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20Mar2015 Market Update: Quad-Witching Day Provides Excitement, But Fundamentally Nothing Has Changed

Written by Gary

Oils spikes and dollar plummets on quad-witching day as the HFT algo computers play and plain old Wall Street manipulation havoc with the averages. Remember, all of this is temporary finances gone awry and lower dollars will not empty near over flowing oil tanks. Fundamentally, nothing has changed, even volume is low, falling US dollar stopped falling along with oil rising.

By noon the averages were still climbing albeit slowly and may be turning over.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 1.46% while U.S.'s S&P 500 is up 0.94% and Mexico's IPC is up 0.36%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 63
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 39
Investors Intelligence sets the breath Above 50 bullish 57.9
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -6.27
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 56.30
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 65.06
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 71.40
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 19.41
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 76.78
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,061

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street climbs on Nike, biotech lift

(Reuters) - U.S. stocks rose on Friday, lifted by results from Nike and another climb in biotechs, as investors assessed the impact of a stronger dollar on corporate earnings.

Fed's Lockhart says U.S. should step up shadow bank monitoring

ATHENS, Ga. (Reuters) - U.S. regulators need to step up monitoring of shadow banks as part of their effort to build a more stable financial system, Atlanta Federal Reserve President Dennis Lockhart said on Friday.

Retiring: Finding Success, Well Past the Age of Wunderkind

Through the arts, education and other pursuits, more people are experiencing late-life rebirths that are rewarding creatively, emotionally and spiritually.

After Backtracking on Trans-Atlantic Flights, Ryanair Learns Its Lessons

While airline executives had discussed loose plans to create such long-haul flights, the project had never been formally discussed by its board.

Merkel sets strict terms for Greek aid, Juncker flags EU cash

BRUSSELS (Reuters) - German Chancellor Angela Merkel, the euro zone's main paymaster, said on Friday Greece would only receive fresh funds to ease a cash crunch once its creditors approve a comprehensive list of reforms it has promised to present soon.

Simon says: Macerich offer 'best and final'

(Reuters) - Simon Property Group Inc , the No.1 U.S. mall owner, made what it said was its "best and final offer" for Macerich Co three days after its smaller rival rejected its initial proposal and adopted a poison pill takeover defense.

The Latest Flashing Red Light: Global Earnings Plunge Most Since Lehman

We will leave it to the chartists to provide an appropriate name for the formation shown below (mutation unchallenged head and shoulders?) but one that is obvious is that global stocks as measured by the MSCI world index have never been higher, and the global central bank bubbe has now easily surpassed both the dot com bubble and the first housing/credit bubble.

But why the surge? We will leave that one to the economists, but we will observe that as BofA comments, "global equity 12-month forward EPS has turned negative on a YoY basis (-6.7%)."

In fact, as the chart below shows, global forward EPS is now plunging at the fastest rate since Lehman, and is down to levels last seen in 2011.

Incidentally, this shoudl not come as a surprise to those who recall our
article that in the most recent period, the "Global Dollar Economy
Suffers Biggest Plunge Since Lehman, Down $4 Trillion." It only makes sense that as global GDP denominated in the reserve currency tumbles, it will drag global Earnings with it as well.

BofA also says what everyone knows, that "investor submission to central bank policies of financial repression is visible" but warns that "equity gains wi ...

Why We're Drifting Towards World War 3

The Economist argues that there are ominous parallels between the conditions which led to the first world war and today:

The United States is Britain, the superpower on the wane, unable to guarantee global security. Its main trading partner, China, plays the part of Germany, a new economic power bristling with nationalist indignation and building up its armed forces rapidly. Modern Japan is France, an ally of the retreating hegemon and a declining regional power. The parallels are not exact—China lacks the Kaiser's territorial ambitions and America's defence budget is far more impressive than imperial Britain's—but they are close enough for the world to be on its guard.

