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26May2015 Market Update: Stocks Fall Following Disappointing Data And Soaring Dollar

Written by Gary

Markets are down 1% attributed to weak economic data released today and a strengthening dollar. This may be an oversimplification of the situation as you read through the information which follows.

Here is the current market situation from CNN Money

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 37 %
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 46
Investors Intelligence sets the breath Above 50 bullish 58.9% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -8.5 NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 60.6% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 63% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 63% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21 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 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors

What Is Moving the Markets

Here are the headlines moving the markets.

May 2015 Chemical Activity Barometer Rises. Suggests Gains In Business Will Continue Into 2016.

from the American Chemistry Council

The Chemical Activity Barometer (CAB), jumped 0.7 percent in May, as measured on a three-month moving average (3MMA). Reaching an index of 99.3, last seen in November 2007, the CAB remains up 3.3 percent over a year ago, and suggests gains in business activity now will continue into 2016.

U.S. top court rules against Cisco Systems in patent infringement fight

WASHINGTON (Reuters) - The U.S. Supreme Court on Tuesday ruled against Cisco Systems Inc over a patent infringement claim the tech giant is fighting.

Cable operator Charter to buy Time Warner Cable for $56 billion

(Reuters) - Charter Communications Inc, controlled by cable industry pioneer John Malone, offered to buy Time Warner Cable Inc for $56 billion, seeking to combine the No. 3 and No. 2 U.S. cable operators to compete against market leader Comcast Corp.

SFX Reaches $774 Million Deal for Founder to Take Company Private

The music festival company's founder and chief executive, Robert F.X. Sillerman, will acquire the shares he doesn't already own at $5.25 each in cash.

Greece and creditors play down fears of imminent default

ATHENS/BRUSSELS (Reuters) - Greece and its European creditors on Tuesday sought to play down fears that Athens would default on a payment to the International Monetary Fund next week.

Meanwhile, In The Real Economy... Or Why Deutsche Thinks "Lunatics Are Running" The Fed

For all the recent talk whether US Q1 GDP (in both 2014 and 2015) was or wasn't seasonally adjusted enough, there is a far greater and more seriously issue: one we hinted in "Global Trade Tumbles Most In 5 Years", "World's Largest Container-Shipper Warns Global Trade Is Slowing Down", and "Global Trade Dives Most since the Financial Crisis" - namely the unprecedented collapse in global trade, a hard-metric which sadly no army of economists can adjust because, well, it simply is.

This is also the issue that Deutsche Bank's head of European rate strategy, Francis Yared, shows as an example of "all not being well in the world, let alone the US."

Here is why he is cautious, and why he thinks it just may be that the lunatics have taken over the insane asylum.

" is imperative that the data does turnaround during 2015h2 for the recent rise in yields to be sustained. It is quite surprising to us that there is so much focus on US employment data and Fed Funds normalization to the exclusion of global trade data or US demand let alone productivity. A case perhaps of the lunatics trying to run the asylum. We suspect that while the last thing the Fed wants to do is to suggest growth isn't what it should be, for fear of making things worse, the over arching principle of not committing the cardinal sin of the Type 2 error will prevail. As long as ho ...

Why Tesla's Batteries Won't Work For Roof-Top Solar

Submitted by Euan Mearns via,

In How Much Battery Storage Does a Solar PV System Need? I assumed that the rooftop PV system would generate just enough power to fill annual domestic demand and that the surplus power generated in summer would be stored for re-use in the winter in Tesla batteries. The result was an across-the board generation cost of around $35/kWh. Clearly the Tesla battery storage option isn't economically viable, or at least not under the scenario I chose.

As Phil Chapman and others pointed out in comments, however, this is not the only way a domestic solar PV system can generate enough year-round power to allow a household to go off-grid. Another is to overdesign the system so that it's large enough to fill demand in winter when solar output is at a minimum and simply curtail the excess power generated in summer. How does this "no storage" option pan out?

Services sector growth slows in May: Markit

U.S. services sector expansion slowed for a third straight month in May, weakening alongside new business activity, an industry report showed on Wednesday.

New home sales, prices rise strongly in April

New U.S. single-family home sales rose more than expected in April and the median price surged, suggesting the housing market recovery was gaining traction.

Consumer confidence rises in May

NEW YORK (Reuters) - U.S. consumer confidence rose in May, according to a private sector report released on Tuesday.

Solid business spending plans offer ray of hope for factories

WASHINGTON (Reuters) - A gauge of U.S. business investment spending plans increased solidly for a second straight month in April, a hopeful sign for manufacturing activity after a long spell of weakness.

Deutsche Bank Pays $55 Million to SEC

Deutsche Bank has agreed to pay $55 million to the SEC to settle allegations it hid paper losses of more than $1.5 billion during the financial crisis that began in 2008.

Altice's ambitions for U.S. undimmed after Time Warner Cable setback

PARIS (Reuters) - Patrick Drahi, the billionaire owner of deal-hungry European telecoms group Altice , will not let missing out on Time Warner Cable dissuade him from further expansion in the United States, people familiar with the situation said.

