51
Support S1 2108.05
S2 2097.30
S3 2086.50
ES 2076.90

Today’s Key Levels

ER 2132.50
R3 2128.95
R2 2125.10
Resistance R1 2121.20
Prior Close   2117.69 +4.76
Support S1 2114.20
S2 2110.30
S3 2106.40
ES 2102.90

Friday, April 24, 2015

Posted by | The Daily | No Comments

2015-04-23.2

Just one more number to go…

Yesterday’s action was able to trade into a new historical high with the intraday high of 2120.49. Also, the market was able to close above the 2111.40 levels suggesting that we will move higher in the pattern. It still will be necessary for the market to close above 2119.45 to confirm the move but there is a 60% probability that the market will now move toward the 2121/2133 levels.

The critical point in the downside for today is 2104.35. A penetration of this level will set the tone for a weaker close suggesting the market would fall back into the range again. There currently is only a 30% probability for this to occur.

While we’ve managed to move to the upper end of the trading range again and penetrate the old highs, we still need to get that confirmation close over 2119. There are no new signals that have been generated from a Fibonacci standpoint for objectives to the upside until we get this close.

The market should open flat to higher, with a 60 percent probability to close higher, should the market remain above the 2104.35 level today.  

Today’s Key Levels

RX 2130.10
R3 2126.05
R2 2121.50
Resistance R1 2116.95
Prior Close 2112.93 +4.97
Support S1 2108.90
S2 2104.35
S3 2099.80
SX 2095.75

 

 

 

Thursday, April 23, 2015

Posted by | The Daily | No Comments

2015-04-22.2

Will a breakout be signaled this time?

The past several sessions I’ve been looking for a close over 2106.40 to signal a retest of the next two resistance levels at 2111 and 2119. As I’ve discussed before, if we can get over these hurdles, then we should continue to move toward an upward objective of around 2127/2142.

It will be critical for the market to close higher today; more specifically above 2116.95.  If this occurs, then we should see a move above the old historical highs at 2119. Furthermore, the markets should move out of the zone into the next level of resistance. Failure to close above 2116.95 today would suggest that we would fall back toward the 2098/2089 levels over the next 2 to 3 days. There currently is a 60% probability that the market will close higher today and move into a new historical high.

The market could finally be in position to move out of the range. But we’ve seen this picture before.  We will see if we get these confirmations to signal the next level to the upside.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2103.60 Level today.  

Today’s Key Levels

  RX 2125.95
  R3 2121.70
  R2 2116.90
Resistance R1 2112.20
Prior Close   2107.96 +10.67
Support S1 2103.70
  S2 2098.95
  S3 2094.20
  SX 2089.95

Wednesday, April 22, 2015

Posted by | The Daily | No Comments

2015-04-21.2

Yawn….

Early in yesterday’s session the market was able to trade up to 2109.64. Shortly after reaching this area, the market reversed and continued to decline for the next 2 hours as the market continued in a sideways range near the lows of the day for the balance of the session to finish at 2097.29.

The configuration suggests that we are in an ongoing sideways trading pattern. Should the 2092.15 level be breached today, we will see a further decline toward 2086/2075 over the next 2 to 3 sessions. Last week’s high was 2111.91. Unless this level is penetrated this week, we could see the markets fall back toward the levels mentioned earlier at 2086/2085.

There appears to be very little able to drive this market. Unless we can get market sentiment to change in the next 3 sessions we can expect more narrow range trading until we can close above 2119 or below 2075.

The market should open flat to lower, with a 60 percent probability to close lower, should the market remain below the 2108.20 Level today.  

Today’s Key Levels

  RX 2119.05
  R3 2113.95
  R2 2108.20
Resistance R1 2102.95
Prior Close   2097.29 -3.11
Support S1 2092.15
  S2 2086.40
  S3 2080.65
  SX 2075.50

Tuesday, April 21, 2015

Posted by | The Daily | No Comments

2015-04-20.2

Here we go again…

Yesterday’s rally reversed Friday’s sharp selloff and for basically different reasons from the same source. On Thursday it was announced that China was going to restrict margin accounts which caused the selloff in China which caused selloffs in the US and Europe. On Sunday China lowered the reserve requirement by 100 basis points which in effect has put huge liquidity into the banking system.

As I’ve discussed many times, when the word stimulus comes in, the markets rally. This has been the case since the crisis in ‘09. But with the market closing back at 2100 yesterday, the stage is set one more time to challenge the 2106.40 pivot number. A close above that level would signal a retest of the historical highs at 2119. Each time in the past that we have gotten toward this level, the market has sold off back toward the 2080/2070 levels.

