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07Apr2015 Market Update: Markets In The Green, Volatility Greater Than Expected, Including Bear Trap

Written by Gary

Markets opened in the green as expected, then dip back to the unchanged line as a bear trap, than back up again. Not sure we can pin a tag on this mornings volatile movements, but the traders sure loved it.

Here is the current market situation from CNN Money

North and South American markets are mixed today. The IPC is up 1.88% while the S&P 500 gains 0.22%. The Bovespa is off 0.22%.

Our medium term indicators are leaning towards SELL portfolio of non-performers and the session market direction meter (for day traders) is 38 % bullish down from 52 % bullish at the opening bell. We remain mostly conservatively bullish, but with a bearish slant. I am very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals that will only please the day traders. The SP500 MACD has turned down, but remains below zero at -1.09. It is expect to move lower over the next few sessions before turning back up.

What Is Moving the Markets

Here are the headlines moving the markets.

Stocks And The Fundamental Backdrop: The New Strategy Is "Hope"

Submitted by Pater Tenebrarum via Acting-Man blog,

When Will Bad News Cease to be Good News for Stocks?

It is quite amazing to watch this. Even as one economic datum after another indicates that a major slowdown is underway that could well turn into a recession (keep in mind that this is not a certainty - at similar junctures in recent years, aggregate economic data recovered just in the nick of time), the US stock market continues to take everything in stride.

The most recent example was the enormous "miss" of the payrolls report on Friday. The cash market was closed on Friday, but US stock futures still traded briefly after the release and declined sharply. Whatever concerns futures traders had were evidently forgotten by Monday. After all, weak jobs data mean more free money from the central bank for longer, as the much talked about rate hike will likely be put off further.

Elnur Amikishiyev - Getty Images

Image credit: Elnur Amikishiyev | Getty Images

It appears though that we didn't really get the memo. According to press reports, the market's sanguine reception of the payrolls data miss isn't driven by expectations about central bank policy. Instead, the main driver is "hope". Hope is generally not thought to be an investment strategy, but there it is. What is even more curious is what the hope is all about. A headline at Reuters reads: "S ...

Mercedes, Nissan expand cooperation to build medium-sized pickup

FRANKFURT (Reuters) - German carmaker Daimler on Tuesday said it would expand its cooperation with strategic partner Nissan to develop a mid-sized pickup truck for Mercedes-Benz.

Fed should not raise rates until late 2016: Kocherlakota

BISMARCK, N.D. (Reuters) - Minneapolis Fed President Narayana Kocherlakota on Tuesday laid out a case for waiting until the second half of 2016 to start raising interest rates, and to then raise them gradually to just 2 percent by the end of 2017.

U.S. job openings at 14-year high in February

WASHINGTON (Reuters) - U.S. job openings surged to a 14-year high in February, a sign that the labor market remains on a solid footing despite a sharp slowdown in job growth last month.

Buffett Bailout? Rail-Based Oil Transit Tumbles To Lowest In Over A Year

It appears time for the Oracle of Omaha to start pressing his bought-and-paid-for Washington well-be-dones as his immensely profitable rail freight business - built on the back of massive deflation-inducing malinvestment in US Shale businesses thanks to ZIRP and QE - is running out of steam. As WSJ reports, in March, oil-train traffic was down 7% on a year-over-year basis amid safety concerns and with lower crude prices, "the extra cost of rail makes it a tougher choice," notes on analyst, adding that the WTI-Brent spread needs to increase "for the economics of crude by rail" to make sense.

As WSJ reports,

The growth in oil-train shipments fueled by the U.S. energy boom has stalled in recent months, dampened by safety problems and low crude prices.

The number of train cars carrying crude and other petroleum products peaked last fall, according to data from the Association of American Railroads, and began edging down. In March, oil-train traffic was down 7% on a year-over-year basis.

Railroads have been a major beneficiary of the U.S. energy boom, as oil companies turned to trains to move crude to refineries from remote oil fields in North Dakota and other areas not served by pipelines. Rail shipments of oil have ...

