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22May2015 Market Update: Afternoon Markets Quiet After Morning Big Losses

Written by Gary

The averages sea-sawed for a while along the unchanged line after recovering from the opening lows only to sink back down into the red. The markets are trending down along with oil, gold and Dr. Copper. U.S. dollar has broken through its resistance and remain steady while oil remains within its sideways range.


Here is the current market situation from CNN Money

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 63%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 61%
Investors Intelligence sets the breath Above 50 bullish 58.8%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +6.68
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 62.18%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 63.34%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 64.20%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 22.25
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 76.96
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,205

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. Slips as Oil Prices Slide

Investors were looking ahead to a speech by the Federal Reserve chairwoman, Janet L. Yellen, later on Friday.

Consumer Prices Rose 0.1% in April

Lower gas prices helped moderate the gauge of inflation, but there were signs of pressure from rising housing and health care costs.

Fair Game: Piles of Overseas Profits Investors Can See but Not Touch

Companies are not required to record a deferred income tax liability on foreign earnings, which can make earnings seem bigger than they are.

Fed still seen in lift-off mode as Yellen takes center stage

NEW YORK (Reuters) - The U.S. Federal Reserve is likely to stick with plans to raise interest rates later this year, with progress towards its employment and inflation goals helping allay concerns over the economy's recent weakness, current and former Fed officials say.

Wall Street lower after CPI data; Yellen speech awaited

(Reuters) - U.S. stocks fell in late morning trading on Friday, retreating from recent record highs, as investors await Federal Reserve Chair Janet Yellen's economic outlook for clues on the timing of a rate hike after new data showed a rise in inflation.

China Shares Hit Seven-Year High

China's stocks rallied for a fourth day to their strongest level in seven years, while Japan's red-hot market rallied anew as the nation's central bank kept its policy on hold.

Overvalued in Silicon Valley, but Don't Say 'Tech Bubble'

The tech industry's venture capitalists admit to a certain amount of "frothiness" in start-up investments, but they studiously avoid another word. Bubble.

Germany Gives No Reason for Gloom

Germany may have posted slower growth and sluggish surveys, but the economy looks to be in decent shape.

Deutsche Bank CEOs Face Pressure After Rebuke

After a stinging rebuke from shareholders at Thursday's annual meeting, Deutsche Bank co-chief executives Anshu Jain and Jürgen Fitschen must quickly present details on their strategy for turning the bank around.

U.S. Stocks Little Changed

U.S. stocks were little changed Friday ahead of a speech by Federal Reserve Chairwoman Janet Yellen scheduled for this afternoon.

Exclusive: Altice seeks financing for Time Warner Cable bid: sources

SAN FRANCISCO/LONDON (Reuters) - French telecommunications group Altice SA is talking to several banks about raising debt for a potential bid for Time Warner Cable Inc, the second-largest U.S. cable operator, according to people familiar with the matter.

Standard Deduction: Yahoo's Tricky Plan for Tax-Free Spinoff of Alibaba Stock

Yahoo's spinoff plan for its Alibaba holdings creates a nasty tax risk for shareholders.

Wall Street R.I.P. - The Bubble Is Dying At The Zero Bound

Submitted by David Stockman via Contra Corner blog,

If any evidence was needed that the market is dying at the zero bound, it came in this week's violent 15-minute rip when the algos read the Fed's release to mean there will be no rate hike in June. It put you in mind of monetary rigor mortis - the last spasm of something that's already dead but doesn't know it.

Certainly the sell-side talking heads are clueless in their utterly mendacious patter that there is no bubble in stocks. Why, valuations are are in-line with historic multiples, we are told, and, besides, the Fed will keep interest rates low for long.

That kind of assurance is at once fatuous and reckless. With the earliest possible "lift-off" date now moved to September, money market interest rates will have been pinned to the zero bound for 81 months running. Do these lemmings actually think this can go on much longer—-to say 90 or 100 months—- without signaling a complete capitulation of the Fed to the robo-traders?