Which, by and large, it is not. The most troubling similarity between 1914 and now is complacency. Businesspeople today are like businesspeople then: too busy making money to notice the serpents flickering at the bottom of their trading screens. Politicians are playing with nationalism just as they did 100 years ago. China's leaders whip up Japanophobia, using it as cover for economic reforms, while Shinzo Abe stirs Japanese nationalism for similar reasons.

The New Republic points out that global downturns can lead to war:

As the experience of the 1930s testified, a prolonged global downturn can have profound political and geopolitical repercussions. In the U.S. and Europe, the downturn has already inspired ...

13 March 2015: ECRI's WLI Marginally Improves but Continues in Negative Territory

ECRI's WLI Growth Index was improved but has remained in negative territory for 22 weeks. According to ECRI, this index is forecasting slower economic growth in 1H2015 and now into 2H2015. ECRI also reported their coincident and lagging indexes this week and is reported below.

Read more ...

Discount trends, Hong Kong protests slow diamond sales growth: De Beers

LONDON (Reuters) - Diamond jewelery sales will keep growing but at a more modest pace, De Beers predicts, blaming a slowdown that started late last year on changing Christmas shopping trends and protest in Hong Kong.

Graco to Pay $10 Million for Delay in Recall of Defective Child Seats

The amount consists of a $3 million fine and $7 million that the company will spend to develop safety programs.

Recent Economic Data Shows the Good Side of Deflation

Submitted by Mises Institute

The Fed, the ECB, and the Bank of England repeatedly tell us that deflation is extremely dangerous for an economy. Central bankers, most economists, and the media speak of deflation as one of the greatest disasters that can strike an economy.

It is stunning then, given the apparent importance of the subject â€" and the possible collateral damage of pro-inflation policies â€" that few seem to bother to ask the deeper, fundamental question: does the historical data show that deflation is actually a terrible thing? The data suggests that it is not. In fact, looking at recent GDP, inflation, and employment data, one could even say that a shot of deflation is what many economies need. Let us take a look at the recent real-life examples.

Japan

Japan is the only Western country that has experienced protracted deflation in recent decades. According to those with deflation-phobia, deflation is a disaster in part because it causes households to postpone their spending, leading to falling consumption and high unemployment. Thus, Japan should be a country characterized by high unemployment, everything but a bustling shopping scene, and a much lower standard of living than, say, twenty years ago. Japan should also be absent from every international comparison of economies in terms of innovation. Instead, Japan features at least in the top 5 of every ranking of the most innovative countries in the world, consumption has increased in spite of years ...

U.S. to set fracking standards on federal land

WASHINGTON (Reuters) - The Obama administration on Friday is due to unveil rules for oil companies that frack on federal land, included beefed-up safety measures, but won't likely require strict oversight as environmental groups want, according to sources.

Chart Of The Day: Biotechs

Presenting the XBI Biotech ETF. And since this time is different, no commentary is necessary.

Wall St. Rises, Buoyed by Solid Earnings

Shares of Nike and Darden Restaurants were up in early trading after their quarterly results beat analysts' expectations.

Shortcuts: Learning to Get Along as Life Inevitably Changes

Most people recover after even the most difficult changes, but it's easier to bounce back if you have emotional, social and financial resources.

Varoufakis Explains How The Video Of His Middle Finger Is "Turning Proud Nations Against Each Other"

Last weekend, we pointed out that while completely irrelevant if Varoufakis had "stuck Germany the finger" in whatever context, that the German media would have a field day with it. Little did we know the firestorm that the German press would unleash, and how obssessed Germany would become with the topic of the Greek finmin's middle finger (which he claimed was faked, and promptly a German spoof emerged that alleged that the video was indeed fake... before that spoof itself was said to be fake too!).

The problem with this latest fiasco is that it took attention away from the key issues: not just the Greek insolvency, but - at the core - how the European Union is only such when it suits the interests of the majority, bringing Greece once again to the edge of expulsion from Europe.