Is This Why Stocks Are Sliding And The Bond Curve Is Flatter

From the best market inflation-point indicator in the known newsletterverse:

Are stocks over-extended to the upside? Yes, of course. Are they over-extended in terms of earnings? Yes, of course. Are the markets in Asia, and particularly the markets in China, almost preposterously over-extended in the short term? Yes, of course. Should we then be short of stocks because of these over-extensions and over-valuation? No, we shall not be, for the trends are clear and those who've sold the markets short using very sophisticated, historically well-precedented, brilliant arguments have been wrong. Eventually they shall be right. Eventually the markets will correct and eventually those corrections will be serious affairs, but as we have always said, "Between eventually and profitability all too often are great chasms of losses." We shall do our best then to remain as we have been: pleasantly long of equities on balance. There really is no other course of actions we can take.


Long of One Unit of Ten Year Notes/short of One Unit of the Long bond future: Friday, May 22nd we wished to sell into the strength of the bond market and we did so by selling the longest end of the curve and buying that which is shorter. That is we bought September T-note futures at or near to 127 5/32nds and sold September bonds at or near to 153 1/32nd. As we write, they are trading 127 17/32nds and 154 22/32ns respectively so we are up 12/32nd on the T-Notes and we are down 43/32 on the bonds. The first loss is always the better loss and we want out… immediately upon receipt of this commentary.

Source: Dennis Gartman, M ...

Cable Giant Forming After $55 Billion Deal

Charter Communications agreed to buy Time Warner Cable for $55 billion, giving cable mogul John Malone the prize he has been chasing for two years.

"Some Folks Are Selling..." Dow Down 350 From Highs, Futures Plunge Below 18,000

Bond yields are collapsing and US equity markets are not happy this morning. The Dow Industrials are now up only 1.2% year-to-date, and over 350 points from last week's record highs (as Trannies are down over 8% YTD).

Bonds are ripping lower in yield...

And Dow futures just lost 18,000...

Charts: Bloomberg

S.E.C. Says Deutsche Bank Misvalued Derivatives

The bank agrees to pay $55 million to settle allegations that its "inadequate internal accounting controls" violated federal securities law.

Big Banks Shut Border Branches in Effort to Avoid Dirty Money

Lenders are closing in Nogales, an Arizona city facing banking problems as Wall Street tries to avoid fines associated with the flow of dirty money.

U.S. Stocks Sharply Lower

U.S. stocks fell Tuesday following disappointing data on big-ticket spending in the U.S., underscoring investor unease with the recent pace of economic growth.

U.S. stocks fall the most in three weeks as dollar soars

(Reuters) - U.S. stocks recorded their steepest fall in three weeks in morning trading on Tuesday as positive economic data added to the gains in the dollar and sent it soaring to a one-month high.

China Outlines New "Offensive" Military Strategy; Builds Lighthouses In Disputed Waters

In what is becoming an intensely contentious situation, China is ramping up its naval ambitions amid fierce criticism from Washington. As we reported on Monday, the Beijing-backed Global Times has suggested that a war with the US may be in the cards if China isn't left alone to complete its "construction work" in the contested Spratly archipelago.

What Beijing calls "construction work", Washington calls an unacceptable attempt to "redraw maritime boundaries" via the building of "sandcastles", a reference to China's land reclamation efforts atop the Fiery Cross Reef. Because Beijing claims most of the South China Sea, it says the construction of ports, cement plants, and airstrips atop the artificial islands its dredgers have built is no different in principle than the construction of roads on the mainland, a contention which the US and its regional allies view as absurd.

If there were any remaining questions about China's maritime resolve, they were answered unequivocally on Tuesday with the release of the country's 2015 defense white paper which indicates that Beijing is set to increase its "open seas protection" after countries with "ulterior motives" have busied themselves "meddling in South China Sea affairs." Beijing also indicates that its air force will shift from a purely defensive strategy to an offensive stance, a nod to what we have described as the establishment of an effective no-fly zone over the Spratlys. Finally, China accuses Japan of "dodging" post-war norms by "overhauling its military." Here's more from the report:

May 2015 Texas Manufacturing Survey Manufacturing Activity Continues to Decline

Of the five Federal Reserve districts which have released their April manufacturing surveys - three forecast weak growth and two are in contraction. A complete summary follows.

Germany sees progress on Greece, EU officials to confer on Thursday

BERLIN/BRUSSELS (Reuters) - A senior German official said on Tuesday there was no reason to believe Greece would be in default after a 300 million euro payment to the IMF falls due on June 5.

Spain's Unfinished Crisis Business

Spain's growth numbers have impressed markets, but not voters. The country has a lot still to do.

More Swiss banks to settle with U.S. DoJ in near future: official

GENEVA (Reuters) - More Swiss banks are expected to settle with the U.S. Department of Justice "in the near future" to avoid prosecution on charges of helping U.S. account holders hide their assets from the tax authorities, a senior Swiss finance ministry official said on Tuesday.

Richmond Fed Manufacturing Survey Squeaks Into Expansion in April 2015

Of the four regional Federal Reserve surveys released to date, three show manufacturing expanding weakly and one is in contraction.

Dollar Jumps Against Yen, Euro

The dollar hits a high of nearly eight years against the yen, as investors returning from a long weekend in Europe bet on the greenback.

Jury Is Still Out on European Central Bank's Stimulus Program

The bank's bond buying has coincided with an improvement in the European economy, but there is reason to question how long the good times can last.

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