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10Apr2015 Market Close: Markets Close Fractionally Higher On Low Volume, Oil Rises, U.S. Dollar Remains Elevated

Written by Gary

This afternoon session generally traded sideways in an narrow zone and moderately elevated. While the averages trended fractionally upwards the oils also retracted from the low $50,s seemingly unable to go lower. The U.S. Dollar is also unable to reach higher than the 99's, but Monday is a new week for more volatility and surprises.

By 4 pm the volatility, or lack there of, was kept low by disinterested investors afraid of what the bearish doomsayers are preaching although the short-term indicators are still bullish. The averages closed without a whimper and the 'normal' amount closing action was minimal.

Todays S&P 500 Chart

Remember, the trend is your friend until it isn't. Some prognosticators are claiming when the markets fall next time there is going to be an immediate 30% drop like the last 'big one'. That is old thinking because mom and pop were solidly in the markets back then and panicked causing a wide spread exodus in quick order. Now the cash market is very small and the big fund managers have no where to go actually and will not move as quickly as some believe. In other words you will have sufficient time to secure your finances if you are observant.

WTI oil is at 51.73 rising from morning lows of 50.10 (Chart Here), Brent has risen to 58.01 from its low of 56.45 (Chart Here), and the U.S. Dollar is lost lost ground now at 99.58, up from its high of 99.96 (Chart Here).

Citi reduced its annual forecast for Brent crude for the second time in 2015. Prices in the $45-$55 range are unsustainable and will trigger "disinvestment from oil" and a fourth-quarter rebound to $75 a barrel, according to the report. "Prices this year will likely average $54 a barrel".

Our medium term indicators are leaning towards SELL portfolio of non-performers and the session market direction meter (for day traders) is 43 % Bullish up from 3 % 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 flat, but remains above zero at +2.12. Watch the WTI oil prices as anything below $50 will be the first sign of a declining market in the works. Below $44 you had better put on your seat belt as the encroaching roller coaster ride may be be very bumpy.

Having some cash on hand now is not a bad strategy as negative market changes are happening everyday, 99% of them are minor, it is that 1% I am worried about. 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.

The Market in Perspective

Here are the headlines moving the markets.

News Corp. and 21st Century Fox Consider Move to World Trade Center Site, Officials Say

The companies, which include Fox News Channel and The Wall Street Journal, have been in discussions for months to build a joint headquarters in an 88-story skyscraper, officials said.

GE to sell bulk of finance unit, return up to $90 billion to investors

(Reuters) - General Electric Co will shed most of its finance unit and return as much as $90 billion to shareholders as it becomes a "simpler" industrial business instead of an unwieldy hybrid of banking and manufacturing.

Oil rises and posts weekly gain as Iran tensions support

NEW YORK (Reuters) - Oil prices rose on Friday, posting a weekly gain on lift from lowered expectations that an agreement on Iran's nuclear program will result in a rapid return of more Iranian barrels to the market.

Fear Or Froth: Zero Rates Are Simply No Longer Needed

Via Scotiabank's Guy Haselmann,

Massaging for a June Hike

A key factor determining the timing of the first rate hike will be the level of the US dollar. Over the past 8 months, the dollar appreciated about 18%. This was the second most rapid appreciation of the dollar in so short a period since the US went off the gold standard in 1971. Importantly, the recent appreciation had reached its highest level, and greatest momentum, within a few days of the March FOMC meeting.

The Fed is fully aware that should the dollar's rise be sustained, it could materially impact the US economic outlook. Janet Yellen acknowledged this fact by saying that export growth had weakened and import prices were being pressured, "at least on a transitory basis". However, she also added that the strength of the dollar also reflected the strength of the US economy.

In general, financial market conditions during the week of the March FOMC meeting were disconcerting, which likely had an impact on the statement and press conference. The Euro was below 1.05 and several EM currencies traded to decade lows. The US 10-year note was trading around 2.10%. WTI oil closed at its lowest point of the year ($43.46). There are more examples, but the point is that financial conditions are not only less worrisome, but more accommodative today, than during that week.

Since March 18th, , for example, the dollar is 2% lower, the S&P is higher, Treasury yields are lower, and oil is 18% higher (taking downward pressure off of inflation indicators). If the Fed based its decision solely on those market factors, the probability of a June hike should be higher today (not lower) than it was on the day of the March meeting.

It might sound strange, but the Fed is probabl ...

How Much Longer Can OPEC Hold Out?

Submitted by Guarav Agnihotri via,

OPEC has been the most talked about international organization among investors, analysts and international political lobbies in the last few months.