Likewise, have they failed to note that the casino is saturated with trillions of carry-trades which will begin to unwind once interest rate normalization commences?

When have speculators ever retreated in an orderly manner, and, most especially, why is the current even greater financial bubble going to deflate any less violently than did the dotcom in 2000 and the housing/Wall Street bubble in 2008?

That is, after years of buying with borrowed money, repo or options, Wall Street gamblers will soon be forced to sell in order to liquidate positions that will become increasingly unprofitable as interest rates rise. Indeed, negative carry as f ...

Uber in Talks for $1 Billion Credit Facility With Banks

Uber Technologies is seeking a $1 billion credit line from banks, a move that could signal an eventual IPO.

Meanwhile, Mass Layoffs Continue For America's Miners

Earlier this month we reported that Patriot Coal, the second-largest coal miner east of the Mississippi, had filed for bankruptcy (again) due to "challenging market conditions."

Summarizing, a global supply glut (which, as we've shown is by no means confined to coal), cheap natural gas, and efforts to curb pollution have conspired to drive prices ever lower, creating an epic downturn in the coal market, exerting enormous pressure on producers.

The latest casualty: nearly 2,000 workers at Murray Energy (where the mascot is a bald eagle).

Murray, the third-largest producer in the US, will layoff 21% of its employees with the majority of the cuts coming in West Virginia, which is staring down a $195 million budget gap thanks to the slide in coal prices.

Interestingly, CEO and founder Robert Murray is adding businesses just as fast as he's subtracting employees in an effort to stay afloat by driving down the cost of production.

Of course, the acquisition spree is being funded by all manner of debt including three quarters of a billion in second-lien notes. Here's WSJ:

Murray two months ago paid $1.4 billion for a controlling stake in Illinois basin miner ...

15 May 2015: ECRI's WLI Into Positive Territory for the Third Week in a Row

ECRI's WLI Growth Index which had spent 28 weeks in negative territory - is now in its third week in positive territory. It is now forecasting better growth later this year. ECRI also released its coincident indicator this week and is reported below.

Germany, France usher Greece back to negotiating table

RIGA (Reuters) - European leaders told Greece on Friday to return to the negotiating table for "intensive work" to wrap up a reform agreement before cash runs out, sidestepping Athens' demand for a comprehensive, long-term solution to its troubles.

Why Oil's Rally Is Over

Submitted by Martin Tillier via OilPrice.com,

A lot of people have got very excited as the price of WTI has bounced back from the lows reached a few months ago. If oil fails to break and hold above $62 this time around, however, their enthusiasm could well be misplaced, as the fundamental factors that caused the price decline in the first instance are still in place.

That, combined with the technical importance of this challenge of the resistance, makes a drop back below $50 look more likely than a continued rally. When short-term technical indicators and long-term fundamentals both suggest a move in the same direction, as is the case here, investors are well advised to pay attention.

In the short term, as the above 3 month chart clearly shows, the $62 resistance level that we are approaching again has enormous significance. Most traders will tell you that the third attempt at a support or resistance level is the most important, and the reason for that is also clear on the chart.

The first time WTI tested $62 it dropped back to around $60 when momentum reversed. Then, a few weeks later, failure to break through led to a more pronounced retreat, back down to around $58. Each failure to break above a resistance point usually results in a bigger correction back the other way, so failure on the third try would likely be followed by a drop to $55-56, making another attempt far less manageable. From there the c ...

Hamburglar and Colonel Sanders Get a Call Back

McDonald's, KFC and other fast-food chains are betting on nostalgia to set themselves apart in a crowded industry. The Hamburglar, above, is reimagined as s a grown man with a wife and children.

