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09Apr2015 Market Update: Markets Trending Lower As The U.S. Dollar Moves Higher And The Oils Trend Lower

Written by Gary

Markets opened higher thanks to some HFY algo computers, but that turned out to be a bull trap. When oil trends south and the U.S. Dollar trends north the equities rarely melt up and that is what happened this morning; I hope you were not sucked in.

The oils are currently experiencing a lot of volatility, but trend is currently down and the only fly in the ointment is that gold is also trending down. The short-term indicators are still slightly bullish, near neutral, but a lot of investors are becoming VERY concerned about remaining long as the US dollar climbs higher.

By 10:30 the averages were flat, DOW on the red side and the small caps just over in the green. The markets are weak, but that doesn't mean they are going to drop precipitously either. I expect some volatility as the bulls and bears duke it out.

Here is the current market situation from CNN Money

North and South American markets are mixed today. The IPC is up 0.44% while the Bovespa gains 0.17%. The S&P 500 is off 0.12%.

WTI oil is at 51.13 falling from morning highs of 51.86 (Chart Here), Brent has fallen to 56.98 from its high of 57.40 (Chart Here), and the U.S. Dollar is regaining lost ground now at 98.95, up from its low at 98.30 (Chart Here).

Our medium term indicators are leaning towards SELL portfolio of non-performers and the session market direction meter (for day traders) is 4 % Bearish down from 15 % bearish 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 flat, but remains below zero at -0.52. It is expect to move lower over the next few sessions before turning back up.

Having some cash on hand now is not a bad strategy as negative market changes are happening everyday. Many investors are starting to take in some profits from 'high-fliers' as a precaution and to build a better cash base for the 'dips'.

As of now, I do see some leading indicators that are warning of a 'long-term' reversal within six months. I believe one is most likely to occur later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market. If you are not worried, then at least be cautious. A good rule is that one cannot be prepared for a situation if you do not anticipate the possibility of that situation materializing.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 55%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 53
Investors Intelligence sets the breath Above 50 bullish 60.1% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. 24.11 NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 61.13% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 65.97% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 71.20% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 19.11 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 76.36 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,051

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. set to dip as jobless claims below expectations

(Reuters) - U.S. stocks were set to dip at the open on Thursday after initial jobless claims rose less than expected, suggesting an abrupt slowdown in job growth in March could be temporary.

Lafarge, Holcim name Eric Olsen as chief of merged group

ZURICH/PARIS (Reuters) - Lafarge and Holcim have picked Lafarge insider Eric Olsen as chief executive of their combined company, potentially opening the way for the two cement groups to clinch their $40 billion merger, if shareholders back it next month.

Bits Blog: Lyft Hires Amazon Executive as Chief Operating Officer

The ride-hailing start-up Lyft appoints a new chief operating officer who worked at Amazon.

Crazed Chinese Housewives Frothing At Hong Kong Bubble Euphoria

As we pointed out Wednesday evening, the spill over of China's self feeding, margin debt driven, domestic equity buying frenzy into Hong Kong-listed shares accelerated markedly overnight as the Hang Seng jumped nearly 7% at one point with volume turnover 400% above the 30-day average. Shares closed up 2.7%, with the Hang Seng now at a 7-year high as cash poured in thanks to reduced regulation on Chinese mutual fund purchases and as some investors likely feel that the following chart may suggest mainland shares are overvalued.

As we've documented over the past several weeks, this has all the makings of an epic bubble as retail investors in China, some with little in the way of formal education, are opening stock accounts at a furious pace with more than 4 million created in March alone. Now, with Hong Kong undervalued relative to extremely overvalued mainland shares, the mania is spreading quickly as housewives and security guards "buy stocks like they're gambling in Macau."

Via Bloomberg:

"Things are getting quite exciting," said Chow Man, a 68-year-old housewife who favors Chinese banks and infrastructure stocks and says she has as much as HK$200,000 ($25,000) in play. "It's becoming like a hobby for a lot of mai ...

Euro zone sets Greece reform deadline ahead of IMF repayment

BRUSSELS/ATHENS (Reuters) - Euro zone partners set Greece a deadline of six working days to improve proposed economic reforms in time for finance ministers to consider some emergency funding to keep the country afloat after it makes a repayment to the IMF on Thursday.

Walgreens profit beats Street, drug chain to close 200 U.S. stores

(Reuters) - Walgreens Boots Alliance Inc reported a better-than-expected quarterly profit, and said it would close about 200 stores in the United States as part of a restructuring plan aimed at cutting costs and streamlining its businesses.

LinkedIn to buy online education company for $1.5 billion

(Reuters) - Professional social network operator LinkedIn Corp said it would buy privately held online education company in a cash-and-stock deal valued at about $1.5 billion.

Another View: Peltz's Attacks on DuPont Threaten America's Research Edge

Nelson Peltz's goals for DuPont would dilute the company's research, a critical component for growth at science-driven corporations.

U.S. jobless claims data point to strengthening labor market

WASHINGTON (Reuters) - The number of Americans filing new claims for jobless benefits rose less than expected last week and the four-week moving average of claims hit its lowest level since 2000, suggesting an abrupt slowdown in job growth in March could be temporary.

Warner Bros. and Lego Enter Market Where Toys and Gaming Meet

The studio unveiled a product called Dimensions, involving collectible movie-character mini-figures that can be brought to life in a video game.