When OPEC speaks, the world listens in rapt attention as it accounts for nearly 40 % of the world's total crude output. With its headquarters in Vienna, Austria, one of the mandates of 12- member OPEC is to "ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry." (Source:

However, OPEC has been in the line of fire from the western world in light of its stance of not reducing the production levels of its member nations (excluding Iran). Most view this as a strategy to squeeze the American shale production and other non OPEC nations.

All is not well for OPEC

Simply put, the world has too much oil at the moment which has resulted in the reduction of price levels from approximately $100 to $50 a barrel, and OPEC (as well as US shale producers) has a major role to play in this supply glut. With the decline of average annual crude prices, OPEC earned around $730 billion in net oil export revenues in 2014 (Source: EIA), a big decline of 11% from its previous year. The EIA even predicts that OPEC's net oil exports (excluding Iran) could fall to as low as $380 billion in 2015.

With the huge reduction in its revenues and growing discomfort among its members such as Venezuela, Libya and Nigeria over its current production levels, is OPEC really getting weaker?

Wall Street Week Ahead: Fed takes back seat as market shifts focus to earnings

NEW YORK (Reuters) - With earnings season underway, Wall Street is temporarily putting the U.S. Federal Reserve and macroeconomic policy on the back burner in favor of a focus on individual company results and forecasts for a pulse on the economy's health.

ECB Taper Date "Announced" On Twitter; SocGen Begs To Differ

Friday marked an important milestone for EU bond markets: the first spoof ECB QE taper Twitter feed was born and the taper date "unveiled"...


ECB taper (@Ecbtaper) April 9, 2015

Although this information didn't come to light until Friday, we suspect that even had it been available on Thursday, SocGen would likely be sticking with their contention that PSPP taper calls are more than a little premature.

Citing the coming EGB supply shortage, still subdued inflation expectations, and the fact that Mario Draghi is pot committed by the central bank's verbosity on its commitment to the program, the bank outlines the case against the taper talk and also highlights the eurozone's accelerating plunge into NIRP-dom.

From SocGen:

We still believe this rally in Europe has more to run, even as ever more bonds push into negative territory. The ECB still has 93% of its projected QE programme left to accomplish. While this is partially anticipated, it is hard to quite integrate the drought in bond supply this summer. In the face of relentless demand, that summer drought will set the scene for another leg lower in yields.

Holders of EGB short positions are likely to find carry a killer. Sure the positive momentum in the EA economy has stronger foundations than a year ago. But with ECB buying set to remain the overwhelming force into summer, better economic news will not threa ...

Wall St. Is Higher, With G.E. Leading the Dow

General Electric said it would sell most of GE Capital, its financial unit, as well as real estate for $23 billion.

9 Reasons Why The Russia Ruble Is The Best Performing Currency Year-To-Date

Submitted by Constantin Grudgiev via True Economics blog,

There is an interesting debate starting up around the Ruble: in recent weeks, Ruble appreciation against the USD has pushed it out of its traditional long term alignment with oil prices, as noted in the chart below:

Leaving the Ruble the best performing currency in 2015...

There are several possible factor that can account for this.

  1. Oil price expectations - if the markets expect oil prices to rise further, Ruble buyers can bid the currency up ahead of the oil price changes. This is unlikely in my view, as we are not seeing oil price firming significantly in both spot and futures markets.

    Oil price revelation - if the markets priced in severe forecasts uncertainty linked to oil price dynamics to the Russian economy back in October-December 2014, then the new information about Russian economy's performance in Q1 2015 should lead to re-pricing of risks. In my opinion, Ruble was heavily oversold in December (not in october-November) and there is some upside potential, given that the Q1 2015 data coming out of the Russian economy is not as apocalyptic as some currency markets analysts expected. No ...

Wall St. up on GE plan; indexes set for strong week

NEW YORK (Reuters) - U.S. stocks climbed on Friday, putting major indexes on track for a week of solid gains as investors lauded GE's decision to divest most of its high-risk GE Capital business and repurchase up to $50 billion of its shares.

Stock buyback zeal undimmed by prospects for Fed rate hike

NEW YORK (Reuters) - The seemingly insatiable appetite of companies for their own stock is unlikely to be satisfied soon, even if the U.S. Federal Reserve begins to hike benchmark interest rates and shares get pricier.

Just One Third Of All Loans Are NOT Covenant-Lite

Back in February 2013, when then-Fed governor Jemery Stein commented on the "overheating in the credit market", he noted that "the annualized rates of PIK bond issuance and of covenant-lite loan issuance in the fourth quarter of 2012 were comparable to highs from 2007." Indicatively the percentage of covenant-lite deals as a percentage of total then was a little under 30%. Shortly after that he quietly left the Marriner Eccles building, knowing well what is coming, and a good thing he did because since then the bubble across all credit products has left many dumbfounded, and nowhere is this more obvious than in the total volume of cov-lite deals, which has doubled since Stein's letter, and is now approximately at two third of all loan issuance.

