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27May2015 Market Update: Markets Melting On Increasingly Lower Volume Recovering 75% Of Yesterday's Losses

Written by Gary

Markets dipped into the red at the opening and then started to melt up on falling volume. Oil stopped its decent as the dollar's rally eased on reports that Greece would avoid a default.

The averages have recovered 75% of yesterday's losses as skeptics warn there are more losses to come. Many more 'stable' analysts write off yesterday's losses as simple number crunching withing the market system.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in U.S. leading the region. The S&P 500 is up 0.76% while Mexico's IPC is up 0.48% and Brazil's Bovespa is up 0.02%.

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 42%
Investors Intelligence sets the breath Above 50 bullish 58.4%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -37.65
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 57.35%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 62.90%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 64.00%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21.60
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 76.90
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,123

What Is Moving the Markets

Here are the headlines moving the markets.

EU officials dismiss Greek statement on aid agreement being drafted

ATHENS (Reuters) - Greece's government on Wednesday said it is starting to draft an agreement with creditors that would pave the way for aid, but European officials quickly dismissed that as wishful thinking.

Wall Street bounces back from Tuesday selloff as dollar eases

(Reuters) - U.S. stocks were up in late morning trading on Wednesday, rebounding strongly from their steepest fall in three weeks on Tuesday, as the dollar's rally eased on reports that Greece would avoid a default.

When Stock Buybacks Go Horribly Wrong

When companies have a burning need to boost their stock price and/or have no organic growth opportunities requiring fresh investment, they do one thing: engage in stock buybacks (usually funded with recently issued bonds). We first warned about the dangers of such a "strategy" in 2012, and most recently, earlier today the WSJ once again noted that "U.S. Firms Spend More on Buybacks Than Factories."

The reality is that stock buybacks are great... as long as the stock price keeps rising. They are also great as long as the stock isn't so illiquid that once the sole buyer withdraws, be it the company itself or its CEO (in the case of Hanergy using corporate funds) the stock crashes.

The real problem emerges when after sinking hundreds of millions, or more, in stock buybacks, the stock no longer keeps rising.

This is precisely what happened to KORS stock. As Dominique Dassault points out, earlier today Michael Kors reported abysmal earnings which have lobbed a whopping 23% off the stock price and the market cap of KORS just today.

But it was not KORS' operational issues that were troubling: it is how much the company burned on stock buybacks. In KORS' earnings release we read:

...

Tiffany's Sales, Profit Beat on Higher Tourist Spending in Europe

Luxury jeweler Tiffany & Co reported a 5 percent fall in quarterly sales as a strong dollar discouraged tourists from spending in its U.S. stores and reduced the value of overseas sales.

Tiffany's sales, profit beat on higher tourist spending in Europe

(Reuters) - Luxury jeweler Tiffany & Co reported better-than- expected quarterly sales and profit as it benefited from higher spending by tourists in Europe and growing demand for its Tiffany T line of fashion jewelry.

Mary Meeker Warns "Pockets Of Over-Valuation... Growth Rates Are Slowing" In Her Latest 'State Of The Internet' Presentation

While careful to 'remain optimistic' KPCB's Mary Meeker warns that "growth rates for leaders... are slowing," and warns that global tech puiblic/private financings are now 17% above 1999 levels and "there are pockets of Internet company overvaluation but there are also pockets of undervaluation," as she unveils her latest (record-breaking) 197-page epic chartapalooza on Internet Trends...

Internet Trends 2015

Need To Manipulate Markets? Just Email The Bank Of England At hammer@bankofengland.co.uk

Meet Martin "The Hammer" Mallett, chief currencies dealer at the Bank of England in 2007, and, as WSJ reports, recipient of emails that were part of an alleged campaign to rig benchmark interest rates, according to evidence presented in a London trial Wednesday. Remarkably, as we have detailed extensively, the emails were sent out with daily suggestions for where a variety of banks should set Libor. Mallett was later fired for what the central bank described as "serious misconduct," although the bank said his departure wasn't directly related to the currencies-rigging investigation.

As The Wall Street Journal reports, Martin Mallett, who at the time was the chief currencies dealer at the Bank of England, was among a couple dozen recipients of emails sent in 2007 by brokers allegedly working at the behest of former bank trader Tom Hayes. The recipients were blind carbon-copied on the messages...

In the emails, the brokers sent out daily suggestions for where a variety of banks should set the London interbank offered rate, or Libor. Mukul Chawla, the prosecutor trying Mr. Hayes, said those emails ...

McDonald's to stop reporting monthly same-store sales after June

(Reuters) - McDonald's Corp said it will stop reporting monthly same-store sales after June, becoming the latest major U.S. retailer to stop reporting the closely watched indicator to gauge overall spending trends and a company's financial health.

Etihad Airways says it will add $6.2 billion to U.S. economy by 2020

DUBAI (Reuters) - Abu Dhabi's Etihad Airway's contribution to the U.S. economy will almost double to $6.2 billion by 2020, it said on Wednesday, in an apparent counter to allegations that government subsidies gave it an unfair edge over competition.

S&P Ramp Stalls At 50% Retracement (For Now)

Rumored - and denied - reports of an imminent Greek deal spewed momentum into stocks but for now, the 50% retracement level of the high-to-low swing is holding the exuberant equity market back...

EU outlines plans to make multinationals pay their share of tax

BRUSSELS (Reuters) - The European Commission outlined plans on Wednesday to limit how much multinational companies can reduce taxes on their European earnings through the use of creative accounting.

Bits Blog: DJI and Accel Partners Form Drone Investment Fund

The Chinese drone maker and the venture capital firm have formed an investment fund to support more drone and advanced robotics start-ups.

Earnings Summary for Today

Earnings Calendar provided by Investing.com.

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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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