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28May2015 Pre-Market Commentary: U.S. Futures Down In Active Premarket Trading, Oil Down, US Dollar Up

Written by Gary

Initial jobs claims came in lower than expected and the US futures didn't budge from already being in the red signaling a lower open one day after the Nasdaq Composite established a closing record high.

Oil is declining rapidly and the U.S. dollar is rising, expect a lower opening.


Here is the current market situation from CNN Money

European markets are mixed. The FTSE 100 is higher by 0.03%, while the CAC 40 is leading the DAX lower. They are down 0.74% and 0.49% respectively.

Investors are worried about Greece's ability to strike a deal with its creditors and China's stock markets crashing yesterday, with indexes dropping over 6 percent in record high turnover as investors rushed to sell.

What Is Moving the Markets

Here are the headlines moving the markets.

23 May 2015 Initial Unemployment Claims Rolling Averages Worsen But Still Very Good Historically

Weekly Initial Unemployment Claims

The market was expecting the weekly initial unemployment claims at 265,000 to 275,000 (consensus 270,000) vs the 282,000 reported. The more important (because of the volatility in the weekly reported claims and seasonality errors in adjusting the data) 4 week moving average moved from 266,500 (reported last week as 266,250) to 271,500. The rolling averages have been equal to or under 300,000 for most of the last 7 months.

U.S. jobless claims up, but still point to labor market strength

WASHINGTON (Reuters) - The number of Americans filing new claims for unemployment benefits unexpectedly rose last week, but remained at levels consistent with a strengthening labor market.

Virtu Revenue In Peril: Reuters, BATS Launch Crackdown On Algo FX Manipulation

Now that the Department of Justice has cleared the financial world of all carbon-based FX market rigging traders by sending precisely nobody to prison and forcing bank shareholders to foot the bill on a settlement that amounts to about 1% of the proceeds earned thanks to years of market manipulation, and has since moved on to such more relevant to US taxpayer fields as football, it is time to turn attention to the robots.

Recall that back in December it was first reported that both Deutsche and Barclays "algos" were busted for FX rigging: something we alleged was taking place about 3 years ago. And now, six months later, exchanges are finally admitting that this too conspiracy theory was in reality fact, and quietly have started to clean up their game before the DOJ comes knocking.

As the WSJ reports, Thomson Reuters Corp. and BATS Global Markets Inc. will limit the practice known as "last look", also known as quasi-FX spoofing, on their platforms in coming weeks "in a move aimed at increasing transparency in the foreign-exchange market.""

What is last look?

The last look practice is a legacy of over-the-phone currency trading, when traders would take a final check of the market before executing an order. It has survived even as foreign-exchange trading moved onto electronic platforms, leaving banks with the option to back out of an order after it was accepted by a client.

Phil Weisberg, global head of foreign exchange at Thomson Reuters, said last look requires "more clarity." Some clients don't understand "the rules of engageme ...

The Salt Mind

The Salt Mind

By Cognitive Dissonance

Want to further explore Cog's 'Salt Mind'? Stop by TwoIceFloes and check out the latest by Mr. and Mrs. Cog.

The plan was always for me to return to 'work', aka gainful employment, after finishing several major sustainability improvement projects to our mountain top homestead. After nearly two years of continuous work on over a dozen undertakings large and small, several months ago the time finally arrived. Of course, the plan always assumed local and national financial conditions were such that a job was available for me to fill. If not.....well, that was precisely why we had improved our ability to self sustain in the face of national (or global) economic disaster.

So for those of you who have been wondering where the hell Cog is.........now you know. Cog has been willingly laboring away at the local (assuming anything twenty four miles away can be termed 'local') big box retail salt mine. And no, I am not a Wal-Mart greeter......yet. Suffice to say I work in a physically demanding retail sales environment as an hourly wage slave working swing shifts any day or evening of the week including holidays and weekends. At least it comes with full benefits, though I don't think I will be joining the 401(k) 'retirement' plan or the company discount stock purchase plan anytime soon.