In other words, just one third of all loans are not covenant lite.

So if the credit market was "overheating" when only one-third of all loans had no covenants, we wonder what Stein would say now, two years later, when just one-third of all loans have covenants... if anything?

Source: Citi

General Electric's Move on Overseas Cash Highlights Tax Debate

At $6 billion, the company's expected tax bill could be "multiples" less than what analysts had estimated.

Gundlach Lieutenant Says Risk/Reward In US Corporate Credit Most Unattractive Proposition Ever

Another day, another big name warns of a bond bubble, and this time it's the (new) Bond King himself. On the heels of Jamie Dimon's critique of credit market liquidity and what a lack thereof could mean in a crisis, Jeff Gundlach and one of his DoubleLine deputies are out calling US IG "one of the most unattractive risk-return propositions" ever witnessed. Between abysmally low yields, heightened rate sensitivity heading into a rate hike cycle, and balance sheet re-leveraging on the part of US corporations, it's a bad time to be betting on corporate credit.

Via Bloomberg:

They're yielding about the least ever, with the average dipping under 2.9 percent this month. Prices of the debt are more sensitive to interest-rate increases than at any time in the past 20 years, just as the Federal Reserve considers raising them.

And now the fortress balance sheets that companies built in response to the 2008 credit crisis are being eroded, with executives increasingly eager to borrow cheaply to satisfy shareholders starved of revenue growth in a sluggish economy.

"In my 30-year career, it's one of the most unattractive risk-return propositions that I've seen," said Baha, who helps manage $73 billion as the director of global developed credit at Jeffrey Gundlach's DoubleLine Capital in Los Angeles…

After more than six years of short-term interest rates ...

A Shifting Middle: Middle Class, but Feeling Economically Insecure

A perspective that was once characterized by comfort and optimism has increasingly been overlaid with stress and anxiety.

"Facts Do Not Cease To Exist Because They Are Ignored"

Submitted by Michael Lebowitz of 720 Global


"The kid had a 94-mile-per-hour fastball, a clean delivery, and a body that looked as if it had been created to wear a baseball uniform. He was, in short, precisely the kind of pitcher Billy thought he had trained his scouting department to avoid."

â€" Michael Lewis, Moneyball

In his book Moneyball, Michael Lewis explores the irrationality and ignorance of human behavior and the opportunities it creates for those willing to resist it. The book represents a value investors guide to how the Oakland A's, with one of the smallest budgets in Major League Baseball, consistently found and acquired quality players that were shunned under the traditional scouting matrix. These overlooked and undervalued players afforded the Oakland A's and General Manager Billy Beane the fifth best winning percentage with the fourth lowest total payroll over the last 15 years. As the graph below from FiveThirtyEight shows, Beane dramatically outperformed his opponents when it came to maximizing the value of his budget.

Once when asked why he was willing to allow Michael Lewis to write a book about his approach, Beane responded "It won't matter who reads it, no one would have the courage to put into ...

G.M. Steering Issue Pushes Automaker's Limits

General Motors' handling of a recent problem in its vehicles sheds new light on what the company and regulators consider an issue worthy of a recall.

Total Rig Count Decline Fastest Since 1986 As Weekly Rig Count Drop Re-Accelerates

With crude production and inventories hitting record highs this week, it is likely no surprise that rig counts continued to decline - falling 40 to 988 total rigs (and down 42 to 760 oil rigs). This is the 18th week in a row of total rig count declines - equal to the record series from 2008/9. At 48.5%, this is the biggest 18-week decline since 1986.



Notably Arkansas and Kansas saw rig counts increase (8 to 9 and 12 to 13 respectively)

The weekly pace of decline has accelerated...

This is the biggest 18-week plunge since 1986...

And Production re-accelerates (US and Saudi oil production record high, Iraq and Libya also boosted production in March) even as rig count collapses...

And Crude's initial response...Nothing

Nissan, BMW recall more than 165,000 vehicles for fuel pump issue

DETROIT (Reuters) - Nissan Motor Co and BMW AG said on Friday they are recalling more than 165,000 vehicles globally due to potential fuel pump failures that could cause an engine to stall or not start.

Economic View: Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance

Graduates who accept jobs on Wall Street have the potential to do good and make money â€" if they use their talents to help solve social problems, instead of just transferring wealth.

Andorra Follows Up on U.S. Inquiry by Cracking Down on BPA

Criminal investigators for the Treasury accused Banca Privada d'Andorra of laundering money for gangs, and now the Pyrenees principality is acting.

Your Money: Questions About Airbnb's Responsibility After Attack by Dog

While Airbnb has begun offering secondary insurance coverage to its hosts in the United States, guests in other countries may have to cover the costs of any accidents themselves.

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