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22Apr2015 Market Update: Bull Trap Opening, Averages Head South On Continuing Concerns Over Weak Earnings, Grexit And China

Written by Gary

Positive opening for the markets immediately turned down into negative territory. Investor unease is the most likely culprit as oil is slipping fractionally and the U.S. Dollar is rising again. A 'Grexit' is still a real possibility as China's financial woes continue to disconcert many financial centers.

The health of the markets is mixed and wary investors need to closely inspect the indexes below.


Here is the current market situation from CNN Money

North and South American markets are mixed today. The Bovespa is up 0.25% while the IPC gains 0.16%. The S&P 500 is off 0.18%.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 59%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 47
Investors Intelligence sets the breath Above 50 bullish 62.2%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -2.17
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 62.07%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 67.56%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 74.40%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 19.52
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 75.89
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,095

What Is Moving the Markets

Here are the headlines moving the markets.

McDonald's to develop new turnaround plan as sales fall again

(Reuters) - McDonald's Corp is developing a new turnaround plan to improve sales and profits as the company struggles to regain its footing in the highly competitive fast-food market.

Economy to rebound in second quarter; strong dollar a threat: Reuters poll

WASHINGTON (Reuters) - U.S. economic growth is set to rebound in the second quarter, but a strong dollar could slow momentum and push the first interest rate hike from the Federal Reserve to later this year, a Reuters poll found.

Brookfield Asset to buy Associated Estates Realty for $2.5 billion

(Reuters) - Brookfield Asset Management Inc said it had agreed to buy Associated Estates Realty Corp for about $2.5 billion in cash, including debt.

Greek cash seen lasting into June, no EU deal imminent

ATHENS/BRUSSELS (Reuters) - Greece can scrape together enough cash to meet its payment obligations until June, euro zone and Greek officials said on Wednesday, playing down fears of an imminent default as hopes receded of a deal with its creditors to release fresh aid.

Political pressure mounts on Deutsche Bank over restructuring

BERLIN/FRANKFURT (Reuters) - Deutsche Bank co-chief executives Anshu Jain and Juergen Fitschen met with German finance minister Wolfgang Schaeuble late on Monday, sources close to the matter said on Wednesday, ahead of a decision on a major restructuring.

The Unbundling of a Money Center Bank

FinTech investment has been increasing dramatically, and I don't mean just the last year or two...

Is the rapid ramp-up in FinTech funding the dawn of the death of a thousand cuts to the traditional banking business model?

Unbundling of a bank V2 cropped

As per CBinsights: "we wanted to dig in and see how banks are being unbundled by startups. The graphic below details companies attacking bank services ranging from

Coke reports revenue growth for first time in nine quarters

(Reuters) - Coca-Cola Co on Wednesday reported a rise in revenue for the first time in nine quarters, helped by a 6 percent increase in North America, its biggest market.

Trader Charged in â€'Flash Crash' Case to Fight Extradition to U.S.

Navinder Singh Sarao is facing criminal fraud charges in London, including claims that he helped set off the 2010 stock market crash in the United States.

Tesco Posts $9.5 Billion Loss in Latest Hurdle

The British retail giant has steadily lost market share in recent years to discount retailers, and it faced pricing wars with its rivals.

McDonalds Reports Disturbing Numbers, Misses Across The Board; Stock Jumps

Moments ago McDonalds reported its latest sales numbers which were basically atrocious, worse than usual, and missed across the board. From BBG:


MCD MARCH TOTAL COMP SALES DOWN 3.3%, EST. DOWN 2.1%

MCD MARCH US COMP SALES DOWN 3.9%, EST. DOWN 3.0%

MCD MARCH EUROPE COMP SALES DOWN 2.9%, EST. DOWN 1.6%

MCD MARCH APMEA COMP SALES DOWN 7.3%, EST. DOWN 4.5%

APRIL GLOBAL COMPARABLE SALES ARE EXPECTED TO BE NEGATIVE

At this point the operational challenges facing the company are clearly unfixable in its current iteration which is broken beyond merely a CEO switch, and not even a "buy 1 Big Mac, get 3 Big Macs (and Joseph A Banc suits) free" strategy will fix the ailing fastfood maker, whose secular collapse is best captured by the charts below.

So what does the stock do? The algos are "luvin' it."

Why? Because with the company clearly facing an operating dead end it will have no choice but to "grow" earnings through even more buybacks.

The Swiss Franc Is Plunging After SNB Comments

Following comments from the Swiss National Bank, reducing the group of sight deposit account holders that are exempt from negative interest rates, has sent Swissy tumbling...

The rush out of swiss francs reignites

As Bloomberg reports,

Swiss National Bank says its reduced the group of sight deposit account holders that are exempt from negative rates.

Says negative rates to apply to sight deposit accounts held at SNB by enterprises associated with federal govt, including pension fund PUBLICA.

Accounts will have minimum exemption threshold of CHF10m, to which negative interest does not apply.

Accounts of cantons of Geneva and Zurich, City of Zurich to be wound up.

Account of SNB pension fund will also be subject to negative rates.

Only sight deposit accounts to be exempt from negative interest will be those of central Federal Administration and the compensation funds for old age and survivors' insurance, disability insurance and fund for loss of earned income.

One wonders if The SNB has licensed Sarao's "spoofing" algo... EURCHF weakness (+100pips to 1.036) seems to imply the SNB's hope is that Sight Deposits are reduced (as every central bank hopes... spend don't save)...

EU Formally (And Spitefully) Files Anti-Trust Charges Against Gazprom

With talks between Greece and its creditors expected to go mostly nowhere in Riga later this week, and with speculation about an energy deal between Athens and Gazprom looking less like speculation and more like reality with each passing day, we've suggested that it's only a matter of time before Russia officially becomes Greece's White Knight by providing a cash advance on the gas deal.

Greece has recently taken to seizing local government cash reserves to pay the bills (including pensions and salaries) and with the ECB reportedly considering 50% haircuts on collateral pledged for ELA by Greek banks (the same Greek banks which FinMin Varoufakis said yesterday were "adequately capitalized"), Athens could sure use the cash, and as we enjoy pointing out, it's an all-around win for the Kremlin as cash given to Greece will be used to make debt payments to the IMF which is set to deliver a €2 billion tranche of aid to Kiev in June, and that bailout funding will promptly be funneled right back to Russia via payments to Gazprom.

As a reminder, here's a map of the Turkish Stream pipeline…

...and here's the complete payment schedule for Greece:

Leading Index Review: February 2015 Philly Fed Leading Index Growth Rate Statistically Unchanged

Econintersect: This leading index is now forecasting growth at 1.5% over the next 6 months - statistically the same as January (which was released at the same time as February). Note that this index has not been published since December 2014 as parts of its methodology were revised. A review of all major leading indicators follows - and no leading index is particularily strong.

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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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