Combine nine hour work days with an hour and a half of commute, add in the physical exhaustion experienced as I ...

Bull Market Dealt A Significant Blow?

Via Dana Lyons Tumblr,

In January, we wrote a post titled "Are Bears Missing The Forest For The Trees?". The gist of it was that while there were certainly concerning bits of evidence piling up regarding the longer-term fate of U.S. stocks, the most important factors in the immediate-term - such as the continued confirmation of new highs by the NYSE Advance-Decline Line - continued to support the bull market. That may be starting to change.

Regarding the NYSE A-D Line, we noted last week that for the first time in awhile, it failed to match the new highs set earlier this month by the S&P 500 and other large cap indices. As a refresher, the A-D Line is a cumulative total of daily advancing issues minus declining issues on the NYSE. In our view, it is an important gauge of the health of the stock market as it measures the level of strength among all stocks. The more stocks there are advancing, the more robust and resilient a rally is likely to be. Therefore, when the A-D Line failed to confirm the new high in the indices, it was an indication that fewer stocks were still participating in the rally.

Yesterday, we saw more confirmation of that. The UP trendline of the NYSE Advance-Decline Line since the beginning of the cyclical bull market in 2009 was broken to the downside with yesterday's poor breadth.

Abercrombie sales fall 14 percent due to strong dollar, discounts

(Reuters) - Teen apparel retailer Abercrombie & Fitch Co reported a 14 percent fall in quarterly sales due to weak demand, a strong dollar, and higher discounts.

Avago to buy Broadcom in $37 billion chip deal

(Reuters) - Avago Technologies Ltd said it would buy fellow chipmaker Broadcom Corp in a cash-and-stock deal valued at $37 billion.

Oil steadies ahead of U.S. inventory data

LONDON (Reuters) - Oil prices steadied on Thursday after a two-day slide as investors awaited data from the U.S. Energy Information Administration (EIA) to see how American oil production was responding to a recent surge in prices.

No change in Greek debt talks after another day of spin

BRUSSELS (Reuters) - The euro leapt, Greek bond yields fell, global financial markets brightened, but nothing actually changed in another day of conflicting statements on Greece's long-running debt talks with international creditors.

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Greece Feigned Deal Progress, Launched Rumors To Avert Bank Run

By now, investors are mostly desensitized to conflicting reports out of Athens and Brussels regarding "progress" on Greece's negotiations with creditors. Indeed it's quite rare that a day goes by without an "unnamed" Greek official reporting that a deal is "close" only to have someone on the other side of the negotiating table dispel any notion that discussions are headed in the right direction.

That said, Wednesday's version of this merry-go-round seemed even more absurd than usual with Greece indicating that a deal between Syriza and the troika was imminent. In fact, PM Alexis Tsipras posted the following message to his official website:

As you are aware, the government operates collectively. Over time, we have established a collaborative decision-making process. Obviously, though, the ultimate responsibility lies with the Prime Minister and the Cabinet. I'd like to state that we have taken many steps and we are now in the final stretch, we are close to an agreement. This agreement will be positive for the Greek economy, this agreement will redistribute the [financial] burdens and I believe that, very soon, we will be in a position to present more information.

Additionally, I would like to add one thing: it is obvious that during this final stretch, composure and determination are required. We are not alone, we are dealing with three separate institutions, which often hold conflicting views and mainly, we are dealing with our partners -many different countries- among which there exist different approaches, but also within those countries there are differing political interests. As s ...

Frontrunning: May 28

No change in Greek debt talks after another day of spin (Reuters)

G-7 Weighs In on Greece as Government Told to Be Serious (BBG)

FIFA Faces Mounting Pressure From Sponsors as Visa Threatens to End Deal (WSJ)

U.S. hopes Chinese island-building will spur Asian response (Reuters)

Japan Inc.'s $104 Billion Investor Payout Set to Surge (BBG)

Russia masses heavy firepower on border with Ukraine (Reuters)

China Says Its Most-Wanted Fugitive Is in U.S. Custody (BBG)

Amazon expands same-day delivery, offers free shipping on orders over $35 (Reuters)

Broadcasters Shop at Home for Shows (WSJ)

Star managers battered by rocky ride in yields, currencies (

Stock futures edge lower as Greece worries weigh

(Reuters) - U.S. stock index futures were lower on Thursday, weighed down by concerns about Greece's ability to strike a deal with its creditors.