Apple says smartwatch demand to exceed supply at launch

(Reuters) - Apple Inc said on Thursday demand for its new smartwatch would exceed supply when the gadget hits stores on April 24.

Rebutting Bernanke's Defense Of Himself

Submitted by Larry Larry

QIRP Does Not Work And Rebutting Bernanke's Defense Of Himself

I refer to the combination of QE and ZIRP as QIRP. Both happened concurrently for the most part. It is hard to dis-aggregate the effect of one from the other. ZIRP has its impact from a mechanical perspective. QE has its impact from a psychological perspective â€" investors believe it drives asset prices up (primarily stocks), so investors then drive up asset prices.

Regardless, at this point the data is in. Asset prices have inflated (and systematic risk as well), but the economy has not. The economy has also missed every forecast the Fed had for it along the way when these policies were implemented. Further, QIRP is not working in Japan, even with the government buying equities. IF QIRP was going to increase inflation, Japan should be the place where it should at least create some inflation as they are huge net importers of commodities.

Consider the following statement from a prominent economist: "Japanese companies held Y236t or $2.0t of cash in 4Q â€" the same as the US corporate cash. Given continued increases in inflation expectations, it's somewhat surprising that cash holdings by companies are still increasing."

This is a very outdated notion that increased inflation expectations drive investment, especially if inflation is going from 0% to 2%. Frankly from any level a few % point change in inflation expectations is NOT enough to scare a business into an investment they wouldn't otherwise make. Further as it per ...

Bank Deposits No Longer Guaranteed By Austrian Government

Bank Deposits No Longer Guaranteed By Austrian Government

- Austria will remove state guarantee of bank deposits
- Austrian deposit plan given go ahead by the EU
- Banks to pay into a deposit insurance fund over 10 years
- Fund will then be valued at a grossly inadequate €1.5 billion
- New bail-in legislation agreed by EU two years ago
- Depositors need to realise increasing risks and act accordingly
- "Bail-ins are now the rule" and â€'Bail-in regime' coming

Bank deposits in Austria will no longer enjoy state protection and a state guarantee in the event of bank runs and a bank collapse when legislation is enacted in July. The plan to ensure that the state is no longer responsible for insuring deposits has been readied by the Austrian government in conjunction with the EU two years ago according to Die Presse.

Currently, Austrians have their bank deposits guaranteed to a value of €100,000 - the first half to be provided by the failing bank and the other by the state. From July, however, the state will be removed from the process and a special bank deposit insurance fund is to be set up and paid into by banks to meet potential shortfalls.

The fund will be filled gradually over the next ten years to a value of €1.5 billion. In the the event of a failure of a major bank in the intervening period the legislation will allow the f ...

Latest Weekly Initial Claims Of 281K Better Than Expected, Under 300K For Fifth Straight Week

After the abysmal March payrolls number, there were expectations in the whisper forecast of today's initial claims that there would be a sizable jump in initial unemployment claims, one that may break the streak of 4 consecutive prints under 300K. It did not happen, and in fact the number which was released moments ago by the BLS indicated continued strength in the US labor market, where there was 281K initial claims in the past week, just under the 283K expected and higher than the revised 267K from last week. This is the lowest level for this average since June 3, 2000 when it was 281,500. The previous week's average was revised down by 250 from 285,500 to 285,250.

The DOL added that "there were no special factors impacting this week's initial claims."

Continuing claims likewise declined from last month's 2.327MM to 2.304MM, below the 2350K expected.

From the report:

In the week ending April 4, the advance figure for seasonally adjusted initial claims was 281,000, an increase of 14,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 268,000 to 267,000. The 4-week moving average was 282,250, a decrease of 3,000 from the previous week's revised average.

The advance seasonally adjusted insured unemplo ...

04 April 2015 Initial Unemployment Claims Rolling Averages Again Improve

Blue Line 4 Week Average

The market was expecting the weekly initial unemployment claims at 275,000 to 325,000 (consensus 285,000) vs the 281,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 285,250 (reported last week as 285,500) to 282,2500. The rolling averages have been equal to or under 300,000 for most of the last 6 months.

Read more ...

Peak Central Planning: BofA Says Fed's Dudley "Does Not Want Stocks To Decline; Wants Bond Prices To Go Down"

Yesterday we got the latest confirmation of what the Fed will never openly admit and which everyone knows. Or rather, the Fed would never openly admit previously, namely that all it cares about are stock prices, or as we first dubbed it here a year ago, the Fed is "Dow Data Dependent." The admission came courtesy of Bill Dudley who during an interview yesterday said:


In other words, the Fed's actions will be shaped by the market, which in turn is shaped by the Fed. Or, as anyone who has used Excel will observe (apparently not the former Goldmanite head of the New York Fed), a circular reference (and one which #Ref!s out whenever there is selling and exchanges have to be closed).

That in itself was bad enough, but things got substantially more laughable when the big banks were forced to defend his words in the context of the Fed's dual mandate, because - well - simply there is no defense that doesn't point out the obvious: the Fed could care less about jobs or inflation and all it does care about is the Dow Jones.

Enter Bank of America, with what may be the peak farce not of the so-called recovery, and the following sentence in particular.

While Dudley clearly does not want stocks to decline a lot, he also wants to avoid meaningful increases... Also very apparent is that Dudley wants bond prices to go down â€" not a lot but clearly down.

And there it is, central planning courtesy of the US central bank, writ large. The USSR is spinning, and laughing, in its grace not only because it knows how such "planning" ends, but because it is truly ironic tha ...

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