As I mentioned in the Market Thunder show yesterday, if we can get a close above 2106.40, then it is likely that we will see a continuation to test the 2119 levels. Based on yesterday’s action, there were some new Fibonacci projections rendered which now suggest the market is likely to rally towards the 2129/2141 levels. However, it will take a close above 2106.40 first followed by a move above 2119 to confirm that the market will move to this next level. These projections came off a short-term chart which suggests if we do get a close over 2119 then we could see further higher objectives.

This five-month trading range that we been have been locked in between 2040/2119 has not been able to move beyond these constraints but a break above 2119 will set the tone for higher prices.

One of the other issues that continues to be dominant is that there is very little traction across asset classes on individual stocks. The current VPM database is only 41% long when looking at the 6100 stocks that we have in our database. The percent bullish on just stocks will need to move above the 46% level to signal a further expansion.

The next several days will be all about earnings. There were over 550 companies releasing earnings in the next four sessions. These reports combined with the forward-looking statements from these companies will drive market sentiment for the rest of this week. With already low expectations there is a pretty good chance that we could see some significant beats.

We should have a better feeling for how this earnings season will go by the close of Wednesday. There are quite a few significant reports to be released that is likely to signal a directional move for the markets for the next 5 to 12 sessions.

The market should open flat to higher with a 60 percent probability to close higher should the market remain above the 2090.00 Level today.  

Today’s Key Levels

  RX 2120.05
  R3 2116.00
  R2 2110.60
Resistance R1 2105.25
Prior Close   2100.22 +19.22
Support S1 2095.60
  S2 2090.00
  S3 2084.80
  SX 2079.95

Monday, April 20, 2015

Posted by | The Weekly Brief | No Comments

Market Overview
2014-08-25 YTD

YTD Performance

China panics!  Lowers rates 1% and decreases reserve requirements most since 2008…

As we begin this week we are already seeing central bank activity to stimulate the markets. While the drop in rates was more than expected, there currently is very little positive response to move the Asian markets. The Chinese markets are trading at seven-year highs and are basically stable at current levels, just slightly lower on the session. But as I have discussed in the past, we continue to see central bankers outside of the US looking to lower rates and stimulate while the US is trying to normalize rates.

While this is going in the background we have the potential for the Grexit. Greece officials continue to play a hard line with creditors keeping plenty of attention on the markets. Also, events in Yemen are keeping the markets somewhat defensive overseas.

As we begin this week in the US we have a substantial amount of earnings to be released. This will dominate market sentiment as economic releases will be moderate this week. On Wednesday we will see Existing Home Sales, Thursday Jobless Claims, PMI Manufacturing, and a slew of treasury auction announcements, and lastly on Friday we will see Durable Goods Orders. None of these releases should have a material effect on the market sentiment. Most of this week will be driven by earnings releases and forward-looking guidance.

By the Box

YTD Performance

2014-08-25 StyleBoxes1

Performance Divergence

2014-08-25 StyleBoxes2

SP 500 for the week of 04/13/2015

2014-08-25 PriorWeek

2014-08-25 PriorWeekLevels

Looking back on last week

Monday

Monday began on a slightly higher note and held in positive territory for the 1st two hours before beginning a decline with the S&P finishing lower by 0.46% on the session. The overall session was very quiet as the S&P 500 was on track to finish higher for the 4th session in the row and traded in a 15 point range for the session before declining in the last two hours to finish lower. The financial sector was the only positive sector, up 0.3%. All other groups were flat to slightly lower.

Tuesday

The market opened flat and declined in the 1st two hours of the session. Then, the market began a rebound to finish just slightly higher on the day with the S&P up 0.16%. The big news of the day was March Retail Sales showing a +0.9% reading. This was just slightly lower than consensus but still positive. The driving force for the session keeping it flat was crude oil as it rallied 2.7% to 53.31 per barrel. This helped the energy sector move up 1.8%, leading the way and keeping the market stable for the session.

Wednesday

Wednesday began on an uptick and remained positive throughout the session as the S&P was able to finish up 0.51%. The news out of China was that GDP came in at 7.0% year-over-year. This represented a six-year low but had no effect on market sentiment. The US dollar was slightly lower on the session which helped keep a bid for the entire day. The energy sector lead the way up again with a gain of 2.3% continuing the gains for the month to 6.8% on the sector.

Thursday

The market started on a slightly lower note. By the last two hours the market had managed to trade higher on the session but could not hold onto the gains as the S&P finished down -0.8% into the close. Some of the overnight news helped to keep a bid in the markets as reports indicated that the Greeks were coming up a restructuring deal with their creditors was later denied. There was little to hold the market up in the final hours of trading as it moved back to unchanged.