February 2015 JOLTS Continues to Predict Elevated Jobs Growth Rate

Written by Steven Hansen

The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year private non-farm job opening growth rate declined marginally. Even with this decline, the jobs growth is still predicted to be historically elevated. The problem with this data series is the huge backward revisions which makes real time analysis problematic.

Scandal-hit Petrobras may issue earnings in April: JP Morgan

RIO DE JANEIRO (Reuters) - Petróleo Brasileiro SA, struggling with fallout from a corruption scandal and a decline in oil prices, could release audited financial information this month despite facing "a perfect storm," analysts at JPMorgan Securities said on Tuesday.

Biggest Shortage Of US 10-Year Treasurys Since June 2014

We are glad to see that after beating the drum on the unprecedented bond market liquidity (and underlying) shortage for over two and a half years (and here and here and here), not only famous hedge fund managers but the mainstream media is now sounding the alarm over this most critical of topics to the US market, with the most recent "exposition" coming courtesy of the WSJ's "Broken Bond Market Complicates Fed's Plan to Raise Rates."

So as a helpful hint for the WSJ and their peers on what to keep an eye for next, one useful place (another one that has been covered here since roughly 2013) is the daily shortage of Treasury collateral as manifested by collapsing rates in the repo market, where just today we saw the repo tighten "immensely" in the words of Stone McCarthy, plunging to super special rates of -224 bps, which implies the liquidity shortage for the On The Run 10Y is now the worst since June of 2014. Granted, there is a 10Y auction tomorrow, settling on April 15, which is usually heavily sh ...

'Chaos' If UK Leaves EU? - Blair Warns of BREXIT

'Chaos' If UK Leaves EU‏ - Blair Warns of BREXIT

- Ex-Prime Minister warns uncertainty would hit UK economy and cause â€'chaos'
- â€'BREXIT' would cause the "most intense period of instability" since WW2
- Seeks to portray Tory policy as disingenuous and cynically putting economy at risk
- Uncertainty caused would have negative consequences for British economy and sterling

Tony Blair has entered into the British election campaign debate in support of David Miliband on the issue of what he regards as the Tories reckless attitude to Europe and the potential â€'BREXIT'.

Blair will address his former constituents in County Durham today strongly urging them to support Miliband, who he praised for his "real leadership on the EU" while portraying David Cameron's EU policy as disingenuous and reckless.

"There is, in my view, a complete under-estimation of the short-term pain of negotiating exit. There would be a raft of different treaties, association agreements and partnerships to be disentangled and re-negotiated. There would be significant business uncertainty in the run-up to a vote but, should the vote go the way of exit, then there would be the most intense period of business anxiety, reconsideration of options and instability since the war",

Blair will say in the well flagged speech which has been trumpeted in th ...

Oil falls as Iran, China discuss more supply

LONDON (Reuters) - Brent crude oil fell below $58 a barrel on Tuesday on signs of growing oversupply as Iranian officials visited Beijing to seek more oil sales following the framework nuclear deal that could lead to the lifting of sanctions.

Wall St. edges higher after two day run; FedEx up

NEW YORK (Reuters) - U.S. stocks edged higher at the open on Tuesday, on the heels of two sessions of gains for the S&P 500, with deals including a bid from FedEx for a Dutch peer indicating companies still see value in the market.

Mohamed El-Erian Explains Why He Is Now "Mostly In Cash"

"I am mostly concentrated in cash... because I think most asset prices have been pushed by central banks to very elevated levels. Central banks look at growth, at employment, at wages. They are too low. They don't have the instruments they need, but they feel obliged to do something; so they artificially lift asset prices... Because they hope that they will trigger what's called the wealth effect, but there is a massive gap right now between asset prices and fundamentals."

"The Fed has been pushing everybody into the public markets... it makes sense to reduce your exposure to the most trafficked assets."

Reflecting Julian Robertson's warnings from yesterday that, unless The Fed acts to end this bubble, there will be a "complete explosion," El-Erian points out the difference between what The Fed will do and what The Fed should do...

That will probably be the last time Mohamed El-Erian is invited to CNBC for a while. Here is what El-Erian said previously on this topic from the OC Register.

