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10Apr2015 Market Update: Markets Are Melting Up On Falling Volume, Short-Term Indicators Remain Bullish

Written by Gary

Hard to tell what the markets are going to do next. We are close enough to the historic highs that there is little reason not to try and best them again. The markets open higher and then go nowhere and then everywhere. Oil is threatening to fall below $50 everyday, but doesn't while the U.S. Dollar is alarmingly close to the 100.00 mark making the bulls very nervous.

Markets are still trying to climb higher as volume is drying up, but short term indicators are bullish.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Brazil leading the region. The Bovespa is up 0.45% while U.S.'s S&P 500 is up 0.24% and Mexico's IPC is up 0.02%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 53%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 59
Investors Intelligence sets the breath Above 50 bullish 60.6%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +18.77
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 61.11%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 66.14%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 71.60%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 19.28
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 76.53
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,087

What Is Moving the Markets

Here are the headlines moving the markets.

Today's Money Regimes Are Doomed To Failure

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

Centrally issued money centralizes wealth and generates systemic inequality.

A Thought Experiment on Money Let's imagine a small mountain kingdom with only ten very scarce and thus highly valued seashells in circulation. These few shells are certainly valuable in terms of scarcity, but there aren't enough of them to act as a means of exchange. One solution to this innate problem of scarcity—money has to be scarce enough to retain value but not so scarce that there isn't enough of it in circulation to grease trade—is for the kingdom to issue 100 slips of paper for each shell, each slip of paper representing 1/100thof the shell's value. Now there is enough money in circulation to facilitate trade and each slip retains a store of value equal to 1/100th of a shell. The slips are paper money, i.e. currency.
This system works well, but the rulers of the kingdom aspire to consume goods and services in excess of what their share of the shell-backed money can buy in the open market. The kingdom's leaders print another 100 slips of paper without acquiring a shell to back the new slips with intrinsic value. Nobody seems to notice, and so the leaders print another 100 slips. Note that the kingdom didn't produce more goods and services; its leaders simply produced more money.
Eventually this excess of paper slips reduces the value of each slip in circulation. What once cost 10 slips now costs 20 slips. This reduction in the purchasing power of money is called inflation, ...

Stocks Are Poised to Lose 50%-90% in the Next Two Years

Stocks continue to operate based on complete delusions.

The market move in the last two years was based on multiple expansion. In the simplest of terms, this means that stock prices rose exponentially higher relative to earnings. If stocks were trading at a P/E of 15 and the P (price) rises 200%, while the E (earnings) rises only 20%, then there is multiple expansion.

Multiple expansion indicates sentiment, NOT fundamentals. It means that investors believe that the economy is expanding, and that earnings will growing rapidly to catch up with prices going forward. It is, in effect, an indicator of bullishness.

As Not Jim Cramer noted recently, the percentage of investors who are bearish is at an all tine low. Put another way, on a percentage basis, fewer investors are bearish than during the 2007 peak AND the height of the Tech bubble.

Again, this is an indicator of a stock market driven bullishness, not fundamentals.

Indeed, based on Cyclically Adjusted Price to Earnings or CAPE, stocks are the at one

CAPE is the single best predictor of future stock market returns. Based on a study completed Vanguard, as a predictor, CAPE outperformed:

1. P/E ratios

2. Government Debt/ GDP

3. Wall Street forecasts/ consensus

4. Trend analysis of stock charts

5. Trending GDP growth

6. Dividend yield

7. The Fed Model

8. Trailing ten year returns

How GE Will Fund The Largest Stock Buyback In History

Back in April 2013, Apple shocked the world when in a dramatic U-turn to Steve Jobs beliefs, it announced what was "the largest single share repurchase authorization in history" when it boosted its share repurchase authorization to $60 billion from $10 billion. Today, GE did its best to match this number, when it reported that as part of a massive business restructuring, it announced a "new Board authorization of up to $50B buyback."

The main reason for this near record buyback announcement is two-fold: GE's belief that there is no incremental value left in GE Capital, the bulk of whose assets it is selling, a division which nearly bankrupted the conglomerate back in 2008 when as a result of its massive leverage, anywhere between 9x and 10x...

... the division that was more profitable than the Industrial section precisely due to this massive leverage...

...forced GE to participate in any number of the freshly created bailout programs and which led to GE being branded a Systemically Important Financial Institution, or SIFI, a stigma which management was less than happy with. As a result of the GECC sale, Jeff Immelt was delighted to report that it "will eliminate the only Industrial, who ...

Wall St. inches up on GE deal, buyback

NEW YORK (Reuters) - U.S. stocks inched higher at the open on Friday as investors lauded GE's decision to divest the bulk of its high-risk GE Capital business and share repurchase plan.

Gold Surges 3.5% in Euro and 2.2% in Pounds This Week

Today's AM LBMA Gold Price was USD 1,201.90, EUR 1,133.49 and GBP 820.58 per ounce.
Yesterday's AM LBMA Gold Price was USD 1,196.00, EUR 1,113.33 and GBP 808.49 per ounce.

For the week, gold is headed for a slightly higher close in dollars and strong gains in euros, pounds and other currencies (see charts).

Gold fell 0.67 percent or $8.10 and closed at $1,195.10 an ounce yesterday, while silver slipped 1.94 percent or $0.32 closing at $16.20 an ounce.

Gold in US Dollars - 5 Days Gold in US Dollars - 5 Days

Gold prices in Singapore reached $1,194.10 an ounce near the end of day trading, after reaching a low yesterday of $1,192.30 per ounce. Gold in London suddenly surged above the key $1,200 level on no breaking news this morning. It was likely a combination of traders going long before the weekend and a short ­covering rally after recent weakness.