However, Varoufakis' middle finger was useful in one specific way: to rip away the facade of solidarity and freidnship in Europe, and reveal just how ugly the undelrying truth is, and to hint just how much uglier it will become once the money runs out not only for Greece, but for everyone else, or as Varoufakis himself who in a blog post today summarized his "middle finger" best when he said that it "has sparked off a kerfuffle reflecting the manner in which the 2008 banking crisis began to undermine Europe's badly designed monetary union, turning proud nations against each other."

Sadly for Europe, which faces an ever uglier face every time it looks in the mirrer, he is right.

* * *

From

Kaisa Bondholders Reject Debt Restructuring Plan

The move could jeopardize a takeover by Sunac China Holdings as the developer tries to avoid becoming the first in China to default on offshore debt.

Tiffany's Sales Fall for First Time in Five Years on Strong Dollar

Upscale jeweler Tiffany & Co's quarterly sales fell for the first time in five years and are expected to decline further in the current quarter, hurt by the strong dollar.

Tiffany's sales fall for first time in five years on strong dollar

(Reuters) - Upscale jeweler Tiffany & Co's quarterly sales fell for the first time in five years and are expected to decline further in the current quarter, hurt by the strong dollar.

Underwater Homeowners "Here To Stay" Zillow Says

A few weeks back we commented on the rather disturbing news that repeat foreclosures jumped in January:

According to Black Knight Financial, both new and repeat foreclosures hit a 12-month high during the first month of the year with repeats (i.e. the borrower was rescued but has since entered the foreclosure process again) jumping 11% M/M. More troubling is the trend in repeat foreclosures which accounted for only 15% of total foreclosures during the crisis but now make up a startling 51%.

Here's what the trend looks like:

Now, a new report from Zillow seems to offer further evidence that the US housing market may not be the picture of health after all (as if we needed more proof after housing starts cratered 17% in February). The percentage of homeowners underwater in the US was flat from Q3 to Q4 which doesn't sound all that terrible until you consider that this figure had fallen for 10 consecutive quarters. Things look particularly bad in Florida and the midwest where Zillow notes more than 25% of borrowers are sitting in a negative equity position. Here's more:

< ...

Treasury's Lew says a strong dollar is a good thing

MIAMI (Reuters) - U.S. Treasury Secretary Jack Lew on Friday said a strong U.S. dollar was a "good thing" and reflected strength in the U.S. economy, repeating a long-standing mantra of U.S. administrations.

Russia's Putin calls for regional currency union

ASTANA (Reuters) - Russian President Vladimir Putin proposed on Friday creating a regional currency union with Belarus and Kazakhstan, Russia's main partners in a union of ex-Soviet states facing growing economic challenges.

Oil, S&P Futures Soar As Quad Witch Volatility Arrives

Just as we warned not even two hours ago, things on quad-witching get exciting, and volatile.

And sure enough, after starting out the overnight session calmly and without much fanfare, US equity futures have proceeded to surge on absolutely no news, but merely what appears to be the latest market-wide stop hunt, or as the CME's central bank liquidity rebate program is being put to good use.

The target: taking out any and all stops since the post-FOMC highs.

As for oil... well, why not.

Simon Property Raises Offer for Mall Rival

Simon Property says offer of $95.50 a share in cash and stock is its "best and final offer."

Graco Fined for Delayed Reporting of Seat-Buckle Complaints

Graco has agreed to pay a $3 million fine to the government for being too slow to report complaints about difficulty opening car seat buckles.

Holcim wins better terms to get Lafarge tie-up back on track

PARIS/ZURICH (Reuters) - Switzerland's Holcim and France's Lafarge have agreed new terms for their plan to create the world's top cement firm, giving unhappy shareholders in the Swiss firm a better deal but leaving a key leadership question unanswered.

Australia signals approval of China-based AIIB; Japan divided

TOKYO/SYDNEY (Reuters) - Australia said on Friday there was a lot of merit in the China-led Asian Infrastructure Investment Bank (AIIB) while Japan's finance minister signalled cautious approval of the institution that the United States has warned against.

Earnings Summary for Today

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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