Q. Where is your money? Stocks? Treasuries? Bonds?

A. It is mostly concentrated in cash. That's not great, given that it gets eaten up by inflation.

But I think most asset prices ha ...

Double Algo Stop-Hunt Fails To Spark Momo Ahead Of US Open

Unfortunately there is not enough macro data for the algos to consider bad enough to be good today...

Stop-hunt complete...

Russia To Offer Greece New Loans, Gas Price Discount

While Greece spent Easter weekend (not Orthodox Easter that is) assuring the IMF (the "institution", not the critical third member of the Troika that shall not be named) that the €450 million payment due to Christine Lagarde's "institution" will be made despite Greece officially (rather than just unofficially) running out of money and being forced to prioritize repaying its creditors over paying wages and pensions, its Prime Minister is currently evaluating what the Plan B will be when he visits Vladimir Putin tomorrow, one day ahead of the double Greek deadlines of IMF payment and cash running out.

As FT reports, "when Alexis Tsipras visits Vladimir Putin's Kremlin on Wednesday there is a chance the Greek premier's eastern manoeuvre will immediately bear fruit: kiwis, peaches and strawberries to be precise. Athens is hopeful that Moscow will lift a retaliatory ban on Greek soft fruits to demonstrate the abiding strength of Russo-Greek relations, just as both leaders feel a diplomatic chill with Europe over the Ukraine crisis and Athens' bailout saga respectively."

Of course, every Greek request for a concession "quid" will be met with a proportional Russian quo, and it is this that worries European diplomats - namely will the Putin-Tsipras gladhanding amount to something more significant than fruit trade. "The big fear, in the words of one suspicious senior official, is a "Trojan horse" plot, where Russia extends billions in rescue loans in exchange for a Greek veto on sanctions â€" a move that would kill western unity over Ukraine."

More Than Half Of Spanish Debt Is Held By Foreigners As Bills Sell Below 0% For First Time Ever

There was a time when foreigners couldn't get enough of Spanish debt, and as shown in the chart below sourced from the Bank of Spain, non-residents, aka International Holders, couldn't get enough of Spanish paper with their total holdings rising well over half of total debt outstanding as recently as 2010.

Then the first European crisis happened and peripheral bonds cratered, sending Spanish yields to record high yields and bringing international holdings of Spanish debt to the lowest in the 21st century just as Mario Draghi unleashed his "whatever it takes" hollow round bazooka and the non-existent OMT, which marked the top in yields so far.

Since then it has been a non-stop buying frenzy, and after bottoming in the low-30%'s in 2012 and early 2013, foreign holdings of Spanish debt have once again shot straight up until, moment ago, we learned courtesy of the latest Bank of Spain update that as of February, International investors once again hold a majority of Spanish debt, or 50.5% to be precise, in the form of €333.5 billion of the unstripped Spanish government bonds of the total €660.4 billion.

This latest herd scramble, which has certainly pushed foreign holdings of Spanish pape ...

Australia Regulator Furious As Central Bank Decision Leaked To HFTs For Third Time

For the third month in a row, FX 'traders' in AUD "guessed" the Reserve Bank of Australia's decision in the milliseconds before it was released to the public. Aussie regulators, seemingly furious at the blatant-ness of the front-running, confirmed they will be investigating the price spike overnight. As we noted last month, the rigged-ness of the markets was so clear as to suggest the decision was clearly leaked ahead of the public release as AUD spiked 70 pips on heavy volume in the 7 seconds before 230pm local time release. As ABC reports, concerns about whether some may be getting advanced notice of the central bank's impending decisions led RBA Governor Glenn Stevens to note his own concerns "about reports that there had been extraordinary trades before the release of the Reserve Bank decision yesterday." Will we see consequences this time?

As ABC reports,

It is the third straight month that money traders appear to have correctly guessed the RBA's next move.

Boeing beats Airbus in first quarter net orders, deliveries

PARIS (Reuters) - U.S. planemaker Boeing beat its European rival Airbus in net new airplane orders and deliveries in the first quarter, according to figures released on Tuesday.

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