Friday

The market opened sharply lower with the S&P declining 1.13% and the Russell 2000 down 1.6%. Most of this decline was generated because of a move by the China regulatory commission to ban margin financing the over-the-counter trades. This triggered a bit of a liquidity crunch as market participants in China sold shares to raise capital. There was also a disruption of Bloomberg terminal’s that caused a further liquidity issue keeping the pressure on the markets for most of the session. The market was able to recover slightly in the final hour of trading finishing off the lows of the session. There were also news flowing out of Europe on the Greek sovereign debt issues as they continue to see rates increase. In the end, the week finished down 1% as Friday’s action representing the entire decline for the week. Up to this point there was very little actual movement from day-to-day activity.


S&P 500 for 04/17/2015

2015-04-17.2

Friday’s sharp selloff has signaled a move back into the trading range. As I have mentioned over the past several weeks, the range continues to be between 2045 and 2115. We saw a high around the 2111 area before the market declined back to 2072 on Friday. The configuration suggests that the market is likely to see some stabilization at these levels and move back toward the 2085/2090 levels over the next 2 sessions.

However, a penetration of 2076.80 today will signal a move toward the 2067/2062 levels. A close below 2076.80 will signal a move lower over the next several sessions suggesting a move down to 2034. There currently is only a 40% probability for the 2076.80 level to be penetrated. The market is likely to trade higher for at least 3 sessions this week.

The lower close on Friday has triggered a pretty substantial loss in momentum on the intermediate weekly graphs. This sets the tone for a potential close below the 2067.00 level. Should this occur it would indicate a move to a minimum of 2034 within an extreme of 2004/1985.

As I have discussed many times in the past, every time we get up at the upper range above 2100, the market has failed. However, this time it has traded down to the 2040 level where it was supported at that level. Until we see a break out of this range, it is likely that this choppiness will continue. Most of this uncertainty in the market is due to just the lack of directional movement in the US dollar.

As I have mentioned also on the Market Thunder show, it is possible that the pattern that is occurring in the energy stocks keep us in the sidewise trading range. Should there be positive earnings or a resolution in Greece which would trigger market sentiment, or a combination of this activity then and only then will we see the market trade higher in this range. Every week that goes by that we don’t see these resolutions and the markets continue in a sideways range a negative scenario is building.

The market should open higher, with a 60 percent probability to close higher, should the market remain above the 2076.80 Level today.

 

 

This Week’s Key Levels

ER 2123.25
R3 2113.35
R2 2102.20
Resistance R1 2091.10
Prior Close   2081.18 -20.88
Support S1 2071.25
S2 2060.15
S3 2049.05
ES 2039.10

Today’s Key Levels

ER 2099.70
R3 2095.35
R2 2090.45
Resistance R1 2085.55
Prior Close   2081.18 -23.81
Support S1 2076.80
S2 2071.90
S3 2067.00
ES 2062.65

Friday, April 17, 2015

Posted by | The Daily | No Comments

2015-04-16.2

Markets hesitate… CPI in focus

As the markets unfold this week market participants continues to look for a trigger point to stimulate market sentiment. Today’s release of CPI is down to a one point variation between bullish and bearish. Should it come in at +0.3% or higher, this would suggest to many participants that the Fed will be raising rates earlier, probably in June. A 0.2% reading will suggest to most that the markets will remain in this trading pattern with a slight bias to the upside.

Yesterday’s action saw the market decline right to the key support at the 2099 level with an intraday low of 2100.02. The market rebounded from his level trading up just shy of Wednesday’s high at the 2111.92 level with an intraday high of 2111.30. The close yesterday fell short of maintaining the critical level of 2106.60 with a close of 2104.99. It will be critical that the market closes above 2106.40 today to keep momentum expanding. Otherwise, we could see the market decline back toward the lows that we saw earlier in the week between the 2090/2088 levels.

The markets continue to show tremendous amount of resistance above 2100, especially as we approach the all-time highs at 2119. As I mentioned in yesterday’s commentary, the short term objectives are for a retest of 2119 with the possibility going to slightly higher between 2124/2128.

The critical level today is 2098.20. Penetration of this level will signal lower prices in the pattern. It will take a penetration of 2111.80 to signal higher prices on the upside as the trading range continues.

The market should open flat to lower, with a 60 percent probability to close higher, should the market remain above the 2098.20 level today.  

Today’s Key Levels

RX 2118.60
R3 2115.40
R2 2111.80
Resistance R1 2108.20
Prior Close 2104.99-1.64
Support S1 2101.80
S2 2098.20
S3 2094.60
SX 2091.40

 

 

 

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