Why The US Consumer Is About To be Crushed: The Obamacare Inflationary Deluge Arrives

For the past three years, the biggest argument supporters of Obamacare would trot out every single time when faced with opposition to the mandatory tax, would be that despite widespread predictions of soaring prices, US medical care service costs had remained low and even, on occasion, declined (we leave aside the lack of discussion about soaring deductibles which are recurring "one-time" charges incurred whenever anyone does need medical care, and whose weighted impact on overall medical outlays is dramatic).

A big reason for this delayed increase in prices is that many insurers were unable to gauge the full base-effect impact of Obamacare on their P&L: after all, effective implementation of Obamacare had been materially delayed thus preventing an apples to apples comparison of incurred fees versus revenues.

All that changed moments ago when core US inflation finally spiked the most since 2013 driven by a 0.7% monthly surge in medical care service costs: the highest since 2007!

What's far worse for the troubled US consumer, this is just the beginning. Because after finally digesting the true cost of Obamacare, any recent insurance prime hikes will seem like a walk in the park compared to what is coming.

According to the WSJ, key insurers in some states are proposing hefty rate boosts for plans sold under the federal health law.

Case in point:

In New Mexico, market leader Health Care Service Corp.

Hong Kong, China to Liberalize Cross-Border Fund Transactions

Hong Kong and Chinese regulators signed a deal allowing funds in both markets to be sold to investors on either side starting July 1, potentially allowing billions of dollars of cross-border investments in stocks and bonds.

Smart Money Entering Precious Metals as Russia Buys Another 300,000 Ounces

Today's AM LBMA Gold Price was USD 1,211.00, EUR 1,083.45 and GBP 772.96 per ounce.
Yesterday's AM LBMA Gold Price was USD 1,209.60, EUR 1,084.36 and GBP 772.60 per ounce.

Gold fell $3.78 to close at $1,205.82 an ounce on yesterday, and silver remained unchanged at $17.12 an ounce.

Gold in U.S. Dollars - 1 Week Gold in U.S. Dollars - 1 Week

Overnight, gold in Singapore inched up 0.2 percent to $1,208.19 an ounce near the end of day trading. Gold is on track to trade down 1.4 percent it largest weekly drop in a month.

Gold prices have rebounded today after ending yesterday down 0.3%, but appear to have run into some resistance at their 200-day moving average (1215). On the week, gold is down 0.7% and silver is marginally lower in dollars for the week but has eked out gains in euro terms. The biggest fall of the week was palladium, down just over 2%.

On a daily basis, palladium's the only precious metal lower today, down just over half a percent, while platinum's up 0.3% and silver's 0.5% higher.

Shake Shocker: Each SHAK "Restaurant" Is Now Worth $53 Million

Yesterday the average SHAK restaurant was worth $48 million. Today it is $53 million and rising, following the overnight 6% surge in the company's market cap. Because why not.

A gentle reminder...

US Consumer Prices Up a Slight 0.1 Percent in April

U.S. consumer prices were up slightly in April, but overall gains were held back by another decline in energy costs that offset the biggest one-month jump in medical care in eight years.

Two Ominous Stock Market Charts

Submitted by Pater Tenebrarum via Acting-Man.com,

A Big Dow Theory Divergence

We briefly want to show a few charts that have caught our eye recently. This is by no means a comprehensive market update (we plan to provide one soon). Here is something though one doesn't see all too often: the Dow Industrials and Transportation averages have diverged from each other for about six months running. To be sure, no valid Dow theory sell signal has been given yet. For that to happen both averages need to break their previous reaction lows in concert. However, divergences at peaks are a "heads up" signal. Charles Dow would probably at least raise one eyebrow and frown a little.

IA_0314_ETFAdvisor_MI600

1-Industrials and transports-ann

Transportation stocks have turned from leaders into laggards, in the process diverging ever more from the Industrials average - click to enlarge.

The NYA, Then and Now

The next two charts were sent to us by a friend who manages a fund and often passes on his technical observations to us. The first chart shows the broad-based NYSE Stock Exchange Index (NYA) as it looked in the final years of the tech mania that fiz ...

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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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