Gold regained ground despite a strengthening US dollar. The U.S. dollar is hovering at a three week high against other currencies.

Gold Technical Levels

The metal has an immediate resistance at 1205.78 (5­DMA) and 1210 levels. Meanwhile, support stands at 1195 (20­DMA) levels below which doors could open for 1193.41 (50­DMA) levels.

Gold Jumps After India Reveals Import Surge

Gold prices jumped overnight on initial rumors and again in the last hour as Indian officials note that March Gold imports surged to 125 tons (more than double last March's 60 tons). As Reuters reports, Gold imports in the fiscal year 2014/15 ended March 31 jumped to 900 tonnes, up 36% from a year ago.

Gold prices jumped as the news broke overnight... (and BBG headlines hit this morning)

BullionStar's Koos Jansen had recently noted the lifting of 'capital controls' on Gold and despite the increasing efforts of the government to enable 'monetization' of gold...

Because of a "current account deficit" the Indian government decided in March 2012 to raise to import duty on gold from 2 % to 4 %, in June 2013 from 4 % to 8% and in August 2013 from 8 % to 10 %. Additionally, in August 2013 the 80/20 rule was implemented, which was eventually withdrawn in December 2014.

Copa Airlines to buy Boeing 737s in $6.6 billion deal

(Reuters) - Panama-based Copa Airlines will buy 61 Boeing 737 MAX 8 and MAX 9 jets in a deal worth $6.6 billion, the airline announced on Friday.

U.S. import prices resume downward trend in March

WASHINGTON (Reuters) - U.S. import prices fell in March as rising petroleum costs were offset by declining prices for other goods, a sign of muted inflation that supports the view the Federal Reserve will probably not raise interest rates in June.

Import and Export Price Year-over-Year Deflation Accelerates in March 2015

Written by Steven Hansen

Global trade prices are continuing to deflate year-over-year. Import prices are down 10.5% from a year ago, while export prices are down 6.7%.

Wealth Matters: I.R.S. Is Looking Into Captive Insurance Shelters

Captives can be designed so the risks they insure are so unlikely they will never pay a claim and all the premiums will go back to the owners or their heirs with little or no tax.

Auto Import Prices Tumble Most On Record As Import Prices Plunge Most Since Financial Crisis

Import Prices dropped YoY by 10.5%, the biggest sequential drop since Dec 2008 (following the Lehamn shock). Priod data was revised lower and March's MoM import prices dropped 0.3% after rising 0.2% in Feb (revised lower from a 0.4% rise). US Auto import prices suffered their biggest YoY drop on record as currency wars and implicitly the strong dollar start to bite (even as imported fuels prices rose 0.4%). Other good news for Americans is that food prices are down 1.1%.

Import Prices dropped YoY by 10.5%, the biggest sequential drop since Dec 2008...

But worse still as the string dollar and global cuirrency wars escalate:



*PRICE OF U.S. AUTO IMPORTS FALLS RECORD 1.8% FROM YEAR EARLIER

How long before the lobbyists demand action against "currency manipulator" Japan?

Exclusive: Canada's Bombardier looks to raise cash from rail business - sources

LONDON (Reuters) - Bombardier is exploring ways to raise money from its transportation unit, potentially worth up to $5 billion, as the Canadian group grapples with huge cost overruns in its aircraft business, six sources familiar with the matter said.

Alibaba forms automotive, 'smart living' business units

SHANGHAI/BEIJING (Reuters) - China's Alibaba Group Holding Ltd , the world's biggest e-commerce company, has formed an automotive unit and a 'smart living' division in the past week, the firm said on Friday, as it ramps up its cloud computing, hardware and big data operations.

Asia Superbubble Unstoppable: Hong Kong Up 10% In Past Week; Soaring Dollar Pushes Euro Back Under 1.06

Overnight market news was once again driven by the Asian superbubble, where as expected, the Hang Seng (+1.22%) soared once more and is now up 9.5% for the week, following news the Hong Kong Exchanges and Clearing Ltd (HKEx) expects it will "substantially increase" quotas for the stock connect program between Hong Kong and Shanghai, HKEx Chief Executive Charles Li said on Friday. The exchange could boost the current quotas, which cap how much mainland investors can buy Hong Kong stocks and vice versa under the trading link, by more than 20 or 30 percent, Li said at a media briefing in Hong Kong. Li did not give a precise date for when the quotas would be raised, but one thing is clear: everyone in China, and Hong Kong, must be all in stocks if the Chinese housing bubble can not be reflated. The Shanghai Comp closed higher by almost 2.0% following better than expected Chinese inflation data, while HK stocks continued their recent rally to closer higher by 9.5% for the week.

Hong Kong Volume turnover on the Index was ~120% above the 30-day average with Shanghai - Hong Kong stocks premium falling to around 24% vs. 35% last month. Shanghai Comp (+1.95%) broke back above 4,000 lifted by Chinese PPI and CPI data. Despite remaining in negative territory, PPI halted its 36 consecutive Y/Y declines (-4.6% vs. Exp. -4.8%, Prev. -4.8%), while CPI was unchanged vs. last month's 3-month high (Y/Y 1.4% vs. Exp. 1.3%, Prev. 1.4%). To some this was evidence the PBOC will stop leaking stories of more imminent easing. To others this was merely confirmation that China's deflation isn't going anywhere and it is the PBOC's sworn duty to make the China stock bubble even greater.

In Europe, it was more of the same, with bond yields contin ...

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