It's Official: Avago Buys Broadcom In $37 Billion Deal, Thousands In Employee Layoff "Synergies" Imminent

As the WSJ reported yesterday when it sent the semiconductor space soaring, moments ago Avago (21x EV/EBITDA) confirmed it would buy Broadcom (19x EV/EBITDA) for $37 billion. The reason for the deal: as the WSJ noted yesterday, "growth has been hard to come by for Broadcom, a 24-year-old company that makes communications chips for tablets and smartphones, and supplies the Internet links for cable-television and telecommunications devices." Or, in other words, only a delusional, yield-chasing bond holder would be willing to fund (with other people's money) the 18.9x Broadcom EV/EBITDA take out price and just like in the oil and E&P space, when organic growth dries out, there is always zero cost debt to extend the dream a little longer.

Neither Avago nor Broadcom has the kind of dominance over individual markets that better-known rivals such as Intel Corp. and Qualcomm Inc. enjoy, and a merger could help address that. In addition to consumer applications, Broadcom supplies the vast majority of chips used in the latest networking switches found in corporate data centers, a fast-growing business that could enhance Avago's communications-focused revenue stream.

Broadcom was co-founded by a team led by engineers Henry Samueli, who remains chairman and chief technology officer, and Henry Nicholas III, a former chief executive who stepped down in 2003. Mr. Nicholas held about 25% of Broadcom's voting shares as of the end of March, according to the company's most recent proxy statement. Mr. Samueli held about 22%.

Avago once was part of Agilent Technologies Inc., which spun off from H-P in 1999. Agilent later sol ...

EU regulators tell 11 countries to adopt bank bail-in rules

BRUSSELS (Reuters) - The European Commission on Thursday gave France, Italy and nine other EU countries two months to adopt new EU rules on propping up failed banks or face legal action.

China Stocks Crash, US Futures Flat Ahead Of More Greek Rumors

Courtesy of central planning, virtually every single capital market has become an illiquid penny stock, with wild swings from one extreme to the other, the latest example of this being the Shanghai Composite, which after soaring 10% in the past ten days, crashed 6.5% overnight tumbling 321 points to 4620 after it briefly rose just shy of 5000. This was the biggest drop since January 19 when the Composite dropped 7.7% only to blast higher ever since. Putting the "plunge" in perspective, now the SHCOMP is back to levels not seen in... one week.

What caused this long overdue plunge? According to the WSJ, three factors were in play: China's sovereign-wealth fund said earlier this week it had sold stakes in two state-owned banks; more brokerages are tightening margin trading; and the central bank soaked up cash from commercial banks, a sign that the government is trying to contain excess liquidity in the financial market.

In other words, more sellers than buyers, but at least the soundbites were great: "The China market is basically trading like a yo-yo," said Steve Wang, research director at Reorient Financial. "It is retail driven, people just follow the trend."

So, fundamentals are at play you say? More soundbites:

Thursday's drop in Shanghai could shift the market from a "crazy bull into a slow bull," said Li Shaojun, analyst at Minsheng Securities Co. Ltd. Most major sectors were down more than 4%, noted Gerry Alfonso, director of trading at brokerage Shenwan Hongyuan Securiti ...

China markets plunge in record turnover as margin traders take fright

SHANGHAI (Reuters) - China's stock markets plunged on Thursday, with indexes dropping over 6 percent in record high turnover as investors rushed to sell after more brokers tightened margin trading requirements for clients and the central bank drained money market liquidity.

China May official factory PMI seen lackluster despite stimulus moves

BEIJING (Reuters) - China's factories struggled to expand in May despite recent interest rate cuts and other policy stimulus, a Reuters poll showed, suggesting the government may have to do more to halt a protracted slowdown in the economy.

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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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